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Good morning. Traders trudge in on Tuesday after yesterday's pop and drop to find a sea of red across the board in foreign markets. Asia finished lower with the Hang Seng down -0.64% while the Nikkei edged off nine week highs dropping -0.20%.
Checking the European bourses, we find the FTSE -0.49%, CAC -0.61%, and the DAX -0.44%. Oil is trading 22 cents lower after the Iraq / Norway inspired pullback yesterday. The dollar index (DXY) is higher by 25 bps. For their part, the stateside futes are below fair value.
Reuters reports that a bomb killed three U.S. troops in Baghdad, a day after the U.S. transferred sovereignty.
Separately, the AFP reports that a bomb blast on a plane in an airport in Turkey killed one person. The bombing occurred after passengers had left the plane. Keep in mind the NATO summit is in its second day in Istanbul.
Former Iraqi president Saddam Hussein will be handed over to the new Iraqi government tomorrow and put on trial by a special court according to Iraq's interim Prime Minister Allawi.
French business confidence climbed to a three year high in June, from 104 to 105, as manufacturing executives foresee production increases as inventories decrease and exports rise.
The yen fell against the dollar for a third day after a report showed Japanese manufacturers increased production by a lower level than anticipated. Japan's industrial output rose 0.5% in May (less than the 2.5% forecast) according to Bloomberg.
The euro fell against the dollar after French PM Raffarin commented that "unemployment figures will remain bad in coming months."
That will leave a mark...
The largest U.S. savings and loan company, Washington Mutual (WM:NYSE), cut its 2004 profit forecast, taking numbers to the $3.00 - $3.60 range vs. $4.05 cons based on the expected impact of an increase in long term rates on the mortgage business. The company also indicated it will have to cut more jobs.
DBAB upgrades food retailer, Winn Dixie Stotes (WIN:NYSE), from sell to hold based on an easing of concerns about liquidity resulting in favorable asset sales.
Morgan punts United Auto Group (UAG:NYSE) from overweight to equal weight on valuation.
According to Bloomberg, U.S. Treasuries are headed for their worst quarter since 1980 as rate hikes and inflationary pressures have taken their toll along with the impacts of an unwinding carry trade. The 10 year note, which started the quarter with a yield of 3.84%, is now at 4.71%.
Bloomberg also reports that trading on the NYSE appears destined for its slowest month of the year as anemic volumes have averaged 1.3 bln shares a day (lowest since December's 1.24 bln share average).
The gold scold...
The yellow metal is off a percent this morning (-$4) and clinging to levels from which it broke out. This is a critical juncture for the metal heads in our midst--if it can hold 'in here,' it will be considered a succesful retest of the acne zone (textbook bullish retest). If, however, it continues to slip, the "pop and drop" we saw in equities will have migrated to this asset class (and catch alotta bulls nappin').
Al-Jazeera reported that militants have indicated they have killed a U.S. soldier that had been held hostage for nearly three months.
Check out the Personal Journal section of the Wall Street Journal for an overview of the approaches aimed at treating Alzheimer's.
The UBS chain store sales index for 6/26 came in (1.2%) vs. the 0.1% prior.
Robinson Humphrey raises Circuit City (CC:NYSE) from neutral to buy.
A few items on the trading radar today... The Fed begins their two day monetary policy gathering, the Japanese Tankan sentiment survey is released on Wed, Beeks drops off the confidence report at 10 am, ISM on Thurs and the employment report on Friday. Keep in mind that earnings season is set to pick up over the next two weeks as well.
On the bank M&A front, there's been a lot of chatter about Citigroup (C:NYSE) taking New York Community Bancorp (NYB:NYSE) to the dance. RBC Capital is out with a note this am saying the deal, while making sense on paper, is unlikely in their view and that a premium is already built in at current levels.
JP Morgan tweaks its estimates on Xilinx (XLNX:NASD) taking numbers to $1.18 from $1.21 ($1.23 cons) as a function of speculation that orders have declined going into the Sep quarter, falling mkt share, and inventory build.
OSI Pharma (OSIP:NASD) is looking higher this morning on news that the FDA has accepted Tarceva for fast track status.
In the News - NYSE charts in the IBD:
AV, DJO, AAP, BLL, CME, COH, COO, RKY, CFC, JWN, OSG, PPC, ROG, SYK, TGN, TTC, TNP
In the News - Nasdaq charts in the IBD...
DECK, KIND, AMMD, ADSK, EBAY, ELAB, ESCA, HIBB, JBHT, IART, LSTR, LCUT, NUCO, ODFL, PLXT, POOL, RIMM, SMHG, SMRT, WFMI, YHOO
Soundview raises their estimates on Lexmark (LXK:NYSE) taking Q2 EPS from $0.97 to $0.99.
Pru raises Q2 estimates on Lucent (LU:NYSE) due to stronger wireless business taking rev's from $2.196 bln to $2.24 bln.
The Redbook chain store sales index came in flat vs. a +0.4% reading last week.
Nortel (NT:NYSE) has reached an agreement with Flextronics (FLEX:NASD) under a five year plan to manage $2.5 bln in annual cost of sales. NT will receive $675 to $725 mln in cash proceeds.
The company also indicated it is making progress on its accounting restatement and will provide updated figures by mid to late July.
Good as Gold!
Coeur D' Alene Mines (CDE:NYSE) announced that it has raised its offer for Wheaton Rivers Minerals Ltd. (WHT:NYSE) from C$5.00 to C$5.47 representing a 16% premium.
The first thing that jumped off my screen this morning was the action in the financials (on the heels of WaMu the killer whale (WM:NYSE)). Please watch Citigroup (C:NYSE) ($45 is THE level) and the BKX (96-98) for messages in the muck.
The Iraqi flea flicker may have caught some off guard but in market terms it seemed a non event. Yesterday's pop and drop confirmed that but the WaMu, GM, and TGT news along with the FOMC, window dressing and anemic volumes provide traders with something to consider.
Many Traders have an eye on NDX support near 1445 with resistance looming overhead at 1510ish. On the S&P 500 Index 1125 support and 1147 resistance remains on the radar.
The internets emerged yesterday as the master beta vehicle of choice for the performance chasers. Their price action today could offer clues as to whether we're dressing or undressing.
Put...the candle... back!
Brazil is sneaking a bit higher this morning (+70 bps) after yesterday's wax.
The biotechs (BTK) spring to an early gain of 1% edging thru the 50 dma (515.02) and back testing important resistance at the 520 level. Keep in mind that's an area we've failed at a few times in recent trade.
The WaMu stew also has the Reits (RMS) retreating a percent. Keep an eye on support at the trendline off the May lows. We're up about 17% off that level with the stochastics hooking from an overbought condition.
The Target (TGT:NYSE) practice has focused the cross-hairs on the retail sector. Wal-Mart (WMT:NYSE) took some heat yesterday and I've heard the word "trend" starting to pop up with my retail trading brethren.
Please note that the RTH (retail holder) is sitting on its 200-day (91.30).
Beeks delivered the consumer confidence report for June 101.9 vs. 95.0 exp.
The rotating beta chase...
Collins touched the master betas before (the biotechs!) and they're sharing the spotlight with the semis thus far. Think about it--if you're a fund manager and need some bang for your buck, you'll migrate to the movers, right?
Todd mentioned Brazil - note that the Bovespa did an about face to bounce off the 200 dma (20339.20). That area also traces out the trendline off the May low which has spurred a gain of roughly 17%. Overall the technicals are waving like a flag with the downtrend from Apr levels forming the upper end of the range.
Keep an eye on those pesky piggies--they're danglin' at double secret support (BKX 96). If (big if) they don't hold there (the 50- and 200-day moving average), the green will be fleeting from your screens.
The NDX is back through 1500 and eyeing yesterday's high at 1509ish (cash). Is it possible that money is rotating out of financials and into the four-letter freaks? Shirley. Can the Minx break out without participation from the financials? That's a much more difficult proposition.
The S&P small cap 600 index (SML) is trading at an ALL-TIME high!
For its part, the Russell 2000 (RTY) is adding a percent to edge thru yesterday's high (588.82). The group is up 11% since carrie came back and testing multiple resistance from here thru 606.
Gold and silver are both gettin' thumped for 1.5% as the demand side of the equation was reduced as a function of the perceived acne.
N's over S's
Not a shocker given the action in the financials and retail vs. the movement in the semis and biotechs. A quick sniff of the morning breadth finds the four-letter internals better than 2:1 positive while the big board temperature is almost even.
If your Buzz blinks, please hit the F5 key to refresh!
The consumer confidence reading at 101.90 is the highest reading since June of '02 (106.30). Note that from the June of '02 level, the gauge proceeded to nose dive to a low of 61.40 in Mar '03.
When the tape is N's over S's like this (or vice versa), I like to look within the S&P complex for shorts and the NDX arena for longs. The thought process is that if one pulls the other, the relative performance will kick in.
Keep an eye on Wal-Mart (WMT) as it teeters at six month lows near important support at 52. I highlighted the technicals as the stock looked to test the downtrend off the March highs with the kiss of death and overbought conditions.
The stock edged thru resistance and has since proceeded to fall nearly 10%. Note we're also at support at the trendline off the July '02 lows.
Advancers are outpacing decliners on the NYSE by a count of 1517 to 1458. On the Nasdaq, advancers lead by 1721 to 966. For their part, volume flows in the early going are running at 366 mln shares on the Big Board and 467 mln on the Naz.
Who will win today's bipolar battle? The piggies are this close to breaking down while the Nazz trades like it wants to offer Viagra to the performance anxiety in the Street. It's a tough call...but I'm using BKX 96 as my main determinant.
Keep an eye on the internets (IIX) as Yahoo! (YHOO:NASD), fresh off its jig yesterday, slips to session lows (-0.75%). Note also that the stochastics are in overbought territory at current levels.
We're seeing a buyer of 6,000 JC Penny (JCP:NYSE) Jul 37.5 puts.
Note that the stock is gapping nearly 4% lower on the heels of the Redbook data.
Please keep an eye on Citigroup (C:NYSE) as it has started to trade with a bid. If the banks turn higher, the wishbone will be a moot point....
Creepin' while ya sleepin...
The VXO has quietly rallied 18% in the last four sessions.
The metals--heavy all day--just got smacked anew. Gold is down $10 and silver is 2% lower.
Duke & Duke!
The big cap brokers are perking up and lending some stability to a fragile financial complex. Breadth on the big board remains flattish and the N's continue to out perform in both price action and the internal readings.
The BOE's King is on the tape commenting that he expects inflationary pressure to build in the U.K. implying a need for futher rate hikes. He does not see oil as the main consideration but rather low spare capacity.
He also notes that the strength in Japan is likely to continue.
Cisco (CSCO:NASD) has announced it will acquire Actona Technologies (private) for $82 mln in cash.
Keep half an eye on SOX 480--it's a level where the semis have repeatedly failed the last few sessions. If they get through there, look for them to test SOX 490--a level they've repeatedly failed the last few months.
The dollar index (DXY) is up 50 bps, trading toward session highs and eyeing the 200 dma (89.35).
The banks held the first test of BKX 96 and, on cue, the N's tickle higher. The NYSE breadth remains a concern--it's not confirming the upside--but if the SOX can poke through 480, it will likely pull the NDX through yesterday's (and the multi-month) high.
Please keep in mind that technicals are but one of the four primary metrics. One need only to look at the gold chart to see the caveat of chart deferral.
That's my boy...
Minyan John Roque had fantabulous commentary this morning on Citigroup (C:NYSE) and while we can't (and won't) ever advise you in the 'Ville, I echo his sentiment that Citigroup is the "bellwether, guiding light, lead dog, torchbearer, pacesetter and, in his view, the most important stock in the world."
Note that the Philly Utility Index (UTY) is off 0.70% and testing support at the the up trend off the May lows. The stochastics are turning over in an overbought condition after the group's roughly 8% run.
Volume flows are now running at 673 mln shares on the NYSE and 809 mln shares on the Naz.
I've gotten a fair amount of emails regarding the gold scold and I would like to take this opportunity to remind ye faithful of two cardinal rules: 1) emotion is the enemy when trading and 2) always define your time horizon before initiating risk.
Point #2 is particularly apt--if you're long-term metal thesis is a dollar devaluation play, you should relax your grip on the handlebars and elongate your price parameters. And if you're an active Minyan, discipline is an absolute must when trading the near-term nuances.
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