Posted Yesterday:
I am going to break tradition today seeing that there is no data due before the open and based on Asia's strength in early trading today. Also on the continuing saga of great earnings and that the bears failed to take the market down successfully last month, there is little to suggest that America is going down this week, let alone today. We shall see but a rally week ahead is suspected
Direction for Monday 02 August, 2010; ∆ Up
The bulls continue to overpower the bears. Boiling or overcooked ? Can’t the traders keep things under controls! Do we always have to overdo?
BRIEFING.COM - Monday 02 August, 2010 @ 18:04 ET AMC
Daily Sector Wrap: Dow Sees Best Close Since May
Positive data and bank earnings out of Europe set the tone for a strong buying effort, sending the major U.S. indices to gains between 1.8% and 2.2%.
Confidence in Europe's economy and financial system was bolstered by solid PMI readings throughout the continent and strong income growth by BNP Paribas and HSBC (HBC 53.76, +2.68). The continent's major bourses climbed between 2% and 3% in response.
In other overseas action, China's Shanghai Composite and Hong Kong's Hang Seng each rallied more than 1% overnight. In contrast to Europe's bourses, their gains came amid a weaker-than-expected PMI reading. The difference in response was largely because it is widely accepted that China's economy remains robust and will help lead a global recovery, but there are concerns that such growth could lead to a tighter policy intended to curb inflation risk.
The positive tone among global traders helped domestic averages gap up at the open. Early action was both strong and broad.
The mood improved further still after the ISM Manufacturing Index for July came in at 55.5. That may have marked a pullback from the 56.2 of June, but it exceeded the 54.2 that had been widely expected.
Additionally, construction spending for June increased a surprise 0.1% after a 1.0% decline in the prior month. A 0.8% decline had been widely expected for June.
Energy stocks made out with the best gains. The sector spiked 3.6% in its best single-session percentage advance in almost two months (compare with a 3.2% gain on 7/7). Even embattled energy giant BP (BP 39.49, +1.02) fought its way back toward two-month highs after it announced that it will make efforts this week to permanently cap its leaking oil well in the Gulf.
Not only did the energy sector benefit from broader market support, but a 3.0% spike in oil prices to a six-month closing high of $81.34 per barrel also fueled the space. In contrast, natural gas gave up 4.1% to close pit trade at $4.72 per MMBtu after it outperformed late last week.
The dollar dropped 0.8% to a new three-month low, but it didn't quite crack its 200-day moving average. Most of the slide was owed to a 0.9% rise in the euro to a near three-month high. A 1.3% spike by the British pound to a near six-month high also detracted from the buck.
There was a slowdown in earnings announcements this morning, but things pick back up this evening. Loews Corp (L 37.58, +0.43) and Humana (HUM 48.67, +1.65) were the more notable names in the handful of reports that were made this morning. Both beat expectations.
In non-earnings related news, AT&T (T 26.59, +0.65) and Verizon (VZ 29.55, +0.50) are planning a phone payment system. That put pressure on payment processors Visa (V 72.22, -1.13) and MasterCard (MA 202.25, -7.79), which had the ignominious distinction of being among the few plays that failed to follow the broader market to a heady gain.
Sector Leaders/Laggards for Monday 02 August, 2010 - 18:19 ET AMC
Leading Sectors: Financials (+2.57%), Tech (+2.04%), Health Care (+1.95%), Consumer Staples (+1.17%), Consumer Discretionary (+2.10%), Industrials (+1.98%), Energy (+3.56%), Telecom (+2.01%), Materials (+2.65%), Utilities (+1.99%).
Leading Industries/ETFs : iShares Spain- EWP +4.7%, heating oil- UHN +4.9%, oil HLDRS & energy components- OIH +4.2%, XLE +3.5%, IEO +3.3%, iShares Sweden- EWD +4.6%, steel- SLX +4.1%, iShares Israel- EIS +4.6%, coal- KOL +4.4%, Russia- RSX +4.2%, iShares France- EWQ +4.1%.
Lagging Sectors: None.
Lagging Industries/ETFs : VIX vol index- VXX -5.9%, VXZ -3.4%, natural gas- UNG -4.0%, US bonds & fixed income- TLT -1.7%, TLH -1.0%, IEF -0.6%.
Other Market Moving Factors:
• Dollar drops as euro climbs
• ISM Index for July exceeds expectations
• Construction spending for June shows surprise increase
• Trading volume remains light
BRIEFING.COM - Monday 02 August, 2010 @ 18:33 ET AMC
After-Hours Report: PFG -4.1% Following Earnings Results
Positive data and bank earnings out of Europe set the tone for a strong buying effort, sending the major U.S. indices to gains between 1.8% and 2.2%. After the close, PFG and SUMR are the only notable names that reported after the close.
Futures are lower after hours with S&P 500 futures 1.41 points below fair value of 1122.71 and Nasdaq 100 futures 3.88 points below fair value of 1897.88.
Sectors in positive territory include Financials (+2.57%), Tech (+2.04%), Health Care (+1.95%), Consumer Staples (+1.17%), Consumer Discretionary (+2.10%), Industrials (+1.98%), Energy (+3.56%), Telecom (+2.01%), Materials (+2.65%), Utilities (+1.99%).
Tomorrow morning, three economic reports are scheduled to be released before the open including: Personal Income (Consensus +0.1%), 2) Personal Spending (Consensus 0.0%) and 3) PCE Prices - Core (Consensus 0.1%).
Companies trading higher in after hours in reaction to earnings: SNTS +12.0%, ESLR +7.5%, HOLX +5.6%, SVR +3.3%.
Companies trading lower in after hours in reaction to earnings: SYKE -30.8%, PWAV -7.6%, BGC -4.7%, PFG -4.0%, SBAC -2.6%.
Companies trading higher in after hours in reaction to news:
• GENZ +1.9% (Genzyme not likely to accept a deal under $80/share); SNY -2.3%.
BRIEFING.COM - Monday 02 August, 2010 @ 10:15 ET
ISM Reports Slower Manufacturing Activities
As expected, manufacturing activities slowed in July as the ISM index declined from 56.2 to 55.5. However, the industry performed better than anticipated as the Briefing.com consensus expected the index to decline to 54.2. While many of the components of the ISM decelerated during the month, there was nothing in the data that would suggest a change in our view on the sector. Manufacturing output will continue to expand for at least another couple of quarters regardless of changes in demand expectations. The new orders and backlog indexes both slipped, but at 53.5 and 54.5, respectively, both indexes remain firmly entrenched in an expansion phase. The production index dipped below 60 for the first time since February, but at 57.0 it is on par with typical expansionary growth following a recession. The only real disappointing data point was a slight increase in the prices paid index from 57.0 to 57.5. Normally, this would signal a reduction in potential profits but the move was fairly benign and the index remains over 10 points below the six-month average.
BRIEFING.COM - Monday 02 August, 2010 @ 10:28 ET
Construction Reverses Trend and Posts Gains in June
Total construction spending increased 0.1% in June, well above the Briefing.com consensus that called for a -0.8% decline. While the growth in the headline number may look shocking at first glance, a review of last week's second quarter GDP data suggests that construction expenditures could have potentially risen 0.8% if there were no revisions to data for April and May. Therefore, the consensus was banking on considerable downward revisions to the data in order for the expenditure numbers to meet expectations. This occurred partially as May's construction numbers were revised down from -0.2% to -1.0%, but not nearly enough to match the thought embedded in the consensus estimate. All of the data in this release has already been incorporated in the GDP numbers so there was not any new information to be gleaned from the report. Total private construction declined 0.6% as residential and nonresidential construction fell 0.8% and 0.5% respectively. Total public construction increased 1.5% due to 25.2% growth in power construction.
Ben Bernanke said on Monday 2 August that the economy is still expanding albeit at a moderate pace.The data that has been suggesting that the economy is not getting worse but at the same time, is not growing at a tremendous pace. It seems pretty obvious that the economy is at some sort of a bottom and has been since May this year ... that's according to all those lagging data we've been getting and the belated upgraded numbers after a month. As long as the economy stays at this pace or begins to improve, I am not going to be bearish for long lengths of time.
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TECHNICAL UPDATE - MONDAY 02 AUGUST, 2010 - AMC
DOW JONES INDUSTRIAL AVERAGE ($INDU: CBOT)
10,674.38 +208.44 (+1.99%)
Volume: 167,642,201 from 208,159,136 the previous day (∇ -19.46%)
Range: 10,468.59 – 10,692.20 (223.61 points)
Posted Yesterday
That's three times in two days that the market rallied back from massive dips. Its going to be a pain in the butt to get DOW above 10,500 again but given what I've seen over the last few days, I reckon we'll pull it off again ... probably in a big way.
"Probably in a big way ..." how prophetic. Not only did DOW break above that 10,500, it sliced its way through 10,600 at 10pm like a hot knife through butter. But let's not get ahead of ourselves yet. Monday’s typically low volumes probably contributed to the ease of which the benchmarks made new highs on Monday. The next level of interest on the DOW will be the 11 year old median of 10,750 and above that, the March and May Resistance at 10,900 and the April 2010 high of 11,200.
NASDAQ COMPOSITE INDEX ($COMPQ.IDX: NASDAQ)
2,295.36 +40.66 (+1.80%)
Volume: 526,005,540 from 625,089,228 (∇ -15.85%)
Range: 2,274.27 – 2,299.24
S&P 500 INDEX (SPX: CBOE)
1,125.86 +24.26 (+2.20%)
Volume: 3,492,172,000 from 3,564,997,600 (∇ -2.04%)
Range: 1,107.53 – 1,127.30
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Market Internals for Monday 02 August, 2010 - 18:19 ET AMC
NYSE :
Lower than avg volume @ 1036 vs closing avg of 1408
Advancers outpacing Decliners (adv/dec): 2610/462 begin_of_the_skype_highlighting 2610/462 end_of_the_skype_highlighting
New highs outpacing new lows (hi/lo): 337/7
NASDAQ :
Lower than avg volume @ 1969 vs 2234
Advancers outpacing Decliners (adv/dec): 1903/764
New highs outpacing new lows (hi/lo): 98/33
Advancers outpaced Decliners by an average 3.68 to 1 on lower average volumes (-17.49%) on Monday (avg +1.997%).
Quite an impressive up-day but as mentioned previously, let's not read too deeply into this as volumes were considerably lower especially being a Monday. Meanwhile, the VIX dropped to its lowest close (22.01) in exactly 3 months.
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BONDS, COMMODITIES & CURRENCIES from Briefing.com
Crude surges; silver trades to 1 month high
The CRB Commodity Index finished well higher today, lead by a 2.3% gain in the industrials. Aluminum futures gain 4% on the day to close at $2163.25 per ton.
The rally in global equity indices helped Sept crude oil close higher by 3.1% to $81.34 per barrel. Crude oil traded to its best levels since May 5 and finished just shy of those highs. Sept natural gas did not partake in today's rally as it shed 4.1% to close at $4.721 per MMBtu. It finished near its session lows at $4.681. RBOB gasoline rallied for 4.91 cents to close at $2.1715 and heaing oil gained 6.88 cents to finish at $2.1569.
Dec gold finished higher by 0.1% to $1185.40 per ounce. Sept silver rallied for % to finish at $18.419. It traded to its best levels in over a month and traded through the top of its recent. Sept copper rallied for 7.8 cents to end at $3.3895.
December corn closed 2.25 cents lower at $4.045 per bushel, November soybeans closed higher by 5 cents at $10.10 per bushel, Sept wheat closed 31.75 cents higher at $6.9325 per bushel, Aug ethanol closed $0.015 higher at $1.681, October world sugar futures closed 0.17 cents higher to 19.40 cents.
The bond market was under the gun all session with the long end leading lower while the shorter end stayed hemmed in, leaving the curve steeper. Trade was working on garbage size most of the day and there was very little going on beyond the data. Bernanke and Geithner were both pretty much as expected, dull, a nonevent ahead of the Aug 10 FOMC and Fri's payrolls data. The 10-yr was able to put on the brakes just through 2.96%, but if stocks keep this up they may have a go at the 2.98% point, as the long end gave back good chunk of Fri's gains.
The curve was swung steeper after spending much of the afternoon ranging with the 2-10-yr yield spread 239.9, back to Fri levels after trading to 235.5. The dollar was crushed as the euro went chasing for 1.32, unable to take it out and leaving trade stranded with the index at the worst since Apr ticking around 80.80. The yen was stuck near 86.50 per buck and 114 per euro in what was also a very slow afternoon.
The day ahead has the PCE, personal income and spending (8:30), pending home sales and factory orders (10) with vehicle sales through the day.
Treasury Yields AMC on 02 August:
• 2 Year Note 0.56% +0.01
• 5 Year Note 1.64% +0.04
• 10 Year Note 2.99% +0.05
• 30 Year Bond 4.06% +0.08
2/30 Spread : 350bps (+7) ... 2/10 Spread : 243bps (+4)
Commodities AMC on 02 August:
Light Crude (NYM) September 10 ($US per bbl.) : 81.34 +2.39 (3.03%)
Gold (CMX ) August 10 ($US per Troy oz.) : 1,183.40 +1.70 (+0.14%)
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Earnings Highlights for Tuesday 03 August, 2010
BMO: ACOR, ALY, ADM, ARM, AAWW, BBG, BYD, CVLT, DF, DTF, DOW, DHI, EMR, ETR, EVR, FE, FDP, GET, GWR, HW, HERO, LEA, MMP, MRO, MMC, MA, MGM, TAP, NICE, NYX, OMX, PH, HK, PDE.
AMC: BPI, CTSH, PG, SOLF, WLK, ACAS, APC, AVB, SAM, FRPT, HTZ, LEAP, PCLN, NVTL, WBMD, WFMI, and WMS.
Events for Tuesday 03 August, 2010
08:30 am Personal Income
08:30 am Personal Spending
08:30 am PCE Prices - Core
10:00 am Factory Orders
10:00 am Pending Home Sales
14:00 pm Auto Sales
14:00 pm Truck Sales
Conferences and Shareholder/Analyst Meetings of Interest
for Tuesday 03 August, 2010
- NATI Investor Conference
- TSPT, CELG, ABT, HUM at Wedbush Morgan Securities Life Sciences Best Ideas MAC: Management Access Conference
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SUMMARY
A slight correction or consolidation on Tuesday would be exactly what the Doctor ordered. But knowing America, we're likely to overcook the damn thing again.
Watch out for support levels instead of highs - I suspect the slew of data today ahead of tomorrow's ADP employment numbers may see the market pricing-in some moves in anticipation of Friday's Non-Farm Payrolls. And keep an eye out for the 10am gyrations from Factory Orders and Pending Home Sales as well as the mid-day reactions as the car-makers release their sales numbers. If they are anything like last month, this could be a catalyst for another overcooked rally.
Direction for Tuesday 03 August, 2010; ∆ Up
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