October 27, 2009

Consumer Confidence Retreated Unexpectedly

The markets bounced back and forth between positive and negative ground throughout the October 27 session, as weaker-than-expected earnings and a disappointing consumer confidence report had investors guessing which way the markets would trade. The markets managed to revive their trek higher, but the major indices remain collectively in the red following the first two trading sessions of the week.

In a report from the Conference Board, consumer confidence in October retreated unexpectedly, as many Americans continue to worry about a gloomy jobs market. In the report, confidence slipped to a reading of 47.7, marking its second lowest reading since May. Economists were anticipating a reading of 53.1. October’s reading comes on the heels of the highest reading of the year in September, in which the index reached 53.4.

Lynn Franco, director of The Conference Board's Consumer Research Center was quoted as saying, "Consumers also remain quite pessimistic about their future earnings, a sentiment that will likely constrain spending during the holidays."

In additional economic news, the Standard & Poor's/Case-Shiller home price index revealed an increase of 1% from July’s reading, as August’s index reading came in at 144.5. Although prices have begun to decline at a much slower rate than in the past, prices remain more than 11% below last year’s prices in August.

In the business of manufacturing and selling a variety of steel mill products, coke and taconite pellets, United States Steel (X) announced prior to the opening bell on October 27 that the company recorded its 3rd consecutive loss during the 3Q, as the economic crisis continues to weigh heavily on earnings. For the period, U.S. Steel booked a net loss of $303M, or $2.11 per share, compared to a profit of $919M, or $7.79 per share a year ago.

Quarterly sales plummeted during the period, falling from $7.31B to $2.82B, a decrease in revenues of more than 61% year-over-year. Analysts, in the meantime, were looking for the steelmaker to post a quarterly loss of $2.87 per share on overall sales totals of $2.72B.

Chairman and CEO at U.S. Steel, John P. Surma, commented on the results, "We expect improvement in our overall fourth quarter results mainly as a result of increased demand for Flat-rolled products in North America, driven primarily by automotive markets and continued strength in tin mill markets. However, we expect to report an overall operating loss in the fourth quarter due primarily to continued low operating rates and idled facility carrying costs for our Flat-rolled and Tubular segments. We remain cautious in our outlook for end user demand as customer order rates in Flat-rolled and U. S. Steel Europe (USSE) have decreased from the third quarter, partly due to seasonal slowdowns, and we will continue to adjust production to meet our customers' demand."

By the close of Tuesday’s trading, shares of U.S. Steel were down nearly 8%, giving back $3.17 to conclude the session at $37.41 per share. Over the past year, the company’s stock price has slipped as low as $16.66 per share and climbed as high as $51.65 per share.

Online brokerage firm, TD Ameritrade Holding Corp. (AMTD) confirmed early Tuesday morning that the company’s net profits slipped during the 4Q, as higher expenses cut into the bottom line. Rising costs greatly affected results, despite the company’s increase in trades per day and trading based revenues, which jumped 35% and 38% respectfully.

For the quarter, AMTD posted a net profit of $156.7M, or $0.26 per share, down from the previous year’s 4Q earnings of $172M, or $0.29 per share, a decrease in earnings of nearly 9%. Total sales during the quarter managed to inch higher, climbing from $649.2M to $657.9M, a 1.3% gain.

Overall expenses for the quarter came in at $403.1M, up almost 9% from a year ago wherein expenses totaled $370.5M. On average, analysts within the industry were looking for the financial trading company to post a quarterly profit of $0.22 per share on total revenues of $630.5M.

Shares of TD Ameritrade traded lower throughout the October 27 trading day. By the sound of the closing bell, the stock was down $0.14, or 0.7%, to finish at $19.34 per share. In the past 52 weeks, AMTD shares have been trading in a range between $9.34 and $20.93 per share.

Wynn Resorts Ltd. (WYNN), which operates some of the most elaborate casinos in the world, made it known before the opening bell on October 27 that the company’s profits dipped over last year’s results, as patrons continued to gamble less during the recession. Although the casino operator has seen improvements in room, food and entertainment revenues, gamblers are still keeping a close eye on their spending.

For the 3Q, Wynn posted a net profit of $34.2M, or $0.28 per share, down more than 33% from last year’s earnings of $51.2M, or $0.49 per share. Revenues during the quarter advanced marginally, increasing from $769.2M to $773.1M.

Expenses were the downfall for the company’s quarterly performance, as costs increased to $693.6M, along with higher promotion expenses, which jumped from $57.9M a year ago to $63.8M, an increase of more than 10%.

Analysts, on average, were looking for Wynn Resorts to post a quarterly profit of $0.15 on total revenues of $743.1M.

Despite results coming in ahead of market expectations, shares of WYNN tumbled in Tuesday’s trading, falling 11%, or $6.94, to end the session at $55.96 per share. The company’s stock has traded within a broad range over the past year, reaching a high of $74.90 per share, while dipping as low as $14.50 per share.

Having reached a yearly high of $82 a barrel last week, the price of crude is hovering near the $80 mark, following Monday’s decline of $1.82 per barrel. At the end of the trading session, the price for a barrel of light, sweet crude for December delivery added $0.87 to settle at $79.55.

In additional NYMEX trading, heating oil added $0.0216 to $2.0523 a gallon, while gasoline for November delivery advanced $0.0367 to $2.0705 a gallon. Natural gas for November delivery increased $0.044 to $4.557 per 1,000 cubic feet.

Within the Forex markets, the U.S. Dollar was mixed versus the major currencies of the world on October 27, as volatility in the equity markets added a little bit of strength to the greenback. By late afternoon, the 16-nation Euro was valued at $1.4794, down from last night’s price of $1.4859. On Monday, the Euro reached a 14-month high versus the Dollar, pricing out at $1.5061.

In other currency trading, the British pound advanced on the Dollar, buying $1.6371, up from the previous session of $1.6303. The greenback also retreated against the Japanese yen, falling from 92.21 late last night to 91.82.

Treasury prices advanced during Tuesday’s session despite the markets trading higher and the government preparing to offer $44B worth of 2-year notes. Additionally, the government is set to offer $28B in 1-year notes as part of a record $123B in treasuries offered throughout the week. Wednesday will see $41B in 5-year notes, while Thursday has $31B in 7-year notes being offered.

By the close of trading on October 27, the benchmark 10-year note advanced 29/32 to 101 14/32, while yielding 3.45%, down 0.10% from the previous day. Meanwhile, the longer maturing 30-year note added 1 13/32 to 103 18/32, as its yield slipped 0.08% to 4.28%. Lastly, the heavily auctioned 2-year note inched higher as well, gaining 6/32 to 100 4/32, while its yield dipped to 0.92%, down from Monday’s rate of 1.02%.

With the October 27 session in the books, the Dow Jones Industrial average added 14.21 points, or 0.1%, to end at 9,882.17, while the broader market indicators concluded the day mixed.

The S&P 500 index slipped 3.55 points, or 0.3%, to finish the session at 1,063.40, while the tech-heavy NASDAQ composite index dropped 25.76 points, or 1.2%, to conclude the day at 2,116.09.

2009 Better Trades Article

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BRIAN MULLIN