February 12, 2009

Better Trades US News

The markets rebounded off their lows of the day by the close as the markets tried to respond positively to several economic reports that came in better than expected, yet still showed weakness within our economy.

In a release from the Labor Department, the government agency confirmed that the number of initial claims for the week ending February 7, the number declined to 623,000 filings, versus the previous week’s reading of 631,000, which was the highest since 1982. Albeit better than the week before, today’s number still came in higher than the 610,000 economists had predicted.

For those continuing to receive unemployment benefits that number increased week-to-week, from 4.78 million to 4.81 million. Add to that an additional 1.5 million receiving benefits under the extended compensation program that number swells to 6.3 million out-of-work people. A year ago, that number stood at only 2.7 million.

A positive report from the Commerce Department this morning revealed that retail sales for January increased 1%, bucking a six-month trend of negative sales growth. Today’s reading marks the largest increase within the sector for the past 14 months.

Analysts were looking for a decline in sales of 0.8% for the month. Additionally, December’s reading was revised even lower than previously posted, a drop in sales of 3%, its worst holiday sales season since 1969.

Excluding the sale of automobiles and their related parts, overall sales for the month advanced 0.9%, still outpacing economists’ projections of a 0.5% decline. Despite a positive monthly report, retail sales are down nearly 10% from January 2008.

RealtyTrac, a leading research company within the real estate industry, announced this morning that the number of foreclosures in January declined 10% from December’s reading to come in at 274,000 notices. Although last month’s number was lower, month-over-month, the total number of foreclosures is up more than 18% from January 2008.

Looking further into the numbers, RealtyTrac stated that more than 2 million homeowners faced foreclosure last year, approximately 16,700 foreclosures per month. Some 67,000 properties were repossessed in January alone.

The final bit of economic news released today was also from the Commerce Department, which acknowledged that in respect to the current economic state, businesses reduced their inventories by 1.3% in December, the largest decrease in more than 7 years, due to the lackluster holiday sales season.

Today’s reading was greater than the 0.9% decline economists’ were expecting and marked the largest decrease in inventories since a 1.5% reduction in October 2001. It also signaled the fourth straight months that businesses have cut their merchandise supplies. With companies reducing their stockpiles and sales dwindling, these events could potentially trigger more layoffs and cut into production even further.

Oil continued its downward trek once again, falling near multiyear lows that were reached during January. By the end of trading, the price for a barrel of light, sweet crude for March delivery dropped $1.96 to settle at $33.98. Oil currently stands just 4% higher than the $32.70 a barrel posted last month.

Traders within the bond markets saw the government debt prices end the day mixed as investors ponder the overall affected of the newly agreed upon stimulus package. By the end of the trading session, the benchmark 10-year note fell 12/32 to 109 6/32, with its yield climbing to 2.79%, up from yesterday’s 2.76%.

Meanwhile, the 30-year note, following a $14B sale of 30-year notes, plunged 1 14/32 to 117 28/32 as its yield advanced to 3.52%, up from Wednesday’s 3.45%, while the 2-year increased marginally, up 1/32 to 99 31/32 while yielding 0.90%.

In the Forex markets, the U.S. Dollar traded higher against the major European currencies as investors looked for the safety of the greenback. By late afternoon, the 16-nation Euro was valued at $1.2777, down from last night’s price of $1.2916, while the British pound was lower as well, buying $1.4192, down from late Wednesday’s price of $1.4394.

In other trading, the greenback traded higher versus the Japanese yen as well, buying 90.56, up from 90.07, while the price of gold slipped to $943.25 per troy ounce, down from the previous day’s price of $944.50.

By the sound of the closing bell, the Dow Jones Industrial average dropped by 6.77 points, or 0.09%, to end the session at 7,932.76, after declining by as many as 245 points, while the broader market indicators concluded the session mixed.

At the conclusion, the S&P 500 index was up marginally, inching higher by 1.45 points, or 0.17%, to finish at 835.20, while the NASDAQ composite index gained 11.21 points, or 0.73%, to close out at 1,541.71.

For the final trading day of the week, the Michigan Sentiment report will be released mid-morning, while two well-known companies, Abercrombie (ANF) and PepsiCo (PEP), will post quarterly earnings results before the opening bell. Don’t count on any of these events to be big market movers.

2009 Better Trades Article

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BRIAN MULLIN