February 17, 2009

Better Trades US News

Coming off a down week, the markets began the shortened trading week by plummeting more than 3.5% each by the close as more disheartening economic reports and below expected earnings reports, helped solidify the selling sentiment in Tuesday’s session.

The late-day announcement of the signing of the stimulus package by President Obama had little effect on the markets’ direction leading into the close. Signed into law, the recovery package will lead off with a $50B proposal to help homeowners stave off foreclosure. Today’s news signals the largest spending program since post-World War II.

Today’s trading saw several economic reports that showed that the nation’s economy remains stagnant as the New York Empire State Manufacturing index fell to its lowest reading on record. For February, the index revealed a reading of -34.65, down from January’s reading of -22.20, marking its lowest level since the index was instituted back in July 2001.

The report also revealed that the region’s employment gauge slipped to 39.08, down from January’s reading of 26.14 marking the lowest reading since November 2001. Additionally, a barometer within the survey showed that new orders for the manufacturing sector plunged to an all-time low with a reading of -30.51, down from January’s reading of -22.81.

In a release from the Treasury Department, the government agency said that the net inflow of capital into the U.S. increased in December, up nearly 21% from November’s reading. For December, more than $74B worth of capital came into the U.S., up from the previous month’s influx of $61.3B.

Moreover, foreign investors purchased nearly $15B worth of Treasury notes and bonds during December, an about face from November’s foreign investors selling of U.S. assets totaling $25.81B. With the new stimulus package taking effect today, the Treasury is preparing to issue some $2 trillion worth of debt securities this year in order to back the rescue efforts.

The report went on to reveal that foreign investors and governments bought a grand total of $34.8B worth of long-term securities, which helped the U.S. finance its trade deficit, which currently stands at $677.1B. The numbers showed that China remains the main holder of U.S. securities, with more than $696B held, while Japan with $578B and the U.K., with $355B, round out the top three.

Announced before the markets opening, the world’s largest retailer, Wal-Mart Stores Inc. (WMT) confirmed that the company’s profits for the 4Q slipped over last year’s performance as exchange rates and a settled lawsuit cut into earnings.

For the period, WMT posted a profit of $3.79B, or $0.96 per share, down more than 7% from last year’s earnings of $4.1B, or $1.02 per share. Revenues increased year-over-year, from $107.34B to $109.12B. Analysts were looking for earnings of $0.99 per share on total sales of $109.1B. On the day, shares of WMT were up $1.71, or 3.7%, to close at $48.24 per share.

An independent petroleum refiner and maker, Holly Corp. (HOC), also announced their company’s quarterly results, as earnings for the 4Q advanced as profit margins within the refining industry improved. For the quarter, HOC posted net earnings of $50.6M, or $1.01 per share, versus last year’s profit of $49.8M, or $0.90 per share.

Adversely, overall revenues for the company plunged 36%, from $1.44B a year ago to $923.9M. In the meantime, analysts were looking for Holly Corp. to post earnings of $0.60 per share on total sales of $1.1B. Despite an advance in profits year-over-year, shares of HOC were down more than 2% at the close, losing $0.57 to trade at $25.16 per share.

Posting a greater loss over last year’s loss, biopharmaceutical company GTx Inc. (GTXI), attributes their 4Q decline to increased costs and personnel expenses as the firm’s leading drug candidate, Toremifene, awaits regulatory approval. Toremifene is used for the prevention of bone fractures in men with prostate cancer on androgen deprivation therapy.

For the recent period, GTXI posted a loss of $13.9M, or $0.38 per share, versus a loss of $12.8M, or $0.36 per share from a year ago. Although the company’s earnings decreased, overall sales for the quarter increased, climbing from $1.9M to $3M, an advance in sales of nearly 58%. On average, analysts were looking for the drug company to post a loss of $0.39 per share on total revenues of $3M. At the close, shares of GTXI were down more than 4%, slipping $0.49 to trade at $10.00 per share.

The oil markets retreated today, as dire economic news strengthened concerns that the economy will remain in a recession for time. With demand continuing to wane, the outlook for the year remains low. By the close of trading today, the price for a barrel of light, sweet crude for March delivery slipped $2.58 to settle at $34.93 a barrel.

In additional NYMEX trading, gasoline futures retreated by $0.0945 to $1.1118 a gallon. Heating oil dropped $0.1136 to $1.1864 a gallon, while natural gas for March delivery plunged $0.249 to $4.203 per 1,000 cubic feet.

After the close of the bond markets on Monday, Tuesday’s trading session brought buyers back in the safety of government-backed securities as the equity markets all took a tumble in today’s trade.

By the close, the benchmark 10-year note jumped 2 5/32 to 100 29/32 as its yield slipped to 2.64%, down from Friday’s close of 2.90%. Meanwhile, the 30-year note surged as well, adding 3 22/32 to 100 17/32 as its yield fell from 3.69% to 3.47%. Finally, the 2-year note inched higher, gaining 7/32 to 100 1/32 as its yield slipped to 0.85%, down from last week’s close at 0.97%.

Following a report released that caused some concerns with investors, economists from Moody’s released their findings that the banks throughout Europe, mainly in Austria, Italy, France, Germany, Belgium and Sweden, have been exposed to severe debt that could weigh heavily on many company’s ability to post positive earnings in the coming months.

By late afternoon, the 16-nation Euro was trading at $1.2615, down from Friday’s price of $1.2902 against the U.S. Dollar, but not before touching $1.2561, a new three-month low. Furthermore, the British pound also retreated in value against the greenback, buying $1.4266, down from last week’s price of $1.4404.

In additional trading on the NYMEX, the Dollar advanced in value against the Japanese yen, buying 92.42, up from Friday’s price of 91.93, while also gaining on the Canadian dollar, priced at 1.2644, up from 1.2356. The Dollar also managed to increase versus the Swiss franc as well, buying 1.1695 from 1.1594 late last week.

By the sound of the closing bell, the Dow Jones Industrial average dropped 297.81 points, or 3.79%, to end the day at 7,552.60, with the broader market indicators concluding the session deep in the red as well.

At the close, the S&P 500 index fell 37.70 points, or 4.56%, to finish at 789.17, its lowest mark in more than three months, while the NASDAQ composite index retreated by 63.70 points, or 4.15%, to close out at 1,470.66.

Wednesday’s session will contain numerous economic reports, and several well-known companies posting their quarterly results. Included are Comcast (CMCSA), Deere (DE), Host Hotels (HST), OfficeMax (OMX), Goodyear Tire (GT) and Suntech Power (STP), all reporting before the opening and with the potential to sway the market’s direction.

2009 Better Trades Article

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BRIAN MULLIN