February 24, 2009

Better Trades US News

Following Monday’s massive sell-off in which the markets lost more than 3% each, Tuesday’s session showed more resolve as Fed Chairman Ben Bernanke instilled some positive words to investors, citing that the country would exit from its current recession by the end of this year.

In a semiannual report to the Senate Banking Committee, Bernanke was quoted as saying that the economy was likely to contract for the first six months of the year, but that “there is a reasonable prospect” that the recession would end this year. With that, the markets started and ended the day trading in positive ground.

Economically speaking, the Standard & Poor’s/Case-Shiller report showed that home prices plummeted in December and in the 4Q. The National Home Price index fell 18.2% during the quarter, its largest drop ever in the 21-year history of the index. During December, the index fell 18.5% for the 20-city index, and 19.2% for the 10-city index. Since the middle of 2006, the 20-city index has seen prices plunge 27%, while the 10-city index prices have fallen more than 28%.

In a report released by the Conference Board this morning, Americans remain distraught over the current economic condition, as the consumer confidence index posted its lowest reading since the study began in 1967. With a reading of 25 in February, the index dropped more than 12 points from January’s reading of 37.4, along with coming in well below economists’ expected reading of 35.5.

In a related report, the Present Situation index retreated as well for the month, falling from 29.7 to a reading of 21.2. In addition, the Expectations’ index plummeted from a reading of 42.5 in January to 27.5 in February.

With the unemployment rate now at 7.6%, its highest in more than 16 years, those who are saying that jobs are hard to come by increased to 47.8% of those surveyed, up from January’s 41.1%. Additionally, those anticipating that the job market will shrink in the coming months jumped from 36.9% to 47.3%.

In company news, one of the largest home improvement retailers in the world, Home Depot (HD) announced before the opening bell that the company posted at 4Q loss of $54M, or $0.03 per share, compared to a profit of $671M, or $0.40 per share from a year ago. Excluding closing costs, HD would have posted a profit of $0.19 per share. As the economy deteriorates, HD sales did as well, falling from $17.66B to $14.61B, a decrease of more than 17%. Analysts, in the meantime, were looking for Home Depot to post quarterly earnings of $0.15 per share on sales of $14.67B. Despite a sour earnings report, shares of Home Depot traded higher on the day, adding $1.96, or 10.5%, to close at $20.67 per share.

As one of the leading operators of full-line department stores in the U.S., Macy’s Inc. (M) acknowledged this morning that the company’s performance for the 4Q came in well below last year’s totals as consumers continue to curb their spending. For the period, Macy’s recorded a profit of $310M, or $0.73 per share, versus a profit of $750M, or $1.73 per share from a year ago, a decline in earnings of nearly 59%. Sales were also off, falling nearly 8%, from $8.59B to $7.93B. Quarterly results included charges totaling $58M, and if excluded, Macy’s would have posted earnings of $1.06 per share. On average, analysts were looking for $1.01 per share on sales of $7.92B. Coming in ahead of expectations, shares of Macy’s were up 12%, adding $0.89 to close at $8.29 per share.

Lastly, engaged in the manufacturing and marketing of an extensive line of processed food products throughout the world, H. J. Heinz Co. (HNZ) made it known before the opening bell Tuesday that the company’s profits increased year-over-year for the 3Q on the backs of increased selling prices. Posting a profit of $242.3M, or $0.76 per share, Heinz recorded an 11% increase over last year’s earnings of $218.5M, or $0.68 per share. Revenues, however, declined during the period, falling from $2.61B to $2.41B, more than a 7% drop. Meanwhile, analysts were looking for the maker of Heinz ketchup and Ore-Ida potatoes to post earnings of $0.64 per share on sales of $2.55B. The company also reaffirmed 2009 guidance and is expecting to post yearly earnings between $2.87 and $2.91 per share. By the close, shares of HNZ were up $1.80, or 5.6%, to finish at $33.77 per share.

With investors back in the markets today, despite disheartening news on consumer confidence and the housing sector, the crude markets inched higher by the close today on the heels of the previous session’s monumental losses. By the end of trading, the price for a barrel of light, sweet crude for April delivery advanced $1.52 to settle at $39.96 a barrel.

In additional NYMEX trading, gasoline futures gained $0.04 to $1.0837 a gallon, while heating oil added $0.033 to $1.2082 a gallon. Natural gas for March delivery advanced $0.14 to $4.236 per 1,000 cubic feet.

In Forex trading, the U.S. Dollar was mixed against the major players today as investors digested economic data released earlier in the session. By late afternoon, the 16-nation Euro was higher against the greenback, buying $1.2852, up from last night’s price of $1.2713, while the British pound advanced in trading, buying $1.4491, up from Monday’s price of $1.4486.

In additional currency trading, the Dollar advanced against the Japanese yen, buying 96.89 up from yesterday’s 94.60, along with trading lower versus the Swiss franc, down from 1.1671 to 1.1603. The greenback also slipped against the Canadian dollar, falling from 1.2516 to 1.2416.

With the Treasury Department set to auction off more than $40B worth of debt securities today, and investors jumping back into the equity markets, the bond markets were mixed heading into the close. At the conclusion of trade, the benchmark 10-year note was lower in trade, falling 14/32 to 99 16/32 with its yield increasing to 2.80% from yesterday’s 2.75%. Meanwhile, the 30-year note added 5/32 to 99 31/32 with its yield slipping from 3.51% to 3.50%. Finally, the 2-year note was down slightly, falling 3/32 to 99 25/32 with its yield advancing to 0.98%, up from Monday’s 0.92%.

By the sound of the closing bell, the Dow Jones Industrial average was up more than 3.3%, adding 236.16 points to close out at 7,285.39, after yesterday’s 3.4% loss. Meanwhile, the broader market indicators concluded the session in positive territory as well, with the S&P leading the way in percentage gains.

As for the S&P 500, it advanced by 29.80 points, or 4%, to finish at 773.15, erasing yesterday’s loss of 3.5%, while the tech-heavy NASDAQ composite index jumped more than 3.9%, gaining 54.11 points to end the session at 1,441.83, eradicating the previous session’s loss of 3.7%.

2009 Better Trades Article

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BRIAN MULLIN