March 18, 2009

Better Trades US News

The markets fluctuated for much of the trading session, following Monday’s trading, which broke a four-day surge in the markets that saw the major indices post gains of 10% or more by the end of last week. Tuesday’s session showed positive economic data that rekindled optimism from last week’s trading.

In a release from the Labor Department on Tuesday, wholesale prices (PPI) inched higher by 0.1% during February, well below the 0.4% increase economists were anticipating. February’s reading also comes in much lower than the 0.8% influx in January as a big decline in food prices offset another increase in the price of energy.

The modest gains in February were accented by a 1.3% increase in the cost of energy, marking the second straight month prices have advanced. The two-month surge comes on the heels of five consecutive months of declines in energy costs.

Meanwhile, the price of food for the month dropped 1.6%, the largest one-month decline in more than three years. On a side note, the price for computers declined 4.5%, its biggest decline in a month since January 2005.

Excluding the costs from food and energy, the core inflation rate advanced as well, moving up 0.2%, slightly higher than the 0.1% increase analyst were looking for, yet half the increase of January’s 0.4% core price rate.

Released before the opening bell, the Commerce Department revealed their findings this morning that an unexpected increase in new home construction in February baffled economists. For the month, construction jumped 22.2% from the previous month to an adjusted annual rate of 583,000 units. Economists were looking for a decline in construction, to around 450,000 units in the midst of a housing slump.

Moreover, applications for building permits increased 3% during February to annual rate of 547,000 filings, with economists looking for a rate of 500,000. Building permit applications is a key economic indicator in that it shows signs of future activity within the construction sector.

Finally, in a report from TransUnion, a credit-reporting agency, the percentage of auto loans past due, more than 60 days delinquent, jumped nearly 9% in the 4th quarter of 2008. TransUnion also stated that at the current rate, those delinquencies could reach their highest levels in more than a decade.

The rate of delinquencies jumped in the final three months of 2008 to 0.86%, up from the previous year’s 4th quarter reading of 0.79%. Analysts predict that the rate could climb as high as 1.13% by the end of 2009, which would be the highest rate on record since TransUnion began tracking the statistics more than 10 years ago.

Since the so-called start of the recession, believed to have begun in December 2007, auto loan delinquencies have jumped more than 25%, in sharp contrast to an increase in delinquencies of 10% during the 2001 recession. Economists also believe that the rate could jump an additional 15% to 16% before peaking.

In company news, FactSet Research Systems Inc. (FDS), which supplies global economic and financial data to analysts, investment bankers and other financial professionals, made it known early Tuesday morning that company’s 2Q earnings came in above analysts’ projections on higher revenues. For the period, FDS posted net income of $34.6M, or $0.71 per share, compared to last year’s tally of $29.5M, or $0.59 per share, an increase of more than 17%. Revenues advanced as well during the quarter, jumping from $140.2M to $156.5M, an increase of nearly 12%. Analysts, on average, were looking for FactSet to record earnings of $0.69 per share on overall sales of $156.54M. Looking ahead, FDS projects 3Q earnings between $0.72 and $0.74 per share, with the markets expecting $0.70 per share. By the sound of the closing bell, shares of FDS were up more than 7%, adding $3.02 to finish at $41.99 per share.

Additionally, WellCare Health Plans, Inc. (WCG), which provides managed care services targeted exclusively to government-sponsored healthcare programs, focusing on Medicaid and Medicare, confirmed Tuesday morning that the company posted a loss during the 4Q due to hefty impairment charges. For the recent period, WCG booked a loss of $31.09M, or $0.75 per share, versus a profit of $59.24M, or $1.41 per share a year ago. During the quarter, the company endured charges totaling more than $78M. Meanwhile, overall sales jumped more than 14%, increasing from $1.4B to $1.6B. On average, analysts were looking for WCG to post quarterly earnings of $0.65 per share on $1.67B in sales. Analysts usually exclude one-time charges. On the day, shares of WellCare surged, adding $0.95, or 11.8%, to close at $8.99 per share.

Lastly, Retalix Ltd. (RTLX), which provides integrated enterprise-wide software solutions for the retail food industry worldwide, including supermarkets, convenience stores and restaurants, acknowledged this morning that the company’s profits increased year-over-year despite a decline in overall sales. For the 4Q, Retalix recorded net income of $2M, or $0.10 per share, versus a loss of $1.73M, or $0.09 per share from a year ago. Meanwhile, revenues slipped from $55.18M to $52.18M, a decline in sales of more than 5%. Even though the company managed to come out of the red, compared to last year, shares of RTLX were down in trading, losing 2.5%, or $0.20, to close the session at $7.93 per share.

As global financial concerns resonate within investors throughout the oil markets, the price of crude continues to increase, but may face significant downward selling pressures in the near future. By the sound of the closing bell, the price for a barrel of light, sweet crude for April delivery added $1.81 to settle at $49.16 a barrel. "At the moment, it's a holding pattern. There are (is) no major news that justify (justifies) movement in the price. The international economic environment remains very weak," claimed David Moore, commodity strategist at Commonwealth Bank of Australia.

In additional NYMEX trading, gasoline for April delivery added $0.0565 to $1.4238 a gallon, while heating oil gained $0.0617 to $1.2747 a gallon. Natural gas for April delivery was lower by $0.038 at $3.85 per 1,000 cubic feet.

Speculation arose Tuesday within the Treasury markets as investors are looking towards the Fed in anticipation of the government agency purchasing long-term debt in order to help stimulate the economy, while bringing down interest rates. By the conclusion of trading, with the markets well into the green, the benchmark 10-year note was down 13/32 to 97 26/32 as its yield advancing to 3.00% from yesterday’s 2.96%. Meanwhile, the 30-year note declined as well, falling 26/32 to 94 18/32, while yielding 3.80%. Finally, the 2-year note inched lower by 2/32 to 99 22/32 with a yield of 1.04%.

In the Forex markets, the Dollar was mixed in trading as economic news helped the Dollar advance against other currencies. By late afternoon, the 16-nation Euro increased against the greenback, buying $1.3005, up from Monday’s price of $1.2981. Meanwhile, the British pound was down versus the Dollar, buying $1.4026, down from yesterday’s price of $1.4085.

In other currency trading Tuesday, the greenback was slightly higher against the Japanese yen, buying 98.46, up from 98.27, while the Dollar edged up to 1.2703 Canadian dollars from 1.2688, and declining to 1.1831 Swiss francs from 1.1863.

By the close of the markets today, the Dow Jones Industrial average was up 178.73 points or 2.48%, to end the session at 7,395.70, while the broader market indicators concluded the session in the green as well. The S&P 500 index gained 24.20 points, or 3.21%, to finish at 778.10, while the NASDAQ composite added 58.09 points, or 4.14%, to close at 1,462.11.

2009 Better Trades Article

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BRIAN MULLIN