July 1, 2009

Consumer Confidence Drops

Throughout the final trading day in June, the major indices could not build on the previous session’s gains, as investors were disgruntled by disappointing economic news. The markets are on pace to post their best quarterly performance in more than a decade, with the S&P 500 up more than 16% since the start of the quarter.

In a relatively quiet economic day, the Standard & Poor's/Case-Shiller index revealed that home prices in 20 major metropolitan areas plunged more than 18% in April, marking the third consecutive month in which the outcome did not reach record levels. The 20-city index is currently more than 32% lower than the peak prices set back in the 2Q of 2006.

The Conference Board, a private research group, made it known early this morning that the Consumer Confidence index showed a reading of 49.3 in June, down from its reading of 54.8 in May. June’s decline follows two straight increases in the index, which was propelled by the market’s overall rise.

With consumers worried about job security and spending habits, the Present Situation Index, which measures the current sentiment regarding the economy, fell to 24.8 from 29.7. Meanwhile, the Expectations Index, consumers’ outlook for the next six months, retreated to 65.5, down from the previous month’s reading of 71.5.

On a side note, the Labor Department announced this morning that the unemployment rate advanced in all 372 major metropolitan areas throughout the U.S. for the fifth consecutive month in May. Leading the way was Kokomo, Indiana, which posted an 11.7% jump in unemployment from last year’s results. Kokomo currently has an 18.8% unemployment rate. Massive layoffs within the transportation equipment manufacturing industry led to the rate surge.

Schnitzer Steel Industries, Inc. (SCHN), which collects, processes and recycles metals by operating one of the largest metals recycling businesses in the U.S., confirmed early Tuesday morning that the company recorded a loss during the 3Q in large part to a sharp decline in volume and selling prices. For the recent quarter, Schnitzer posted a loss of $1.5M, or $0.05 per share, versus a profit of $61.7M, or $2.14 per share from a year ago.

Quarterly sales for SCHN plummeted during the period, falling from $972.1M to $411.8M, a decrease in revenues of more than 57%. Sales from the company’s metal recycling business dropped nearly 61% to $318M, while the auto parts unit witnessed revenues slip nearly 35% to $66M. Lastly, sales from Schnitzer’s steel manufacturing segment plunged more than 72% to $47M during the quarter.

By the sound of the closing bell, shares of SCHN were down more than 12%, losing $7.35 to end the session at $52.86 per share. Over the past year, Schnitzer’s stock has traded within a range between $16.45 and $118.55 per share.

Reporting before the opening bell, Park Electrochemical Corp. (PKE) affirmed that the company’s earnings during the 1Q plummeted, as a result of a sharp decrease in sales compared to last year’s results.

Primarily engaged in the design, production and marketing of advanced electronic materials used to fabricate complex multilayer printed circuit boards, semiconductor packages and other electronic interconnection systems, PKE recorded net income of $3.1M, or $0.15 per share, in sharp contrast to the previous year’s earnings of $7.6M, or $0.37 per share, a decrease in income of more than 59%.

For the quarter, gross sales plunged from $59.8M to $36.7M, a decrease in revenues of nearly 39% year-over-year. On average, analysts were looking for the maker of printed circuit materials to record quarterly earnings of $0.19 per share on total revenues of $36.21M.

In lieu of a dismal earnings report, shares of Park Electrochemical ended the session in the red, losing $0.22, or 1.0%, to end the final trading day in June at $21.53 per share.

Looking into the crude markets, the price of oil declined during the June 30 session, despite the value of the U.S. Dollar gaining ground. By the close of trading, the price for a barrel of light, sweet crude for August delivery lost $1.60 to settle at $69.89 a barrel, but not before reaching an eight-month high of $73.38.

In additional NYMEX trading, gasoline for July delivery slipped $0.0386 to $1.8972 a gallon, while heating oil fell $0.0655 to $1.718. Natural gas for July delivery receded $0.11 to $3.835 per 1,000 cubic feet.

Despite the overall decline in the equity markets on June 30, the demand for government-backed bonds slipped in trading by the closing bell. At the end of the day, the benchmark 10-year note was lower by 13/32 to 96 21/32 with a yield of 3.52%. Meanwhile, the 30-year note slipped as well, falling 20/32 to 99 24/32 with a yield of 4.32%, while the 2-year note was down 2/32 to 100 while yielding 1.11%.

Within the Forex markets, the value of the U.S. Dollar advanced in trading, as the 16-nation Euro declined versus the greenback, buying $1.4025, down from last night’s price of $1.4086. Additionally, the British pound lost value against the Dollar as well, buying $1.6462, down from Monday’s price of $1.6573.

In other Forex trading, the greenback increased in price against the Japanese yen, climbing from 95.99 to 96.34, as well as advancing versus the Swiss franc, buying 1.0863, up from yesterday’s price of 1.0818. Finally, the Dollar gained ground against the Canadian dollar as well, buying 1.1622, up from the 1.1566 price the day before.

With the final trading session of the 2Q concluding, the Dow Jones Industrial average declined by 82.38 points, or 1.0%, to end the day at 8,447.00, while the broader market indicators finished the day in the red as well.

The S&P 500 index slipped 7.95 points, or 0.9%, to conclude the session at 919.30, while the NASDAQ composite index fell 9.02 points, or 0.5%, to finish the day at 1,835.04.

2009 Better Trades Article

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BRIAN MULLIN