July 9, 2009

The Markets Continued Their Downward Trek

The markets continued their downward trek, as investors remain cautious about betting on an upward trend amidst the continuously weakening demand for energy commodities. With no economic news and the earnings season set to kick off tomorrow, the markets had no news to regain a positive sentiment.

There was no major economic reports released today, there was however, a report revealed by the American Bankers Association (ABA), which showed that consumer loan delinquencies surged to a record high in the 1Q.

"The number one driver of delinquencies is job loss. When people lose their jobs, they can't pay their bills. Delinquencies won't improve until companies start hiring again and we see a significant economic turnaround," affirmed James Chessen, the ABA's chief economist.

For the quarter, the delinquency rate surged to 3.23% on closed-end installment loans. The previous record on closed-ended loans was 3.22% set in the final quarter of 2008. Meanwhile, credit card delinquencies advanced to 4.75% in the most recent period, up from the 4Q rate of 4.52%. The record rate on credit cards currently sits at 4.81%, which was established in the 2Q of 2005.

In a light docket of company earnings during the July 7 trading session, Greenbrier Companies Inc. (GBX) announced early Tuesday morning that the company booked a net loss for the 3Q on extensive impairment charges. As a leading supplier of transportation equipment and services to the railroad and related industries, Greenbrier Cos witnessed a net loss of $50.5M, or $3.00 per share, in sharp contrast to the previous year’s profit of $8.1M, or $0.49 per share.

In the meantime, quarterly sales plunged for the company, slipping from $382.1M to $244.4M, a decline in revenues of more than 36%. Prior to the company taking a one-time goodwill charge, earnings came in at $0.6M, or $0.03 per share. On average, analysts were looking for a loss of $0.05 per share on total sales of $268.7M.

Despite coming in ahead of market expectations, excluding the impairment charges, Greenbrier Cos. saw their stock lose nearly 9% in Tuesday’s trading, falling $0.61 to end the session at $6.31 per share. Over the past year, shares of GBX have ranged between $1.86 and $22.45 per share.

Also reporting before the opening bell today was International Speedway Corp. (ISCA), which made it known that the company booked a substantial loss for the 2Q, as sales and one-time charges weighed heavily on the company’s quarterly performance. With operations consisting primarily of racing events at its motorsports facilities, ISCA took a $31.7M, or $0.65 per share loss during the quarter, versus a profit of $25.97M, or $0.52 per share from a year ago.

Affecting the company’s bottom-line during the period was a $1.2M charge related to its property in Staten Island, as well as a $53.7M charge in losses from investments related to a joint venture with Motorsports Authentics LLC. Excluding one-time charges, ISCA would have posted net income of $17M, or $0.35 per share.

Quarterly revenues slipped as well, dropping from $174.9M to $152.4M, a decline in sales of nearly 13%. Analysts, on average, were looking for the motorsports themed entertainment company to record net earnings of $0.32 per share on overall revenues of $152.9M.

Forward looking, ISCA reiterated their outlook for fiscal 2009, while projecting a range of $1.80 to $2.00 per share with overall revenues coming in between $700M and $720M for the year. Analysts, in the meantime, are anticipating yearly results of $1.82 per share on total revenues of $700.3M.

As the July 7 session concludes, shares of ISCA ended the day in the green, adding $0.10, or 0.4%, to close out the session at $25.39 per share. Over the past 52 weeks, shares of International Speedway have traded as high as $42.58 per share and as low as $15.96 per share.

In the crude markets, the price of oil inched higher in Tuesday’s trading, despite a 13% decline in price of last week’s trading. After hitting an eight-month high last week above $73 per barrel, oil retreated as investors remain concerned over the recovery status of the global economy.

At the end of the trading session, the price for a barrel of light, sweet crude for August delivery slipped $1.12 to settle at $62.93 per barrel. In additional NYMEX trading, gasoline for August delivery was higher by $0.008 at $1.75 a gallon, while heating oil advanced marginally to $1.63. Natural gas for August delivery was flat at $3.49 per 1,000 cubic feet.

The U.S. Dollar traded mixed against the world’s major currencies on July 7, as investors watch as the markets and the price of crude continue to trade lower. By late afternoon, the 16-nation Euro bought $1.3927, down marginally from the previous session’s price of $1.3960. Meanwhile, the British pound slipped in value against the greenback, buying $1.6133, down from last night’s price of $1.6254.

In additional Forex trading, the Dollar bought 94.78 Japanese yen, down from the previous day’s price of 95.29. Against the Swiss franc, the Dollar bought 1.0885, up from yesterday’s price of 1.0863, while the greenback also advanced in price versus the Canadian dollar, buying 1.1655, up from 1.1621 the day before.

Looking inside the bond markets, government-backed debt securities advanced in trading today, as investors were looking to place their capital into safer investment vehicles as the major indices traded in the red. By the sound of the closing bell, the benchmark 10-year note added 18/32 to 97 12/32 while yielding 3.44%.

In the meantime, the 30-year note gained 1 2/32 to 99 8/32 with a yield of 4.29%, while the shorter 2-year note slipped 1/32 to 100 10/32 with a yield of 0.96%.

By the sound of the closing bell, the Dow Jones slipped 161.27 points, or 1.9%, to end the session at 8,163.60, while the broader market indicators concluded the day in the red as well.

The S&P 500 index dropped 17.65 points, or 2.0%, at 881.05, while the NASDAQ composite plunged 41.23 points, or 2.3%, to finish the session at 1,746.17.

2009 Better Trades Article

brought to you by

BRIAN MULLIN