Dow Jones 30: Industrials Index

[setravis]

Monday, February 7, 2011...

Overnight U.S. Stock News

•   March S&Ps this morning are trading up +4.10 points and posted a fresh contract high in overnight trade. The US stock market last Friday gyrated on both sides of unchanged until late morning when it moved higher into the close and settled with modest gains after the Jan US unemployment rate fell to a 1-3/4 year low: Dow +0.25%, S&P 500 +0.29%, Nasdaq Composite +0.56%. The S&P 500 climbed to a 2-1/3 year high and the Dow posted a 2-1/2 year high.

                Bullish factors included (1) the unexpected decline in the Jan US unemployment rate to a 1-3/4 year low (-0.4 to 9.0% versus expectations of +0.1 to 9.5%), (2) the larger-than-expected increase in Jan manufacturing payrolls (+49,000 versus expectations of +10,000), (3) the statement from the US Labor Department that said bad weather prevented 886,000 Americans from going to work the week of the Labor Department's Jan monthly job survey, compared with an average of 282,000 over the past 5 Januarys, which suggest s that winter storms caused much of the weakness in the Jan payrolls report, and (4) the action by JPMorgan Chase to raise its 2011 S&P 500 profit forecast to $97.50 a share from $94.00, citing improved prospects for technology, energy and financial companies.
   
                Bearish factors for stocks included (1) the much smaller-than-expected growth in Jan nonfarm payrolls (+36,000 versus expectations of +143,000), although the US Labor Department said much of the weakness was weather related, (2) interest rate concerns after the 10-year T-note yield surged to a 9-month high of 3.659%, and (3) concern that riots in Egypt may intensify over the weekend, which prompted profit taking and long liquidation in stocks.


•   InterDigital (IDCC) rose 4.2% in European trading after Barron's predicted in its "The Trader" column that the designer of mobile-phone technology may rise as much as 15% as demand increases for its network-maximizing technology and as it moves to a new business model.


•   Bank of America (BAC) gained 1.9% in pre-market trading after the biggest US lender by assets said it created a unit to modify delinquent mortgages, handle foreclosures and resolve investor disputes over faulty loans originated by the company.

[setravis]

Dow Jones Industrial Average...

The Dow broke resistance at 12000, while rising Twiggs Money Flow (21-day) indicates buying pressure. Expect a test of 12600*. Reversal below 11000 is most unlikely, but would signal a primary reversal.

* Target calculation: 11200 + ( 11200 - 9800 ) = 12600

[setravis]

Tuesday, February 8, 2011...

Overnight U.S. Stock News

•   March S&Ps this morning are trading little changed, up +0.20 of a point. The US stock market yesterday moved higher from the opening and finished moderately higher on strong company earnings results and reduced tensions in Egypt: Dow +0.57%, S&P 500 +0.62%, Nasdaq Composite +0.53%. The S&P 500 and the Dow posted 2-1/2 year highs and the Nasdaq soared to a 9-3/4 year high.

                Bullish factors included (1) strong M&A activity as Bloomberg data shows global mergers and acquisitions increased to $688.29 billion in Q4, the highest in 2 years, (2) strong company sales forecasts as Bloomberg data shows 71% of S&P 500 Index companies last quarter reported more revenue than analysts estimates, the largest proportion since 2006, (3) the action by UBS AG to boost their year-end forecast for the S&P 500 Index this year to 1,425, up from a previous forecast of 1,325, saying the outlook for the economy and earnings has improved, (4) the larger-than-expected increase in Dec US consumer credit (+$6.1 billion versus expectations of +$2.0 billion), which increases the chances that consumer spending will continue to expand, and (5) carry-over support from strength in European and Asian equity markets as tensions subsided in Egypt after Egyptian Vice President Suleiman promised a draft list within a month of constitutional changes needed for free elections.
   
                Bearish factors for stocks included (1) comments from Dallas Fed President Fisher who said he's unlikely to support further monetary accommodation and that he will vote against any new quantitative easing beyond the $600 billion QE2 program of Treasury purchases, and (2) interest rate concerns after the 10-year T-note yield climbed to a 9-month high of 3.693%.


•   Principal Financial Group (PFG) fell 2.2% in European trading after the company posted Q4 operating earnings of 66 cents per share, below analysts' estimates of 68 cents.

[setravis]

Wednesday, February 9, 2011...

Overnight U.S. Stock News

•   March S&Ps this morning are trading down -4.20 points. The US stock market yesterday crept higher the entire day and finished on its high due to increased economic optimism: Dow +0.59%, S&P 500 +0.42%, Nasdaq Composite +0.47%. The S&P 500 and the Dow posted 2-1/2 year highs and the Nasdaq limbed to a 9-3/4 year high.

                Bullish factors included (1) the larger-than-expected increase in the NFIB small business optimism index (+1.5 to a 3-year high of 94.1 versus expectations of +1.4 to 94.0), (2) strength in homebuilders on optimism that a growing US economy will prompt a pick up in home sales this spring, (3) a rally in bank stocks after RBC Capital Markets predicted that regulators this quarter will enable US banks that took government stress tests 2 years ago to receive Fed clearance to increase their dividends, and (4) comments from Richmond Fed President Lacker who said that higher consumer spending, along with business investment in equipment and soft ware, point to US growth this year of "pretty close to 4%."

   Bearish factors for stocks included (1) carry-over weakness from China's action to raise interest rates for the third time since mid-Oct, which may slow China's economic growth and the global economy as well, (2) weakness in raw-materials and energy producers on concern Chinese demand for commodities will wane as it tightens monetary policy further, (3) the report from the US Labor Department that said Dec US job openings fell by -139,000 to 3.06 million, the lowest in 3 months, which signals a sustained labor-market recovery will be slow to develop, and (4) heightened interest rate concerns after the yield on the 10-year T-note rose to a 9-1/4 month high of 3.733%.


•   Walt Disney (DIS) rallied 3.6% in European trading as the company late yesterday reported Q1 net income of 68 cents a share, exceeding analysts' estimates of 56 cents after an increase in attendance at its resorts and advertising sales growth at ESPN.


•   3M Co. (MMM) gained 1.5% in pre-market trading after the company approved a stock-repurchase plan of as much as $7 billion and increased its quarterly dividend by 5%.

[setravis]

Thursday, February 10, 2011...

Overnight U.S. Stock News

•   March S&Ps this morning are trading down -7.70 points. The US stock market yesterday settled mixed as positive earnings results offset comments from Fed Chairman Bernanke that unemployment is likely to remain elevated: Dow +0.06%, S&P 500 -0.28%, Nasdaq Composite -0.29%. The Dow posted a 2-1/2 year high and the Nasdaq rose to a 9-3/4 year high.

                Bearish factors included (1) comments from Fed Chairman Bernanke who said the US unemployment rate is likely to remain high "for some time," which may keep the US economy from expanding at its full potential, (2) weakness in energy and raw materials producers on concern China's demand for commodities will decline as it keeps increasing interest rates, and (3) data from the MBA that showed the average rate for a 30-year fixed mortgage rose to a 10-month high of 5.13% last week, which may further depress US housing activity and overall economic growth.

   
                Bullish factors for stocks included (1) comments from Treasury Secretary Geithner who said the US economic "recovery is accelerating" and that the US is growing twice as fast as Europe or Japan, (2) continued strong company earnings results with 74% of the 319 S&P 500 companies that have reported quarterly results since Jan 10 have beaten market expectations, and (3) reduced interest rate concerns after the yield on the 10-year T-note fell 12 bp from a 9-1/2 month high yield.


•   Cisco Systems (CSCO) tumbled 7.9% in pre-market trading after the company forecast Q3 earnings of as little as 38 cents a share, below analysts' estimates of 40 cents.

[setravis]

Friday, February 11, 2011...

Overnight U.S. Stock News

•   March S&Ps this morning are trading down -5,80 points. The US stock market yesterday opened lower on renewed European sovereign-debt concerns but recovered and settle mixed on better than expected US jobless claims along with speculation that Egyptian President Mubarak would soon step down: Dow -0.09%, S&P 500 +0.07%, Nasdaq Composite +0.05%.

                Bearish factors included (1) carry-over weakness from a fall in European socks on renewed sovereign-debt risk concerns after the yield on the 10-year Portuguese bond climbed to its highest since the introduction of the euro in 1999, (2) valuation concerns as the current rally has pushed the S&P 500 to about 16 times the reported operating earnings of its companies, near the highest in 7 months, and (3) weakness in technology stocks led by a plunge in Cisco which fell after it said gross margins in its fiscal Q2 fell because the company spent more money developing products.


   Bullish factors for stocks included (1) the larger-than-expected decline in weekly initial US unemployment claims which fell to their lowest level in 2-1/2 years (-36,000 to 383,000 versus expectations of -5,000 to 410,0000, (2) the larger-than-expected increase in Dec wholesale inventories (+1.0% versus expectations of +0.7%) as distributors try to keep up with improving sales, and (3) speculation that President Mubarak of Egypt would soon step down, which may end the civil unrest in Egypt.


•   Kraft Foods (KFT) slid 2.2% in European trading after the company forecast profit excluding costs to the integration of its Cadbury Plc acquisition to be as much as $2.28 a share, below analysts' estimates of $2.32.


•   Expedia (EXPE) sank 13% in European trading after the company reported Q4 earnings, excluding some items, of 32 cents a share, weaker than analysts' estimates of 36 cents.

[setravis]

Monday, February 14, 2011...

Overnight U.S. Stock News

•   March S&Ps this morning are trading down -1.40 points. The US stock market last Friday closed higher after Egyptian President Mubarack resigned and US consumer confidence rose: Dow +0.36%, S&P 500 +0.55%, Nasdaq Composite +0.68%. The S&P 500 and the Dow climbed to 2-1/2 year highs and the Nasdaq posted a 9-3/4 year high.

                Bullish factors included (1) the action by Egyptian President Mubarack to resign, which reduces concern that tensions will spread throughout the Middle East, (2) the larger-than-expected increase in the Feb US University of Michigan consumer confidence which rose to its best level in 8 months (+0.9 to 75.1 versus expectations of +0.8 to 75.0), (3) final trade data for 2010 that showed US exports rose +17% last year, their biggest gain since 1988 and US imports in 2010 climbed +20%, their biggest increase since 1984, and (4) a rally in mortgage insurers after Treasury Secretary Geithner called for limiting the role of government-backed competitors Fannie Mae and Freddie Mac in the mortgage market.

   Bearish factors for stocks included (1) the prediction from Societe Generale that the actual US unemployment rate in Jan would be 12.8% instead of the Labor Department's reported 9.0% if Americans dropping out of the workforce were taken into account, and (2) weakness in energy producers after crude oil tumbled to a 2-1/2 month low.


•   Wal-Mart (WMT) slipped 1.4% in European trading after JPMorgan Chase cut its recommendation on the stock to "neutral" from "overweight."

[setravis]

A taxpayer-funded bull market

The Dow is rising as investors, anticipating higher inflation, migrate from bonds to equities. The result is higher long-term interest rates and a buoyant stock market. Not quite what the Fed had planned, but they will take the credit anyway.

The rate of contraction of US bank loans and leases (including securitized loans) is slowing, but is a long way from the 5% or more associated with a bull market.



Inflationary pressures are fueled by debt growth which, however, can come from two sources: the private sector or government. Private sector debt continues to contract (-$295 billion in 2010), but is more than offset by rapidly expanding federal debt ($1.4 trillion deficit in the last fiscal year). Only if the federal deficit is severely curtailed will inflationary pressures subside.

Can rapidly expanding government debt fuel a bull market? Rising public debt levels increase instability and place upward pressure on long-term interest rates, both of which should deter investors and the banking sector from increasing their exposure to equity markets. Treasury may be hoping to prime the pump: creating an initial surge in equities and then stepping back as private sector demand takes over. But markets are a lot more savvy than they were a few years ago.

[setravis]

Tuesday, February 15, 2011...

Overnight U.S. Stock News

•   March S&Ps this morning are trading little changed, down -0.20 of a point. The US stock market yesterday fluctuated between gains and losses and settled mixed as valuation concerns were offset by strength in Chinese exports: Dow -0.04%, S&P 500 +0.24%, Nasdaq Composite +0.28%. The S&P 500 posted a fresh 2-1/2 year high and the Nasdaq posted a 9-3/4 year high.

                Bullish factors included (1) optimism that the global economic recovery may be sustained after the Jan China trade balance narrowed to a 9-month low as Chinese exports and imports increased more than expected, (2) optimism about Egypt's democratic transition plan after Egypt's ruling army council said it aims to transfer power within 6 months to a democratically elected government, (3) a strong earnings season thus far with 74% of the 348 companies in the S&P 500 that have reported results since Jan 10 beating analysts' estimates, and (4) the action by Bank of America to raise its per-share pr ofit estimates for companies in the S&P 500 Index to $95 a share in 2011 from an earlier estimate of $93 and to hike its 2012 estimate to $102 from $99, citing accelerating growth in US and world gross domestic product at the end of last year that's boosting corporate profits.

   Bearish factors for stocks included (1) concerns that valuations have become stretched as the S&P 500 Stock Index rose to its most expensive valuation since June, (2) renewed European sovereign-debt concerns after Reuters reported that a rescue plan for WestLB AG, the German state-owned bank bailed out during the financial crisis, is faltering, and (2) revised deficit figures from the White House that predict the US deficit for the current fiscal year will climb to a record $1.6 trillion, up from a $1.4 trillion estimate the administration previously estimated.



•   FedEx (FDX) fell 1% in European trading after the company cut its fiscal Q3 quarterly earnings forecast to 70 to 90 cents a share, below an earlier forecast of 95 cents to $1.15 as higher-than-expected fuel costs and severe winter weather disrupted delivery operations in the US and Europe.


•   US Steel (X) rose 2% in pre-market trading after Goldman Sachs raised its recommendation for the company to "buy" from "neutral."

[setravis]

Wednesday, February 16, 2011...

Overnight U.S. Stock News

•   March S&Ps this morning are trading up +4.30 points and posted a fresh contract high in overnight trade. The US stock market yesterday closed lower after retail sales rose less than forecast and import prices increased more than expected: Dow -0.34%, S&P 500 -0.32%, Nasdaq Composite -0.46%.

                Bearish factors included (1) the weaker-than-expected Jan US retail sales (+0.3% and +0.3% less autos versus expectations of +0.5% and +0.5% less autos), (2) the larger-than-expected increase in Jan import prices (+1.5% m/m and +5.3% y/y versus expectations of +0.8% m/m and 4.4% y/y), with the +5.3% y/y gain the highest in 9 months, and (3) the stagnant US housing market after the Feb NAHB housing market index remained unchanged for the fourth consecutive month at 16.

   Bullish factors for stocks included (1) carry-over support from a rally in foreign stock markets after German investor confidence advanced for a fourth month, Jan China consumer prices rose less than expected and the BOJ raised its economic assessment for the first time in 9 months, (2) the stronger-than-expected Feb Empire manufacturing index which expanded at its best level in 8 months (+3.5 to 15.4 versus expectations of +3.1 to 15.0), and (3) continued strong earnings results with 73% of the 359 companies in the S&P 500 that have reported results since Jan 10 beating estimates.



•   Dell (DELL) climbed 6.2% in European trading after the company reported profit, excluding some costs, of 53 cents a share in the quarter that ended Jan 28, well ahead of analysts' estimates of 37 cents.


•   Aaron's (AAN) rallied 10% in pre-market trading after the furniture manufacturer and retailer forecast Q1 profit excluding some items of as much as 52 cents a share, stronger than analysts' estimates of 49 cents.


•   Family Dollar Stores (FDO) surged 24% in European trading after Trian Group offered to acquire the second-biggest US dollar-store chain for $55 to $60 a share.

[setravis]

Thursday, February 17, 2011...

Overnight U.S. Stock News

•   March S&Ps this morning are trading down -1.50 points. The US stock market yesterday pushed higher on increased M&A activity, robust earnings and a sharp increase in US housing starts: Dow +0.50%, S&P 500 +0.63%, Nasdaq Composite +0.76%. The Dow and S&P 500 posted fresh 2-1/2 year highs and the Nasdaq advanced to a 10-year high.

                Bullish factors included (1) increased M&A activity after Sanofi-Aventis SA agreed to buy Genzyme for $20.1 billion and Nelson Pertz offered to acquire Family Dollar Stores for $7.6 billion, (2) strength in homebuilders after Jan US housing starts increased more than expected and climbed to a 4-month high (+14.6% to 596,000 versus expectations of +2.1% to 540,000), (3) the minutes of the Jan 25-26 FOMC meeting in which the Fed raised its US growth projections for this year to 3.4% to 3.9%, compared with a Nov forecast of 3.0% to 3.6%, saying household spending picked up and recent economic data showed a "stronger t enor," and (4) continued strong earnings results with 73% of the 371 companies in the S&P 500 that have reported results since Jan 10 beating estimates.

   Bearish factors for stocks included (1) increased inflation concerns after the larger-than-expected increase in Jan core PPI (+0.5% m/m and +1.6% y/y versus expectations of +0.2% m/m and +1.2% y/y) as the +1.6% y/y gain matches a 16-month high, (2) concern the US housing market will struggle to recover after MBA mortgage applications declined to a 2-year low in the week ended Feb 11, (3) the unexpected decline in Jan industrial production (-0.1% versus expectations of +0.5%), and (4) geo-political concerns after Israel's foreign minister called Iran's plans to sail 2 gunboats through the Suez Canal a "provocation."



•   Williams Cos. (WMB) climbed 8.1% in European trading after the fourth-largest US pipeline operator by market value said it will sell as much as 20% of its oil and natural-gas exploration unit in an IPO.

[setravis]

Friday, February 18, 2011...

Overnight U.S. Stock News

•   March S&Ps this morning are trading down -0.70 of a point. The US stock market yesterday rallied on strong manufacturing data and improved company earnings results: Dow +0.24%, S&P 500 +0.31%, Nasdaq Composite +0.21%. The S&P 500 and Dow posted new 2-1/2 year highs.

                Bullish factors included (1) the larger-than-expected increase in the Feb Philadelphia Fed manufacturing index which expanded at its fastest level in 7 years (+16.6 to 35.9 versus expectations of +1.7 to 21.0), (2) the +0.1% gain in Jan leading indicators, their seventh consecutive monthly increase and a sign the economic expansion will extend into this year, (3) continued strong earnings results with 72% of the 388 companies in the S&P 500 that have reported results since Jan 10 beating estimates, and (4) reduced interest rate concerns after the 10-year T-note yield slipped to a 2-week low.

   Bearish factors for stocks included (1) the larger-than-expected increase in Jan core CPI (+0.2% m/m and +1.0% y/y versus expectations of +0.1% m/m and +0.9% y/y), (2) the larger-than-expected increase in weekly US initial unemployment claims (+25,000 to 410,000 versus expectations of +17,000 to 400,000), and (3) increased geo-political concerns after Iran said it is sending 2 warships through the Suez Canal, which risks an Iranian confrontation with Israel.


•   Intuit (INTU) gained 2% in European trading after the company boosted its full-year profit forecast to as much as $2.48 a share from an earlier outlook of $2.43 a share at most.

[setravis]

Dow Jones 30: Industrials Index...
The Dow reinforces the signal, with Twiggs Money Flow (21-day) rising strongly. Expect a test of 12600*. Penetration of the (olive) trendline would warn of a correction. Reversal below 11000 is most unlikely, but would signal a primary reversal.

* Target calculation: 11200 + ( 11200 - 9800 ) = 12600

[setravis]

Stocks fall on Libya tensions, H-P earnings
Stocks drop as oil jumps to two-year high, traders remain concerned about protests in Libya
Wednesday February 23, 2011, 2:40 pm EST


NEW YORK (AP) -- Stocks fell for a second straight day Wednesday after clashes in Libya sent oil prices to two-year highs and technology giant Hewlett-Packard said its revenue growth was slowing.

Forces loyal to Libyan leader Moammar Gadhafi continued to attack anti-government demonstrators, leading to widespread chaos and shooting in the streets of the Libyan capital, Tripoli. Nearly 300 people have been killed, according to the New York-based Human Rights Watch.

The unrest sent oil up 3.6 percent to $98.90 a barrel, its highest price since October 2008. Libya is the world's 15th largest exporter of crude, accounting for 2 percent of global daily output. Traders are worried the revolt could threaten Libya's oil production and spread to other countries in the region.

"We're at a point where the market is concerned over this series of dominoes in the Middle East and wonders if there's another country that's next to fall," said David Katz, a portfolio strategist for Weiser Capital Management.

Oil companies benefited from the higher crude prices. Chevron Corp. was the biggest gainer in the Dow average, rising 3 percent. Exxon Mobil Corp gained 2.4 percent. Energy companies in the Standard & Poor's 500 index rose 2 percent, the only gain among its 10 company groups.

The Dow Jones industrial average lost 99 points, or 0.8 percent, to 12,112 in afternoon trading. The S&P 500 fell 7, or 0.6 percent, to 1,308. The Nasdaq composite fell 30, or 1 percent, to 2,726.

Each major index has gained more than 10 percent over the last three months, leading some analysts to say that the situation in Libya is giving traders an opportunity to sell and lock in profits after the market's recent run-up.

The market's two-day stumble is only its second significant decline this year. The other came on Jan. 28, when protests in Egypt escalated.

"The market has strong fundamentals and those will once again dominate very shortly," said Doug Cote, senior market strategist with ING Investment Management.

Technology stocks fell after Hewlett-Packard Co., a bellwether for the group, gave a disappointing revenue forecast for the current fiscal year. The stock fell 11 percent, the most out of the 30 that make up the Dow average.

Government bonds and other relatively stable assets rose for the second day in a row. The yield on the 10-year Treasury note fell to 3.44 percent from 3.46 percent late Tuesday. Bond yields fall when their prices rise.

DirecTV Group Inc. rose 3 percent after the satellite TV provider said it attracted more new subscribers in the fourth quarter than it has in a decade. Washington Post Co. fell 4.5 percent after its fourth-quarter net income fell 3 percent on flat revenue.

[setravis]

Tuesday, February 22, 2011...

Overnight U.S. Stock News

•   March S&Ps this morning are trading sharply lower by -17.40 points as violence escalates in North Africa. The US stock market last Friday overcame early weakness from China's action to boost its banks' reserve requirements and closed higher on better-than-estimated company earnings results: Dow +0.59%, S&P 500 +0.19%, Nasdaq Composite +0.08%. The S&P 500 and Dow posted new 2-1/2 year highs.

                Bullish factors included (1) strong company earnings with 72% of the 395 companies in the S&P 500 that have reported earnings results since Jan 10 beat estimates, (2) a rally in education companies after American Public Education reported earnings results that beat estimates, and (3) strength in energy producers after crude prices soared on rising Middle East tensions.

   Bearish factors for stocks included (1) the action by China to raise its banks reserve ratio requirements for the second time this year, which stokes concern that China's economy may slow and drag the global economy down as well, (2) interest rate concerns after ECB Executive Board member Smaghi said that monetary policy "has to be monitored, and if needed, corrected," and (3) increased geo-political concerns after Egypt granted Iran permission to send 2 warships through the Suez Canal, which raises the risk of an Iranian confrontation with Israel.