Today was a fantastic day for the markets among the barrage of economic news that came out. There were quite a few positives; and a negative, but the biggest boost was provided early on before the market opened. Wells Fargo, a financial institution, reported better than expected results and also increased its dividend by 10%. This was enough to convince the markets for the time being that maybe the financials have been oversold and that the bad news might already be baked into the pie.
Following this positive announcement was a negative reading on the CPI. Headline CPI rose 1.1% last month, and Core-CPI rose a modest 0.3%, more than a 0.2% consensus estimate. This was followed by the Net Foreign Purchases, Capacity Utilization, Industrial Production, Crude Inventories, and FOMC minutes from their last meeting in June. Let's look at these one by one.
Net Foriegn Purchases were $67B, more than the consensus estimate of $65B. Capacity Utilization was 79.9%, 0.5% better than expected. To put this number in perspective, it has been between 80-85% over the past 15 years. Industrial Production came in at 0.5% while the consensus was 0%, which again shows that the economy continues to grow, albeit at a slower pace. Crude inventories came in at a positive 3 million barrels, while the analysts were expecting it to shrink by the same amount. All these economic indicators provided an initial boost to the stocks. Financials rallied and energy sector plunged.
Financials gained across the board today, up 6.5%. Fannie Mae and Freddie Mac, which had been battered in the past two weeks rose 29% and 30% respectively. Wells Fargo, Lehman Brothers, Washington Mutual, and Banc of America were among the other winners.
Among other news, Sony Corp. lowered the price of PS3 by $100 to $299. It will be interesting to see how this affects the stock since they have not yet turned a profit for this device. RIM's earnings estimates were lowered by an analyst st Koffman reflecting increasing competition by Apple's iPhone in the consumer market.
This month will be marked by a lot of companies reporting their second quarter's earnings and hence will be as much, if not more, volatile than June. Ebay reported after close today and the stock shed about 6% after hours (I think they did not raise their guidance that's why).
My opinion is that the Technology sector will continue to outperform the broad market till year end and there are quite a few bargains out there. If an investor has a big risk appetite then financials should prove to be attractive as well - looking forward 2-3 years.
This is my first blog ever and I plan to continue giving this market commentary on a regular basis going forward.
Let the good times begin!!!!!!!
ciao
4 comments:
Great first post -- keep the news coming!
I liked what i read so far...keep it going
Nicely summarized Ranjit...I totally agree that tech. sector is going to be not "as affected" by the slump and will likely outperform the rest of the market. Keep the good news coming:)
Nice, precise and to the point I liked it. Keep up the good work.
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