Another good day for the markets, DOW in general. 3 of the 20 DOW components reported earnings before the market opened and all surprised to the upside. The market did get a kick, for a second consecutive day, out of a bank reporting earnings. J.P Morgan surprised to the upside and beat analyst expectations by 10 cents. Coke and United Health were the other components propping up the market. One big stimulus was provided by a drop in oil prices for a third consecutive day. Oil is down to $129 a barrel, the lowest close since June 5. Last week's record was $147/barrel. This helped the market in the afternoon after the early morning gains were surrendered.
A lot of the money flowed in to the financials for the second straight day. The Financial sector led the market again, rising 3.6%, and materials were hit hardest, declining 2.2%. Probably investors are expecting the bubble to pop or atleast are hoping that it pops sooner than later. This has been a trend lately - with materials declining on the day when oil price declines and financials are strong (not that we've seen a lot of those). Fannie Mae and Freddie Mac had another strong showing, rising 17% and 20% respectively. My opinion is that both these companies have been sold off since the start of this month on the fears that they may become insolvent, a scenario which is pretty unlikely (although anything can happen in this kind of a "fear" driven market).
Merrill Lynch, Microsoft, IBM, and Google are set to report their second quarter's results after hours. Google has already reported and surprised the market to the downside. The stock is down almost 10% after hours (as I'm writing this) and is taking a toll on other big tech names as well. This could be a good entry point into this stock as "One bad quarter does not a trend make". Merrill Lynch reported their results just now and as expected, they are not good. They lost almost $5B last quarter and the stock is down 5% after hours. IBM surprised on the upside. Tomorrow is another crucial day for the market since Citi is reporting before market opens. If they disappoint (which I think will be the case) we will be in for a very bad day. The short lived rally in the financial sector, which led some investors and analytsts to belive that the bottom might be close, will be gone.
Among other news today, Apple became the third largest PC retailer in the US last quarter. It overtook Acer and is now behind Dell and HP.
Internationally, China's GDP grew at a 10% annualized rate last quarter. Inflation in India was 11.91% and if that number continues to grow the economy will be in a very rough patch pretty soon. The GDP growth estimates have already been scaled down from 10% to between 7-8% by some economists. The startling news came from Karachi, Pakistan where people stormed the stock exchange and pelted it with stones. This was a result of the third consecutive day of declines in the market and allegations that some of the big brokers were manipulating the market for their own gains.
Thursday, July 17, 2008
Wednesday, July 16, 2008
Market Update - 7/16/08
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
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
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