Wednesday, August 20th
Today's market summary comes from Rob Black's MarketWrap
A funny thing happened on the way to the summer doldrums. Here we are in the dog days of August, and blue chip stocks are at fourteen month highs, while the tech stocks have pushed to a sixteen month peak. You don't have to look under rocks -- the economy is improving, and so is the prospect for corporate profits. Earnings growth for the companies in the S&P 500 is forecast to accelerate to 14.1 percent in the third quarter and 21 percent in the final three months of the year from 9.5 percent in the second quarter, according to Thomson. In Wednesday's session, the DJIA sank 31 points (-0.3%) to 9,397, with Hewlett-Packard accounting for more than half of the drop. The S&P 500 Index declined 2 points (-0.2%) to 1,000. The declines pulled the Nasdaq Composite down from its 16- month closing high yesterday. The index slipped 0.57 to 1,760. Richmond Fed-head Broaddus said the economy could grow at a 4% clip through 2004, reversing more conservative comments made in July. That, combined with jitters over a potentially upbeat report from the Philly Fed tomorrow, had Treasurys falling. The 10-year Treasury note fell 19/32 to yield 4.44 percent while the 30-year government bond was down 24/32 to yield 5.295 percent. The latest weekly data from the Mortgage Bankers Association showed that U.S. mortgage applications decreased by 10.7 percent. In commodities, crude prices rose after U.S. inventories showed an unexpected drop. Gold was also higher on a flight to safety following yesterday’s bombings in the Middle East.
Strong Sectors: computer storage & peripherals, tobacco, leisure products, utilities, oil & gas services, food retail, appication software
Weak Sectors: computer hardware, insurance, healthcare, homebuilding
Top Stories . . . The 10-year U.S. Treasury note had its biggest decline in a week in New York trading on speculation jobs and manufacturing reports tomorrow will support evidence of faster economic growth, helping to spark inflation.
Applications for U.S. mortgages fell for a second straight week to the lowest in more than a year as rising mortgage rates and the biggest power failure in U.S. history hindered refinancing, an industry report showed.
Hewlett-Packard, the world's second-biggest computer maker, fell as much as 12 percent after the company said it missed analysts' third-quarter sales and profit estimates and may have cut PC prices too much.
The hedge funds of George Soros, Louis Bacon, Bruce Kovner and Paul Jones made little or no money in July as U.S. bonds slumped, leading to the biggest surge in yields in almost 20 years.
Dillard's had a second-quarter loss of $50.4 million as sales fell after the department-store company reduced prices to try to keep shoppers from going to discounters and retailers such as Kohl's
R.J. Reynolds Tobacco, the second-biggest U.S. cigarette maker, will fire an unspecified number of workers to reduce costs as competition from discount brands hurts sales and profit.
Quotes of Note . . . ``The mortgage refinancing boom is not only over, but recent data suggest that activity has collapsed,'' said David Rosenberg, chief North American economist at Merrill Lynch. Economic stimulus from mortgage refinancing ``is in the process of unwinding.''
``Hewlett-Packard's a setback'' for stocks, said Richard Sichel, CIO at Philadelphia Trust, which manages $900 million in assets. ``Maybe there was too much exuberance about how things were improving.''
On Hewlett . . . ``It's tough; they've got Dell whacking away at them in desktops. I was hoping they would do better because they would get cost efficiencies from the merger. I think they have a tough row to hoe until they build their services more.'' said Graham Tanaka, whose Tanaka Capital Management oversees $130 million, including Dell shares and who has been considering buying Hewlett-Packard shares.
Housing Prices . . . Growth in home prices would slow to below 4% later this year down from about a 7% annualized pace now if the housing market responds to the spike in mortgage rates as it has in the past. The average rate on a 30-year fixed-rate mortgage is up a full percentage point since the end of June, to 6.24%. A USA TODAY analysis of housing finance data since 1979 shows that price growth slowed by an average of more than 40% following similar rate spikes.
www.usatoday.com/money/perfi/housing/...age-applications_x.htm
Gurus . . . The S&P 500 got above the 1000 level, but some pundits points to trouble between 1000 and 1015. Investor's Business Daily says paying attention to psychological levels is, for the most part, useless. Tuesday's appearance of solid new breakouts among good quality stocks is the ultimate confirmation of a healthy rally. It is also not surprising that the S&P 500 has lagged, because most market leaders have been smaller stocks.
Steve Galbraith, strategist for Morgan Stanley, was the guru who recommended a higher weighting in bonds. He is not suggesting the bull market in stocks has ended, but the bond market sell-off has driven yields up to levels that make them relatively intriguing. He upped his bond allocation from 20%-to-25%, while cutting cash from 15%-to-10%. Stocks stay at 65%.
...
Today's market summary comes from Rob Black's MarketWrap
A funny thing happened on the way to the summer doldrums. Here we are in the dog days of August, and blue chip stocks are at fourteen month highs, while the tech stocks have pushed to a sixteen month peak. You don't have to look under rocks -- the economy is improving, and so is the prospect for corporate profits. Earnings growth for the companies in the S&P 500 is forecast to accelerate to 14.1 percent in the third quarter and 21 percent in the final three months of the year from 9.5 percent in the second quarter, according to Thomson. In Wednesday's session, the DJIA sank 31 points (-0.3%) to 9,397, with Hewlett-Packard accounting for more than half of the drop. The S&P 500 Index declined 2 points (-0.2%) to 1,000. The declines pulled the Nasdaq Composite down from its 16- month closing high yesterday. The index slipped 0.57 to 1,760. Richmond Fed-head Broaddus said the economy could grow at a 4% clip through 2004, reversing more conservative comments made in July. That, combined with jitters over a potentially upbeat report from the Philly Fed tomorrow, had Treasurys falling. The 10-year Treasury note fell 19/32 to yield 4.44 percent while the 30-year government bond was down 24/32 to yield 5.295 percent. The latest weekly data from the Mortgage Bankers Association showed that U.S. mortgage applications decreased by 10.7 percent. In commodities, crude prices rose after U.S. inventories showed an unexpected drop. Gold was also higher on a flight to safety following yesterday’s bombings in the Middle East.
Strong Sectors: computer storage & peripherals, tobacco, leisure products, utilities, oil & gas services, food retail, appication software
Weak Sectors: computer hardware, insurance, healthcare, homebuilding
Top Stories . . . The 10-year U.S. Treasury note had its biggest decline in a week in New York trading on speculation jobs and manufacturing reports tomorrow will support evidence of faster economic growth, helping to spark inflation.
Applications for U.S. mortgages fell for a second straight week to the lowest in more than a year as rising mortgage rates and the biggest power failure in U.S. history hindered refinancing, an industry report showed.
Hewlett-Packard, the world's second-biggest computer maker, fell as much as 12 percent after the company said it missed analysts' third-quarter sales and profit estimates and may have cut PC prices too much.
The hedge funds of George Soros, Louis Bacon, Bruce Kovner and Paul Jones made little or no money in July as U.S. bonds slumped, leading to the biggest surge in yields in almost 20 years.
Dillard's had a second-quarter loss of $50.4 million as sales fell after the department-store company reduced prices to try to keep shoppers from going to discounters and retailers such as Kohl's
R.J. Reynolds Tobacco, the second-biggest U.S. cigarette maker, will fire an unspecified number of workers to reduce costs as competition from discount brands hurts sales and profit.
Quotes of Note . . . ``The mortgage refinancing boom is not only over, but recent data suggest that activity has collapsed,'' said David Rosenberg, chief North American economist at Merrill Lynch. Economic stimulus from mortgage refinancing ``is in the process of unwinding.''
``Hewlett-Packard's a setback'' for stocks, said Richard Sichel, CIO at Philadelphia Trust, which manages $900 million in assets. ``Maybe there was too much exuberance about how things were improving.''
On Hewlett . . . ``It's tough; they've got Dell whacking away at them in desktops. I was hoping they would do better because they would get cost efficiencies from the merger. I think they have a tough row to hoe until they build their services more.'' said Graham Tanaka, whose Tanaka Capital Management oversees $130 million, including Dell shares and who has been considering buying Hewlett-Packard shares.
Housing Prices . . . Growth in home prices would slow to below 4% later this year down from about a 7% annualized pace now if the housing market responds to the spike in mortgage rates as it has in the past. The average rate on a 30-year fixed-rate mortgage is up a full percentage point since the end of June, to 6.24%. A USA TODAY analysis of housing finance data since 1979 shows that price growth slowed by an average of more than 40% following similar rate spikes.
www.usatoday.com/money/perfi/housing/...age-applications_x.htm
Gurus . . . The S&P 500 got above the 1000 level, but some pundits points to trouble between 1000 and 1015. Investor's Business Daily says paying attention to psychological levels is, for the most part, useless. Tuesday's appearance of solid new breakouts among good quality stocks is the ultimate confirmation of a healthy rally. It is also not surprising that the S&P 500 has lagged, because most market leaders have been smaller stocks.
Steve Galbraith, strategist for Morgan Stanley, was the guru who recommended a higher weighting in bonds. He is not suggesting the bull market in stocks has ended, but the bond market sell-off has driven yields up to levels that make them relatively intriguing. He upped his bond allocation from 20%-to-25%, while cutting cash from 15%-to-10%. Stocks stay at 65%.
...
