Markets Tempered by Weakness in Financial Sector

[Excerpted from Bill Cara's Daily Report]

US stocks posted small gains on Tuesday, after an optimistic reading on housing was equalized by weakness in the Financial sector (XLF -1.6%).

On Wall Street, the weakness came as four major firms made significant moves to raise capital, which they claim is to repay debts to the US government. Goldman Sachs sold a $2 billion stake in China's ICBC. JPMorgan Chase (JPM), Morgan Stanley (MS) and American Express (AXP) announced stock sales. By selling common stock, JP Morgan plans to raise $5 billion, Morgan Stanley about $2.2 billion, and American Express $500 million.

At the close, the DJIA (8,740.87 +19.43 +0.22%), S&P 500 (944.74 +1.87 +0.20%) and NASDAQ Composite (1,836.80 +8.12 +0.44%) were higher for the fifth day in the past six.

Although it was not sustainable, the market got an early boost after the release of the April Pending Home Sales data, which implied some unexpected strength in the housing market. The index jumped +6.7%, more than twice its growth rate in March, whereas economists had expected growth of the overall index to have lifted by only +0.5%.

Traders may be reserving judgment until the Friday release of the US May employment report.

The Toronto Composite (10,588.79 -15.27 -0.14%) and the Toronto Venture Board (1,141.74 +1.19 +0.10%) seemed unimpressed.

In NY, the Basic Materials (XLB +1.0%), Consumer Staples (XLP +1.0%), Consumer Discretionary (XLY +0.8%) and Healthcare (XLV +0.6%) were sector leaders. In addition to Financials (XLF -1.6%), the losers were led by Utilities (XLU -1.2%).

Among the industry groups on the rise, the Homebuilders (XHB +3.2%) and Goldminers (GDX +2.6%) were stand-out performers, but hardly optimal leaders for sustained Bull moves.

The Cara 100 company stocks that lifted the most were Dow Chemical (DOW +9.5%), optionsXpress (OXPS +6.6%), Garmin (GRMN +5.8%), Brunswick Corp (BC +5.4%) and Goldcorp (GG +5.4%). Pulling the market down were Juniper (JNPR -6.0%), SanDisk (SNDK -3.9%), and Applied Materials (AMAT -3.7%) in the Tech sector,and Canadian oil major Suncor (SU -3.7%).

The $USD plunged (78.39 -0.82 -1.03%). All major currencies soared against the USD: Yen (104.50 +0.90 +0.87%), Euro (143.11 +1.47 +1.04%), British Pound (165.85 +1.41 +0.86%), and Cdn Loonie (92.49 +0.80 +0.87%).

Earlier Wednesday, equity prices were quite strong in Austral-Asian markets. Japan’s Nikkei 225 (9,741.7 +37.36 +0.38%), Shanghai (2,778.6 +54.3 +1.99%), Hong Kong (18,576.5 +187.39 +1.02%), and Aussie All Ordinaries (4,009.3 +61.2 +1.55%) were strong, but India’s BSE 30 (14,870.9 -4.01 -0.03%) took a rest.

At this point in the European equity bourses, the French CAC (3,336.2 7:09AM ET -1.24%), German DAX (5,111.2 6:54AM ET -0.64%) and UK FTSE 100 (4,391.4 6:54AM ET -1.91%) were trading lower.

In auto industry news, General Motors (GM) began the process of remodeling itself after filing for bankruptcy protection. GM said it had reached a tentative deal to sell its Hummer brand to China’s Sichuan Tengzhong Heavy Industrial Machinery Co. GM also said it had 16 potential buyers for Saturn.

Separately, the auto manufacturers reported dismal sales, but somewhat better than analysts had anticipated. GM reported a quarterly -30% decline Y/Y in sales whereas analysts had expected a -37% lower revenue figure. Chrysler sales were down -47% after analysts had projected a -54% drop. Ford reported US sales fell -24.2% in May, which wasn’t as bad as the expected -28.5% result.

In a volatile US bond market, the US long Bond ($USB 116.77 +0.78 +0.67%) managed a gain. The yields were lower as follows for 30-year (4.489 -0.86 -1.88%), 10-year (3.644 -0.71 -1.91%), and 5-year (2.513 -0.30 -1.18%).

As nervous traders stayed in Treasury bills, the yields remained at 0.130.

Crude Oil ($WTIC 68.55 -0.03 -0.04%) held the previous day’s gain.

$GOLD futures lifted (981.50 +6.20 +0.64%).

Spot (cash) market prices earlier Wednesday were as follows: Gold (980.60 -3.75 -0.38% 07:12am ET), Palladium (248 +2 +0.81% 07:12am ET), Platinum (1247 +7 +0.56% 07:12am ET), and Silver (15.9425 -0.1575 -0.98% 07:12am ET). Traders were being advised that with Chrysler coming out of bankruptcy and GM’s storm clouds soon to be removed, there would soon be more sales (???) and demand for platinum and palladium metal.

Dollar futures are higher and the Euro lower (1.4242 -0.0076 -0.53% 06:59am ET).

Crude Oil futures were a tad softer earlier today (68.24 -0.31 -0.45% 06:44am ET).

Stock futures for the DJIA were showing softness Wednesday morning (8680 -34 -0.39% 06:56am ET).