Closing Update for Thursday, Sept. 24: Nasdaq, Oil Lead the Decline

4:11 PM, Sep 24, 2009 --

• DJIA down 41 (0.4%) to 9,707.
• S&P 500 down 10 (1%) to 1,051.
• Nasdaq down 23.8 (1.1%) to 2,108.

GLOBAL SENTIMENT

• Hang Seng down 2.52%
• Nikkei up 1.67%
• FTSE down 0.93%

UPSIDE MOVERS

(+) RHT continues evening upside that followed earnings and guidance beat.

(+,-) NSM gets analyst upgrade, but loses early gain.

(+) COMS beats Q1 expectations.

(+) SNE cutting price of Nintendo Wii for first time.

(+) VICL reports positive pre-clinical results for Vaxfectin cancer vaccine.

(+) GNVC secures fourth year of funding for HIV vaccine contract.

(+) HLCS reports first direct sequencing of single molecules of RNA.

(+) ICGN starts proof-of-concept study in photosensitive epilepsy.

DOWNSIDE MOVERS

(-) BBBY continued evening decline; shares reversed to trade lower in extended hours after Q2 beat.

(-) ARO CEO to resign near end of fiscal year.

(-) RAD lowers FY 2010 outlook to below Street.

(-) TEVA turns lower after mixed court ruling in challenge to Lilly's Evista.

(-) MKC turns lower despite topping with Q3 EPS. Sales were shy, expects 2009 EPS in upper end of range.

MARKET DIRECTION

Stocks end lower after disappointing housing data sapped early market strength. The tech-concentrated Nasdaq closes down 1%, as does the S&P 500. The DJIA ends with a slimmer 0.5% decline. Oil hit a two-month low at $65.89 a barrel, also dragging on stocks.

August existing home sales declined 2.7%, compared with a 7.2% rise in July and expectations for a fifth straight monthly increase. On average, economists polled by Thomson Reuters expect an increase of 2.1% to an annual rate of 5.35 million.

The shocking home sales report erased early gains made on a drop in weekly jobless claims that put the number of applicants at the lowest since July. Claims fell 21,000 to 530,000 in the latest week. Continuing claims fell 123,000 to 6.14 million a week earlier.

Homebuilder shares were broadly lower after the National Association of Realtors reported the unexpected drop in U.S. existing home sales in August.

In active company news, Red Hat (RHT) gained after the company topped Q2 estimates late Wednesday. National Semiconductor (NSM) erased early gains made after Citigroup reportedly raised its rating on the stock to buy from hold. Leading Brands (LBIX) jumps after reporting late Wednesday a profit in Q2, up from a loss a year ago.

GenVec (GNVC) is up on news it received a fourth year of funding for a HIV vaccine contract.

Meritage Homes (MTH) rises on an upgrade to conviction buy at Goldman Sachs. Goldman raised its rating on the entire homebuilders sector to attractive, too.

OraSure (OSUR) rallied on a deal with Premier Purchasing Partners for its HIV-1/2 antibody test.

On the downside, Nomura (NMR) declined on plans to sell $5.65 billion in stock.

Chelsea Therapeutics (CHTP) tumbled after one of its drug fails to meet a primary endpoint in a study.

Electronic Arts (ERTS) gave back some of Wednesday's gains after Microsoft (MSFT) debunked a rumor it was interested in buying ERTS.

Ann Taylor (ANN) fell after after Goldman Sachs downgraded the shares to neutral from buy.

AstraZeneca (AZN) weakens after an appeals court upholds an earlier trial ruling, which allows a national class action suit to proceed.

Housing data and demand worries dented commodities trading. Crude oil closed down 4.5% at $65.89 a barrel, a two-month low. Gold shed 1.5% to close below $1,000 an ounce.

Crude supplies grew by 2.8 million barrels and gasoline by 5.4 million barrels last week, according to the Energy Information Administration. That compares with analysts' expectations for a decline by nearly that much, according to a survey by Platts, the energy information arm of McGraw-Hills Cos.

Comments

[David White:]

Good article. You forgot to mention that distillate inventories grew by 3M. This made a total increase in inventories of 11.2M barrels of petroleum products. This is about 3 times the size of a usual "good increase". This is very bearish for the near term. Crude has gone down $6-$7 since EIA reported it on Wednesday. I still expect we will see crude stay low through out this week. A small bounce tomorrow remains a possibility. Natural Gas inventories were up 67B cf last week.

The USD Index rallied today from an initial loss to a gain of approx. +0.5%. This was partially due to the $29B 7 yr note auction going well. It is looking more and more like yesterday was the bottom. Prechter has been predicting a rally due to only 3% bullish sentiment for several weeks now. I saw waht looked like a capitulation (followed by a strong rally) yesterday. Time will tell if the USD has really started an uptrend. If it has, the markets likely have a good amount more down side.

The Fed has made several announcements that would tend to indicate that the USD may rally. It has said it is ending its Treasury buying program by the end of October. It has said it intends to end its MBS buying program by the end of Q1. It intends to slowly phase this out. It has said it intends to reduce and then end its TAF and TSLF programs. The Fed also announced they would use reverse repos in the $2.5T money market mutual fund business to drain liquidity from the financial system. The Fed has been slowly decreasing the money supply since June (after increasing it dramatically for the 8 months prior to that). All of these things mean that there should be some room for the dollar to rally. If this happens, it should push equities down.

Cramer recently called for a US equities markets retracement. So far he is dead on. They may even retreat more than he envisioned. In any case, a lot of people listend to him, so it is that much more likely that equities will go down in the near term.

News from Japan about trade was very negative as exports shrank again. This helped the USD regain some of its initial loss.

Sep 24 06:05 PM