Markets Give Back Some of Monday's Gains

[Excerpted from Bill Cara's Daily Report]

Despite modest improvement in the consumer sectors (Consumer Staples and Consumer Discretionary XLP, XLY +0.5%), the US equity market gave back some of Monday’s gains. At the close in New York, the S&P 500 (1,060.61 -2.37 -0.22%), DJIA (9,742.20 -47.16 -0.48%), and NASDAQ Composite (2,124.04 -6.70 -0.31%) all closed lower. The Technology and Financial sectors (XLK, XLF) both pulled back -0.5%.

Traders now will see if the last Wednesday afternoon (2:39pm ET) post-FOMC report benchmarks can be exceeded this week: S&P 500 (1,079.12), DJIA (9,906.73), and NASDAQ Composite (2,166.02).

The Toronto Exchange Composite (11,394.99 +56.27 +0.50%) and Venture market (1,272.31 +2.58 +0.20%) followed up Monday’s solid gains with smaller gains.

Prices of Crude Oil ($WTIC 66.71 -0.13 -0.19%) and Gold ($GOLD 992.30 +1.10 +0.11%) were quiet.

In NY, leading the Consumer sectors to the upside was Walgreens (WAG +9.2% +335%ADSV). This Cara 100 company issued a notable quarterly report:

Walgreen Co (WAG) reported Q4 EPS of 47c, above analysts' consensus estimate of 39c. EPS included 3c in costs and 7c in savings associated with the Rewiring for Growth initiative. Q408 EPS was 45c per share, which included the benefit of a vacation accrual adjustment of $79M. Revenue was $15.7B, also beating analysts' estimates of $15.68B, a 7.6% increase from the prior year period. Cash flow from operations was $852M for the quarter, a 55% increase from a year earlier, and total same store sales increased 2.4% in the quarter, with front-end comparable drugstore sales down 1.4%. The company, which opened 149 new drugstores in Q4, said prescription sales rose 9%, with prescription sales in comparable stores up 4.5%. Walgreen said it will balance the pace of new store openings with other growth opportunities and will continue to evaluate potential acquisitions. Looking ahead, the company forecast FY10 CapEx of about $1.6B and said on the earnings conference call that it plans to return cash to shareholders through a combination of dividends and buybacks. Walgreen shares are up $3.54, or 10.38%, to $37.75 in afternoon trading.

Other Cara 100 company stocks that lifted most were Kinross Gold and Russia’s Mobile TeleSystems (KGC +5.0% MBT +5.0%), while Nokia, Dell and Aetna were losers (NOK -3.5% DELL -3.2% AET -3.2%).

For the industry groups in NY on Tuesday, on a day the commodity prices were flat, the commodity price sensitive Pulp & Papers ($DJUSPP +2.7%) and Goldminers ($XAU +2.6%) were strongest. REITs ($DJR -1.8%) were weakest, but modestly so.

The US Dollar lifted a bit ($USD 77.12 +0.13 +0.17%) for the second day, along with the help of political comrades in the UK (Pound $XBP 159.58 +0.71 +0.45%) and Canada (Loonie $CDW 92.19 +0.01 +0.01%). The Cdn Dollar managed to hold the previous day’s strong gains. On the downside were the Yen ($XJY 111.05 -0.52 -0.47%) and Euro ($XEU 145.88 -0.36 -0.25%).

US Treasury Bonds ($USB 121.62 +0.19 +0.15%) lifted for the fifth day in a row and 6th in seven as there has been a flight out of the higher risk equities, and because the US economic data is looking less than hopeful, including yesterday’s Consumer Confidence report. Treasury yields on the 30-year (4.023 -0.22 -0.54%) and 10-year (3.292 -0.10 -0.30%) had a serious decline, while the 5-year paper (2.342 -0.03 -0.13%) continues to fall less quickly. T-bill yields moved higher (0.120 +0.30 +33.33%), which must have reflected an FOMC sale to the banks.

Maybe the Fed was anticipating the announcement by the International Monetary Fund (IMF) that banks are in much better shape than previously thought. If that is true, traders can expect to see T-bill yields lifting as central banks start cleaning up their own balance sheets.

Earlier Wednesday in overseas equity markets, there was nothing of note happening. In Asia-Pacific markets, Australia (4,739.3 -0.17%), Shanghai (2,779.4 +0.90%), Hong Kong (20,955.3 -0.28%), India (17,126.8 +1.63%) and the Nikkei 225 of Japan (10,133.2 +0.33%) were mixed.

At 7:09AM ET, France (3,826.7 +0.33%), Germany (5,720.8 +0.13%) and the FTSE 100 of London (5,160.4 +0.01%) are managing to hold the Monday gains.

In futures trading at 7:11am ET, the Euro (1.4660 +0.0092 +0.63%), the DJIA December futures (9697 +24 +0.25%), and the Crude Oil futures (67.80 +1.09 +1.63%) were all stronger.

At 7:25am ET, the precious metals market was also a bit firmer. Spot (cash) trades were as follows: for gold (1001.96 +5.46 +0.55%), silver (16.43 +0.09 +0.55%), palladium (288 +2 +0.70%), and platinum (1288 +11 +0.86%).