Market Performance Review: 8/20/08

by: J Clinton Hill

U.S. Market Summary

DJ-30 Industrials +68.88 @ 11417.43;  SP-500 +7.85 @ 1274.54; Nasdaq +4.72 @ 2389.08; Russell 2000 +1.57 @ 731.60

ETF Sector Patrol

Consumer Discretionary -1.23%; Consumer Staples +0.04%; Energy +2.89%; Financials +2.06%; Health Care -0.63%; Industrial -0.80%; Basic Materials +1.75%; Technology +0.22%; Telecom +0.17%; Utilities +0.38%.

Bullish Events for U.S. Stocks

Economic Indicators: EIA Petroleum Status report indicated crude oil supplies unexpectedly increased 9.39mm barrels vs. 400k barrel drawdown from the previous report.

Companies with positive price performance in reaction to news events: 1) DVN (Goldman Sachs sees fundamentals of supply and demand supporting $147 per barrel oil prices; 2) FCX (stands to benefit from dwindling copper supplies); 3) DELL (trades in sympathy with positive earnings report from Hewlett Packard); AAPL; 4) XLF, BAC, & LEH (Fed policy makers want more time to decide on bailout of GSEs). 5) SLM (will provide $20bn in government backed student loans during 2008-2009)

Companies with positive price performance after earnings or guidance: HPQ; AMWD; MENT; RTLX; STP.

Industries within 5% of 52 week highs: Auto Parts Stores; Biotechnology; Cleaning Products; Discount Variety Stores; Industrial Equipment Wholesale; Long Distance Carriers; Medical Appliances & Equipment; Medical Instruments & Supplies; Personal Products; Personal Service.

Biggest point gainers: RTP (375.05 +16.96), BIDU (323.89 +15.05), FSLR (270.89 +12.15), ALX (390.98 +8.98), CEO (140.00 +7.92), NWLIA (238.84 +6.24), ENER (76.27 +5.87), STP (42.85 +5.72), GMXR (65.48 +5.69), SNP (101.34 +4.82), DVN (102.27 +4.78), CF (139.60 +4.68), FCX (89.29 +4.59), RIMM (130.33 +4.38), MON (117.1 +4.24), PTR (128.01 +4.23), EOG (104.01 +4.13), CNQ (81.55 +4.10), ESI (87.41 +4.09), PAY (18.72 +3.99), PKX (114.34 +3.87), BPT (87.03 +3.62).

Technical Analysis Highlights: Consumer Staples (NYSEARCA:XLP) downtrend intact but formed a bullish candlestick hammer; Energy ETF (NYSEARCA:XLE) breakout pattern makes 6 day new high… Basic Materials (NYSEARCA:XLB) daily downtrend halted by consolidation… Utilities (NYSEARCA:XLU) downtrend changing to  consolidation pattern…

Misc: N/A.

Bearish Events for U.S. Stocks

Economic Indicators: 1) MBA Purchase Applications index for the week of August 15th dropped -0.4% to 314 to confirm continued weakness in housing; and the refinance index also contracted -3.7% to 1,034.5. Mortgage rates average 6.47% for 30 year fixed loans vs. 5.76% only 3 months ago. 2) EIA’s Petroleum Status report indicated gasoline stocks unexpectedly decreased 6.2mm barrels vs. consensus estimates for a 3mm barrel drawdown.

Companies with negative price performance in reaction to news events: 1) FNM & FRE declined on prospects of further credit losses and high probability of a government bailout that would wipe out common shareholders.2) M; & KSS (Goldman Sachs downgrades retailers based on slowdown in consumer spending). 3) OMX (CFO resigns to take position at Allstate).

Companies with negative price performance after earnings or guidance: ADI; BJ; EV; EJ; ROST.

Industries within 5% of 52 week lows: Telecommunications; Utilities; Accident & Health Insurance; Air Delivery & Freight; Aluminum; Broadcasting-Radio; Computer Peripherals; Diversified Utilities; Electric Utilities; Electronic Equipment; Farm Products; Gas Utilities; Internet Info Providers; Internet Service Providers; Major Integrated Oil & Gas; Photographic Equip & Supplies; Telecom Services-Domestic; Telecom Services-Foreign; Tobacco Products; Wireless Communications.

Biggest point losers: FSYS (55.01 -4.58), PMFG (26.20 -3.70), KTII (148.51 -3.50), Y (308.50 -3.50), ATRI (109.38 -3.11), SIRO (25.40 -3.09), BJ (37.82 -2.86), DEG (60.25 -2.83), CALM (44.26 -2.75), LVS (42.78 -2.75), WYNN (93.32 -2.73), ABII (71.03 -2.67), LMT (113.10 -2.64), CTRN (18.17 -2.50), TRIN (158.50 -2.49).

Technical Analysis Highlights: SP-500 trades below 50 day m.a. for 3 consecutive days… DJ-30 trades below 50 day m.a. for 3 consecutive days… Nasdaq trades below 200 day m.a. for 3 consecutive days… Russell 2000 daily uptrend intact and approaching 200 day m.a. … VIX building support as it consolidates… Gold may be putting in a bottom and starting a retracement pattern…  Oil finds support @ its 200 day moving average & could signal more pressure on the economy if prices start to rise… Commodities (NYSEARCA:DBA) likely to challenge 200 day m.a. which would pressure consumer stocks… U.S. Dollar may be topping out with resistance @ 77-76 levels… Consumer Discretionary (NYSEARCA:XLY) downtrending and approaching 50 day m.a. … Financials (NYSEARCA:XLF) downtrend intact… Health Care (NYSEARCA:XLV) starts downtrend & sitting @ 200 day m.a. … Industrials (NYSEARCA:XLI) closes below 50 day m.a. 2nd day in a row with downtrend intact… Technology (NYSEARCA:XLK) downtrend intact… Telecom ETF (BATS:IYZ) downtrend intact…

Misc: N/A.

Bond Market Summary

Comments: A flight to safety and speculation that the government will bail out GSE’s Fannie Mae and Freddie Mac supported a rise in bond prices. 2-year note up 0.09 to yield 2.25%; 10-year note 0.31 to yield 3.79%; and 30-year bond up 0.34 to yield 4.44%. 2-10 year spread @ 154 bps. Market expectations are currently pricing an 11% chance of a 25bp hike by the next meeting on Sept. 16; a 30% chance of a 25bp hike by year-end; and a 100% chance of a 50bp hike and a 1% chance of a 75bp hike by June 24, 2009.

Commodities Market Summary

Energy: 1) EIA reported crude oil supplies up a surprising 9.4mm barrels last week to 305.9 million barrels; gasoline supplies down 6.2mm barrels; and heating oil supplies up 600k barrels. Strategic Petroleum Reserve [SPR] unchanged at 707.2mm barrels and refinery capacity down to 85.7% from last week’s 85.9%. Over the past 4 weeks, gasoline demand down 1.6% from last year and distillate demand 3.3% from last year. 2) Crude Oil up$0.94 to $115.47; Natural Gas up $0.096 to $8.074; Heating Oil up $0.0433 to $3.1670; and RBOB Gasoline up $0.0446 to $2.9085. 3) Crude up $1.52 to $114.39; Natural Gas up $0.096 to $7.984; Heating Oil up $0.412 to $3.126; and RBOB Gasoline up $0.0448 to $16.942 (all Sept contracts).

Agriculture: 1) Corn and Soybeans rise on speculation that floods may delay plantings in Midwest and reduce crops. Wheat demand may increase as importers and commercial buyers accumulate spot grain $2 a bushel cheaper than futures traded on CBOT. 2) Sept Corn up $0.105 to $5.7525 per bushel; Sept Soybeans up $0.2675 to $12.9375 per bushel; Sept Wheat up $0.295 to $8.7475 per bushel; and Sept Ethanol up $0.080 to $2.278 per gallon.

Metals: Oct Gold down $2.50 to $810.50; Sept Silver down $0.11 to $12.995; and Sept Copper down $0.03 to $3.3985.

Disclosure: Author may own positions in the equities mentioned in our reports. We do not receive any compensation from any of the companies covered in our reports.