Daily State of the Markets
Tuesday Morning – May 25, 2010
Good morning. Is it just me, or is anybody else beginning to get annoyed by the triple-digit moves in the last fifteen minutes of the day? For those of you keeping score at home, the Dow's dive of just about 100 points in the last fifteen minutes of the session was the third such event in as many days. Sure, Friday's version of the game was more enjoyable. But seriously, if the end result is going to continue to be decided by a couple of guys and their nifty new computers, I may start sleeping in.
I'd like to be able to tell you that the late-day dance to the downside was tied to the latest pain in Spain. Unfortunately though, the news of the difficulties relating to Spanish banks was well know before the program-driven dive began. But to review, Spain's central bank was forced to buck up 530 million Euro's Monday to bail out CajaSur, a regional bank that fell victim to property loans as merger plans fell through at the last minute.
Speaking of the pain falling on Spain, CajaSur wasn't the only casualty of the problems in the Spanish banking system. Apparently the government decided to be proactive and not-so gently encouraged four other Spanish banks to merge ala Bank of America/Merrill Lynch. With credit tightening up rather precipitously in the region, Spanish officials and stock market investors alike are worried about a repeat of our credit crisis where banks didn't lend to each other and the credit markets ultimately froze up.
While we're on the topic of credit markets, investors couldn't be blamed for their trepidation in front of today's 3.5 billion Euro auction of 3- and 6-month bills in Spain. Although the recent auction of 10-year notes went well, the yield did rise 20 basis points from the previous auction and was the highest since last April. In addition, last week's 12- and 18-month auctions saw yields jump 70 and 79 basis points respectively. As such, investors may be bracing for another big jump in yields on Spanish debt, or worse.
Before we leave the theme of the day and move on to more encouraging items such as Asia's stellar day, the jump in existing home sales, and the surprisingly strong Chicago Fed National Activity Index, we should probably also mention the social unrest that is developing in Spain. And with union leaders talking openly about a national strike in response to the government's decision to do something as rash as spending only what they earn; it is a safe bet that we may not have seen the last of the pain in Spain.
So, with a big test for the Eurozone on the docket for Tuesday, it wasn't exactly surprising to see buyers head out to the golf course early Monday afternoon. And with the buyers working on their short games, that left only the boys and their toys at the corner of Broad and Wall. And by now, we all know how that tends to turn out.
Turning to this morning... we don't have any economic data to review before the bell. However the news flow has been tough on the bulls as North Korea is readying its army for combat, Germany is proposing further bans on short selling (which has been seen by the market as a sign of panic), and the credit situation appears to worsening in terms of the tightness of credit and the spreads.
Finally, be sure to take time to breathe today...
Here are the important indicators we review each morning before the opening bell...
Major Foreign Markets:
- Australia: -2.87%
- Shanghai: -1.90%
- Hong Kong: -3.47%
- Japan: -3.06%
- France: -3.35%
- Germany: -2.79%
- London: -2.64%
Crude Oil Futures: -$2.36 to $67.85
Gold: -$1.900 to $1192.10
Dollar: Higher against Yen, Euro, and Pound
10-Year Bond Yield: Currently trading at 3.13%
Stocks Futures Ahead of Open in U.S. (relative to fair value):
- S&P 500: -25.90
- Dow Jones Industrial Average: -200
- NASDAQ Composite: -32
Wall Street Research Summary
- Nike (NYSE:NKE) - Argus Research
- Career Education (NASDAQ:CECO) - Argus Research
- AK Steel (NYSE:AKS) - BofA/Merrill, Citi
- RTI International Metals (NYSE:RTI) - BofA/Merrill
- Progress Energy (PGN) - BofA/Merrill
- ADTRAN (NASDAQ:ADTN) - Barclays
- Murphy Oil (NYSE:MUR) - Benchmark
- Deere & Company (NYSE:DE) - Estimates increased at Bernstein
- General Dynamics (NYSE:GD) - Citi
- US Airways (LCC) - JPMorgan
- NetApp (NASDAQ:NTAP) - JPMorgan
- Werner Enterprises (NASDAQ:WERN) - KeyBanc
- Gilead Sciences (NASDAQ:GILD) - Morgan Joseph
- PPL Corp (NYSE:PPL) - Morgan Stanley
- LM Ericsson (NASDAQ:ERIC) - RBC Capital
- AvalonBay (NYSE:AVB) - RW Baird
- Essex Property (NYSE:ESS) - RW Baird
- Mid-America Apartment (NYSE:MAA) - RW Baird
- Mirant (MIR) - UBS
- RRI Energy (RRI) - UBS
- Arkansas Best (ABFS) - Target reduced at FBR Capital
- EMC (EMC) - - JPMorgan
Long positions in stocks mentioned: none
For more "top stock" portfolios and research, visit TopStockPortfolios.com
The opinions and forecasts expressed are those of David Moenning, founder of TopStockPortfolios.com and may not actually come to pass. Mr. Moenning’s opinions and viewpoints regarding the future of the markets should not be construed as recommendations. The analysis and information in this report and on our website is for informational purposes only. No part of the material presented in this report or on our websites is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed nor any Portfolio constitutes a solicitation to purchase or sell securities or any investment program. The opinions and forecasts expressed are those of the editors of TopStockPortfolios and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as recommendations of any specific security nor specific investment advice. Stocks should always consult an investment professional before making any investment.
Any investment decisions must in all cases be made by the reader or by his or her investment adviser. Do NOT ever purchase any security without doing sufficient research. There is no guarantee that the investment objectives outlined will actually come to pass. All opinions expressed herein are subject to change without notice. Neither the editor, employees, nor any of their affiliates shall have any liability for any loss sustained by anyone who has relied on the information provided.
The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.
The information contained in our websites and TopStockPortfolios publications is provided by Ridge Publishing Co. Inc. (Ridge). One of the principals of Ridge, Mr. David Moenning, is also President and majority shareholder of Heritage Capital Management, Inc. (NASDAQ:HCM) a Chicago-based money management firm. HCM is registered with the U.S. Securities and Exchange Commission as an investment adviser. HCM also serves as a sub-advisor to other investment advisory firms. Ridge is a publisher and has not registered as an investment adviser. Neither HCM nor Ridge is registered as a broker-dealer.
Employees and affiliates of HCM and Ridge may at times have positions in the securities referred to and may make purchases or sales of these securities while publications are in circulation. Editors will indicate whether they or HCM has a position in stocks or other securities mentioned in any publication. The disclosures will be accurate as of the time of publication and may change thereafter without notice.
Investments in equities carry an inherent element of risk including the potential for significant loss of principal. Past performance is not an indication of future results.