Tag - AMEX:UQM

Stocks closed lower today as investors took some profits off the table after the market had a long sustained rally. The Dow closed down 39.22 points to 9,280.97; the Nasdaq finished at 1,993.05, down 18.26 points; and the S&P 500 stayed over 1,000 to close at 1,002.72, down 2.93 points.
 

The Russell 2000 was down 4.75 points to close the day at 565.99.

Small-cap price gainers were lead by Radian Group (NYSE:RDN) up 83% on news that the firm handily beat Wall Street expectations. Wall Street had called for the firm to report a quarterly per share loss of $1.51 while the Radian actually reported $2.82 to the positive. Radian's revenues were reported at $577.4 million, with analysts calling only for $284 million.

Other small-cap gainers include Triad Guaranty (Nasdaq:TGIC) up 65%; American Axle & Manufacturing (NYSE:AXL) up 44%; and UQM Technologies (AMEX:UQM) up 31%.

*****Stocks rallied out of the hole yesterday, as expected. It should be clear now that government intervention in the financial markets is supporting asset prices across the board. That includes cars, houses, stocks, bonds - you name it.

Now, I don't mean to suggest that economic fundamentals support current stocks prices. Most likely, earnings expectations and valuations are getting a little out of whack. Barron's has the P...E ratio for the Dow Industrials at 14.76 and the Wall Street Journal says it's 15.03. And forward estimates are about the same. In the current environment, that's fair value at best.

At worst, earnings estimates are too aggressive and valuations should be lower. While the U.S. economy is expected to grow slightly this quarter, I don't see that translating to earnings surprises when third quarter earnings come in. If companies can manage to meet expectations, I'd consider that a victory. Clearly, I don't see much upside for valuations based on fundamentals.

For the bulls, however, the story is about how much downside there is. And again, the government is saying "not much."

*****70% of the U.S. economy is consumer spending. That's a big ratio, and it shows why the U.S. can plunge in to recession easily. It also shows why I expect it to take a while before we return to decent growth rates.

The unemployment rate is pushing 10%. Economists expect it to move into double-digits in early 2010. Personally, I can't believe it will take that long.

The U.S. lost 371,000 jobs in July. Since December 2007, 6.5 million jobs have been lost. There were 5.7% fewer job cuts announced in July than a year ago. That's supposed to sound like the rate of job losses is slowing. And believe it or not, some economists are saying that payrolls could actually rise some in early 2010. Sounds crazy, I know.

But suppose payrolls start rising at the same rate they've been declining? If 371,000 people get jobs every month, it'll take 17 months to get the unemployment rate back where it was when the recession began. That would put the U.S. economy back on track by January 2011 at the absolute earliest.

*****One aspect of government intervention (which I call "Managed America"), is that the U.S. dollar is being systematically devalued. Against the Euro, it's trading lower than when that currency was introduced. (Reference point: today the U.S. dollar fetches just 0.69 Euros while back on January 1, 1999-when the Euro was introduced-you could get 0.86 Euros for your dollar. That's a 25% long-term slide in the value of the dollar.)

This is having a profound effect on commodity prices. Oil, copper, even steel prices are up significantly this year. And given China's continually robust demand and the near certainty that the dollar will remain weak, investing in commodities is rewarding investors handsomely. And if inflation takes hold as the global economy starts to go and central bankers leave stimulative monetary policy in place, commodity prices will hit new all time highs.

My Global Commodity Investing advisory service is benefiting from current commodity prices and will provide one of the only safe havens if inflation picks up. You can find out more about Global Commodity Investing here.

*****The Managed America video conference is coming up next Monday, August 10 at 6:00 P.M. It's free to attend and you can register HERE.

Best Regards,

Ian Wyatt
Editor
SCI Daily

Small-cap shares opened flat and then edged higher, underpinned by news of a big-cap energy acquisition, a firm tone in the dollar, and ideas that Wednesday’s post-FOMC minutes slide was overdone. At 9:52 a.m. ET, the Russell 2000 (NYSE:IWM) was up 2.46, or 0.34%, at 729.56.

News that NRG Energy (NYSE:NRG) tendered a bid to buy Calpine Corp. (NYSE:CPN) for a stock deal worth $11 billion injected some enthusiasm back into the M&A picture this morning, and played a supportive role in market psychology. Calpine shares were up 7.1% shortly after the opening on the news. If there are large-cap merger deals to be done, then there are certainly bargains to be had within small caps.

There are several apparel retailers coming out with earnings today, which could ripple through the markets. Children’s Place Retail Stores (Nasdaq:PLCE), which is right on the upper end of small-cap market capitalization, reported solid quarterly results this morning and the stock was up 6.2% right after the open.

Large caps in the news early today include Pfizer Inc. (NYSE:PFE), which tumbled 1% on the opening on news that its anti-smoking drug had serious side effects. Also, NetApp Inc. (Nasdaq:NTAP) tumbled 5.7% as the company’s forward projections disappointed.

Crude oil prices shot above $135 dollars a barrel overnight, and continue to be a drag on the both the consumer pocketbook and the cost structure for corporations (just ask the battered airline industry). Goldman Sachs technical analyst Kevin Edgeley said in a research report overnight that crude oil momentum and trend strength are pointing higher, and that there is a long-term channel extension target for crude at $142.90. If crude oil were to close lower today, and well off that $135 record overnight peak, it could generate a topping reversal on charts, and is worth . . .