Tag - NYSE:AA

Today looks like an easy one: solid earnings from Alcoa (NYSE:AA) + lower than expected initial jobless claims = higher stock prices.

We've seen the initial jobless claims vary quite a bit lately. Some weeks they have been worse than expected, some weeks better. As I've said, this is to be expected as the US economy puts in a floor.

Third Quarter earnings can't get here quickly enough for me. We need some new information to support the Cash for Clunker Stock rally. And I think earnings season is our best chance to see new life breathed into stock valuations.

It's no surprise that investors are growing tired of the flip-flopping economic data. Unemployment claims come in better than expected one week, and then worse than expected the next. Manufacturing data looked promising last month, this month, not so much. Housing data is doing the same non-rhythmic dance.

Basically, new economic data is showing the brutal downward-sloping trendline of previous economic data has been broken. But we haven't established a new uptrend for economic data yet. And if you remember how the stock market gyrated during the "jobless recovery" of 2004, you know it can take a while for data like unemployment to get on a positive track.

Stocks traded downward today with fresh worries about the economy. Stocks put in their steepest decline in six weeks with nearly all industries getting pulled down on investor concerns of consumer reluctance to spend. Indeed, American consumers have closed their wallets so tightly that the personal savings rate, as released by the Bureau of Economic Analysis, was over 5% at the end of Q2 2009. This contrasts to 1% at the beginning of the economic downturn.

The Dow closed down 186 to finish at 9,136 with Alcoa (NYSE:AA), American Express (NYSE:AXP), Caterpiller (NYSE:CAT), and DuPont (NYSE:DD) the leaders in the declining stock prices in the index.

The Nasdaq finished the trading session at 1,931, down 55 points and the S&P 500 finished at 980, down 24 points.

The Russell 2000, a composite of leading small-cap stocks, ended the day at 548, down 16 points.

Small-cap price leaders today include Align Technology (Nasdaq:ALGN), up 29%; Protalix BioTherapeutics, (Amex:PLX), up 11%; and CryoLife (NYSE:CRY), 10%.
 
*****30 Hour work week the new normal

Economic analysts were out in full force last week as headline data pointed to a recovery in employment. Although people may have started finding jobs, we question the quality of work being found by new workers.

After the Japanese financial crisis in the late 1980s, many of Japanese workers ended up working on temporary jobs that didn't have good salaries and benefits. Perhaps the U.S. is entering a similar phase.

Over the past year and a half companies have slashed budgets and expenses. Businesses are more likely to hire low cost temporary help until the economy starts to show significant changes. Part-time jobs usually have lower pay and part-time jobs don't have many of the benefits that full-time jobs have.

In past recessions, businesses would hang onto valued employees and many times increase their salary levels. This recession has proven different. There is a large number of highly educated people competing for menial jobs. This has given businesses an opportunity to hire skilled workers at bargain rates.

*****An insider's look at the housing numbers.

Inside Mortgage Finance sponsored a nationwide survey of 1,556 real-estate agents in mid-June. Their results bring up important data that contradicts many of the figures we have been reading in the past few weeks.
They unanimously acknowledge that the low end of the market is cranking. This area of the market is primarily driven by foreclosures, first-time buyers, and investors. The numbers show that near 43% of homebuyers are first-time homebuyers, 29% are current homeowners, and another 29% are investors. 
Unfortunately, their findings show that the high end of the market is dead. This area of the real estate market remains very weak because sellers are still in denial, existing homeowners aren't trading up, and there are fewer foreclosures and forced sales at the high end.

For those who already own houses, "affordability" is not a particularly meaningful measure of housing-market health. The main reason is because existing home owners cannot sell their current property at break-even levels, let alone a little profit.

*****No Inflation

Last week CPI came in about as expected. Although prices are rising slightly, CPI remains negative taking into account year over year changes.

A sign of confidence that U.S. inflation should remain under control is that foreign governments have been switching out of shorter-term U.S. government bills and into longer-dated bonds. Last week, when the U.S. government issued $75 billion in new bonds, 10-year notes made up the largest percentage since 2005.

*****Managed America

So there's where we are: shorter work weeks (read: less take-home pay), home values gone bust, homeowners stuck in their homes, and inflation initially non-existent. These are some of the themes I recently shared with investors in my Managed America: Investing in the New Economic Reality. During the presentation I shared with investors some of our top holding for the new economy and the strategies we'll employ for profits in the months and years ahead. The presentation is in replay mode and is open access (free): click HERE to watch now.

Regards,

Ian Wyatt
Editor
Small Cap Investor Daily

Stocks slid during the morning session and began a more gradual recovery after noon eastern time. The Dow closed up 4.76 points to 8,183 in choppy trading all day and on news that initial jobless benefits claims came in at 565,000 down from the 605,000 that analysts had expected.  

Both the Nasdaq and the S&P 500 closed up today at 1,752 and 882, respectively. 
The top 2,000 small-cap stocks making up the Russell 2000 closed down 0.4 points to end the day's trading at 479. 

Small-cap gainers were lead by Superior Bancorp (Nasdaq:SUPR) up 22% on heavier than normal volume. The stock opened today at $2.19 and hung around that level until shortly after 1:00 p.m. eastern to spike to $2.75 within 15 minutes. The remainder of the trading session saw SUPR trying to push through resistance at $2.97 before settling at $2.69. 

Other small-cap gainers for today include Park Bancorp (Nasdaq:PFED) up 21% to close at $8.70 from a previous close of $7.19; MOD-PAC (Nasdaq:MPAC), a manufacturer of folding cartons in north America, up 20%; and Chicago Rivet & Machine (Amex:CVR) up 25%. 

Decliners in the small-cap space were lead by American International Group (NYSE:AIG), down 28% on news that the company is potentially looking to sell parts of its foreign life-insurance units to MetLife (NYSE:MET). This comes on the heels of AIG's announcement last week that shareholders had approved a 1-for-20 reverse stock split in an effort to maintain the firm's listing on the New York Stock Exchange. 

Other small-caps losing in today's session include United Community Bancorp (Nasdaq:UCBA) down 17%; Tuesday and Wednesday's high flyer, Novagen (Nasdaq:NVGN) was down 20% as profit-takers continued the sell-off that started Wednesday afternoon; and MedQuist (Nasdaq:MEDQ) down 13%.

*****Earnings season has begun. Alcoa (NYSE:AA) kicked things off with a report that was better than expected, even though the company lost $454 million in the second quarter. Yes, nearly half a billion dollars.  

Alcoa went on to say that aluminum demand will be down 7% this year. One analyst widened his loss estimates for the remainder of this year and 2010. And yet the stock is up 6% in the early going.  

How can that possibly be bullish, you ask?  

Well good question. And the answer may not come as that much of a surprise: China. Alcoa believes that Chinese stimulus spending may help it become "…free cash flow positive very soon…" Alcoa's CFO said.

*****I've discussed China's stimulus plans at length here in Daily Profit. And I've also been aggressively adding Chinese stocks to the SmallCapInvestor PRO portfolio. (Click here to find out which ones.) 

But it's still nice to hear from a major U.S. corporation that China's $585 billion stimulus spending plan is expected to have a positive effect on commodity pricing and demand.  
In fact, Alcoa's CEO added a little color to China's stimulus efforts. He reported that China is telling its people "…that it's good to not have too much savings and to buy new cars and get a new air-conditioner." 

It would be ironic if China usurped the U.S. and became the world's consumer of last resort. And a profitable irony at that. 

*****It's being reported that stocks are rallying after weekly new unemployment claims were down sharply last week. But continued unemployment benefit claims from workers already on the dole rose for the week.

The drop in new claims appears to be an anomaly due to a break in layoffs in the auto industry. There doesn't appear to be any significant change in the unemployment trend.  

*****I hope you've been paying attention to Jason Cimpl's video chart analysis and weekly forecasts. He's been hitting the market's next moves with uncanny accuracy. You'll recall from last week, he was looking for more weakness early this week, with a recovery mid-week. If yesterday's late rebound can continue today, he'll be spot on again. Be sure to read tomorrow's Daily Profit to view Jason's forecast for next week.
 
And his prescient forecasts are making money for subscribers to TradeMaster Daily Stock Alerts, too. They just took 15% on the Ultrashort Financial ETF (NYSE:SKF) in 8 days. And it looks as though he's getting his readers ready for some upside trades.  
Of course, you'll get his video forecast in tomorrow's Daily Profit, but if you want to start getting his profitable trades, too, then you'll want to sign up for TradeMaster Daily Stock Alerts. There's a 30-day trial available. Click here to find out how you can enjoy steady profits in this uncertain market.

*****The PPIP is doomed. PIMCO's Bill Gross is dropping out of the government's program to remove toxic assets from banks' balance sheets. Gross and Co. are apparently concerned that the government has gotten too unpredictable, changing its mind, and even the terms, of other bailout measures retroactively.   

Plus, there's also the likelihood that banks won't sell toxic assets at anything resembling attractive prices. And that will kill the program.  

I still believe Geithner blew his opportunity to use the stress-tests to force banks to sell their toxic assets and improve their balance sheets. But as we know, Geithner simply does not play hardball. And that's too bad, because our economy could use some leadership from the Treasury.  

P.S. I just finished reading through a new book by senior trader Larry Connors. It's called "High Probability ETF Trading". It's on profitable trading strategies using ETFs and he's hitting a 93% win rate. I don't know about you, but I'll take 93% any day. He gave me a link to more information about the book to share with Daily Profit readers (I asked him for it as readers send me a ton of questions on ETFs). Click here to find out more about his book and discover how to get up a 93% win rate on your ETF trades.

It started off as another ugly day for stocks. But the major indices rallied out of the hole after hitting their lows for the day around 11 AM. There was no particular fundamental catalyst propelling stocks prices higher. The move appears to be technically based, with traders apparently considering the drop to 886 on the S&P 500 close enough to support At 880 to start buying.

The S&P finished the day with a slight 2.3 point gain. The Dow Industrials finished up 44 points, completing a 122 point reversal. Only the Nasdaq finished in the red. The 9 point loss there was led by Apple (Nasdaq:AAPL) and Amazon.com (Nasdaq:AMZN).

Once again, there plenty of regional banks on the top performers' list. Park Federal (Nasdaq:PFED) was up 34%. Eurobancshares (Nasdaq:EUBK) rose 18% and Community Shores Bank (Nasdaq:CSHB) was up 18%. The only problem is that these stocks are rallying on extremely light volume.

At least with today's decliners, there are some stocks that aren't regional banks. TerreStar (Nasdaq:TSTR) dropped 20%. Spectrum Pharmaceuticals (Nasdaq;SPPI) was off 16% and Republic Airways Holdings (Nasdaq:RJET) was down 16%.

*****Despite the early declines, TradeMaster technical analyst Jason Cimpl had us prepared with his excellent video chart analysis that accompanied Thursday's Daily Profit. If you missed Jason's analysis, here's the link again.

Jason is expecting some upside later in the week. That would coincide with the start of earnings season. Alcoa (NYSE:AA) kicks things off tomorrow.

*****Bloomberg is reporting that the earnings decline is slowing. Year over year corporate earnings fell around 60% in the first quarter. Earnings were expected to have dropped another 34% last quarter and may slow to a 21% drop in the third quarter.

67% of companies beat expectations in the first quarter. But of course, when expectations were as low as they were, that's not particularly impressive. Plus, gains were accomplished through cost-cutting, which is only a temporary fix. Still it was enough to get a rally going. It will be interesting to see if earnings season can send stock prices higher again...

*****Oil has dropped to $64 a barrel. Demand is down as the economic recovery is not exactly robust. Back in 2005 and 2006, oil was the leading indicator for the economy. Even though oil prices were taking a bite out of consumers' budgets and even sparking some price inflation, stocks moved higher as oil demand indicated a thriving global economy.

Not much has changed. Even though comparatively lower gasoline prices give us a bit more spending money, rising unemployment is indicative of a still-weak global economy. Some analysts are saying that oil could fall to $50 a barrel.

*****China's still about the only country in the world that's growing. Its Purchasing Manager's Index rose for the 4th straight month. Current estimates are for a 7.8% GDP expansion this year. The U.S. will contract 2.7%, and that includes slight growth for the fourth quarter.

At SmallCapInvestor PRO, we've been ahead of the curve, adding Chinese stocks for the last two months. You can get our complete analysis on 4 top Chinese investments here.

*****Now, let's have a look at this week's economic data...

Wednesday, July 8, we get weekly crude oil inventories and the consumer credit report for May.

Thursday, July 9 we get weekly unemployment claims numbers and wholesale inventories for May.

Then on Friday, July 10, we get import and export prices along with the trade balance. We'll also be treated to a preliminary look at the Michigan Consumer Sentiment poll for July.

Stocks don't like Mondays. This is the third Monday in a row that's started with a gap down open. And volume has been on the light side each of these Mondays. What does it mean?  

Low volume is usually interpreted to mean that there's little conviction behind a move. That doesn't mean the move itself can't be large, just that it likely won't follow through and may even reverse. Still, I can't say I'd run out to buy stocks in anticipation of a rebound after yesterday's drop.  

My initial reaction to recent trading is confusion. Or maybe indecision is a better word. We've seen some anecdotal improvement in the economy. We are not at risk of melting down anymore. But it's the start of summer, and stocks have rallied a long way and priced in some pretty rosy expectations.  

If I can tie myself in knots with a bunch of "yes, buts", you can bet other investors can, too. So we can expect to see this lackluster, directionless trading continue until something tips the balance... 

*****Yesterday's downward global GDP revision from the World Bank might have done it. So might the end of the 2nd Quarter in 6 trading days. Or maybe it will be Alcoa's (NYSE:AA) earnings report on July 7 (yes, Q2 earnings are that close).   

*****On April 21, 2009, the S&P 500 broke above 839 and closed at 850. On June 1, 2009, the S&P 500 posted its first close above 936 since the rally began. What's the significance of 839 and 936, you ask? Those levels are the intra-day highs and lows from October 10, 2008. 

In essence, the S&P 500 has spent the last 2 months trading within a range defined in one day last year. The S&P 500 has closed above that range 9 times during the rally. Yesterday, it closed below the October 10 close of 899. October 10 was a powerful day. 

*****A good technical analyst can be a scary thing.  And Jason Cimpl, technical analyst at TradeMaster Daily Stock Alerts, has been scary good over the last couple of weeks.  

In case you don't know, technical analysis is the study of price and volume action to determine the market's next move. Sometimes a good technical analyst sounds like they are staring into a crystal ball. That's been the case with Jason lately.  

He called last Monday's sharp drop, got his TradeMaster Daily Stock Alerts readers positioned for the bounce at the end of the week, took quick profits when the market failed to make new highs, warned about yesterday's sharp drop and is now readying his troops for another round of upside gains.

Whew! It's a busy job but somebody's got to take make the money! 

If you're interested in short-term trading, give Jason and TradeMaster Daily Stock Alerts a try. He doesn't do day-trading (the average hold time is around a week) and he doesn't trade options - just stocks and ETFs. There's a 30-day trial available, click HERE for details. 

*****We'll be discussing our bullish outlook for commodity stocks in next Wednesday's Video Conference. It's titled Inflation Busters: Discover the Stocks to Grow and Protect Your Wealth and will air on Wednesday, June 24 at 6 pm. It's free to attend, you can sign up HERE.

Stocks are navigating choppy trading Wednesday after the Federal Reserve’s recent meeting meetings showed that officials saw that the economy was deteriorating.

At 2:18 pm ET, the Russell 2000 (NYSE:IWM) is up 5.73, or 1.33%, at 437.43, while the Dow is up 0.23% and the S&P 500 is up 0.59%.

Pulte Homes Inc. announced today that it has agreed to buy rival small-cap Centex Corp. (NYSE:CTX) for $1.3 billion in a stock deal that will create the nation's largest homebuilding company. Centex shares are currently up almost 20%.

Other small caps climbing today include United Western Bancorp (Nasdaq:UWBK), up 42% on news it will sell certain assets of its Sterling unit.

******It doesn’t happen often. Earnings season usually kicks off with either some bullish enthusiasm or bearish pessimism. But Tuesday afternoon, Alcoa (NYSE:AA) gave analysts exactly what they were looking for: nothing more, nothing less.

Alcoa lost money in the first quarter. A lot of it, really. $497 million. A year ago it earned $303 million.

But that loss was, apparently, perfectly priced into the stock. And so . . .