Tag - Mbi

Stocks continued their slide today as traders are holding tight until they get the Fed's word on the economy. Bernanke & Co. are expected to wrap things up tomorrow, so we could see another round of lower closing prices. 

The Dow closed down 96.50 points at 9,241.45; the Nasdaq finished at 1,969.73, down 22.51; and the S&P 500 fell back below 1,000 to finish the day's session at 994.35, down 12.75 points. 

Stocks in the Russell 2000 were down 9.75 points to end at 562.12. 

Oil closed at $69.38, down $1.22 and gold was at $946.20, up $1.20.
Bucking the downward trend were small-caps like Avanir Pharmaceuticals (Nasdaq:AVNR) up 30%; EchoStar (Nasdaq:SATS) up 19%; and Ivanhoe Energy (Nasdaq:IVAN) up 15%.  

Trending down with the broader markets many small-cap outpaced the market's fall, including Anthracite Capital (NYSE:AHR), down 30%; Javelin Pharamceutical (Amex:JAV), down 27%; Petroleum Development (Nasdaq:PETD), down 22%; and Flotek Industries (NYSE:FTK), down 20%. 

*****Have you noticed that analysts are starting to downgrade stocks? Sprint Nextel (NYSE:S), Yum Brands (NYSE:YUM), PETsMART (Nasdaq:PETM), MBIA (NYSE:MBI) and Aegon (NYSE:AEG) were all marked down by analysts yesterday.  
Coverage was initiated on American Express (NYSE:AXP) at "Sell" by Ladenburg Thalman. Boeing (NYSE:BA) and Research in Motion (Nasdaq:RIMM) have also been downgraded in the last few days.  

So what gives? If everyone's so bullish right now, why are stocks getting downgraded?  
First, stocks have rallied strongly since March. And second, there's no guarantee that earnings can continue to rise. The analysts may be playing it safe, but investors should take note.  

*****AIG (NYSE:AIG) has doubled in the last three days. If there was ever a company that shouldn't double, it's AIG. The government owns something like 90% of the company. And it's actively selling off its important pieces to pay off debt. It's highly unlikely there will be any return for common shareholders.  

And if a completely speculative stock like AIG is moving, we might expect to see others. And sure enough, General Motors, which now carries the ominous name Motors Liquidation Company (MTLQQ.PK), has very nearly doubled in the last week. I don't think that's a good sign for the health of the stock market.

*****Word is that more traders think the dollar may have put in an important low. That would be bad for stocks and commodities. To follow the action, watch the iShares Barclay's 20+ Treasury Bond Fund (TLT).

When this ETF rallies, stocks are usually selling off. And the chart for TLT shows a pretty decent looking double bottom at $90.

*****The latest FOMC meeting starts today. Nobody really expects the Fed to raise interest rates. Even the inflation crowd has to admit that the economic recovery is too frail for higher rates. Still, judging by the declines in the stock market, investors are nervous about what the Fed has to say.

Alan Greenspan used to try to let his words act as monetary policy. Instead of actually moving rates, he would voice his bearish opinion, in the hope that he could keep a lid on asset prices.

It didn't work. And I hope Bernanke doesn't make the same mistake. There's no substitute for actual changes in rates. And despite the weak economy, investors could probably use a message about asset bubbles and risk.  

*****The Managed America Internet video conference aired last night with great success. You can still catch it if you missed. There's a replay available HERE if you're interested in discovering the trends that will affect your investments for the next couple of years and how you can profit from them.

Ian Wyatt
Editor
Daily Profit

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Small-cap stocks pushed higher in morning action, underpinned by a stronger-than-expected GDP report, which continued a string of recent bullish data surprises. However, gains were limited by a soft tone in the U.S. dollar and by climbing crude oil prices. At 9:52 a.m. ET, the Russell 2000 (NYSE:IWM) was up 1.74, or 0.24%, at 734.69.

The headline figure on GDP was at 3.3%, quite a bit better than the projection for a rise 2.7%, boosted by a 13.2% rise in export activity and by a bump in consumer spending from the release of tax stimulus checks. The latter is a temporary lift and it should be noted that this GDP report is for the second quarter, and we’re nearly two-thirds of the way through the third quarter now. Economic activity has slowed again … if the market wants to rally in the shadow of this GDP report, then there are probably other stories driving the push. The most likely story is that hedge funds are booking profits on shorts for month-end purposes, and that short-covering push is taking place at a time when volume is very thin ahead of the last summer holiday weekend in the United States.

In addition to the GDP report, weekly unemployment claims out this morning, and hit the forecast on the noggin at 425,000. While the headline number was in line with expectations, the continuing claims figure was at 3.42 million, which marks the highest point since November 2003. The number might not have been a surprise, but it also wasn’t anything for the bulls to get excited about either.

It is worth noting that economic data has been the story of late, starting with an upside surprise on consumer confidence Tuesday, continuing with durable goods orders Wednesday and then hitting another high note on GDP numbers this morning.

The morning focus on economic releases did manage to shuffle crude oil to the background, if only for a moment. That said, crude oil prices remain in rally mode, churning toward $120 dollars a barrel into the stock market open. Crude prices continue to climb as traders fret about the need for a risk premium as Tropical Storm Gustav is on a path that could threaten energy production in the Gulf of Mexico. As Gustav treks into the Gulf, it is expected to regain hurricane status; . . .

Small-cap stocks are expected to open higher, boosted by an upside surprise on economic growth for the second quarter, which will help investors once again look beyond another surge in crude oil prices. The Russell 2000 (NYSE:IWM) pushed from flat to up about 0.4% after the data, which suggests an opening near 735.50.

GDP was pegged at plus 3.3% for the second quarter, well clear of the 2.7% forecast, boosted by strong exports, which were up 13.2%. At the same time that GDP numbers came out, the market also received data on weekly unemployment claims, which met the forecast at 425,000.

The immediate market response to the numbers was a five-handle upside rise in S&P 500 futures, which moved from slightly lower territory to higher ground. In addition, the dollar firmed from down 0.2% against the euro and yen to near unchanged levels. Perhaps the biggest move was seen in Treasury markets, with bonds and notes sinking in response to the stronger-than-expected GDP number.

Crude oil futures continued to push higher overnight, climbing toward $120 dollars a barrel amid concerns about the path of Tropical Storm Gustav, which could threaten energy production in the Gulf of Mexico. Although the weather system was downgraded to a tropical storm, it is expected to regain hurricane status soon and appears to be trekking toward key crude oil and natural gas areas in the Gulf.

Stocks on the radar screen overnight included Sears Holdings Corp. (Nasdaq:SHLD), which was down about 1.3% after quarterly profits missed the forecast . . .

After spiking into the green out of the gate, small caps have since plunged and are flickering in and out of the green and red midday after waning global economic growth weighed on oil, pushing the dollar and larger-cap equities higher.

At 12:30 p.m. ET, the Russell 2000 (NYSE:IWM) slipped 3.46, or 0.46%, to 750.91, while the Dow had gained 18.73, or 0.16, to 11634.66.

Crude has touched a low on today’s session, selling off $3 a barrel to roughly $111 midday and posting a three month low, after OPEC forecasted that global demand for energy continue to falter.

Higher oil prices have pushed input costs for all companies higher and have weighed on operations. A decline in global growth would mean a reduced thirst for oil, which would push down the escalating raw material costs for most firms. However, that slower growth means less demand for final products. So it’s a double edged sword keeping equities in check.

“The global economic race to the bottom appears to be over as the U.S. has hit bottom and the rest of the world is still falling,” Andy Busch wrote in an email today.

The potential slowing global growth’s effect on oil sent the dollar surging to $1.4686 against the euro and 110.47 against the yen midday. The surge in the dollar as of late all started with the European Central Bank’s dovish comments last Thursday followed by reported negative GDP growth in the euro zone.

Despite increasing crude oil prices, small-cap stocks are on a timid rise in afternoon trading after being pummeled during last week’s trading. A better-than-expected Chicago Purchasing survey on manufacturing provided encouragement to bullish investors. At 1:48 p.m. ET, the Russell 2000 (NYSE:IWM) was down 1.79, or 0.26%, at 696.35.

The Chicago Purchasing Manager’s Survey, which tracks economic conditions in Michigan, Indiana and Illinois, clocked in at 49.6, which topped the forecast for a figure of 48. Despite the bullish surprise on the report, it still marked a fifth consecutive month below 50, which indicates contraction in the Midwest business sector.

Crude oil prices gushed to $141.11 a barrel in afternoon trading. The U.S. dollar was up against both the yen and euro.

Small caps on the rise Monday afternoon include Alto Palermo S.A. (Nasdaq:APSA), which is up 23% despite no fresh news. Aceto Corp. (NYSE:ACET), which was up 13.55%, reversing a steep slide from last week amid oversold conditions. Rediff.com India Ltd. (Nasdaq:REDF) is up 16% despite no announcements from the India-based online company.

Small caps attracting sellers this afternoon include Security Bank Corp. (Nasdaq:SBKC) is down 23% despite no announcements from the Macon, Ga.-based firm. MGIC Investment Corp. (NYSE:MTG) is falling some 21% after shareholders on Friday gave the mortgage insurer approval to increase its share base to raise capital. Life Partners Holdings, Inc. (Nasdaq:LPHI) is down 13% despite an announcement that the firm was added to the Russell 3000 Index. Investors on Internet message boards speculated that Life Partner was recommended as a stock to sell . . .

Small-cap stocks hovered near steady levels in early trading, with pressure from higher crude oil prices offset by a better-than-forecast figure for the Chicago Purchasing survey. At 9:54 a.m. ET, the Russell 2000 (NYSE:IWM) was up 0.42, or 0.06%, at 698.56.

The Chicago Purchasing Manager’s Survey headline figure came in at 49.6, which was well above the forecast for a figure of 48. Despite the bullish surprise on the report, it still marked a fifth consecutive month below 50, which indicates contraction in the Midwest business sector.

Crude oil prices climbed to a fresh record high ahead of the U.S. stock market opening, and remained solidly higher in early U.S. trading. The U.S. dollar pushed to three-week highs against the euro overnight, but backed off those highs and was up about 0.1% versus the euro at the time of the stock market open today. The dollar was down against the yen, sinking about 0.3%, which is supportive to the commodity markets.

Large-cap stocks of note this morning include MBIA Inc. (NYSE:MBI), which was off at 52-week lows amid credit rating downgrades. MBI shares were off 0.7% shortly after the open. Meanwhile, H&R Block Inc. (NYSE:HRB) was up 9.7% after topping analyst estimates for quarterly results.

Broad market sectors on the rise this morning included coal, oil exploration and production, diversified metals and mining, oil and gas storage and transportation and steel stocks. On the downside, food distribution, airlines, specialty stores and food retail stocks were all in the red.

Small caps of note included Aceto Corp. (NYSE:ACET), which was up about 13%, reversing a steep slide from last week amid oversold conditions. Orbotech Ltd. (Nasdaq:ORBK) was up about 14%, recovering from a big slide Friday in . . .

Small-cap stocks took flight Thursday, soaring in response to strong chain store sales, and a bullish surprise on weekly unemployment claims. The Russell 2000 (NYSE:IWM) shot up 19.55, or 2.63%, to 763.26, the highest daily close of the year.

In the process, the Russell stormed through key long-term resistance at 750, a point that had been difficult to tackle in recent weeks. That area represented a 50% Fibonacci retracement of the entire bear market collapse, and sets the stage for a rally toward the final key retracement of 61.8%, which is near 775. The market could pause near 760, which is a logical chart-related resistance area on the way toward 775. A weekly close above 750 after jobs Friday would be an important benchmark within the ongoing rally off the March lows.

The strong performance was impressive in front of Friday’s employment report, which suggests that shorts were no longer willing to risk losing trades in front of the big release, and that new longs were comfortable taking on positions ahead of the jobs event.

The catalyst for today’s rally appeared to center on surprisingly stout monthly chain-store sales results. Apparently gasoline pump prices near $4 dollars a gallon didn’t stop consumers from heading out to the store to unload some of their tax rebate money from Uncle Sam. With the U.S. economy heavily dependent on spending for momentum, a show of strength from retailers is a welcome sign to the market.

Among retailers, discounters like Costco (Nasdaq:COST) and Wal-Mart (NYSE:WMT) had particularly impressive results, with Costco comp sales up 9% in May and Wal-Mart up 3.9%. Wal-Mart’s stock embraced the news, surging 3.5% to four-year highs. Costco was up 3.4%. And it wasn’t just a large-cap story on the retailer front. Small-caps Hot Topic Inc. (Nasdaq:HOTT) jumped some 16% as sales at the pop culture apparel and accessories store came in much better than feared. Also, Cache Inc. (Nasdaq:CACH) rose about 14% as sales at the specialty women’s apparel store . . .

Small caps are rising in Wednesday’s afternoon trading, after three consecutive losing sessions. Promising economic data assuaged investors’ concerns about the financial sector after Moody’s Investors Service warned that it might lower the credit ratings of bond insurers Ambac Financial Group (NYSE:ABK) and MBIA Inc. (NYSE:MBI). At 2:13 p.m. ET, the Russell 2000 (NYSE:IWM) was up 6.37, or 0.86%, at 745.37.

The ADP private employment survey today showed a better-than-expected gain of 40,000 jobs in May. Nonfarm payrolls also jumped 60,000 in May. On Friday, the Labor Department reports its data on U.S. nonfarm payrolls for May.

Lower crude oil prices are easing inflation concerns. In afternoon trading, crude oil is down to $122.66 a barrel. Gold futures are also down in Wednesday afternoon action.

Lehman Bros. (NYSE:LEH) shares are dipping after the Wall Street Journal reported that the brokerage firm might need capital from foreign investors to strengthen its balance sheet. Further concerns about the financial sector were raised when ratings agency Fitch said overnight that a couple of large French banks needed to raise capital.

Moody’s Investors Service said Wednesday afternoon that MBIA Inc. has weak new business prospects and may incur higher losses on guarantees it sold on mortgage-backed securities and collateralized debt obligations. Moody’s put MBIA on review for a possible downgrade.

Broad market sectors under pressure include coal energy, home improvement retailers, oil and gas, metal mining, aerospace and defense companies. On the upside, airline, printing services, plastics and rubber, auto and truck manufacturers, school . . .

Stocks continued their assent midday, as oil slipped, the greenback gained and investors shrugged off lackluster earnings news from bond insurer MBIA.

At 12:49 p.m. ET the Russell 2000 (NYSE:IWM) was up 1.34%, or 9.63, to 729.68 while the Dow had gained 0.79%, or 100.79, to 12,846.67.

Oil futures continued to slide midday as investors locked in gains from last week. A crude oil contract for the month of June was off roughly $1.21 midday to $124.75, down from the $126 level breached last week.

As oil futures sold off, the dollar rallied against other major currencies, quelling inflation concerns.

Just this morning Chicago Fed President Charles Evans said that housing was still a drag on the economy, and that growth risks were to the downside, but inflation risk was on the upside. Evans also said that U.S. growth should improve in the second half of the year, but that tight credit markets would crimp near-term GDP.

In corporate news, the financial sector is making headlines today. Investors shrugged off MBIA’s (NYSE:MBI) first-quarter results, as the bond insurer swung to a first-quarter loss on account of $3.58 billion unrealized loss on insured derivatives. Shares rallied.

Small-cap stocks are expected to start out the week in the green, lifted by gains in overseas equity indices, a firm tone in the U.S. dollar, and a pullback in crude oil prices. In after-hours trading, the Russell 2000 (NYSE:IWM) was up 0.7%, which would translate to an opening near 725. However, S&P 500 futures were only up about 0.1% moving toward the open, which would be a much more tame advance for small caps.

In overseas markets, Japan’s Nikkei was up 0.6%, while European shares were up about 0.5%, underpinned by profit news from the largest European bank, HSBC, which gained about 2%. The HSBC news could provide a lift early this week . . .

The Russell 2000 (NYSE: IWM) closed in the red while the other major U.S. indices rose on news of a plan to help bond insurers. The small-cap index fell 0.85 points, or 0.12%, to 695.43. The Dow Jones Industrial Average (INDU) gained 96.72 points, or 0.79%, to 12,381.02.

On a year-to-date basis, the Russell 2000 has declined 9.22%, while the Dow is down 6.66% and the S&P 500 has retreated 7.85%.

Bond insurers were the story today, first causing steep declines and then becoming the catalyst of a breathtaking rebound that lifted all but the small-cap index.

Stocks small and large spent the majority of the session deep in negative territory on speculation that rating agencies Moody’s, Standard & Poor’s and Fitch will move to downgrade major bond insurers MBIA Inc. (NYSE: MBI) and Ambac Financial Group, Inc. (NYSE: ABK).

The Russell 2000 (NYSE: IWM) has extended its decline and remains the worst performing major U.S. index. At 2:03 p.m. ET, the small-cap index had dropped 10.73 points, or 1.54%, to 685.55. The Dow Jones Industrial Average (INDU) had retreated 105.02 points, or 0.85%, to 12,179.28.

The bears are in control as investors respond to news of current and possible future downgrades in the financial sector.

There’s speculation that rating agencies Moody’s, Standard & Poor’s and Fitch will move to downgrade major bond insurers MBIA Inc. (NYSE: MBI) and Ambac Financial Group, Inc. (NYSE: ABK).

That will create problems for banks that hold bonds insured by MBIA and Ambac, possibly leading to billions in writedowns.

Elsewhere, brokerage house Merrill Lynch & Co., Inc. (NYSE: MER) downgraded government-sponsored mortgage lender Freddie Mac (NYSE: FRE) to “sell” from “hold.”

Small-cap stocks have fallen more than their bigger brothers, with Cbeyond, Inc. (Nasdaq: CBEY), a provider of Internet protocol-based (IP) communications services, being one of the biggest losers.

The Russell 2000 (NYSE: IWM) is going strong on positive comments from a Fed official and news that billionaire Warren Buffet can help bond insurers. At 1:10 p.m. ET, the small-cap index had climbed 8.82 points, or 1.26%, to 708.57. The Dow Jones Industrial Average (INDU) had advanced 181.52 points, or 1.48%, to 12,421.53.

Stocks have been in the green out of the gate on news that billionaire investor Warren Buffett has offered to have his company, Berkshire Hathaway, assume responsibility for $800 billion of municipal bonds guaranteed by bond insurers MBIA Inc. (NYSE: MBI), Ambac Financial Group Inc. (NYSE: ABK) and Financial Guaranty Insurance Co.

There have been concerns recently that the three companies could be downgraded due to write-downs from insuring subprime debt.

Investors took the news as bullish even though one of the three bond insurers turned down the offer while the other three have not yet replied. The bond insurers would like relief with their entire portfolio, but Buffet is only offering help for their relatively safe municipal bond holdings.

The Russell 2000 (NYSE: IWM) and the other major U.S. indices are rising on news of a narrower-than-expected loss at General Motors Corp. (NYSE: GM) and financial relief.

At 10:16 a.m. ET, the small-cap index had advanced 8.54 points, or 1.22%, to 708.29. The Dow Jones Industrial Average (INDU) had added 192.33 points, or 1.57%, to 12,432.34.

Stocks small and large climbed out of the gate following news that GM swung to a fourth-quarter net loss that was not as bad as the one predicted by analysts. The Detroit-based carmaker also announced that it will offer buyouts or early retirements to all the 74,000 U.S. hourly workers represented by the United Auto Workers union in order to cut down on costs.

Helping the bulls gain traction is news that billionaire investor Warren Buffett has offered to have his company, Berkshire Hathaway, assume responsibility for $800 billion of municipal bonds guaranteed by bond insurers MBIA Inc. (NYSE: MBI), Ambac Financial Group Inc. (NYSE: ABK) and Financial Guaranty Insurance Co.

There are fears that the three companies could be downgraded due to writedowns stemming from the subprime mess. A downgrade would make it difficult to find clients and would lower the value of many of the bonds that it insures, causing more write-offs at banks and other financial institutions.

One of the three bond insurers has turned down the offer while the other two are still thinking it over, but investors are nevertheless in a buying mood.

Posting a solid gain is Evercore Partners Inc. (NYSE: EVR), a small-cap investment banking company that reported fourth-quarter earnings above Wall Street’s expectations.

On the flip side, Cynosure Inc. (Nasdaq: CYNO) reported fourth-quarter net income that disappointed analysts despite the fact that it was 300% better than a year ago. The maker of light-based aesthetic and medical treatment systems also said that revenues jumped 49%.

General retailer 99 Cents Only Stores (NYSE: NDN) barely beat analysts’ third-quarter earnings projections.

The Russell 2000 (IWM) and the other major indices posted significant declines despite news of an expected interest rate cut. The small-cap index dropped 9.71 points, or 1.38%, to 695.49. The Dow Jones Industrial Average (INDU) shed 37.47 points, or 0.30%, to 12,442.83.

On a year-to-date basis, the Russell 2000 has let go 9.21%, while the Dow has declined 6.20% and the S&P 500 has dropped 7.67%.

“Financial markets remain under considerable stress, and credit has tightened further for some businesses and households,” the Federal Open Market Committee said in a statement this afternoon, explaining its decision to lower its target federal funds rate 0.50% to 3%.

“Today’s policy action, combined with those taken earlier, should help to promote moderate growth over time and to mitigate the risks to economic activity,” said the FOMC.

The move follows an emergency rate cut on Jan. 22, which saw the target interest rate fall to 3.5% from 4.25%. The Fed is acting aggressively to prevent an economic recession and today promised to “act in a timely manner as needed” in order to address “downside risks to growth.”