Fundamental Analysis and the Week Ahead
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In Europe, S&P downgraded Belgium one notch to AA from AA-plus, further heightening worries over the Euro zone debt problems.
Earlier, EU officials said Euro zone member states were discussing dropping private sector involvement from the permanent bailout mechanism.
An Italian T-bill auction offered a fresh indication of investors’ lack of confidence in the country’s newly appointed government and broad fears that the Euro zone debt crisis cannot be contained. Yields rose to new Euro era highs.
THE WEEK AHEAD
MONDAY: New home sales, Dallas Fed mfg survey
TUESDAY: S&P Case-Shiller home price index, consumer confidence, FHFA home price index, Fed’s Kocherlakota speaks, Fed’s Yellen speaks;
WEDNESDAY: Weekly mortgage applications, Challenger job-cut report, ADP employment report, productivity & costs, Chicago PMI, pending home sales index, oil inventories, Beige Book, farm prices, AT&T/TMobile hearing, USDA’s agricultural trade outlook
THURSDAY: Jobless claims, ISM mfg index, construction spending, chain store sales, auto sales
FRIDAY: Employment situation, Fed’s Plosser speak
Binary Options Trading analysis written by Bradley Welcher
Stocks Rise Despite GDP Disappointment and Ratings Cuts
The Bank of Japan announced it would expand its current asset purchase program by another $124 billion, but the news had little lasting impact on the region’s markets. The Nikkei closed down .4% to 9521, surrendering a brief gain following the announcement. The Kospi rose .6%, boosted by Samsung Electronics 2.5% gain, after announcing a record $5.2 billion profit for the first quarter. The Shanghai Composite slipped .4% to 2396, and both the Hang Seng and ASX 200 declined .3%.
S&P cut its debt ratings on peripheral European countries by 2 notches, although the equity markets failed to notice. Spain’s IBEX jumped 1.7%, the CAC40 gained 1.1%, and the DAX rose .9%. Trailing behind, the FTSE posted a respectable .5% gain. Superb earnings by Swedish engineering firm, Sandvik, helped push stocks higher, as the stock rose 12.5%.
US stocks closed higher, despite disappointing GDP data. The Dow added 24 points to 13228, the Nasdaq climbed .6% to 3069, and the S&P 500 gained .2% to 1403. The Nasdaq rallied 2.3% this week, its biggest gain in 3 months.
Procter & Gamble lowered its guidance for the year, citing high commodity costs. The stock fell 3.6% to 64.44.
Expedia shares soared 23.5% to 40.31 after blowing past analyst forecasts, collecting at least 8 analyst upgrades on the way.
Treasuries and Commodities
Bonds closed little changed, with 10-year notes up 1/32 to yield 1.93%, while 30-year notes eased 3/32 toy yield 3.12%. Overseas, UK bonds struggled, as 10-year notes ticked down .26 to yield 2.12%, and 30-year notes fell .63 to yield 3.33%.
Energy gained, led by natural gas, which rallied 2.8% to 2.186. Gasoline gained .7% to 3.2062, and crude oil edged up .4% to 104.93.
Copper climbed 1.4% to 3.82, silver rose .5% to 31.347, and gold edged up .3% to 1664.80.
Copper's Powerful Rally Over the Past Week
The Dollar fell against all major currencies on Friday. The Yen and Australian Dollar both jumped an impressive .9%, to 80.29 and 1.0467, respectively. Meanwhile, the Swiss Franc, Euro, Canadian Dollar, and Pound moved up .5% in an unusually synchronized effort.
US GDP grew at an annualized 2.2% rate in the first quarter, slower than the 2.6% expected. On a brighter note, consumer sentiment climbed to 76.4, exceeding forecasts.
Monday’s reports will include personal income & spending, Chicago PMI, and the core PCE price index. GDP data is due from Canada, with expectations for a dismal .2% growth rate.
Earnings are scheduled for Anadarko Petroleum, Anheuser Busch, FMC, Humana, Loews, and Sohu.
European Shares Sink as Spain Slips into a Recession
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Asian markets opened the week solidly, led by Hong Kong’s Hang Seng, which rallied 1.7% to 21094, a 6-week high. The ASX 200 climbed .8% to 4397, and the Kospi gained .3% to 1982. Markets in Japan and mainland China were closed for holidays.
GDP data from Spain showed the economy shrunk by .3% in the first quarter, indicating it had slipped into a recession. The news sent the IBEX down 1.9%, and pressured European stocks across the region. The CAC40 fell 1.6%, the FTSE dropped .7%, and the DAX slid .6%.
France's CAC40 Drops 1.6%
US stocks snapped a 4-day winning streak, closing moderately lower. The Dow erased 15 points to 13214, the S&P 500 shed .4% to 1398, while the Nasdaq skipped .7% to 3046.
Microsoft announced it would invest $300 million in Barnes & Noble’s digital and college businesses, giving Microsoft a 17.6% stake. Barnes & Noble’s shares soared 52% on the news.
Sunoco surged 20.5% on news it would be bought by Energy Transfer Partners.
Bonds gained, with 10-year notes up 7/32 to yield 1.91%, and 30-year notes up 13/32 to yield 3.10%.
Energy traded mixed. Natural gas spiked 4% to 2.273, extending its recent rally. Gasoline fell .8% to 3.1821, and crude oil slipped .3% to 104.57.
Silver sank 1.2% to 30.965, while gold closed flat at 1665, and copper edged up .3% to 3.8325.
The Dollar traded mostly higher on Monday. The Euro eased .1% to 1.3232, and both the Pound and Swiss Franc declined .2%. The Australian Dollar sank .5% to 1.0415 ahead of the central bank’s rate decision, and the Canadian Dollar dropped .6%, following disappointing GDP data. The Japanese Yen rallied .6%, breaking through the 80 price barrier to 79.83.
Midwest business activity slowed last month according to the Chicago PMI report, which fell to 56.2 from 62.2. Personal income rose .4%, more than expected, while personal spending rose .3%, less than expected.
Tuesday’s reports will include the ISM manufacturing index, construction spending, and auto sales.
Earnings are expected from Archer Daniels Midland, ADP, Broadcom, CBS, Chesapeke Energy, Endo Pharmaceuticals, Kindred Healthcare, Motorola Mobility, Office Depot, Pfizer, and Valero.
Dow Closes at Highest Level Since December 2007
Australia’s central bank, the RBA, cut interest rates by 50 basis points, more than expected, pushing up the ASX 200 by .8%. In contrast, the Nikkei tumbled 1.8% to 9351, as the recent advance in the Yen weighed on exporters. Honda and Toyota both fell more than 3.4%, and Sharp plunged 9.3% after releasing a disappointing outlook. Markets in greater China were closed for holidays. Factory activity in China rose to a 13-month high, according to the April PMI report.
Most European markets were closed for May Day holidays, but in the UK, the FTSE rallied 1.3% on light volume. Lloyd’s spiked 8.3% after releasing upbeat earnings, with profit more than doubling during the first quarter.
The Dow climbed to a 4-year high, ticking up 66 points to 13279, as US stocks gained. The S&P 500 climbed .6% to 1406, and the Nasdaq edged up .1% to 3050.
Herbalife tumbled 15.1%, after famed short-seller David Einhorn questioned why the company had stopped providing information regarding its distributors.
Bank of America gained 2.5% after announcing plans to cut 400 jobs. Sears jumped 15.4% after issuing an outlook which was better than expected.
Bonds fell, with 10-year notes down 8/32 to yield 1.94%, and 30-year notes down 22/32 to yield 3.15%.
Natural gas continued to rally feverishly, jumping 3.6% to 2.367. The energy commodity has bounced more than 20% off 10-year lows over the past 2 weeks. Crude oil advanced 1.1% to 106.04, and gasoline climbed .8% to 3.1006.
Natural Gas Bounces off 10-Year Lows
Gold and silver both declined fractionally, while copper inched up .2% to 3.84.
The Australian Dollar slumped .9% to 1.0330, more than erasing the previous session’s gains, while most other currencies traded in narrow ranges. The Euro and Swiss Franc both eased less than .1%, and the Pound slipped .1% to 1.6217. The Yen declined .4% to 80.12, and the Canadian Dollar ticked up .1% to .9859.
Manufacturing activity increased to 54.8 from 53.4 according to the ISM’s PMI report. Construction spending rose less than expected, inching up .1% vs. forecasts for a .5% gain. Total auto sales were flat from last month at 14.4M, slightly below expectations.
Wednesday’s reports will include the ADP employment report, factory orders, weekly mortgage applications, weekly oil inventories, and the Challenger job-cut report.
Earnings are due from Clorox, Comcast, CVS, Dreamworks, Green Mountain Coffee Roasters, Mastercard, Visa, and Whole Foods.
Binary Options Report (April 30- May 4)
NFP Payrolls badly missed th marks and teh S&P500 and NASDAQ posted thier biggest losses of hte year. The Dow Jones Industrial Average fell 168.32, to close at 13,038.27. The S&P 500 lost 22.47, to close at 1,369.10. The Nasdaq dropped 2.25 percent, to close at 2,956.34.
The NFP in April was disappointing, as they fell for the third straight month.The NFP reported that employers added 115,000 in April, down from March’s revised figure of 154,000. March’s figure had been revised upwards from its original print of 120,000. The forecas called for an increase of 160,000. Private payrolls rose by 130,000 in April, down from 166,000 in March, while manufacturing added 16,000 jobs as opposed to 41,000 jobs a month ago. Employment increased in professional and business services, retail trade and health care, but fell in transportation and warehousing.
Meanwhile, the unemployment rate fell slightly in April to its lowest level since January 2009, to 8.1 percent. This is down from 8.2 percent the previous month..
Crude was down nearly 4 percent at 98.49 per barrel. WTI has lost all of its gains for the year and is down fractionally for the year and down 6 percent on the week.
Brent crude, was down 2.5 percent at $113.18. It lost 5.6 percent for the week.
Apple dragged on the Nasdaq as it fell to $585 a share. The iPad maker has lost 6 percent for the week, and 12 percent from its all-time high of $644 a share. Kraft Foods posted results that above estimates. They reaffirmed its full-year growth targets and said it was going ahead with the 2-1 split into two companies later this year.
The news, for better or worse, was out of the US this week. The NFP rose much less than expected, adding just 115,000 jobs in April. This was well below expectations for 170,000 . The unemployment rate slipped to 8.1 percent. The lowest reading since January 2009.
MONDAY: Consumer credit
TUESDAY: NFIB small biz index, 3-yr note auction, McDonald’s April sales, Fed’s Fisher speaks
WEDNESDAY: Weekly mortgage apps, wholesale trade, oil inventories, 10-yr note auction, BofA shareholders mtg, Fed’s Kocherlakota speaks, Fed’s Pianalto speaks, Fed’s Plosser speaks
THURSDAY: International trade, jobless claims, import & export prices, 30-yr bond auction, Ford shareholders mtg, Fed Chairman Bernanke speaks, Fed’s Evans speaks, Fed’s Kocherlakota speaks
FRIDAY: Producer price index, consumer sentiment
Binary Options Report (May 7- May 11)
Euro zone issues caused t othe US Iindexes to close lower thiss week. The Dow Jones lost 34.44 points, to close at 12,820.60. The S&P 500 lost 0.34 percent, to close at 1,353.39. The Nasdaq rose 0.18 points to close at 2,933.82 points.
The dollar’s recent performance is impressive. The Dollar Index has risen 1.9 percent to its highest weekly close since the middle of December. Looking at currency’s performance in specific corners of the market, we find the EUR/USD is below 1.3000, AUD/USD is at its lowest level for the year and the Dollar has even been able to muscle gold to a correction of a bull run that goes back nearly three years. The euro is the most fundamentally loaded currency this coming week. Through the close of this past week, the currency won temporary stays on two of the most critical threats to regional stability: the Greek election turmoil and Spanish financial troubles. Both areas can quickly flare up. For Greece, the short-term concern is creating a new government and seeing if it backs the austerity measures or withdraws from EU and suffers a default. As for Spain, the relief in the Bankia nationalization has been muddied by the Economic Minister’s announcement that another €30 billion will be needed to be set aside for further losses of other Spanish banks.
London brent crude for Junefell to $111.40, but did not go back above $113.18, needed to avoid a weekly loss.
Crude lost 0.95 to close at $96.13. This is now below the 200-day moving average of $96.27. Gold fell 0.8 percent to close at $1,5780.25. For the week, gold saw a 3.7 percent loss. Yhis is the Yellow metals worst performance since the week of Dec. 18 last year when it lost nearly 7 percent.
Arena soared after the drugmaker’s experimental obesity pill won an FDA panel’s support.
Meanwhile Facebook’s record IPO is already oversubscribed. Shares are expected to begin trading on May 18. Nordstrom lost after the department-store chain missed Wall Street expectations. And Nvidia surged after the chipmaker reported revenue and outlook which topped estimates.
Fundamental Analysis and the Week Ahead May 11
In the latest news from Greece, socialist party leader Evangelos Venizelos failed to form a coalition government after hosting last-minute talks. This news all but crushing earlier hopes that the debt-ridden nation would avoid another round of elections next month. According to the US Labor Department, producer prices posted a surprising drop in April as energy costs declined.
TUESDAY: CPI, retail sales, Empire state mfg survey, Treasury international capital, business inventories, housing market index
WEDNESDAY: Weekly mortgage apps, housing starts, industrial production, oil inventories, FOMC minutes
THURSDAY: Jobless claims, Philadelphia Fed survey, e-commerce retail sales, leading indicators
Binary Options Daily Analysis – Equities Rebound ahead of Fed
Asian market retreated from Monday’s gains, as the market focused on debt troubles facing Spain and Italy. The Nikkei dropped .8% to 8656, the ASX declined .3% to 1892, and the Shanghai Composite fell .7% to 2301. The Hang Seng closed down fractionally, and the Kospi ended flat.
Meanwhile, European markets surged as weak German economic data helped boost hopes for another round of central bank stimulus. The FTSE and CAC40 jumped 1.7%, and the DAX surged 1.8%, as financials led the gains. Spain’s IBEX jumped 2.7% almost completely recovering from Monday’s steep 3% slide.
US stocks rallied as well, but the gains were slightly more muted. The Dow ticked up 96 points to 12837, the Nasdaq climbed 1.2% to 2930, and the S&P 500 advanced 1% to 1358.
S&P 500 Rallies 1% for its 4th Straight Gain
Microsoft shares gained 2.9% after announcing a new tablet device, the Surface, which will run Windows 8. There will be two versions, the first of which will arrive in the fall.
Oracle climbed 3.1% after announcing profits which beat forecasts. The earning report was issued 3 days ahead of schedule.
Bonds fell, as anxiety eased. 10-year notes fell 12/32 to yield 1.62%, and 30- year notes tumbled 1 15/32 to yield 2.73%.
Crude oil gained 1% to 84.14, while natural gas slumped 2.7% to 2.563, and gasoline eased .6% to 2.6458.
Precious metals declined, as silver dropped 1% to 28.395, and gold declined .4% to 1619.80. Copper advanced .9% to 3.427.
The Dollar traded lower across the board. Leading the gains, the Euro and Swiss Franc both bounced .9% to 1.2688 and .9466 respectively. The Australian Dollar gained .7% to 1.0189, the Canadian Dollar rose .5% to 1.0182, and the Pound edged up .4% to 1.5728. Finally, the Japanese Yen inched up .2% to 78.94.
Building permits jumped by 60K to an annualized rate of .78M, significantly better than forecast. Housing starts dipped slightly, sliding from .74M to .71M.
The Fed will issue a rate statement and hold a press conference on Wednesday afternoon, and the market is hoping for a new stimulus package.
Also due on Wednesday are oil inventories and mortgage applications.
Earnings are scheduled for Bed Bath & Beyond, Goodrich, Micron Technology, and Red Hat.
Binary Options Daily Analysis – Crude Oil Tumbles, Bernanke Disappoints
Asian markets gained on Wednesday, ahead of the Fed’s press conference, in anticipation of further economic stimulus. The Nikkei advanced 1.1% to 8752, the Hang Seng gained .5% to 19519, and the Kospi rose .7% to 1904. Trailing behind, the ASX 200 inched up .2%, while the Shanghai Composite slipped .3%.
European stocks rose as well, in choppy trading. The FTSE gained .6% to 5622, the DAX climbed .5% to 6392, and the CAC40 edged up .3% to 3163. German Chancellor, Angela Merkel said a move to use the European Stability Mechanism to buy bonds from indebted nations was not up for debate. Yesterday, France’s President backed the idea as a means to lower interest rates for struggling countries.
Bernanke once again disappointed investors, failing to announce a new round of stimulus, although the Fed did extend “Operation Twist” by another $267 billion, a move which sells short-term bonds while buying long-term bonds. Stocks fell after his speech, but stocks closed only moderately lower. The Dow slipped 13 points to 12824, the S&P 500 eased .2% to 1356, while the Nasdaq closed up fractionally.
Tesla Motors rallied 5.3% after garnering an upgrade from Goldman Sachs. Adobe slumped 2.7% after cutting its outlook for the year.
Bonds closed mixed, as 2-10 year notes fell, while 30-year notes gained 11/32 to yield 2.71%. The benchmark 10-year note dropped 8/32 to yield 1.64%.
Crude oil skidded 3.9% to 81.08, as an unexpected jump in oil inventories added to selling pressure. Gasoline sank 1.9% to 2.5902, and natural gas declined .9% to 2.521.
Crude Oil Tumbles nearly 4%
Metals came under pressure, particularly copper which tanked 1.7% to 3.3745. Gold fell 1% to 1605.90, and silver dropped 1.3% to 27.995.
Most currencies closed within a stone throw of their opening price. The Pound, Australian Dollar, and Canadian Dollar all declined less than .1%, while the Euro and Swiss Franc inched up .1%. A notable exception was the Japanese Yen which fell .7% to 79.52.
The Fed cuts its projections for 2012 GDP growth by .5% to a range of 1.9%-2.4%. The slower growth means unemployment is unlikely to improve dramatically in 2012.
Thursday’s reports will include weekly jobless claims, flash manufacturing PMI, existing home sales, the Philly Fed manufacturing index, and the FHFA home price index.
Earnings are expected from Carmax, ConAgra, and Rite Aid.