U.S. stocks rose as investors snapped up energy shares that are trading at their cheapest levels in 18 months (and beyond that the lowest multiples in many years) and FedEx stated current-quarter profit would exceed their forecast, helping industrial and transportation shares.
In addition, Texas Instruments maintained their third-quarter earnings guidance, helping to assuage some concerns over tech-industry revenue growth, which sent the NASDAQ Composite higher.
That said, the benchmark indices did come off of intra-day highs, but closed on the plus side nonetheless.
Market Activity for September 10, 2008
Energy share led the advance, rising 4.12%. Basic material, information technology and industrial shares also performed well.
The news of the day was Lehman’s earnings report in which they stated a third-quarter loss of $3.9 billion as they wrote-down the value of mortgage and commercial real estate assets by $5.6 billion. The firm will also sell a majority stake in its asset-management unit, spin off its commercial real estate holdings and cut the dividend in an attempt to shore up capital and regain investor confidence – which didn’t seem to work yesterday at least as the shares were down 6.9%.
Oil
The weekly energy report showed crude-oil inventories dropped 5.8 million barrels – supplies were forecast to decline 3.5 million. Stockpiles are now eight million barrels below the five-year average. In the meantime, refinery production dropped also as operating rates fell to 78.3% (has been averaging 88%) due to Hurricane Gustav.
Crude prices fell, nevertheless, as demand for fuels (averaged over the past four weeks) declined 3.8%, according to the Energy Department; that is a significant easing. As the chart below shows, the Federal Highway Administration has miles driven down 4.7%.
The Dollar
The greenback is on fire as we’re seeing the more traditional flight-to-quality dollar trade during the current environ of risk aversion. The ECB (European Central Bank) has raised their benchmark interest rate over the past year even as economic activity has weakened – further damaging growth prospects. (Unions have much more clout in the EU – thus they are very able to push wages up as costs rise, increasing the phenomenon of wage-push inflation, something we don’t need to worry about here in the U.S. as our labor market is more free and flexible.)
That said I do believe our central bank has gone too far with its easing campaign – 3.00% fed funds would be more appropriate in my view – but the freer labor market dynamics here in the states has granted us more flexibility with policy.
We were without an economic release yesterday. Well, we did get mortgage applications for the week ended September 5, but that isn’t a major release. Those apps rose 9.5%, following a 7.5% increase in the prior week. Hopefully, we see this trend continue – fixed mortgage rates will fall next week and that should help to some extent.
This morning we get back to it as all eyes will be on initial jobless claims and import prices. The trend in jobless claims is not looking particularly good, so I wouldn’t expect an inspiring number. Then again, maybe we will see some easing in claims as the government’s program that extended benefits wears off.
Import prices should fall – on a month-over-month basis – as the dollar continues to strengthen (that reduces our cost of imports) and lower oil prices will have a large effect on the reading. Still, ex-petroleum import prices are up 8% year-over-year, so we may not see the overall easing that we’re all hoping far.
We’ll also get the July trade balance and the Treasury’s monthly budget statement. The budget deficit has widened this year as the rebate check scheme combined with weak growth has sent revenues lower, yet spending has jumped. That’s too bad because we had driven the budget deficit down to the low level of 1.2% of GDP last year. In any event, the 2008 fiscal deficit is on schedule to come in at $450 billion, or 3% of GDP, which is manageable – the long-term average is 2.5%.
This morning the NYSE will schedule a moment of silence at 9:46 ET – the time American Airlines Flight 11 crashed into the North Tower of the WTC seven years ago.
Brent Vondera, Senior Analyst
In addition, Texas Instruments maintained their third-quarter earnings guidance, helping to assuage some concerns over tech-industry revenue growth, which sent the NASDAQ Composite higher.
That said, the benchmark indices did come off of intra-day highs, but closed on the plus side nonetheless.
Market Activity for September 10, 2008
Energy share led the advance, rising 4.12%. Basic material, information technology and industrial shares also performed well.
The news of the day was Lehman’s earnings report in which they stated a third-quarter loss of $3.9 billion as they wrote-down the value of mortgage and commercial real estate assets by $5.6 billion. The firm will also sell a majority stake in its asset-management unit, spin off its commercial real estate holdings and cut the dividend in an attempt to shore up capital and regain investor confidence – which didn’t seem to work yesterday at least as the shares were down 6.9%.
Oil
The weekly energy report showed crude-oil inventories dropped 5.8 million barrels – supplies were forecast to decline 3.5 million. Stockpiles are now eight million barrels below the five-year average. In the meantime, refinery production dropped also as operating rates fell to 78.3% (has been averaging 88%) due to Hurricane Gustav.
Crude prices fell, nevertheless, as demand for fuels (averaged over the past four weeks) declined 3.8%, according to the Energy Department; that is a significant easing. As the chart below shows, the Federal Highway Administration has miles driven down 4.7%.
The Dollar
The greenback is on fire as we’re seeing the more traditional flight-to-quality dollar trade during the current environ of risk aversion. The ECB (European Central Bank) has raised their benchmark interest rate over the past year even as economic activity has weakened – further damaging growth prospects. (Unions have much more clout in the EU – thus they are very able to push wages up as costs rise, increasing the phenomenon of wage-push inflation, something we don’t need to worry about here in the U.S. as our labor market is more free and flexible.)
That said I do believe our central bank has gone too far with its easing campaign – 3.00% fed funds would be more appropriate in my view – but the freer labor market dynamics here in the states has granted us more flexibility with policy.
We were without an economic release yesterday. Well, we did get mortgage applications for the week ended September 5, but that isn’t a major release. Those apps rose 9.5%, following a 7.5% increase in the prior week. Hopefully, we see this trend continue – fixed mortgage rates will fall next week and that should help to some extent.
This morning we get back to it as all eyes will be on initial jobless claims and import prices. The trend in jobless claims is not looking particularly good, so I wouldn’t expect an inspiring number. Then again, maybe we will see some easing in claims as the government’s program that extended benefits wears off.
Import prices should fall – on a month-over-month basis – as the dollar continues to strengthen (that reduces our cost of imports) and lower oil prices will have a large effect on the reading. Still, ex-petroleum import prices are up 8% year-over-year, so we may not see the overall easing that we’re all hoping far.
We’ll also get the July trade balance and the Treasury’s monthly budget statement. The budget deficit has widened this year as the rebate check scheme combined with weak growth has sent revenues lower, yet spending has jumped. That’s too bad because we had driven the budget deficit down to the low level of 1.2% of GDP last year. In any event, the 2008 fiscal deficit is on schedule to come in at $450 billion, or 3% of GDP, which is manageable – the long-term average is 2.5%.
This morning the NYSE will schedule a moment of silence at 9:46 ET – the time American Airlines Flight 11 crashed into the North Tower of the WTC seven years ago.
Brent Vondera, Senior Analyst
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