Tuesday
Apr152008

Treasury Yields and the Dollar

Both the 10-Year Treasury yield and the US Dollar index are at technical tipping points.  As shown in the first chart below, the yield on the 10-Year is hitting resistance at the top of its downtrend line.  Since stocks have been moving up as Treasury yields have risen (and fallen as yields have fallen), it would be nice to see this downtrend broken.

While it's hard to find many positives with the chart of the US Dollar, it has at least made a short-term bottom in recent weeks and is currently in a "flag" pattern.  When this happens, the price eventually breaks big to the upside or downside.

10yr415

Dxy415

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Tuesday
Apr152008

Bespoke's Paul Hickey on CNBC Tuesday at 2:15

Street_signs_4Bespoke's Paul Hickey will appear on CNBC's Street Signs today at 2:15 PM ET.  Topics of discussion will include the market's seasonal pattern following tax day.

Tuesday
Apr152008

INTC Earnings After the Close

lntel (INTC) reports earnings after the close today, and below we provide a snapshot of the company's historical quarterly reports since the end of 2001.  This snapshot is from the Bespoke Earnings Report Database that has the same information for more than 2,700 US stocks. 

There are a couple of things worth highlighting based on Intel's historical reports.  Since 2001, the company has beaten earnings estimates just over half of the time.  On the first trading day following its report, the stock has averaged a decline of 1.83%.  When the stock has gapped up at the open on earnings, it has averaged a decline of 1.52% from the open to the close.  When it has gapped down at the open following earnings, it has averaged a decline of 0.44% from the open to the close.

Traders and investors find this information useful for stocks they own in their portfolios as well as for finding trading opportunities around earnings reports.  If you'd like to learn more about purchasing the Bespoke Earnings Report Database, please email info@bespokeinvest.com

Intcearnings

Tuesday
Apr152008

Bad News on the Front; Good News In the Back

Russian_oil_productionOil is trading at another record high today, after eclipsing $113 per barrel.  One driver of today's surge is a front page story in the WSJ highlighting that Russian oil production in 2008 is set to decline for the first time in ten years.  The article explains that "Declining production from the world's largest oil producer and one of its largest exporters puts further pressures on an already strained market and adds to the potential for higher prices for a global economy coping with a slowdown."

While the front page story of today's Journal focused on a 1% decline (approximately 100,000 barrels) in Russian oil production in the first quarter of 2008, not all the news is bad.  On page 14 of today's issue, the Journal ran a story highlighting a potential 33 billion barrels in new supply off the coast of Brazil.  If confirmed, the discovery would represent the largest ever new discovery of oil in the world.  Why the 100,000 barrels in decreased production made the front page, while the 33 billion in potential new supply was relegated to page fourteen is not clear, but net net, you would expect these two stories to have a negative impact on the price of oil.

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Tuesday
Apr152008

LEH, MER and MS Credit Default Risk

Below we highlight the credit default risk for Lehman (LEH), Merrill (MER) and Morgan Stanley (MS) as measured by the prices of their 5-year credit default swaps (CDS).  These swaps are measured in basis points and represent the cost per year of insuring against default for the next five years.  We chose these three because they are currently the highest priced in the global bank and broker arena.  As shown, default risk has declined dramatically since late February/early March when financial markets seemed to be on the brink of collapse.  While they are sharply lower from their peaks, swap prices remain high.

Cdslehmerms

Interestingly, stock prices for LEH and MER have once again moved lower over the past couple of weeks, even as default risk has fallen.  Stock prices for each of these companies were much higher when CDS prices were at similar levels in early 2008.

Leh414

Mer414

Ms414

   

Monday
Apr142008

Writedown Poll -- Merrill Lynch and Citigroup

Merrill Lynch (MER) and Citigroup (C) are expected to report earnings (or the lack thereof) later this week.  MER is expected to report on Thursday morning, while Citi is expected to report Friday morning.  The current Bloomberg estimate for Merrill's Q1 '08 earnings per share is -$2.056.  Citi is currently expected to report a loss of 93.3 cents per share.

Investors will also be looking at how big the writedowns are for Citi and Merrill.  News reports seem to be using $12 billion as a target level for Citi's writedowns, while Merrill is at $5 billion.  We want to know what Bespoke readers think they'll be.  Will writedowns be more or less than the levels being thrown around in the financial world?  Please take part in the two polls below, and we'll report back with the results before the two companies report.


Will Merrill Lynch's Q1 writedown be more or less than $5 billion?
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Free polls from Pollhost.com


Will Citigroup's Q1 writedown be more or less than $12 billion?
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Free polls from Pollhost.com

Monday
Apr142008

JPMorgan (JPM) Down 7 Days in a Row

JPMorgan (JPM) has now been down 7 days in a row.  Over this time period, the stock is down 10.33%.  We went back to 1980 and found all of the other times that the stock has had a 7-day losing streak. 

As shown in the table below, a losing streak of this magnitude has happened 15 other times for JPM since 1980.  It has gone up on the 8th day 67% of the time for a median change of 0.47%.  Over the next week, the median change for the stock has been 1.16%. 

There have been times when day 8 was another big loser for JPM, however.  Back in October 2000, the stock went down 7% on day 8, and it went down 18% on day 8 of the losing streak in July 2002! 

Jpm7days_2 

Each day at Bespoke Premium, we release a list of stocks with winning and losing streaks and how they typically perform following similar streaks in our Stock Odds report.  Subscribe to Bespoke Premium to receive our Stock Odds along with many more unique reports. 

Monday
Apr142008

US vs Europe EPS Growth Estimates

Below we highlight the bottoms up estimated 2008 earnings growth estimates for the S&P 500 and Europe's Stoxx 600.  As shown, estimates for growth in S&P 500 earnings are expected to be 10.8% in 2008, while estimates for Europe are at -0.1%.  There are some big discrepancies between sectors as well.  Telecom is expected to see the biggest growth in Europe and the smallest growth in the US.  Technology is expected to be the best sector in the US, but estimates for growth are twice as high for Tech in Europe.  Energy stocks rank 2nd for growth in the US at 14%, but earnings are expected to decline 9% in the Oil & Gas sector in Europe.  Finally, while earnings in the US Financial sector are expected to grow by 10.7% in 2008 (a number that many think is unlikely especially given today's news from Wachovia), analysts in Europe are expecting a decline of 8.8%.

Sp500414

Stoxx60041408

 

Monday
Apr142008

Remember Ambac?

While it may seem like years ago, it was only two months ago that the direction of the market seemed to hinge on the daily fluctuations of Ambac (ABK).  Remember that Friday in February when the Dow rallied over 200 points off the low on rumors of a bailout for the company?  Luckily for the market, investors have moved on from watching ABK.  Since the early March capital injection into the company, ABK shares are down 44%.

Abk_change_in_prices_2

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Monday
Apr142008

Global Stock Market Performance

Below we highlight the distance below the 52-week highs of 22 major equity market indices.  As shown, China is trading the furthest below its 52-week high at -46.2%.  China is followed by Japan (-29.4%), Sweden (-28.4%), Hong Kong, India and Switzerland.  The US actually ranks in the better half of the group at 15.4% below its 52-week high.  Canada, Brazil, Mexico and Canada are trading the closest to their 52-week highs.  (We also provide a table of the indices we used for the countries, along with their year to date changes and trailing 12-month P/E ratios.)

52wkhigh

Ytdequity1_2

   

Monday
Apr142008

Last Week's Winners and Losers

The market sold off last week after seeing gains since the March 10th bottom.  We broke the Russell 1,000 into deciles (10 deciles of 100 stocks) based on stock performance from 3/10 to Friday, April 4th and calculated the average stock performance of each decile during last week's selloff (4/4 close to 4/11 close).  As shown below, the stocks that were up the most during the rally were down the most last week, indicating that investors were taking recent gains off the table.

Decile411

Below we highlight the best and worst performing Russell 1,000 stocks last week.  As shown, FMD was down the most at -47.37%, followed by LNG, CIT, CC, GRMN and IMB.  After its negative earnings report on Friday, GE made the losers list by declining 14.67% on the week.

MLNM topped the winners list after rising 50% last week.  Other notables on the list of best performers include DAL, UAUA, WM and HAL.

Worst411

Best411

   

Friday
Apr112008

GE's Earnings Miss -- At Least It Wasn't IBM

While the Dow is trading down nearly 1.5% due to GE's earnings miss, GE itself is having a relatively minor impact on the total decline in the Dow even though it is down 12%.  The reason for this lies in the way the Dow is calculated.  Unlike every other major index, stocks in the Dow are weighted according to their price instead of their market cap.  Therefore, the lower the stock's price, the smaller its weight in the index.  Additionally, when a stock in the index splits, its weighting is automatically cut in half even though nothing has really changed about the company. 

As of last night, GE closed at $36.75, giving it a weight in the index of only 2.4%.  This contrasts to IBM which is the highest priced stock in the Dow with a weight of 7.7%.  Below, we highlight the impact in Dow points of a 12% decline in each of the Dow components.  As shown, GE is only having a direct impact of 36 points.  If IBM traded down 12%, its impact on the index would have been a decline of 117 points!

Dow_impact_in_points_4   

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Friday
Apr112008

S&P 500 Testing 50-Day Moving Average

With today's market declines, the S&P 500 is in danger of breaking its short-term uptrend line as well as its 50-day moving average.  The index is currently trading just a half of a point below its 50-day moving average and will need to close above that level for the uptrend to hold.

Spx50day

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Friday
Apr112008

Bespoke on Bloomberg TV

Bespoke's Justin Walters will appear on Bloomberg TV around 1:30 PM ET and 4:30 PM ET to discuss earnings season and the outlook for stocks.

Friday
Apr112008

Bespoke's Commodity Snapshot

Below we highlight our trading range charts of ten major commodities.  The green shading represents two standard deviations above and below the commodity's 50-day moving average.  Moves above the green shading represent overbought levels and moves below represent oversold levels.  As shown, most commodities found a bottom in recent weeks after sharp declines late in the first quarter.  Oil found support at the $100 level and is looking to break through $110 resistance.  Metals have also staged rallies in recent weeks as the dollar has struggled, but they haven't moved back into overbought territory yet.  Corn is in overbought territory, while wheat, orange juice and coffee are closer to the bottom of their trading ranges than the top.

Oilnatgas

Goldsilver

Platcopp

Cornwheat

Ojcof