Interdum stultus opportuna loquitur...

Tuesday, September 13, 2005

USRant: Indices Stable - Oil Decline, Merger Stupidity...

Note - from June 24th 2009, this blog has migrated from Blogger to a self-hosted version. Click here to go straight there.

The Fed's Open Market Operations desk performed 1 repurchase operation - a $4.75billion, overnight repurchase with $2.52billion in T-backed collateral undertaken at a 4.5 basis point discount to the Fed Funds Rate (FFR). Too small to be useful, but the discount size was interesting given that the market still expects the Fed to raise interest rates again next week. 

Close to an FOMC meeting, the repo issue starts to happen at a premium to the prevailing FFR in anticipation of the new, higher FFR... but that usually doesn't start to happen to the overnight repurchases until a couple of days before the FOMC meeting, so I'm only mentioning it as a 'heads-up'. The big tip of the hand on the FOMC move will happen when the Fed's OMO desk performs this week's 14-day repurchase (that usually happens on Tuesday or Wednesday); if that repurchase is performed at a significant premium, it is a certainty that the Fed will hike rates again.

Major US Indices

The Dow Jones Industrial Average rose 4.38 points (0.04%), closing out the day at 10682.94 points. The index dipped to 10664.09 just after the end of the first hour, encouraging breakout traders to short. Then it reversed, of course, hitting an intraday high of 10701.81 (10700-ish) at 12:30 p.m. - breaking the Dow's first-hour high by a nuffie-teasing 5.5 points... before reversing down again. All in all ,the entire day's trading range was a soggy 37-ish points, so there would be plenty of breakout traders who just got clipped and clipped all night. Click go the shears, boys - click click click.

One thing to notice about the secondary intraday high in the Dow (and the Nasdaq, which happened at the same time) was that the S&P did not participate. The Nasdaq was all twitterpated because of Oracle's announcement that it was going to acquire Seibel Systems - a stock trading at 302x trailing earnings.

I've said it before, but I'll keep saying it: these mergers are a dick thing. If anybody ever tried to tell me that the best use of a company's cash was to acquire a profit stream by paying $302 per dollar, I would have to slap them - because deep down I would know that they thought I was a fucking idiot. Try to get that shit by me? Not on your best day.

Wanna know the stated reason for ORCL's decision to set fire to a bunch of shareholder value?  It wants to improve its market share in its 'battle' with German giant SAP. Why doesn't the CEO just buy a "strap-on" or get a penis extension using his own damn money? Why drag shareholders into his feelings of penile inadequacy?

Market share doesn't mean a damn thing if you're constantly writing down massive amounts of goodwill - and this acquisition will result in at least 80% of the purchase price being written off - I guarantee it, and I will remind you of it when the writedown eventually happens.

Oh... and eBay is acquiring Skype - a company whose primary product is free (and the uptake of the paid version of Skype is lamentable and will always BE lamentable). Another $2.6 billion of shareholder value about to go down the pan; if Skype was genuinely worth $20 million I would be very surprised. Note that I am not trying to 'dis' Skype's product - which is a fairly typical internet telephony application. what I am 'dissing' is eBay's management's idiocy at acquiring a firm with no decent revenue stream, and paying 1999/2000 prices for it.

Still, this sort of bullshit always happens near market tops, so we shouldn't be surprised. I just hope that Skype's current owners don't accept eBay stock for the deal (or if they do, that the stock is non-escrowed).

Within the blue-chip index, 15 stocks rose, the biggest gainers being General Electric (GE, +1.32% to $34.43) and Alcoa (AA, +1.04% to $27.12), which accounted for 6 Dow points between them. Losers in the Dow numbered 14 and were led by Exxon Mobil (XOM, -1.08% to $62.52) and Intel (INTC, -1.03% to $24.99), with these two stocks contributing -7 Dow points worth of downward pressure on the index. Volume traded was tilted in favour of the gainers by 152.2m shares to 143.9m.

The broader S&P500 slid 0.92 points (0.07%), ending the day at 1240.56 (the entire day's trade took place in a 3.5 point range). Within the index, gainers numbered 246, while 233 S&P500 stocks fell for the day. Volume was tilted 1.3:1 in favour of the winners with 1089.93 million units traded in the winners as compared with 808.75 million traded in the losers .

Over at Times Square, the Nasdaq Composite rose 7.32 points (0.34%), to close at 2182.83, while larger-cap technology issues fared worse with the Nasdaq100 adding 4.37 points (0.27%), to end at 1612.2 points. Within the tech benchmark, gainers numbered 56, while 40 Nasdaq100 stocks fell for the day. Volume was tilted 2.2:1 in favour of the winners with 604.28 million traded in the winners compared to 270.42 million in the losers .

NYSE Volume was super-chunky, with 1.94 billion shares changing hands, while Nasdaq Volume was chunky, with 1.76 billion shares being shifted from one online brokerage account to another (and back again, in all likelihood).

Major Market Statistics
Dow Jones Industrial Average10682.944.380.04%
Nasdaq Composite2182.837.320.34%
NYSE Volume1.94bn--
Nasdaq Volume1.76bn--


My 9-stock "bellwethers" group rose by an average of 0.38%

  • General Electric (GE) +$0.45 (1.32%) to $34.43;
  • Citigroup (C) +$0.40 (0.9%) to $45.01;
  • Wal Mart (WMT) -$0.00 (0%) to $45.89;
  • I.B.M. (IBM) +$0.04 (0.05%) to $81.48;
  • Intel (INTC) -$0.26 (1.03%) to $24.99;
  • Cisco Systems (CSCO) -$0.10 (0.54%) to $18.48;
  • eBay (EBAY) +$0.32 (0.83%) to $38.94;
  • Fannie Mae (FNM) +$0.11 (0.23%) to $48.80; and
  • Freddie Mac (FRE) +$0.99 (1.71%) to $59.04.

Market Breadth & Internals

NYSE declining Issues beat out advancers by 1745 to 1539, for a single-day A/D reading of -206; Nasdaq gainers trumped losers by 1725 to 1283. The 10-day moving average of the A/D line fell to 430.8 on the NYSE, while the 10dma of the Nasdaq A/D rose to 274.5.

On the NYSE declining volume was greater than volume in advancing issues by 992.1 to 886.7 million shares; Nasdaq advancing volume was greater than volume in decliners by 1144.7 to 594.1 million shares.

223 NYSE-listed stocks rose to new 52-week highs, and 23 posted fresh 52-week lows, while on the Nasdaq there were 160 stocks that hit new 52-week highs, and 32 which fell to fresh 52-week lows.

Market Breadth Statistics

Advancing Volume (m)886.651144.65
Declining Volume (m)992.09594.08
New Highs223160
New Lows2332

Market Sentiment Statistics
CBOE Volatility Index11.65-0.33-2.75%
CBOE Nasdaq Volatility Index15.160.896.24%
Equity Put-Call Ratio0.690.0711.29%
10-day PCR0.60-0.03-4.76%
SPX-VIX Ratio106.52.862.76%

Bond Market Analysis

Bonds fell at the long end, with the yield on the benchmark 30-year Treasury bond rising 4.2 bps to 4.444%. The 30-year bond future fell another 18 ticks to 115-31/32 (its session low was 115-21/32).

The middle of the yield curve was broadly lower in price: five year yields rose to 3.974%, and ten-year yields rose to 4.169%.

Treasury Yields
UST 13wk (yld)3.41500%
UST 2Y (yld)3.8600%
UST 5Y (yld)3.9740.0411.04%
UST 10Y (yld)4.1690.0461.12%
UST 30Y (yld)4.4440.0420.95%

The Banks Index slid 0.12 points (0.12%), closing at 98.8; within the index,

  • Wachovia (WB) -$0.81 (1.61%) to $49.57;
  • National City Corp (NCC) -$0.32 (0.88%) to $36.24;
  • JPMorganChase (JPM) -$0.25 (0.72%) to $34.57;
  • M&T Bank Corp (MTB) -$0.66 (0.61%) to $107.71; and
  • Bank Of America (BAC) -$0.25 (0.58%) to $42.70.

The Broker-dealer Index added 1.95 points (1.11%), at 176.88; the ticket clippers lined up as follows -

  • Charles Schwab (SCH) +$0.28 (2.04%) to $13.98;
  • Jeffries Group (JEF) +$0.73 (1.78%) to $41.63;
  • Legg Mason (LM) +$1.74 (1.62%) to $109.42;
  • Goldman Sachs (GS) +$1.83 (1.58%) to $118.00; and
  • Lehman Brothers (LEH) +$1.36 (1.23%) to $112.33.

The Philadelphia SOX (Semiconductor) index declined 1.07 points (0.22%), ending the day at 481.09

  • Advanced Micro Devices (AMD) -$0.47 (1.97%) to $23.41;
  • Texas Instruments (TXN) -$0.63 (1.87%) to $33.11;
  • Infineon Tech (IFX) -$0.16 (1.59%) to $9.89;
  • Altera (ALTR) -$0.24 (1.21%) to $19.57; and
  • ST Microelectronic (STM) -$0.19 (1.08%) to $17.47.

Gold & Silver Markets

Gold rose $0.7 (0.16%) to close at $450.70 per ounce despite a significant surge in the US dollar index (which rose just under 1%). it pulled back as far as $448 during the early part of the session, but from 11 a.m. onwards it shot back up to test the ACCESS session high at $452... which was a teensy breach of the August 12th swing high (and should therefore see a nuffie attempt at a breakout which will get smashed over the coming days).

The Gold Bugs Index gained 0.13 points (0.06%), closing at 220.36

  • Hecla Mining (HL) +$0.09 (2.34%) to $3.94;
  • Randgold Resources (GOLD) +$0.32 (2.27%) to $14.40;
  • Freeport McMoran (FCX) +$0.56 (1.28%) to $44.29;
  • Agnico Eagle (AEM) +$0.16 (1.15%) to $14.07; and
  • Coeur d'Alene (CDE) +$0.03 (0.77%) to $3.95.

Silver fell by $0.01 (0.07%) to close at $7.06 per ounce. The Gold and Silver Index (XAU) gained 0.08 points (0.08%), at 102.68 points.

  • Freeport McMoran (FCX) +$0.56 (1.28%) to $44.29;
  • Agnico Eagle (AEM) +$0.16 (1.15%) to $14.07;
  • Placer Dome (PDG) +$0.16 (1.03%) to $15.68; and
  • Durban Rooderpoert Deep (DROOY) +$0.01 (0.78%) to $1.29.
Precious Metals and Indices
PHLX Gold and Silver Index102.680.080.08%
AMEX Gold BUGS Index220.360.130.06%

Oil Market

Oil lost ground, shedding $0.83 per barrel, closing at $63.25 per barrel. the session low was $62.55 - below the $62.75 I identified last week as a key 'pivot' level. The full 'lasciate ogne speranza' level for the nuffnuff longs, is actually two consecutive closes below $62.75. That is a very high probability event for this week, but tomorrow will almost certainly see a bounce in Crude.

And for those playing at home, lasciate ogne speranza is the first part of the inscription above the Gates of Hell in Dante's Inferno. It translates as "Abandon All Hope"; the full quotation is "lasciate ogne speranze, voi ch'intrate". Abandon All Hope, Ye Who Enter Here.

Anyone who thinks its a good idea to try and trade breakouts should print that phrase out, memorise it, and remind themselves of it every time they decide to buy and overbought market. The time to be a buyer is when others have abandoned all hope.

The Oil and Gas Index (XOI) slid 24.63 points (2.29%), at 1049.43

  • Sunoco (SUN) -$3.57 (4.48%) to $76.08;
  • Amerada Hess (AHC) -$4.17 (3.03%) to $133.23; and
  • Kerr Mcgee (KMG) -$2.64 (2.78%) to $92.21.

The Oil service stocks (OSX) Index slid 4.63 points (2.66%), at 169.56

  • Halliburton (HAL) -$2.50 (3.78%) to $63.60;
  • Tidewater (TDW) -$1.59 (3.45%) to $44.50; and
  • Smith International (SII) -$0.96 (2.88%) to $32.41.
Energy Complex
Reuters CRB319.81-2.05-0.64%
Crude Oil Light Sweet63.25-0.83-1.3%
Heating Oil1.8143-0.08-4.33%
Natural Gas11.031-0.23-2.06%
Unleaded Gas1.868-0.09-4.68%
AMEX Oil Index1049.43-24.63-2.29%
Oil Service Index169.56-4.63-2.66%

Currency Markets

USD Exchange Rates
US Dollar Index87.710.820.94%
Australian Dollar0.7686-0.0062-0.8%
Swiss Franc1.25820.01531.23%
Canadian Dollar0.8422-0.0067-0.79%