Wall Street Update and Outlook
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Previous close
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Chg
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% chg
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DOW
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11,062.78
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-31.79
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-0.29%
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Nasdaq
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2,468.77
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33.39
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1.37%
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S&P
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1,176.19
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2.38
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0.20%
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Source: Yahoo Finance
Earnings, Bernanke, and data were in focus on Friday, but the major averages diverged as the Nasdaq jumped (attributed to the huge rally in Google shares), the Dow dragged, and the S&P 500 settled flat.
Comments from Fed Chairman Bernanke were also in focus this morning. His comments indicated that further quantitative easing and accommodation are likely, all else equal, caused the dollar to dance. The greenback swung sharply between positive and negative ground before it settled near its session high with a 0.6% gain.
Trading volume was robust amid all of the headlines. It was also stoked with the expiration of monthly options. The 1.4 billion shares traded on the NYSE was the second highest total since July.
Personal opinion: As mentioned in 15 Oct news update, there is likely to be interest in the tech sector due to Google and Seagate. This indeed occurred on U.S. Friday trading session where Nasdaq diverged sharply from S&P.
Next week, it will be a battlefield between the bulls and the bears (albeit weakened), as there are ample results releases from the banks, industrial, technology and consumer sector.
Secondly, the issue on the recent revelations about mortgage fraud and flawed foreclosure paperwork fuelled doubts about the health of major banks may cascade into bigger problems. According to financial data firm Markit Group Ltd, on Friday morning, it cost between about 10% more to insure bonds issued by Bank of America, Wells Fargo, Citigroup Inc. and JPMorgan than it had just two days earlier.
I would suggest traders to keep their tight stop losses for their long positions or to initiate partial short positions (e.g. put warrants etc)
Schedule of Economic News for the Day (SIN time)
07.01 am – GBP – Rightmove HPI m/m
07.50 am – JPY – Tertiary Industry Activity m/m
08.30 pm – CAD – Foreign Securities Purchases
09.00 pm – USD – TIC Long-Term Purchases
09.15 pm – USD – Industrial Production m/m
US / Overseas Economic News
1. U.S. retail sales for September increased 0.6%, which is stronger than the 0.4% increase that had been widely expected among economists polled by Briefing.com. Sales less autos for September increased 0.4%, as expected.
2. Overall consumer prices for September increased 0.1% month-over-month and core prices were unchanged month-over-month. The consensus among economists polled by Briefing.com had called for a 0.2% monthly increase in overall prices and a 0.1% monthly increase in core prices.
3. A gauge of manufacturing in New York State jumped in October, lifted by improvements in new orders and shipments, the New York Federal Reserve said in a report on Friday. The New York Fed’s ‘Empire State’ general business conditions index rose to 15.73 in October from 4.14 in September. Economists polled by Reuters had expected a reading of 6.50 for October. New orders index climbed to 12.90 in October from 4.33 the previous month, and shipments advanced to 19.39 from -0.27. The inventories index, however, fell below zero and hit its lowest level since January.
4. The Treasury Budget for September showed a deficit of $34.5 billion, which is a bit deeper than the $33.5 billion deficit that had been expected among economists polled by Briefing.com. Still, the latest deficit isn’t as deep as the $45.2 billion shortfall that was recorded for the same period one year ago.
5. Federal Reserve Chairman Ben Bernanke says the central bank is prepared to take steps to rejuvenate the economy through the purchase of Treasury bonds but is wrestling with how big the program should be. Many economists predict the Fed will announce a new program at its next meeting Nov. 2-3.
US / Overseas Corporate News
1. GE said Friday that sales of industrial equipment – everything from wind turbines to jet engines to locomotives – lagged in the third quarter. Revenue of $35.9 billion was about $1.7 billion shy of Wall Street estimates and investors drove the stock down 5 percent.
While GE has struggled to grow sales, its order book is showing signs of life. CEO Jeffrey Immelt said both equipment and service orders increased for the first time in two years. That led him to forecast better results and increased dividends in 2011.
2. Recent revelations about mortgage fraud and flawed foreclosure paperwork fueled doubts about the health of major banks and the how quickly they will be able to put the mortgage mess behind them.
S&P downgraded Bank of America stock to “Hold” from “Strong Buy” Friday as they cited that the bank may not have set aside enough cash to cover losses on fraudulent loans that were resold to investors. They also are concerned about costly legal bills after the bank agreed to review paperwork for thousands of foreclosures that may have been done improperly. The same issues drove higher the cost of insuring the debt issued by banks.
Banks hold trillions dollars worth of home loans on their books at close to face value. Yet the loans may be worth far less. Many are held by borrowers who can’t afford to pay and secured by real estate whose value has plummeted. The banks don’t have to acknowledge these losses as long as they don’t plan to resell the loans.
US Corporate Results Update & The Week Ahead
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Companies
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Stk Symbol
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Actual
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Consensus
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General Electric
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GE
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0.29
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0.27
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Infosys
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INFY
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0.65
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0.61
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Mattel
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MAT
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0.77
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0.76
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Source: Briefing.com
18 Oct before market opens Citigroup
18 Oct after market closes Apple / IBM
19 Oct before market opens Bank of New York / Bank of America / Goldman Sachs /
Johnson & Johnson / State Street
19 Oct after market closes Boston Scientific / Juniper Networks / Western Digital / Yahoo
20 Oct before market opens Morgan Stanley / Wells Fargo
20 Oct after market closes eBay / Seagate / Xilinix
21 Oct before market opens Caterpillar / Eli Lily / Seagate / Xerox
21 Oct after market closes Amazon / American Express / Sandisk / Wipro
22 Oct before market opens LM Ericsson / Schlumberger
Asian Markets Update on Previous Close
Asian: Most Asian markets ended lower Friday as materials plays retraced some recent gains, but Chinese shares extended their winning run amid expectations of strong earnings and hopes of further yuan appreciation.
Japan’s Nikkei Stock Average fell 0.9% to 9500.25 and Australia’s S&P/ASX 200 declined 0.2%, while South Korea’s Kospi tacked on 0.1%. Hong Kong’s Hang Seng Index shed 0.4%, while China’s Shanghai Composite jumped 3.2%.
Among other markets, New Zealand’s NZX 50 fell 0.2%, Philippine shares ended 0.4% lower, Taiwan’s Taiex shed 0.1% and Indonesian shares declined 0.6%, while Thailand’s SET Index rose 0.4% and Singapore’s Straits Times Index added 0.3%.
Dow Jones Industrial Average futures fell five points in screen trade.
STI Market Update on Previous Close and Outlook
STI: Singapore shares ended higher Friday as investors remained optimistic about the third quarter earnings season which starts in earnest next week and two imminent big listings.
The benchmark Straits Times Index wrapped the day 9.25 points, or 0.3%, higher at 3,204.27 with gainers outnumbering losers 271 to 219. In the broader market a total of 1.57 billion shares changed hands compared with 2.04 billion Thursday
Personal opinion: As mentioned on 15 Oct news update, SGX indeed rose due to earnings anticipation and multiple brokerage upgrades. (Do refer to more info on SGX below on Technical)
Some noteworthy companies which are releasing results are M1, SGX and Ezra. There may be some opportunities in these companies, depending on prices.
STI supports and resistances are:
Current: 3,204.27
Support 1: 3,195
Support 2: 3,155
Resistance 1: 3,220
Resistance 2: 3,275
SIN / Asian News
1. NA
SIN Companies News
1. Shares of Singapore Exchange, Asia’s second-largest listed bourse by market value, opened lower after it reported its July-September net profit fell 21% to S$74.2 million ($57.30 million) due to lower trading volumes and higher technology-related expenses.
2. Shares of Global Logistic Properties jumped by up to 10% when it debuts in Singapore on Monday, according to a median forecast of five analysts polled by Reuters. The firm said its initial public offering of 1.13 billion shares, the second-biggest ever in the city-state, was heavily over-subscribed.
3. Singapore Airlines, the world’s second-biggest airline by market value, said on Friday it filled 69.9% of the space available on its planes for passengers and cargo in September. The figure was higher than 68.1% recorded in August, but lower than 70.3% in September 2009.
4. Wastewater treatment firm United Envirotech said it will issue 32 million Taiwan depository receipts at NT$15.60, with each TDR representing 1.25 ordinary shares.
5. Property developer GuocoLand said its net profit for the three months ended Sept 30 was up 9% at S$13.4 million. Its revenue rose 15% to S$109.9 million from S$95.7 million due to higher contribution from residential projects in Singapore.
SIN Technical Highlights*
1. SGX is approaching overbought levels with RSI at 84.2, MACD at 0.41. ADX is at an unsustainable level of 64.0. Nevertheless, my personal opinion is that it is still not safe to short SGX yet. It would be good to view its results, analyst revision to target prices and the chart at the end of today.
2. Ezra results out on 22 Oct. It typically halts trading on that day of results release during lunch time. Analysts are expecting solid results and better results going forward. A cluster of strong support set at $1.73 – $1.78. Resistance at $1.94
*This is to highlight stocks which are worth to look into from a technical standpoint for a small punt (i.e. with smaller gains over a shorter period of time) It involves speculation and may not meet the needs of certain clients. In addition, this strategy involves cutting loss if necessary. Thus, this mentality may not be suitable for some clients. Furthermore, entry and exit levels may change depending on market and chart conditions.
Commodities Update
Commodities were weak today, with all but one sector (livestock) closing in negative territory. Energy (-1.9%) led the way lower today, with Nov crude oil futures shedding 1.7% to close at $81.25 per barrel. In fact, crude oil posted its first weekly loss in a month. Nov natural gas didn’t fare much better after it dropped 2.3% to finish at $3.532. Continued bearish fundamentals helped natural gas prices traded to their lowest levels in 13 months.
A rebound in the dollar index sent Dec gold, which finished lower by 0.9% to $1372.00 per ounce, and Dec silver, which ended off 0.9% to $24.29 per ounce, lower today. Both metals have extended their sell off in electronic trade, and are approaching their respective lows.
All the best for your investment and trading!
Information sources: Various sources such as Bloomberg, Briefing.com, Dow Jones, forex calendar, Reuters, SGX, Yahoo Finance etc.
*This news update was delayed. It was sent out to my clients in the morning.
Disclaimer
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