Intraday Market Update
The downward slide in US equities yesterday continued in the global markets overnight. Japan's Nikkei index lost -3.55% while many other Asia-Pacific markets were down -1%. European markets found a bottom late in the day and experienced a rally, paring early losses to finish mixed to slightly higher. Here in the US the S&P 500 was down -8 points shortly after the bell as the index tested the important 1,040 level for 3rd time in 5 days. However, decent manufacturing data and good consumer confidence numbers have lifted the S&P 500 more than +10 points off of its lows. All of the major indexes are now firmly positive with the tech heavy NASDAQ and NASDAQ 100 lagging a bit and struggling to hold onto gains. Crude oil's slide after last week's gains continues giving back another -2.0%, while Gold has tacked on over +$11 and reaching highs not seen since late June. Banks and homebuilders are participating in today's rally as these sectors are up +1.30% and +1.60%, respectively. This afternoon attention will turn to the FOMC minutes that are being released from their meeting earlier this month when the Fed downgraded its assessment of the economy.
Today's economic data began in the pre-market with chain store sales rising +0.1% which ended four weeks of declines. The y/y pace was up +0.5% to +2.8%, however, the 4-week average for the for the y/y pace was down -0.3% to a reading of +3.0%, which is the softest reading since late June. The report says warm weather continues to hurt demand for fall and back to school apparel.
Also released just before the opening bell was the S&P/Case-Shiller Home Price Index which showed an increase in home prices of +4.23% y/y in June. This beat estimates calling for an increase of +3.50%. Month-over-month (m/m) home prices increased +0.28%, compared to estimates calling for a gain of +0.20%.
Equities bounced hard when the Chicago PMI index showed solid growth in August and a Consumer Confidence reading of 53.5 exceeded consensus estimates. Although the Conference Board's index rose +2.5 points from July, August's 53.5 level is still down almost -10 points from May. More respondents say jobs are hard to get at 45.7% compared to July's reading of 45.1%. This is the worst reading on Job expectations since February. Buying plans for homes also continues to be depressed with only 2% of respondents considering purchasing a home in the future.
Chicago's PMI index showed solid growth Augusts but at a slower m/m pace. August's reading came in at 56.7 which was down from 62.3 in July, but still well above 50 which is the breakeven point between growth and contraction. Estimates called for a reading 56. Today's report could lead to favorable readings for tomorrow's ISM report in the manufacturing sector and Friday's ISM report in the non-manufacturing sector, albeit at slower growth rates which is what estimates are calling for. Over the next three days we get the ADP Employment Report, Jobless Claims and August's Non-farm Payroll Report, none of which is expected to provide a great deal of confidence to the market.
In equities, Dollar General (DG) beat Q2 earnings estimates with revenues increasing +10.8% y/y which was in line with estimates. The company increased its full year guidance and same-store sales outlook. DG is about breakeven. Monsanto (MON) is off more than -6% after trimming its 2010 earnings outlook. The company offered no explanation for the cut, although it has already reduced 2010 guidance once this year due to pressure in sales of its Roundup products. Monsanto called Q4 "solid" and said quarterly sales in Latin America and other international markets were "strong." Heinz is up about +1% after offering firm guidance for its Q1 results, while also reiterating its 2011 outlook.
In M&A news, shares of Saks (SKS) are up better than +23% to $8.14 on unconfirmed reports that a consortium of private equity names would take out the luxury retailer for around $11 per share. Lions Gate (LGF) is up better than +12% after Carl Ichan raised his longstanding tender offer for the firm.
Core Sector List:
Overall reading: 13 sectors advancing, 7 sectors declining
Strongest Sectors: Coal, Gold Miners, Home Construction, Banks
Weakest Sectors: Oil Services, Semiconductors, Broker Dealers
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