Intraday Market Update
New claims for unemployment benefits dipped for the fourth straight week but not by much. Initial claims dropped -4,000 but the drop was offset by an upward revision of +4,000 to the prior week. Continuing claims rose to 4.627 million which also increased the 4 week average to 4.64 million. Employers seem to be encouraged by the recovering economy and are hiring again. However, the hiring pace so far hasn't been nearly enough to reduce the jobless rate. The trend in claims have been consistent with sizeable payroll growth in recent months, but the lack of significant improvement may start to rattle investor confidence about payroll growth in the months ahead.
On the housing front, millions of Americans are still likely to lose their homes in the coming years but the foreclosure crisis has finally showed a sign of subsiding, at least in the headline numbers. According to RealtyTrac, the number of households facing foreclosure in April fell -2% from a year ago, which is the first annual decline in 5 years. But the data isn't all rosy. Although the number of new delinquencies is dropping, the number of borrowers losing their homes is still rising. Banks foreclosed a record 92,000 homes last month.
Cisco is weighing on the Nasdaq today despite beating consensus earnings estimates and reporting their best quarter ever. On the conference call CEO John Chambers said "it doesn't get any better than this" but also offered cautious comments about the industry's supply chain which scared investors. Executives said Cisco's financial position is probably stronger than it was before the financial downturn. Shares of CSCO are down about -4.5%. Database company Sybase is up more than +55% since Monday's close after SAP offered $65 per share to acquire the company yesterday. The chatter is that the move is an attempt to keep up with SAP's rival Oracle, which will allow the company to strengthen their position in mobile applications in Asia.
In other earnings news, Kohl's met expectations but its outlook for next quarter was much weaker than analysts expected. Executives warned that the company is being conservative because their current quarter results exceeded the company's expectations KSS is off by almost -5%. Wendy's/Arby's Group missed top and bottom line estimates which has sent shares of WEN down about -3.5%.
In a New York Times report, NY Attorney General Andrew Cuomo is probing eight banks including Morgan Stanley, Goldman Sachs, Citi, UBS, Deutsche Bank, Credit Agricole and Merrill Lynch over their influence on ratings agencies. The root of the investigation is to determine whether the banks provided misleading information to rating agencies in order to inflate the ratings of mortgage-backed securities. Reports surfaced yesterday that Morgan Stanley is under a Federal probe of its mortgage-backed securities business. Notable bank analyst Dick Bove said in an interview on CNCB that the investigation is an "orchestrated political campaign" to get the financial regulation bill through Congress.
Front month crude has picked itself up off the ground after being down -2.50% in early trading. Crude is now trading at about break-even which seemed to give a lift to the overall market. Gold and Silver are taking a breather after hitting 52-week highs yesterday. Both are off by about -1%.
Natural Gas (+2.15%) is catching a bid after a smaller than expected build in weekly inventories. Natural gas is approaching a long term downtrend line from January and horizontal resistance from April. Copper is up +1.50%.
Markets in the Asia-Pacific region were mostly higher. Notable winners were China (+2.06%), Japan (+2.18%), Australia (+1.75%), and Hong Kong (+1.04%).
European markets were mixed. The leaders were Germany (+1.11%), and London( +0.93%) while the losers were Spain (-1.11%) and Italy (-0.72%).
Core Sector List:
Overall reading: 7 sectors advancing, 9 sectors declining.
Strongest Sectors: Internet, Broker Dealers, Utilities
Weakest Sectors: Home Construction, Semiconductors, Retail
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