Oil prices still dropping as summer driving season comes to a close

Weekly market returns...

Well folks!

This was a much better week for the stock market as oil prices moderated and the Olympics drew to a close without a terror incident.

For the week the tech heavy Nasdaq lead with a 1.3% gain, the S&P 500 followed with a .9% gain and the DJIA had a .8%.

Not shabby, but nothing to crow about. The markets where headed in the right direction for a change, but as they say on Wall St. even dead cats bounce.

Maybe it is not a dead cat bounce but the selling action over the last couple of weeks has left the markets in an extremely oversold position technically and we were due for a rally.

We need for the fundamentals to continue to improve to have another leg up in this market.

The Social Security Solution Op/Ed by Newt Gingrich

If you are younger than 50 you should read this. If we don't take steps to encourage private retirement security soon no one will have a secure retirement.

Busy with Google...

Fairly busy day with the big news being the Google (GOOG) IPO that began trading at about a twenty percent discount to the low end of the scale they had previously announced ($108 to $135). However, it did provide the market with the most excitement during the trading session after an 18% gain from the final IPO price of $85. People have been asking us whether this it is a good idea or not to get into this now, and our general opinion is to wait until the equity has "seasoned" a little bit. The best aspect of the public offering is the fact that investors seemed to be judicious about whether or not they wanted to purchase the shares. Five years ago, the Dutch auction would have raised considerably more money, and the shares would have still gone into the stratosphere (remember Red Hat RHAT, which came public just shy of $25 on a split adjusted basis and sky-rocketed to around $200; now trading near $13). One final note, the guys at Google fancied themselves as creating a fairer way for initial public offerings to take place but perhaps realized there is a lot more to an offering than they had thought. Idealism is a good thing, but in this case it could have been tempered with a little more realism and common sense to accomplish their objectives in a realm that was foreign to them.

Friday the 13th! Weekly market returns...

Well,

Market returns for the week of Friday the 13th weren't as scary as the name sake movie, but investing has not been much more fun than being in a horror movie.

For the week the Dow Jones lead with a rise of 0.1%, and S&P 500 rose 0.1% and the tech heavy NASDAQ fell -1.1%.

Earnings reports have been good this quarter but right now high crude oil prices and fears over the strength of future earnings have a grip on this market.

Weakness in the recent numbers gives the bears firepower for their argument. But, we believe that growth has slowed from an unsustainable pace in March, April and May to a sustainable pace in June and July. Growth has slowed but it has not stopped.

Right now crude oil is the real wild card. The fundamentals support crude oil of $33-$35 a barrel. The thing to watch for is oil above $50. That level is going to be harmful to global growth and we are just a couple of bucks away.

HP, oil weigh on market...slide continues.

12:00 ET Dow -72, Nasdaq -19, S&P -7.24 : [BRIEFING.COM] Once again, the technology sector is the bane of the market's existence as a surprise earnings announcement from Hewlett-Packard (HPQ 16.15, -3.37) has thrown added fuel on the fire stoked yesterday by Cisco's (CSCO 17.64, -0.65) lackluster revenue guidance for fiscal Q1 (Oct)... Specifically, HP surprised the market in three ways: first, it released its fiscal Q3 (Jul) results early (the company was scheduled to report on Aug. 18); secondly, HP's fiscal Q3 profit of $0.24 was $0.07 shy of the Reuters Estimates consensus; and third, HP issued EPS guidance of $0.35-0.39 for fiscal Q4 (Oct) that is below the current Reuters Estimates consensus of $0.43... Blame for the disappointing report was placed on poor execution in the company's Enterprise Servers and Storage business... The latter suggests this may be more of a company-specific issue, but given its proximity to Cisco's disappointing report, that consideration has been trumped by the idea that it is symptomatic of a bigger end demand issue in the technology sector... Accordingly, there is broad-based weakness across the tech sector that is weighing heavily on the broader market... A separate concern today is the continued rise in oil prices ($0.48 at $45.28/bbl) as supply concerns persist amid the same litany of concerns (read: Yukos, Iraq, Venezuela, hurricane in the Gulf of Mexico, etc.)... Target (TGT 42.69, +2.27) and Wal-Mart (WMT 53.02, +1.39), both of which checked in with encouraging earnings results, are standout performers in the S&P... Nonetheless, with growth concerns predominating for now as oil prices continue to rise, and underlying investor sentiment heavily influenced by the lousy performance of the tech stocks, the broader market continues to languish... ..NYSE Adv/Dec 1018/2028. ..NASDAQ Adv/Dec 826/1997.

FRB: Press Release--FOMC statement and Board discount rate action--August 10, 2004

Read it with your own eyeballs. Fed raises it a quarter of a point.


For immediate release
The Federal Open Market Committee decided today to raise its target for the federal funds rate by 25 basis points to 1-1/2 percent.
The Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. In recent months, output growth has moderated and the pace of improvement in labor market conditions has slowed. This softness likely owes importantly to the substantial rise in energy prices. The economy nevertheless appears poised to resume a stronger pace of expansion going forward. Inflation has been somewhat elevated this year, though a portion of the rise in prices seems to reflect transitory factors.
The Committee perceives the upside and downside risks to the attainment of both sustainable growth and price stability for the next few quarters are roughly equal. With underlying inflation still expected to be relatively low, the Committee believes that policy accommodation can be removed at a pace that is likely to be measured. Nonetheless, the Committee will respond to changes in economic prospects as needed to fulfill its obligation to maintain price stability.
Voting for the FOMC monetary policy action were: Alan Greenspan, Chairman; Timothy F. Geithner, Vice Chairman; Ben S. Bernanke; Susan S. Bies; Roger W. Ferguson, Jr.; Edward M. Gramlich; Thomas M. Hoenig; Donald L. Kohn; Cathy E. Minehan; Mark W. Olson; Sandra Pianalto; and William Poole.
In a related action, the Board of Governors unanimously approved a 25 basis point increase in the discount rate to 2-1/2 percent. In taking t"

Bill Gross from PIMCO commentary on hedge funds

Bill Gross at Pimco gets it right again. If you invest the time to read this article, take away one thing. Hedge funds sexy returns just might be a function of the leverage they use, not the skill of the fund managers.

Reasons the Fed will raise rates today...

Market Week

Although the employment report on Friday was dismal and interpreted as a possible reason for the Fed to not raise rates, we believe rates will be increased by 25 basis points today for the following reasons:

- inflation is increasing at the consumer level as the cost of raw materials goes up due to higher global demand
- real interest rates (near-term market rates minus inflation) are still very negative, and are even more so after higher inflation numbers last month
- the economy is indeed growing, as evidenced by higher industrial production and company earnings; we have just slowed from a very fast rate of growth to a more sustainable rate over time
- the recent jobs report was awful, but there are factors behind the numbers that must be considered:
- there was growth in employment in the manufacturing sector
- the household survey showed a significant net gain in jobs produced; this survey is based on a smaller sample and is far more volatile, but you must consider the fact that there is a huge discrepancy between this and the other report
- the jobs report is seasonally adjusted, and small changes in percentage points of growth can significantly affect the number of jobs created; if this seasonality is taken out, the jobs growth rate may have been much higher
- finally, the Fed must be concerned about the signal it sends to the marketplace; no increase in rates (after indicating that one would be occurring) would be a major negative signal about the direction of the economy

We do not have any forecast for the Federal Reserve meetings in the fall, but we do believe the pieces are in place for a continued recovery. However, that is contingent upon the price of oil in the world markets; and, that we will be watching over the coming months.

Heads Up, Be vigilant!

TIME MAG DETAILS EVIDENCE OF POSSIBLE AL-QAEDA ATTACK ON U.S. ‘This is looking more real every day,’ says senior intelligence official
Sun Aug 08 2004 09:59:10 ET

FBI official warned a congressional leader he and others could be targeted in Washington and on trips around U.S.

New York – An FBI official warned a congressional leader that he and other top legislative officials could be targeted by al-Qaeda in Washington or on their trips around the country, TIME has learned. The warning came two days before Ridge issued his nationwide alert.

TIME reveals exclusive new detail of al-Qaeda attack plans, in the cover story/special report “Al-Qaeda in America. Inside the Terrorist Group’s Plot to Attack the U.S. Can We Get to Them Before They Strike?” (on newsstands Monday, Aug. 9).

Assessing the accumulation of evidence of a possible attack inside the U.S., a senior intelligence official tells TIME, “This is looking more like the real deal every day.” TIME also learns that Osama bin Laden may already have ordered up another attack: a top homeland security official tells TIME “We have a number of times picked up information that al-Qaeda wants to attack us before the election, and some of the communications attribute that desire to Osama bin Laden.”

Though surveillance for the al-Qaeda attack plans seized July 24 was mostly done in 2000 and 2001, “there remains plenty of cause for concern,” according to TIME. A surveillance report notes windows behind the six columns in front of the New York Stock Exchange building make it appear “a little fragile.” Operatives specifically discuss using “usual methods” such as a heavy gas truck or oil tanker to attack facilities. Surveillance of helicopter ports and cockpits in New York City suggest al-Qaeda has investigated using them for an airborne attack.

A U.S. law-enforcement official told TIME that a recent Pakistani intelligence report made available to senior U.S. intelligence and security officials offers details of alleged al-Qaeda plans to use speedboats and divers for attacks in New York harbor before the November 2004 elections.

TIME has learned that one seized disc contains an updated photo of the Prudential Building in Newark, New Jersey that was added in January of this year. Operatives noted it might be difficult to drive a truck or van into the Prudential’s underground parking garage. So they proposed acquiring a black limo, gutting all but the front seat and presumably filling the empty portion with explosives, TIME reports. They also discussed using an oil truck to ram through the front entrance. Information on New Jersey Transit passenger rail systems and PATH train timetables suggested al-Qaeda may have been exploring ways to escape after pulling off the attack, TIME reports.

A senior U.S. intelligence official tells TIME that the three laptop computers and 51 discs seized in a July 24 raid in Pakistan represent an unprecedented “treasure trove” of information about al-Qaeda’s determination to pull off more acts of catastrophe on U.S. soil. “The discs revealed far more detailed, wide-ranging and current research” than has been made public, a source tells TIME. A senior law-enforcement force tells TIME the FBI is pursuing information from computer files that may lead to al-Qaeda members in the U.S. Perhaps a half-dozen individuals are believed to have been in contact with at least one of three men apprehended in Pakistan.

All eyes on Fed after bad market week

A ugly week...

The markets sunk across the board this week lead by the NASDAQ with a -5.9% decline, followed by the S&P with a -3.4% decline and the DJIA with a -3.2% decline.

Oil in the drivers seat...hold on.

The market at 16:20 ET
Dow: -163.48...
Nasdaq: -33.43... S&P: -17.93... NYSE Vol: 1.40 bln.. Adv: 886.. Dec: 2362
Nasdaq Vol: 1.56 bln.. Adv: 831.. Dec: 2242

Moving the MarketSector Watch
10-yr note +6/32 at 4.39%

Crude oil rises 4% as the Russian govt bans Yukos from using bank accounts

July same store sales disappointing relative to market expectationsStrong: --

Weak: retail, insurance broker, oil driller/service, steel, internet, airline, drug store, brokerage, material, biotech


16:20 ET Dow -163.48 at 9963.03, Nasdaq -33.43 at 1821.63, S&P -17.93 at 1080.70
[BRIEFING.COM] Rising oil prices and disappointing same-store sales for July from the retailers combined to undercut the stock market today as each, in its own way, contributed to concerns about the pace of earnings growth in coming quarters... Crude futures, in fact, hit a new record high of $44.50/bbl before closing the session at $44.41, up 3.7%... The spike in prices followed news reports that Russia's Justice Ministry said "nyet" with respect to Yukos being able to use previously frozen funds to pay for day-to-day operations... Recall that oil prices fell yesterday afternoon on a report that ministry bailiffs authorized Yukos to use frozen funds... That authorization was revoked, though, on the opinion that it was not based on legal norms... The striking flip-flop sparked a torrent of uncertainty regarding Yukos's fate and simply exacerbated already pressing supply concerns... The major indices slipped in the face of the oil price spike and showed virtually no inclination to forge a rebound effort due to a notable lack of industry leadership and the market's poor technical condition... To that end, the Nasdaq faltered early in the session, unable to climb back above a primary resistance point (i.e. 1865/1869 level) and kept right on falling through a couple of support zones (1845/1842 and 1832/1829) with selling activity accelerating into the close... The closing slide left the Nasdaq at a new closing low for the year and took the Dow below the psychological barrier of 10,000... Market internals reflected the broad-based selling interest as decliners swamped advancers; meanwhile, down volume outpaced up volume by nearly an 8-to-1 margin at the NYSE and Nasdaq... Retail, and specifically apparel, was the S&P's biggest weak spot with names like Gap (GPS 19.79, -1.59), TJX Cos. (TJX 21.49, -1.34), and Wal-Mart (WMT 52.05, -1.14) posting notable losses... There wasn't a single S&P industry group with a gain of more than 0.3% and Hewlett-Packard (HPQ 20.50, +0.06) was the only Dow component that didn't trade lower for the day... The Treasury market got some help from the stock market's misfortune as the 10-yr note gained six ticks to lower its yield to 4.39%... The positive move was a bit counter-intuitive in light of the spike in oil prices, but inflation concerns were trumped by the view that higher oil prices will slow economic activity... Tomorrow the July employment report, and particularly the nonfarm payrolls number, will serve as the trading catalyst; today, nervousness ahead of the report contributed to the selling interest... The consensus estimate is for an increase of 243K positions; Briefing.com is forecasting a gain of 215K... In our estimation, anything over 175K should help alleviate concerns about the economic slowdown... ..NYSE Adv/Dec 886/2362. ..NASDAQ Adv/Dec 831/2242.