2011 FinaVestment Commentary Archives.
Week of September 26th, 2011
Stocks rose, rebounding from last week’s declines, and Treasuries retreated as European officials discussed plans to tame the debt crisis. Commodities reversed earlier losses. The Standard & Poor’s 500 Index climbed 0.4 percent to 1,141.15 at 11:06 a.m. in New York, resuming gains after Apple Inc. led a slump in technology stocks that briefly turned the market lower.
Ten-year U.S. Treasury note yields increased three basis points to 1.86 percent, rising from near a record low. The S&P GSCI Index of commodities gained 0.2 percent, erasing an earlier drop of as much as 2.6 percent, while the Dollar Index lost 0.4 percent. The benchmark Stoxx Europe 600 Index added 0.6 percent to 217.48 at 3:39 p.m. in London, rebounding from an earlier loss of 1.4 percent, as the IMF said that euro-area countries will do whatever is necessary to end the region’s debt crisis. The European Central Bank is likely to debate restarting covered-bond purchases and may discuss interest rates to ease funding trains, a euro-region central bank official said. German Chancellor Angela Merkel’s comments that leaders must erect a firewall around Greece prompted speculation about a European version of the U.S.’s Troubled Asset Relief Program after finance chiefs including U.S. Treasury Secretary Timothy F. Geithner urged more efforts to prevent contagion. “There is a lot of talk about the Europe TARP and rate cuts so that has led to optimism in some quarters,” said Ioan Smith, a director at Knight Capital Europe Ltd. in London. “I still think there is a long way to go. Nobody wants to be too long this market.” The S&P 500 and Dow Jones Industrial Average rose for a second day.
The Dow rebounded following last week’s 6.4 percent drop, its biggest since October 2008. Berkshire Hathaway Inc., billionaire investor Warren Buffett’s company, climbed 5.8 percent after saying it will repurchase shares of its stcok because it considers the shares undervalued. U.S. economic activity fell in August, according to the Federal Reserve Bank of Chicago. The Chicago Fed national index, which draws on 85 economic indicators, was minus 0.43 in August versus 0.02 in July. A reading below zero indicates belowtrend- growth in the national economy and a sign of easing pressures on future inflation.
Week of July 10th, 2011
Stocks sank, dragging the Standard & Poor’s 500 Index to the biggest twoday drop since March, while Spanish 10-year bond yields topped 6 percent for the first time since 1997 amid concern Europe’s debt crisis will spread. The euro tumbled, while gold and U.S. Treasuries rallied. The S&P 500 slid 1.7 percent to 1,320.43 at 11:09 a.m. in New York, and is down 2.4 for the past two days. The Markit iTraxx SovX Western Europe Index of default swaps jumped to an all-time high. The euro sank 1.8 percent to $1.4015, the weakest since May. Oil fell 1.7 percent, while gold futures increased 0.8 percent. Yields on 10-year Treasuries fell below 3 percent.
A meeting of European officials today was enlarged amid speculation Italy may be engulfed by the crisis and divisions on how to structure aid for Greece. Alcoa Inc. (AA) will start the second-quarter earnings season today after markets close in the U.S., while President Barack Obama said he will continue to press congressional leaders for “the largest possible deal” on a package of significant deficit cuts. “The size of Italy’s economy makes sovereign credit issues there a much greater concern,” said Gary Flam, who helps oversee $6.5 billion at Bel Air Investment Advisors. “Greece, Portugal and Ireland are manageable given the small size of those economies relative to the EU. Once you cross the threshold into Spain and Italy, you’re taking a big step up. That’s a major negative.” The S&P 500 retreated after capping a 5.9 percent gain since June 24, its biggest two-week rally since October 2009. The index lost 0.7 percent July 8 after American employers added 83 percent fewer jobs in June than economists forecast. U.S. Equities have rebounded in July after the S&P 500 tumbled 3.2 percent in May and June.
Week of June 6th, 2011
Stocks retreated for a fourth day and oil declined below $100 a barrel amid concern the global economic recovery is faltering. Treasuries dropped before the U.S. sells $66 billion of notes and bonds this week.The Standard & Poor’s 500 Index slipped 0.3 percent to 1,295.9 at 11:33 a.m. in New York and the Stoxx Europe 600 Index declined 0.5 percent. Oil retreated before OPEC ministers meet this week in Vienna. The yen strengthened against 14 of its 16 major peers, adding 0.1 percent versus the dollar. Ten-year Treasury yields rose four basis points to 3.03 percent. More than $2 trillion has been erased from the market value of global equities since this year’s peak on May 1 amid disappointing economic data, capped by last week’s U.S. jobs report. The S&P 500 has tumbled almost 5 percent from a nearly three-year high at the end of April, leaving the index trading at 12.3 times estimated earnings, the lowest valuation since September, according to data compiled by Bloomberg. “We had very negative economic data points last week,” said Tom Wirth, senior investment officer for Chemung Canal Trust Co., which manages $1.6 billion in Elmira, New York. “I’m expecting the recovery will come back in the second half. For the time being, I’m not expecting much from the market.” Financial shares were the biggest drag on the S&P 500, falling more than 1 percent as a group. Wells Fargo & Co. (WFC), the largest U.S. home lender, slumped 1.5 percent after Rochdale Securities LLC’s analyst Richard Bove cut his recommendation on the stock. The group of 82 banks, insurers and investment firms is also the worst-performing of the 10 main industries in the index this year with a collective drop of almost 6 percent.
Week of May 2nd, 2011
Most U.S. stocks fell for a second day as commodity producers slumped and Sears Holdings Corp. (SHLD) led retailers lower, while MasterCard Inc. rallied after earnings topped analysts’ estimates. Newmont Mining Corp. (NEM) and ConocoPhillips paced losses in metal and energy companies as gold and oil prices retreated. Sears Holdings Corp., the largest U.S. department-store chain, tumbled 8.7 percent after forecasting a loss for the first quarter. Pfizer Inc. (PFE) slid 2.7 percent as sales of its Lipitor cholesterol pill, the world’s best-selling drug last year, missed analysts’ estimates. MasterCard rallied 2.6 percent. About two stocks fell for each that rose on U.S. exchanges. The Standard & Poor’s 500 Index dropped 0.1 percent to 1,359.29 at 11:50 a.m. in New York. The Dow Jones Industrial Average rose 20.81 points, or 0.2 percent, to 12,828.17 as Alcoa Inc., Bank of America Corp. and JPMorgan Chase & Co. climbed. Both gauges fell yesterday from the highest levels since June 2008. “People are taking some chips off the table,” said Michael Strauss, who helps oversee $27 billion as chief investment strategist at Commonfund in Wilton, Connecticut. “We’ve had good numbers, but we also had a good run in the equity markets. Investors are treating things here more cautiously.” The S&P 500 has risen 8.2 percent this year through yesterday amid government stimulus measures and higher-than- estimated corporate profits. Earnings-per-share beat estimates at about three-quarters of the 336 companies in the S&P 500 that reported results since April 11, according to data compiled by Bloomberg
Week of March 7th, 2011
U.S. stocks fell, with technology and consumer-discretionary companies leading declines in the Standard & Poor’s 500 Index, as oil resumed its advance above $105 a barrel amid growing violence in Libya. Walt Disney Co. and Cisco Systems Inc. lost more than 1.7 percent to lead declines in the Dow Jones Industrial Average. JDS Uniphase Corp. and Micron Technology Inc. slid more than 5 percent for the biggest declines in the S&P 500. The S&P 500 slipped 0.6 percent to 1,313.79 at 11:07 a.m. in New York after climbing 0.5 percent earlier as crude retreated from its high of the day of almost $107. Oil for April delivery recently was up 1.2 percent to $105.67. The Dow Jones Industrial Average lost 38.45 points, or 0.3 percent, to 12,131.43. The S&P 500 fell 0.7 percent on March 4, trimming a weekly advance, as the surge in oil fueled concern consumer spending may slow as Labor Department data showed average hourly earnings were unchanged last month. Oil rose to a 29-month high as escalating violence in Libya bolstered concern that supply disruptions may spread through the Middle East. Crude climbed as much as 2.4 percent after fighting between Libyan rebels and troops loyal to Muammar Qaddafi intensified. Hedge funds raised purchases of futures to a record for a second week on speculation unrest will cut output further. Citigroup Inc. increased its Brent oil price estimate, saying the threat of more disruptions supports a “fear premium.” Crude briefly trimmed gains earlier as the BBC, citing al- Sharq al-Awsat newspaper, reported that Qaddafi turned to rebels in securing his exit in return for guaranteeing his and his family’s safety. Oil then resumed its gains, pulling stocks lower.
Week of February 7th, 2011
Stocks climbed, driving benchmark European and U.S. indexes to at least 2 1/2-year highs, as takeovers, faster global growth and reduced tension in Egypt boosted investor optimism in the economy. U.S. Treasuries fell, while Egyptian bonds rallied and the nation’s currency weakened. The Standard & Poor’s 500 Index rose 0.8 percent to 1,320.87 and the Stoxx Europe 600 Index gained 0.9 at 11:24 a.m. in New York. The 10-year Treasury yield climbed for a sixth day, gaining four basis points to 3.68 percent. The yield on Egypt’s 2020 bond sank 37 basis points to an eight-day low. Copper jumped to a record in New York and London. Beckman Coulter Inc. and Pride International Inc. jumped at least 9.7 percent after receiving takeover bids, two of 22 U.S. deals announced today worth a total of $16 billion. About two- thirds of MSCI World Index companies that reported quarterly earnings have topped estimates. India predicted its economy will expand the most in three years and Indonesia grew at the fastest pace in six years. Investor sentiment also improved as Egypt’s politicians took steps to resolve the crisis. “More and more people and companies see the economic recovery as sustainable,” said Joseph Veranth, chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin, which manages $2.8 billion. “It’s no surprise that there are so many M&A deals going on. Earnings have been good and that’s indication that companies will have more cash to fund those deals.”
Week of January 3rd, 2011
Stocks rallied, sending the Standard & Poor’s 500 Index to its best gain in a month, and oil rose as growth in U.S. and European manufacturing bolstered speculation the economic recovery will strengthen. Treasuries slid. The S&P 500 increased 1.4 percent to 1,275.41 at 12:47 p.m. in New York and the Stoxx Europe 600 Index gained 0.8 percent for its largest advance since Dec. 21. Oil rose to a 27-month high, copper touched a record near $4.50 a pound and silver topped $31 an ounce. The 10-year Treasury note fell, sending the yield seven basis points higher. Markets in London, Shanghai, Tokyo and Sydney were closed for holidays. All 10 industry groups in the S&P 500 advanced today after U.S. manufacturing expanded at the fastest pace in seven months in December, while data later this week is forecast to indicate growth in services and employment. European manufacturing expanded more than initially estimated in December, London-based Markit Economics said.
German stocks advanced during the first trading session of the year, led by automakers. Volkswagen AG led gains on the DAX after Porsche SE, the sports-car maker with which it plans to merge, persuaded a U.S. judge to dismiss two lawsuits claiming the company cost hedge funds more than $2 billion by misleading shortsellers in its acquisition of Volkswagen shares in 2008. Also, Volkswagen’s supervisory board unanimously extended Chief Executive Officer Martin Winterkorn’s contract by five years to the end of 2016. Volkswagen preferred shares, which have replaced its common stock on the DAX, rose 5.1 percent to 127.60 euros, while Porsche’s preferred shares rose 15 percent to 68.49 euros in Frankfurt. Competitor Bayerische Motoren Werke AG also rose, with BMW shares gaining 4.4 percent to 61.45 euros. The DAX increased 1.1 percent to 6,989.74