Tuesday August 5, 2008 - Good Market Day

[ReubZee]

http://finance.yahoo.com/marketupdate/update

The above is a summary of the trading day. It has some insight on why we saw the big jump.

[TSPking]

This was a great day. I still think the prognosis is bad for the foreseeable future, but maybe the market will continue to respond positively to the Fed's comments over the next couple of days. I need an exit point and I'd like to regain a few more percent if possible.

I've posted the market comments you linked to since they will be overwritten with the start of a new trading day tomorrow.

4:25 pm : The stock market posted its largest percent gain in four months on Tuesday in a broad-based rally that was aided by favorable wording in the Fed's latest directive, a drop in crude prices and a better-than-expected economic reading on the services sector.

All ten of the economic sectors posted a gain, with seven sectors advancing more than 2%. The S&P 500 surged 2.9%, with 91% of its components ending the session in positive territory.

The FOMC left the fed funds rate at 2.00%, and the discount rate at 2.25%, as expected. The Fed noted that there are both risks to inflation and growth. The FOMC said that although the economy grew in the second quarter, labor markets have "softened further" and financial markets remain under "considerable stress."

Most of the directive was very similar to June, when the Fed also kept rates unchanged. However, there were some subtle changes in the final paragraph.

In June the Fed said downside risks to growth remain, although they have "diminished somewhat" and that upside inflation risks have "increased." In the latest directive, the Fed said downside risks to growth remain, and inflation is a significant concern -- removing the comments related to diminishing downside risks and increasing upside inflation risks.

Traders took this as a sign that a Fed rate hike is not imminent, causing stocks to soar to their session highs in late afternoon trade. The FOMC decision does not deserve all the credit for the market's rally this session, as stocks were already up 1.9% prior to the announcement.

A portion of the buying interest this session was due to a 2.3% drop in the price of crude oil to $118.64 per barrel, which follows the previous session's drop of 3.0%. The drop in crude prices aided oil-cost sensitive areas, with consumer discretionary rallying 4.4% as retailers spiked 5.3%. Airlines got a large 9.4% boost, and transportation as a whole rose 4.9%. Conversely, the energy sector underperformed on a relative basis with a gain of 1.1%.

The financial sector (+5.1%) provided leadership throughout the session, indirectly benefiting from a healthy advance in European banks after Paris-based Societe Generale reported better-than-feared earnings. AIG (AIG 29.89, +3.20) led the surge higher with a gain of 12% after being upgraded to Buy from Neutral at UBS.

Earnings news was mixed as Procter & Gamble (PG 67.97, +2.15) topped expectations, while MGM Mirage (MGM 35.85, +4.85), Molson Coors Brewing (TAP 48.18, -6.25) and Archer Daniels Midland (ADM 25.88, -1.52) fell short of analyst estimates.

In terms of economic news, the July ISM Services report indicates business conditions aren't as weak as widely reported, although conditions are still not ideal. The reading rose to 49.5 from 48.2 in June, which topped the average estimate of 48.8. Since the reading is below 50, it reflects contraction in the services sector, although the number is moving in the right direction. DJ30 +331.62 NASDAQ +64.27 NQ100 +3.6% R2K +2.4% SP400 +2.1% SP500 +35.87 NASDAQ Adv/Vol/Dec 1937/2.39 bln/884 NYSE Adv/Vol/Dec 2377/1.41 bln/752

3:30 pm : The stock market is trading near session highs, as it has for for the past half-hour. There are strong gains across the board, with the exception of energy (-0.6%) and material (+0.1%) stocks.

Small- and mid-cap stocks are posting decent gains, but are signficantly trailing their large-cap counterparts. The Russell 2000 Index is up 1.6% and the S&P 400 is up 1.3%, compared to the S&P 500's advance of 2.3%.DJ30 +272.99 NASDAQ +47.92 SP500 +28.27 NASDAQ Adv/Vol/Dec 1752/1.89 bln/1053 NYSE Adv/Vol/Dec 2218/1.04 bln/892

3:00 pm : The stock market climbs to session highs, with a gain of more than 2%, as investors show relief that there is nothing in the FOMC directive that indicates a fed funds rate hike is imminent.

Seven of the ten sectors are now up more than 2%. Consumer discretionary (+4.4%) and financials (+4.4%) are seeing the most buying interest.

The energy sector (-0.7%) has been moving in the opposite direction of the broader market, falling into negative territory. Crude prices are down 2.3% to $118.65 per barrel.DJ30 +282.38 NASDAQ +50.14 SP500 +28.09 NASDAQ Adv/Vol/Dec 1758/1.68 bln/1001 NYSE Adv/Vol/Dec 2209/927 mln/898

2:35 pm : The Fed took a neutral tone in its latest directive, noting that there are both risks to inflation and growth. The Fed noted that although the economy grew in the second quarter, labor markets have "softened further" and financial markets remain under "considerable stress."

The statement was very similar to the June 25 release when the Fed also kept rates unchanged. One notable difference is in June the Fed said "upside risks to inflation and inflation expectations have increased," while the current statement says "upside risks to inflation are also of significant concern to the committee."

The FOMC believes that inflation will moderate later this year and in 2009.

The stock market traded in choppy manner following the release, and is currently trading modestly higher than pre-FOMC levels.DJ30 +242.93 NASDAQ +42.52 SP500 +24.56 NASDAQ Adv/Vol/Dec 1708/1.52 bln/1049 NYSE Adv/Vol/Dec 2193/834 mln/899

2:15 pm : The FOMC left the fed funds rate at 2.00%, and the discount rate at 2.25%, as expected.

The Fed noted that downside risks to growth remain, although there is "significant" concern regarding upside risks to inflation.

Dallas Fed President Fisher dissented, preferring an increase to the fed funds rate. This does not come as a surprise, as Fisher also dissented at the June 25 meeting, preferring a rise in the fed funds rate due to inflation risks.DJ30 +227.40 NASDAQ +37.61 SP500 +23.47 NASDAQ Adv/Vol/Dec 1663/1.35 bln/1073 NYSE Adv/Vol/Dec 2188/748 mln/884

2:00 pm : The major indices are trading just off their session highs. The Dow is leading the charge, now up 2.0% as all but two of its components trade with gains.

The only Dow components currently failing to participate in the session's advance are Chevron (CVX 81.77, -1.03) and IBM (IBM 127.42, -0.14).

Crude has fallen back below $120 per barrel, encouraging buying among consumer discretionary stocks (+3.1%). The S&P 500 Retail Index is up a hefty 3.8% as participants argue that lower fuel prices translate to increased buying power among consumers.DJ30 +222.92 NASDAQ +37.99 SP500 +23.27 NASDAQ Adv/Vol/Dec 1696/1.31 bln/1047 NYSE Adv/Vol/Dec 2204/723 mln/871

1:35 pm : The stock market continues to sport strong gains, as it has throughout the whole session. The dollar is getting a nice boost, up 0.6% against a basket of world currencies.

Trading action is likely to be volatile following the FOMC announcement at 2:15 ET, so market participants will be watching to see if the stock market can sustain this session's advance into the close.

The financial sector is rallying 3.2%, although Goldman Sachs (GS 178.05, +0.19) is not participating. Goldman had its third quarter earnings estimates cut to $2.80 from $4.28 at Merrill Lynch, citing negative trends, according to Reuters. Goldman Sachs has so far outperformed its peers during the recent credit market turmoil.DJ30 +217.49 NASDAQ +39.05 SP500 +22.84 NASDAQ Adv/Vol/Dec 1700/1.19 bln/1005 NYSE Adv/Vol/Dec 2230/661 mln/826

1:00 pm : Crude oil continues its volatile trade, paring its loss to just 0.4% at $120.90 per barrel. As a result, the energy sector is up 1.1%. The remaining sectors are not being hindered by crude recovering its losses, as now all ten economic sectors are up more than 1%.

The stock market is holding onto a large gain near its session high as investors await the FOMC decision that is a little more than an hour away.DJ30 +203.79 NASDAQ +37.99 SP500 +21.94 NASDAQ Adv/Vol/Dec 1723/1.08 bln/959 NYSE Adv/Vol/Dec 2232/607 mln/811

12:30 pm : The major indices climb to fresh session highs. Stock market bulls are pleased with the performance thus far, as only one economic sector -- energy (+0.5%) -- is posting a gain less than 1%.

On the NYSE, advancers outpace decliners by 14-to-5, and advancers have a 13-to-7 edge on the Nasdaq. Volume is on the average side.DJ30 +217.08 NASDAQ +38.92 SP500 +22.50 NASDAQ Adv/Vol/Dec 1721/960 mln/926 NYSE Adv/Vol/Dec 2214/544 mln/795

12:05 pm : Stocks are rallying at midday ahead of the widely anticipated FOMC announcement at 2:15 ET. The buying interest is fueled by a drop in crude prices and a better-than-expected services sector reading.

Strength in the S&P 500's 1.7% rally is broad-based, with all ten economic sectors posting a gain, and seven sectors up more than 1%. Within the S&P 500, 88% of stocks are in positive territory.

Crude oil is trading with a loss of 1.7% at $119.43 per barrel, which follows its 2.9% retreat in the previous session. Although crude did make a modest recovery from its session low when it was down 2.9%, oil price sensitive names are rallying.

The consumer discretionary sector is providing leadership with a gain of 3.1%, as retailers spike 4.1% higher. Meanwhile, airlines advance 6.7% and transports gain 3.6%.

The financial sector is another area of notable strength, benefiting from overseas gains in response to better-than-feared earnings from Paris-based Societe Generale. AIG (AIG 28.68, +1.99) is leading the way after being upgraded to Buy from Neutral at UBS.

The energy sector (+0.8%) is underperforming on a relative basis due to the drop in crude prices. The materials sector (+0.8%) also trails the broader market as silver (-3.0%), gold (-2.3%) and corn (-2.2%) go on the retreat.

In earnings news, Procter & Gamble (PG 67.73, +1.91) topped expectations, while MGM Mirage (MGM 34.22, +3.22), Molson Coors Brewing (TAP 48.21, -6.22) and Archer Daniels Midland (ADM 26.10, -1.30) fell short of their respective estimates.

In terms of economic news, a better-than-expected July ISM Services report sent the market to its best levels of the session as it indicates business conditions aren't as weak as widely reported, although conditions are still not ideal. The reading rose to 49.5 from 48.2 in June, which topped the average estimate of 48.8. Since the reading is below 50, it reflects contraction in the services sector, although the number is moving in the right direction.

Market participants now turn their attention to the FOMC policy announcement at 2:15 ET. The Fed is expected to leave the fed funds rate unchanged at 2.00% -- futures imply a 92% chance -- so traders will focus on the wording in the FOMC's directive.DJ30 +216.82 NASDAQ +39.16 SP500 +21.63 NASDAQ Adv/Vol/Dec 1726/855 mln/906 NYSE Adv/Vol/Dec 2218/500 mln/757

11:30 am : The stock market extends its gains as crude oil futures go back on the retreat, now down 2.1% to $118.84 per barrel. Oil prices have fallen 24% since hitting an all time high of $147.27 per barrel on July 11. However, prices are still up 42% from their 52-week low that was reached in August 2007.

The energy sector (+0.1%) drops near the unchanged mark, but its dip is offset by advances in consumer discretionary (+2.8%) and financials (+2.9%).DJ30 +196.30 NASDAQ +35.45 SP500 +19.54 NASDAQ Adv/Vol/Dec 1691/723 mln/893 NYSE Adv/Vol/Dec 2144/431 mln/815

11:00 am : The stock market is trading in a tight range near its session high.

The financial sector continues to show strength (+2.4%), with 92% of its 88 components posting a gain. AIG (AIG 28.71, +2.02) is the best-performing name after being upgraded to Buy from Neutral at UBS. UBS believes that AIG is well positioned to absorb further losses without the need for an equity raise.

Oil prices climb to just under the unchanged mark and then run into some resistance, sending oil to a loss of 1.1% at $120.06 per barrel. As a result, the energy sector (+0.8%) is underperforming on a relative basis.DJ30 +176.65 NASDAQ +29.80 SP500 +18.07 NASDAQ Adv/Vol/Dec 1672/579 mln/848 NYSE Adv/Vol/Dec 2119/351 mln/772

10:30 am : The stock market is trading near its session high, as it continues to benefit from the encouraging ISM services report. All ten economic sectors are posting a gain, and nine sectors are up more than 1%.

The defensive oriented utilities (+0.8%) sector is underperforming on a relative basis, although it is still posting a respectable gain.

Within the S&P 500, 90% of stocks are trading higher.

Crude oil is trading with a loss of 0.4% at $120.95 per barrel as it continues to recover from its low when it was down 2.8%.DJ30 +157.22 NASDAQ +27.92 SP500 +16.65 NASDAQ Adv/Vol/Dec 1688/433 mln/760 NYSE Adv/Vol/Dec 2151/268 mln/676

10:05 am : The stock market extends its gain thanks to a better-than-expected economic reading. The gains come as crude oil (-0.8% at $120.47) continues to pare its losses. Strength is broad based with all ten economic sectors posting a gain. Consumer discretionary (+2.2%) and financials (+2.1%) are leading the way.

The nonmanufacturing ISM index just hit the wires, posting a reading of 49.5 in July, which is a gain of 1.3 from the previous month. Economists expected a reading of 48.8. A reading below 50 is intended to reflect contraction in the services sector. Of note, the ISM nonmanufacturing price index retreated to 80.8 from 84.5, which is good news considering the current inflation worries.DJ30 +146.96 NASDAQ +29.10 SP500 +15.01 NASDAQ Adv/Vol/Dec 1532/221 mln/165 NYSE Adv/Vol/Dec 1975/148 mln/726

09:40 am : The stock market gets off to a strong start ahead of the FOMC policy announcement at 2:15 ET. The Fed is expected to leave the fed funds rate unchanged at 2.00%, but the wording of the directive will have a market-moving impact.

Giving stocks a boost is a 1.3% drop in crude prices to $119.80 per barrel, although prices have recovered from a loss of as much as 2.8%. Meanwhile, European markets are rallying, lifted by bank stocks after Societe Generale posted better-than-feared earnings. London's FTSE is up 2.0%, Germany's DAX is up 2.4% and France's CAC is up 1.6%.

In earnings news, Procter & Gamble (PG 66.58, +0.76) topped estimates, while Archer Daniels Midland (ADM 27.31, -0.09), Molson Coors Brewing Company (TAP 47.98, -6.45) and MGM Mirage (MGM 32.70, +1.70) fell short of expectations.DJ30 +127.99 NASDAQ +23.79 SP500 +11.94

09:15 am : S&P futures vs fair value: +9.6. Nasdaq futures vs fair value: +17.0.

08:55 am : S&P futures vs fair value: +9.2. Nasdaq futures vs fair value: +16.6. Early indications suggest a firm upside start for the major indices. In earnings news, MGM Mirage (MGM) reported second quarter earnings of $0.40 per share, which was two cents short of estimates. Molson Coors Brewing (TAP) earned $0.93 per share in the second quarter, ex-items, which fell well short of the $1.16 consensus. TAP cited challenges of energy and commodity inflation.

08:31 am : S&P futures vs fair value: +7.7. Nasdaq futures vs fair value: +15.8. Futures continue to indicate a higher start to the trading day. The July ISM Services Index (10:00 AM ET) is the only economic report set for release this session.

08:00 am : S&P futures vs fair value: +8.3. Nasdaq futures vs fair value: +15.2. Futures point to a higher open ahead of the FOMC policy announcement at 2:15 ET. The Fed is expected to leave the fed funds rate unchanged at 2.00% (fed funds futures imply a 93% probability rates will remain unchanged). Giving futures a boost this morning is a 1.9% drop in crude prices to $119.07per barrel. In addition, European stock markets are rallying thanks to strength in financial names following better-than-expected results from Societe Generale. In earnings news, Procter & Gamble (PG) topped its expectations.

07:56 am : S&P futures vs fair value: +8.7. Nasdaq futures vs fair value: +16.5. Early indications suggest a firm upside start for the major indices. In earnings news, MGM Mirage (MGM) reported second quarter earnings of $0.40 per share, which was two cents short of estimates. Molson Coors Brewing (TAP) earned $0.93 per share in the second quarter, ex-items, which fell well short of the $1.16 consensus. TAP cited challenges of energy and commodity inflation.

06:21 am : S&P futures vs fair value: +10.5. Nasdaq futures vs fair value: +18.3.

06:21 am : FTSE...5395.10...+74.90...+1.4%. DAX...6491.41...+141.60...+2.2%.

06:21 am : Nikkei...12914.66...-18.52...-0.1%. Hang Seng...21949.75...-565.17...-2.5%.