Market Summary

Signs of optimism in the housing market and economy prompted investors to move funds away from bonds as stock markets rallied worldwide today. Following up on yesterday’s strong advance, the blue chips gained 40.43, or 0.4 percent, to 10,309.24. The Standard & Poor’s 500 index rose 4.64, or 0.4 percent, to 1,099.51, while the Nasdaq composite index climbed 12.10, or 0.6 percent, to 2,226.29.

The Fed released the minutes from the January Fed meeting, where despite persistently high unemployment over the next two years, they have raised their assessment of the economy.

On the Corporate Front

Hewlett-Packard Company (HPQ) reported after the bell that net income was $2.3 billion, or 96 cents per share last quarter. Those figures are up from the $1.9 billion, or 75 cents per share the company earned the same period a year prior. Revenue jumped 8 percent to $31.2 billion on the top line, beating analyst estimates of $30 billion.

For 2010, HPQ is forecasting revenue of $121.5 billion to $122.5 billion, above street estimates of $120 billion.

Housing Climbing Out of Hole..Slowly

According to the Commerce Department, groundbreaking activity for new homes increased 2.8 percent to a seasonally adjusted annual rate of 591,000 units, north of the 580,000 unit annual pace. December’s housing starts were revised upwards to 575,000 units from the previously reported 557,000. Compared to January last year, starts increased 21.1 percent

To get a gauge of where we are in this recovery compared to past activity, housing starts peaked at a 2.273 million unit annual pace in January 2006 and bottomed at 479,000 units last April. It is staggering how far we have to go.

Debt Up to Our Eyeballs

The Treasury Department said Wednesday that the deficit for January totaled $42.63 billion, down from a $63.46 billion deficit in January 2009 and was below the $47 billion forecast of private economists. That left the total of red ink so far this budget year at $430.69 billion, 8.8 percent higher than last year when the deficit soared to an unprecedented level of $1.42 trillion.

Our deficit in 2010 will be north of 10 percent of GDP, that’s huge! The president’s commission established to come up with legislative recommendations has the goal in mind of reducing our annual deficit to roughly 3.3 percent of GDP.

Major averages soared well over 1 percent following the long holiday weekend as a sagging greenback sent raw materials higher. It was the best day on the street since November as the Dow Jones Industrial average closed up 170 points, or 1.7%, to 10,269. The Standard & Poor’s 500 Index added 19 points, or 1.8%, to 1,095, and the Nasdaq Composite Index rose 31 points, or 1.4%, to 2,214.

Morning Outlook

Futures look to the upside Wednesday morning, following yesterday’s strong gains. The greenback is advancing, while crude is still making its way higher to test its upward resistance. Dow Jones industrial average futures rose 21, or 0.2 percent, to 10,262. Standard & Poor’s 500 index futures rose 3.30, or 0.3 percent, to 1,096.50, while Nasdaq 100 index futures rose 5.00, or 0.3 percent, to 1,804.25.

Fifteen companies from the benchmark S&P index are scheduled to report earnings today, including Deere & Co. (DE) and Hewlett-Packard Co (HPQ)

Currencies and Commodities

The dollar rose 0.6484% at 90.724 yen in the currency market. The euro depreciated 0.2429% to $1.3736 while the pound lost 0.1021% to $1.5776. Gold rose 60 cents to $1120.40 an ounce, while silver ticked up 0.45% at $16.22. Light, sweet crude for March delivery continued up from yesterday’s 4% increase, rising 52 cents to $77.53 per barrel on the NYMEX; a 0.68% gain

Economic Calendar

8:30 AM
Housing Starts: Measures initial construction of residential units for the month of January. Housing construction impacts so many other segments of the economy, from consumer spending on appliances and material to labor. The consensus figure is 580,000 units, after falling 4 percent to 557,000 in December.

9:15 AM
Industrial Production: The index of industrial production measures the physical output of the nation’s factories, mines and utilities. The consensus is for a production increase of 0.8% for the month of January for its 7th consecutive monthly advance; up from the 0.6% gain in December. The manufacturing component fell 0.1% last month, so we will have to see if that trend continues.

Wall Street saw a mixed session Friday, with the blue chips advancing for the first time following four consecutive weekly declines. The Dow Jones industrial average lost 45.05 points, or 0.44 percent, to close at 10,099.14. The Standard & Poor’s 500 Index declined 2.96 points, or 0.27 percent, to close at 1,075.51. However, the Nasdaq Composite Index saw positive territory on the day, closing up 6.12 points, or 0.28 percent, at 2,183.53.

Morning Outlook

Stocks look to continue their rise following the first up week in 5 weeks. Financials look to pull the market higher after Barclays, the U.K.’s second- largest bank, beat analysts’ earnings forecasts. Dow Jones industrial average futures rose 34, or 0.3 percent, to 10,151. Standard & Poor’s 500 index futures advanced 4.70, or 0.4 percent, to 1,083.80, while Nasdaq 100 index futures gained 10.00, or 0.6 percent, to 1,793.25.

A drop in the greenback is sending raw materials higher, also helping the major averages and equity markets. This is the kickoff to a busy holiday shortened week following the President’s Day holiday. Outside of scheduled economic data, forty five companies will release quarterly results, including Hewlett- Packard Co. (HPQ) and Wal-Mart Stores Inc. (WMT) today.

Currencies and Commodities

The dollar fell 0.1128% at 89.916 yen in the currency market. The euro appreciated 0.3273% to $1.3643 while the pound gained 0.0948% to $1.5675. Gold surged $22.70 to $1112.70 an ounce, while silver climbed 1.99% at $15.76 Light, sweet crude for March delivery rose $1.06 to $75.19 per barrel on the NYMEX; a 1.43% advance

Economic Calendar

1:00 PM
Housing Market Index: Based on a survey in which respondents from The National Association of Home Builders. Thoughts and feeling over the general economy and housing market conditions weigh into an index that rates the different factors of the housing market.

Time to look back on the year that was 2009, and the end of the first decade of the 21st century. For Wall Street, is was a decade most would like to forget. One thing we have definately learned is that despite the way 2010 starts, it is not a precurser to how it will end.

The benchmark Standard & Poor’s 500 is down about 10 percent over the last 10 years, which puts Wall Street on course to register its first-ever negative decade on a total return basis, even with dividends reinvested.

Even the Great Depression in the 1930s, which followed the stock market crash in October 1929 and spanned one of the worst periods for stock investing, turned out positive as dividends helped investors cushion some of the turbulence.

Below is a list of the 5 top performers and laggards for the blue chips.
LOSERS:

- General Electric (GE) -54.18 pct

- Merck & Co (MRK) -46.49 pct

- DuPont (DD) -39.94 pct

- Alcoa Inc (AA) -21.78 pct

- Coca-Cola Co (KO) -14.89 pct

WINNERS:

- United Technologies Corp (UTX) 155.49 pct

- Caterpillar Inc (CAT) 148.65 pct

- 3M Co (MMM) 127.68 pct

- Hewlett-Packard Co. (HPQ) 92.70 pct

- Exxon Mobil Corp (XOM) 86.56 pct

Where do we go from here? You have some swearing that this is a V shaped recovery, while others point out that the economic fundamentals don’t support that. The facts are that you have a ton of government monetary and fiscal stimulus in the system right now. The November unemployment rate stands at 10%.

The S&P 500 is up 66.5 percent from a 12-year closing low set on March 9. Its trading levels now imply a forward price/earnings ratio of 15.5. Such a huge run up begs the question where will the correction come. for 2009, the S&P 500 is up 24.7 percent — a gain that puts the broad market index on track for what could be its best year since 2003. An even stronger advance this week could put the S&P 500 in position for its best year since 1998. For 2009, the Dow is up 19.9 percent and the Nasdaq is up 45 percent.

Trading to start the year will be determined based whether or not the economy can grow without government support. I don’t know if it can. There are serious underlying problems in this economy, with the lack of serious consumer spending being number one. You have seen a generational shift, as people are saving more and spending less.

And then you have the X factor…Terrorism. All bets are off when it comes to economic direction when you throw that wild card in. In the best of economic times and can cause panic, as we stand now it could be a near fatal blow to the American way of life. This near Christmas tragedy is a reminder of all the nuts out there.

Market Summary

Wall Street saw ended lower on Tuesday, as stocks fluctuated in trading following a host of economic data and comments from the central bank. The fed upped their 2010 growth prospects for the U.S., while downwardly revising their unemployment predictions for Q4 of 2010.

In a very light volume session, HPQ led the blue chips lower, as the Dow Jones industrial average dropped 17.24 points, or 0.16 percent, to end at 10,433.71. The Standard & Poor’s 500 Index lost 0.59 of a point, or 0.05 percent, to 1,105.65, while the Nasdaq Composite Index fell 6.83 points, or 0.31 percent, to 2,169.18.

The dollar rose slightly, while benchmark crude for December delivery fell $1.54 to settle at $76.02 a barrel on the NYMEX. The EIA will release their inventory report tomorrow.

New Fed Forecasts

The fed forecasts that the unemployment rate will be in the 9.3 to 9.7 percent range at the end of 2010, compared with a 9.5 to 9.8 percent range in their previous forecasts from June. They expect GDP to grow 2.5 to 3.5 percent next year, compared with a 2.1 to 3.3 percent projection in June.

In addition, the unemployment rate will be in the 6.8 to 7.5 percent range at the end of 2012, according to forecasts of 17 top Fed officials. The unemployment rate currently stands at 10.2%. Tons of slackkkk

Tons of Economic Data…No Clear Direction

The street was hit with a barrage of economic reports during the session, and its clear that nothing is definitive in terms of the economic strength and direction.

The U.S. Commerce Department’s second estimate of third quarter economic output, published on Tuesday, showed growth at a 2.8 percent annual rate, rather than the 3.5 percent pace it estimated last month.

It was still the fastest pace since the third quarter of 2007

The Standard & Poor’s/Case-Shiller index of home prices in 20 metropolitan areas rose 0.3 percent in September. It was the fifth straight monthly increase in home prices. Year over year however, home prices fell 9.4%.

Consumer confidence also edged up in November following October’s decline. The index increased to 49.5 in November from 48.7 in October. Economists had been expecting a slight decline.

Market Summary

Stocks and commodities surged on Monday, as the greenback fell while the markets got an additional boost from existing home sales data. Futures were strong in the premarket and traders took it from there, sending major averages to fresh 13 month highs. The blue chips recouped all of and then some of their losses over the past 3 sessions, rising 132.79, or 1.3 percent, to 10,450.95. The Standard & Poor’s 500 index gained 14.86, or 1.4 percent, to 1,106.24, while the Nasdaq composite index rose 29.97, or 1.4 percent, to 2,176.01. In small cap trading, the Russell 2000 index advanced 10.13, or 1.7 percent, to 594.81.

Gold prices surged to a new high of $1,174 an ounce, while crude for January delivery rose 9 cents to $77.56 a barrel on the NYMEX. The moves were all aided by a 70 basis point decline in the dollar index.

HPQ Shares Fall Slightly after Earnings

Hewlett-Packard Co (HPQ), the world’s largest maker of personal computers reported earnings of $2.4 billion, or 99 cents a share, up from $2.1 billion, or 84 cents a share, a year earlier. Despite a 14% increase in profit, revenue decreased 8.4% to $30.8 billion

Existing Home Sales Surge Ahead of Initial Tax Credit Deadline

Sales of previously owned U.S. homes rose in October at a faster-than-expected pace to the highest in more than 2-1/2 years.

The National Association of Realtors said sales surged a record 10.1 percent month-over-month to an annual rate of 6.10 million units, the highest since February 2007, from a downwardly revised 5.54 million-unit pace in September.

Analysts had expected October sales to jump to a 5.70 million-unit pace from the previously reported 5.57 million units in September. Compared to October last year, home sales were up by a record 23.5 percent.

We have a lot of data being released in the next two days, what a boost if it was better than the forecast. With such light volume this week, we can see some major moves in equities.

Big week coming up in financial markets, as the holiday shortened week squeezes more economic data and earnings in the four day week. Also, Black Friday hits us this week, and retailers have shed inventory to prepare for a slow season, but at the end of the day, the holiday season is crucial for retailers to make something resembling a profit in line with the consensus.

Three important questions about the economy came up this week, and they may be answered next week. How the answers turn out may well signal where the market may end next week and, perhaps, in December.

Question No. 1: Where is technology going?

After a miss on the part of Dell Inc (DELL), the market will get a better picture of that Monday when Hewlett-Packard Corp (HPQ) reports its fiscal-fourth-quarter earnings.

HP is expected to report earnings of $1.13 a share, up from $1.03 a year ago, on revenue of $30.4 billion. Revenue is expected to be down 9.7%.

The key is how HP, the top PC maker, describes its PC business. It markets computers largely through retailers. So it has a big consumer franchise. But it also has a big corporate business.

Question No. 2: Is housing dead or alive? The news for housing this week was miserable. A big decline in housing starts in October to an annualized 529,000 units — 76% lower than the January 2006 peak — was largely driven by a big drop in apartment construction. Mortgage delinquencies now affect more than 10% of all outstanding mortgages.

Next week brings three more important looks at the housing market:

First up is existing-home sales from the National Association of Realtors on Monday. IHS Global Insight sees the October rate hitting 5.85 million units, up from 5.57 million units in September and up 18% from a year ago. Any number that beats September’s sales rate is a bullish signal. Probably a third, maybe more, will come from first-time homebuyers scrambling to qualify for the $8,000 tax credit as well as foreclosed homes being unloaded by lenders.

Next is the S&P/Case-Shiller Index for September, due Tuesday. This tracks sale prices of existing homes in 20 major markets. The index has been trending higher since April or so.

Last is new-home sales, due Wednesday from the Commerce Department. IHS Global sees slippage to a 394,000-unit sales rate, based on declining building permits and the 13-month period it takes to sell a new home. An important point about new-home sales: Typically, people who already own a home form the core of new-home buyers. Builders aren’t generally looking for first-time buyers.

Question No. 3: Has the U.S. dollar bottomed? For the pros on Wall Street, this was a big and important question. Granted, the dollar didn’t rise much. The U.S. Dollar Index was up just 0.4% to 75.73. The dollar was up 1.1% against the British pound, 0.3% against the euro and nearly 2% against the Canadian dollar. The greenback posted its fourth straight weekly loss versus the yen.

The dollar has been trading lower because traders believe the Federal Reserve when it says it will keep interest rates near zero to encourage economic growth.

Nonetheless, the week’s move higher had an important impact on stocks if only because nobody expected it. It hit oil prices, and energy stocks were among the week’s biggest losers.

Wall Street rebound nicely following Monday’s global route. Stocks were up in the premarket and saw green on the street all day, led by financials and retailers. The Dow Jones industrials rose 82, or 0.9 %, to 9,217, while the Standard & Poor’s 500 index rose almost 10, or 1 %, to 989. The Nasdaq composite index gained 25, or 1.3 %, to 1,955.

The volatility is back in the marketplace however, as things don’t look all sunshine and rainbows for today.

Morning Outlook

Stocks fell and fell hard overnight in Asia as investors become increasingly uneasy with bank lending policies in China, and if easy money will lead to a sustained recovery. Japan’s benchmark Nikkei 225 stock average lost 80.96 points, or 0.8 %, to 10,204.00. Hong Kong’s Hang Seng shed 1.7 % to 19,954.23. China’s Shanghai index closed down 125.30 points, or 4.3 %, to 2,785.58.

With a vacuum of corporate and economic news, Asian losses rippled to Europe. In late morning trading, Germany’s DAX fell 65.60 points, or 1.3 %, to 5,185.14 while Britain’s FTSE 100 dropped 41.11 points, or 0.9 %, to 4,644.67. France’s CAC-40 fell 31.02 points, or 0.9 %, to 3,419.67.

On Wall Street, futures look to be heading sharply to the downside at the open, a mirror image to the pattern Monday’s trading took. Dow Jones industrial average futures are down 82, or 0.9 %, at 9,125. Standard & Poor’s 500 index futures are down 9.60, or 1 %, at 980.00, while Nasdaq 100 index futures are down 18.75, or 1.2 %, at 1,568.25.

On the Corporate Front

Hewlett-Packard Company (HPQ) earned $1.64 billion, or 67 cents per share, in the three months ended July 31; a decline of 19%. A year earlier the company made $2.03 billion, or 80 cents per share. Sales fell 2% to $27.45 billion, slightly ahead of analysts’ projections for $27.26 billion.

Currencies and Commodities

The dollar fell 0.4124% at 94.297 yen in the currency market. The euro depreciated 0.318% to $1.4132 while the pound lost 0.83% to $1.6422 as traders head into the safety of the dollar, a lower yielding asset (Same pattern that Monday’s route brought). Gold fell $3.40 to $935.80 an ounce, while silver tanked 2.61% at $13.63. Light, sweet crude for September delivery fell 26 cents to $65.93 per barrel on the NYMEX; a 0.38% decline ahead of today’s EIA report.

Economic Calendar

10:30 AM
EIA Petroleum Status Report: The Energy Information Administration (EIA) provides weekly information on petroleum inventories in the U.S. Oil prices have rebounded to their 2009 highs as corporate earnings and economic data have rejuvenated recovery hopes.

Market Summary

Stocks rebounded Tuesday on the street following Monday’s global bloodbath. Positive retail reports and a boost in financials led the major indices nearly 1% higher. The Dow Jones industrials rose 82, or 0.9 percent, to 9,217, while the Standard & Poor’s 500 index rose almost 10, or 1 percent, to 989. The Nasdaq composite index gained 25, or 1.3 percent, to 1,955. Who would have thought that retailers would have led a rally today following continually weak retail sales results. It just goes to show how phony earnings are and not a measure of economic strength as cost cutting measures prop up the bottom line, while margins and sales fall.

Single Family Housing Gaining Momentum

The Commerce Department reported that construction of new homes and apartments fell more than expected last month, but construction of single-family homes actually rose 1 percent to an annual rate of 581,000 units; the highest level since October 2008. It was the fifth straight monthly increase.

HP Sees Decline in Profit

Hewlett-Packard Company (HPQ) earned $1.64 billion, or 67 cents per share, in the three months ended July 31; a decline of 19%. A year earlier the company made $2.03 billion, or 80 cents per share. Sales fell 2 percent to $27.45 billion, slightly ahead of analysts’ projections for $27.26 billion.

SEC Moves Closer to Limiting Shorts

It’s been almost a year since the SEC temporarily banned short-selling the stocks of financial companies and four months since initial proposals on the practice were announced.
But finding curbs on short selling that actually make any sense has been difficult.

Today, the SEC is trying to finish the deal, requesting comment on one of the more practical previous proposals — the so-called “tick-test.”

New York Times: The proposal would require that short sales be made only at a price higher than the current best price being offered by would-be buyers of the stock. It is similar to the so-called tick-test, which was effective on many stock markets before 2007, but would be more restrictive and could be easier to apply given the current structure of markets. There is now no limit on short-selling, so long as the seller can locate shares to borrow.

As the Times notes, Wall Street argues there’s no evidence short-selling caused the plunge last year, and the academic studies out there agree with that. But politicians and the public love to hate shorts, so there’s pressure on the SEC to act. The question is: can they do something without actually doing anything?

Futures turned negative Tuesday after a premarket report showed housing construction plunged to a record low in April as a steep drop in apartment building offset a rebound in single-family construction. Permits for new projects also hit a new low. The Commerce Department reported that construction of new homes and apartments fell 12.8% last month, the lowest pace on records going back a half-century. In a disappointing sign for the future, applications for new building permits dropped 3.3 %. Stocks rebounded during trading before closing the day in the red. The Dow Jones industrial average fell 29.23, or 0.3 %, to 8,474.85. The S&P 500 index fell 1.58, or 0.2 %, to 908.13, while the tech heavy Nasdaq composite index rose 2.18, or 0.1 %, to 1,734.54.

Morning Outlook

Asian markets were mixed overnight as Japan, the world’s 2nd largest economy, saw its GDP shrink at an annual rate of 15.2% in the quarter. However, the Nikkei 225 stock average edged up 54.35 points, or 0.6 %, at the close to 9,344.64, but Hong Kong’s Hang Seng finished down 68.19 points, or 0.4 %, to 17,475.84.

Markets were mixed in Europe, giving up earlier gains in the session after futures in the U.S. pointed to a flat opening on Wall Street. The FTSE 100 index of leading British shares was down 20.44 points, or 0.5 %, at 4,461.81, while Germany’s DAX was up 26.50 points, or 0.5 %, at 4,986.12. The CAC-40 in France rose 2.59 points, or 0.1 %, at 3,277.55.

Stocks look to open mainly flat in either direction as Dow Jones industrial average futures rose 12, or 0.1 %, to 8,461. Standard & Poor’s 500 index futures gained 2.10, or 0.2 %, to 908.60, while Nasdaq 100 index futures slipped 0.75, or less than 0.1 %, to 1,393.25.The treasury secretary will be testifying on Capitol Hill today around time for the opening bell, while Bank of America announced that it raised $13.47 billion through the sale of 1.25 billion shares. BAC was said to have needed nearly $35 billion after the results of the stress tests.

On the Corporate Front

Hewlett-Packard Co (HPQ) reported a drop in 1st quarter profit of 17% on slow consumer spending in the personal technology arena. Sales fell 3 % to $27.4 billion, on par with analyst estimates, as was its earnings of 86 cents per share after one time charges. The company announced 6,400 workers, or 2 % of HP’s workforce will be laid off within the year, a figure on top of the already announced 24,600 jobs HP was already eliminating as part of its acquisition of Electronic Data Systems. HP kept its profit forecast at $3.76 to $3.88 per share for fiscal 2009

Deere (DE), the world’s largest maker of farm machinery says it earned $472.3 million, or $1.11 per share. That’s down from $763.5 million, or $1.74 per share, during the same period last year. Company revenue fell 17 % to $6.75 billion. Even with the 38% drop in profit, results beat analyst expectations of $1.07 per share on revenue of $6.60 billion.

Economic Calendar

10:35 AM
EIA Petroleum Status Report: The Energy Information Administration (EIA) provides weekly information on petroleum inventories in the U.S. With the sharp fall in crude, it will be interesting to see if demand has continued to taper off as well. Any unexpected drop in inventories could see a rebound in commodity prices in a fragile economy.

2:00 PM
FOMC Minutes: Gives a more in depth look at the thinking of the Fed at the last Federal Open Market Committee meeting in April, where the fed left its target rates unchanged and no new policy initiatives were released.