It was a definite down day for the three major averages. As was the case yesterday, a rally near the end of regular trading kicked in. Unlike yesterday's, though, today's was insufficient to push any of the three into a gain position. All three were in loss territory for today's entire trading session; it was the Dow that fared the best of the three. The S&P 500 fared the worst. Although a lousy durable-goods report contributed to the down day, even if it was partially compensated for by an encouraging Fed Brown Book report on the U.S. economy, the main drag-down was oil prices. Hammered by a surprise leap in inventories, light sweet crude plummeted 5.8% today. The hoped-for demand isn't appearing, at least with respect to inventory drawdown, so the plummet was taken as indicative of a pushed-back recovery process. Despite the recent leap-up in oil, there hadn't been much publicly-expressed bullishness. Now that oil has dropped, there is publicly-expressed bearishness. An example can be found at Yahoo! Finance's Tech Ticker, where an oil trader calls crude "well overpriced." On the other hand, the same la-di-da complacency that accompanied oil's rise to $73 last month wasn't in evidence yesterday or the day before.
Like oil and the three major averages, the lowest quintile for the Low P/E Bin fell today: 10.81, from yesterday's 10.88. The S&P dividend yield remained the same once again, holding at 2.77%. After ETFs, stocks with market caps of less than 500M and ones with yields of 10% or more were eliminated, the Bin was left with ninety stocks; its membership dropped by two from yesterday. Here are the changes in the Bin, as dash-listed below:
- Allianz SE
- Duncan Energy Partners LP
- Hillenbrand, Inc.
- Honeywell International Inc.
- Hugoton Royalty Trust
- Sempra Energy
The first Arrival is one that's been in and out of the Bin before. Allianz is far from its earnings date, but it dropped today as if it had announced a disappointing result. A 2.57% loss on the day was more than enough to lower its P/E to Bin levels. The other Arrival is yet another energy income trust. Duncan Energy, though, is in the business of transportation and storage; although it deals solely in natural gas and natural-gas liquids (so it has no stake in the oil-storage mania), it's similar in business model to Sunoco Logistics Partners. Like Sunoco Logistics, its 2Q earnings were up sharply. In Duncan Energy's case, the resultant bump-up in 12-month trailings was enough to put it in the Bin.
Hillenbrand was one of the few stocks that wasn't down today, at all. Although it closed unchanged, the drop of the lowest P/E quintile was enough to get it out of the Bin. Honeywell was down on the day, but its earnings were down too - enough to push it out. Hugoton's market cap dropped, once again, to below 500M. Sempra, on the other hand, was like Hillebrand: it moved out of the Bin because the cut-off P/E moved below its own.
Like the above-mentioned Bin newcomer, Qwest Communications announced an increase in 2Q earnings. In Qwest's case, it reported 12 cents EPS for 2Q '09 which made for one cent higher than 2Q '08's 11 cents. Despite that gain, and despite indications that it beat the consensus, the report did Qwest no good today: its stock dropped 3.20%, even though that loss was half-reversed in after-hours trading. Qwest's dividend is relatively recent, but its 8 cent-per-quarter payment gives it a yield of 8.14%. After rallying strongly in April, the stock's been a trading range until a little more than three weeks ago, when a break-down established a lower level. It's been in the Bin since inception, and its recent 1-cent gain in 12-month trailing EPS all-but assures it'll stay one if its stock keeps acting in the same way.
That's all for today's Wrapup. Thanks for reading, and may your buying opportunites come quietly.