Thursday, July 9, 2009

Daily Wrapup For July 9th

Earnings season is underway, and the major averages' six-day decline may have ended for the nonce. The plummet in oil halted, although it remains to be seen whether or not today's small rise constitutes a relief rally. Some beaten-down capital goods and financial stocks snapped back up today, in a manner that may indicate "relief rally" too. The broadcastable opinion about the economy has changed from anticipatory optimism to a more gritty realism. It's a sure bet that, if today marks the start of another short-term rally, the optimists will be back.

The lowest-quintile P/E joined the major averages by rising also, to 9.61. The Low P/E Bin's dividend cutoff, derived from an estimated dividend rate for S&P SPDRs, shrunk by a basis point to 2.99%. After eliminating ETFs and stocks with market cap of less than 500M, the Bin had eighty-seven stocks - one more than yesterday. Today's changes are dash-listed below:

- Deere & Company
- Harte-Hanks, Inc.

- Allianz SE

One of the Arrivals and Allianz have this feature in common: they're both occasionals in the Low P/E Bin. Harte-Hanks got back in the Bin through a 3.76% drop, while Allianz got out through a 3.1% rise. The other Arrival, Deere and Company, got in through a sustained drop over the last month - a not uncommon fate nowadays for capital-goods and durable-consumer-goods companies. Its industry, Construction and Agricultural Machinery, formerly held only one company: Caterpillar. Both Caterpillar and Deere have this element in common: a worrying 1Q report, even if their specific worries are the obverse of the other's. Caterpillar reported a first-quarter loss of 19 cents/share, as compared with a $1.19 profit in 1Q '08, even though its operations cash flow for 1Q '09 was well above 1Q '08's. Deere reported a $1.11 profit for 1Q '09, as compared with $1.74 for 1Q '08, but its 1Q '09 cash flow from operations was well in the red. Either way, both reports show an industry that's been having its troubles lately. So, of course, have agricultural commodities until recently.

There was another change, even though it didn't affect the membership composition of the Low P/E Bin. One of the Bin stocks had a name change: Banco Latinoamericano de Exportaciones is now Banco Latinoamericano de Comercio Exterior. I have no comment about what can be read into a company adding a word to its name. It gained 8.4% today, so I'm sure that some people will be glad to put an optimist's spin on the change.

That's all for today's Wrapup. Thanks for reading, and may the recent market jitters not scare you into Treasury securities.

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