Wednesday, August 26, 2009

Daily Wrapup For August 26th

For the second day in a row, a wild ride in the market ended with the three major averages virtually unchanged. Before the lastest releases, the averages opened down, and were all losing more than 0.5% by 9:50 AM ET. Then, two economic-aggregate items hit the wires. Durable goods orders for July increased 4.9% overall, but the market didn't react all that much to it. That lassitude wasn't true of the other datum, from a series more closely watched. New home sales for July rose 9.6%; the median price was virtually unchanged from the previous month. The second item added an extra push to the subsequent rally, which carried the averages from loss to gain. As was the case yesterday, though, the rally fizzled. Until a much weaker rally kicked in at about 2 PM ET, the averages were in loss territory once the morning one backslid. The second rally also faded; had it not been for a third one in the last minutes, the averages would have ended up in negative territory. Instead, like yesterday, they were virtually unchanged. The Dow was up 0.04%; the S&P and NASDAQ, both 0.01%. Yesterday's drop in oil continued today, with light sweet crude for October delivery closing down 62 cents per barrel to end the day at $71.43.

The lowest-quintile cut-off also fell, slightly, from yesterday's 11.95 to today's 11.91. Once again, the yield cut-off remained unchanged: the S&P dividend yield stayed at 2.59%. After ETFs and stocks with market caps of under 500M were thrown out, along with ones yielding more than 10%, the Low P/E Bin was left with one hundred stocks for a gain of one from yesterday. Here are the changes in the Bin, as dash-listed below:

- Banco de Chile
- Bancolombia SA
- FPL Group, Inc.
- Williams Pipeline Partners LP

- Altria Group, Inc.
- Cooper Industries, Ltd.
- CPFL Energia SA

Three of today's Arrivals are new to the Bin. The first, Banco de Chile, got in because a 3.64% drop in its stock put its P/E well below the Bin's cut-off. FPL Group, an electric utility based in Florida, also saw its stock drop and its P/E lowered to Bin levels. The third new Arrival got in for the same reason. The stock of Williams Pipeline Partners, which transports and stores natural gas, dropped 1.07% and its P/E dropped below the cut-off. Bancolumbia got out only yesterday: a 0.56% drop in its stock puts its P/E below the lowest-quintile cut-off, but only slightly so.

The Altria Group do-si-do continued today. The stock of the American arm of Phillip Morris was up slightly, edging its P/E slightly above the Bin cut-off. Cooper Industries, a maker of electrical circuit protection products and tools, fared better today. Its stock was up 0.93%, making for enough P/E expansion to put it out of the Bin too. The final Departure was a recent Arrival, whose stock put in an even bigger gain. CPFL Energia, a Brazilian electric utility, saw its P/E go above the Bin maximum with a 1.80% gain in its stock.

Sunoco's a Bin stock that was easy to underestimate. About a month and a half ago, it had hit a 52-week low. The company, which is the only major oil to not have any significant upstream operations, was poleaxed by collapsing crack spreads that ended up hitting its second-quarter income statement to the tune of a 47 cent per share loss. Since then, though, the stock has undergone a quiet, slow but largely steady recovery. Crack spreads have improved subsequently, and the alarm that had permeated the petroleum-products market is now gone. Today, the stock's recovery was a little on the quick side: it gained 5.01% to close at $27.69. Not bad for a stock that was below $22 as of July 8th.

That's all for today's Daily Wrapup. Thanks for reading, and be comforted by yet another example of market overreaction.

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