Tuesday, August 4, 2009

Daily Wrapup For August 4th

It was another down day that turned into an up day. The three major averages all posted modest gains at the end of regular trading, thanks to a rally in the last twenty minutes which pushed all three from negative to positive territory. The shift from watching earnings to following economic indicators was made evident. Today didn't begin all that well, because of a reported 1.3% drop in consumer income for June. The opening decline, though, was reversed by a report that pending home sales (of previously-owned homes) rose yet again in June. The market reversed its decline and was up to a solid advance as of 1 PM ET. Then, the decline began anew, and pushed all three averages into a loss position as of the next hour. Interestingly, the 1000 level acted as a support for the S&P 500. After churning for some time, the above-mentioned end-of-day advance pushed the Dow to close with a 0.36% gain, the S&P to close with a 0.30% gain, and the NASDAQ to close with a gain of 0.13%. A report that crude stocks declined by an unexpected 1.5 million barrels helped edge light sweet crude up 16 cents per barrel to close at $71.58.

The lowest-quintile P/E cut-off rose again, to 11.41 from yesterday's 11.35. Thanks to the last-minute rise in the S&P, the dividend yield cut-off dropped by a basis point to 2.68%. Once ETFs and stocks with less than 500M market cap were thrown out, as well as ones with yield greater than 10%, the Low P/E Bin was left with one hundred and four stocks for a gain of two from yesterday. Here are the changes in the Bin, as dash-listed below:

- Navios Maritime Holdings Inc.
- Portugal Telecom, SGPS
- Public Service Enterprise Group Inc.
- Tenaris SA
- Titanium Metals Corporation

- CVB Financial Corp.
- Eni SpA
- Permian Basin Royalty Trust

Of the five Arrivals, only one is a newcomer to the Bin. Public Services Enterprise Group is a holding company for mainly electric utilities located in the Northeastern and Mid-Atlantic regions of the United States. It got in through P/E compression: the stock dropped 1.79% in regular trading today. Navios, a dry-bulk shipper, got back in the Bin because its market cap rose above 500M. Portugal Telecom's been out of the Bin for a long time, but it came back today because the cut-off P/E rose above its own. Tenaris, a maker of steel pipe products for the energy industry, sunk 2.37% today; that decline brought its P/E back to the lowest quintile. The final Arrival, Titianium Metals, had a one-day holiday from the Bin. The stock was almost unchanged today, but the P/E cut-off's rise brought Titanium back in.

The first of the three Departures left after a one-day return to the Bin. CVB Financial, a bank holding company whose operations reside in seven California counties near Los Angeles, shot up another 5.92% in regular trading; that jump was enough to put it out of the Bin again. The second Departure, Eni, is an Italian integrated oil company. Its second-quarter earnings dropped, making its 12-month trailing P/E higher than the cut-off. The final Departure, Permian Basin Trust, is an express trust with the right to 75% of the income of several oil-producing properties in Texas. It got pushed out of the Bin because its market cap dropped below 500M. Permian's been pushed out for that reason several times; it keeps coming back.

The second-biggest Bin stock by market cap, General Electric, cleared up a little trouble today. The Securities and Exchange Commission alleged that four accounting iregularities were committed in 2002 and '03, so as to make its earnings look better than they were to aid in beating analysts' expectations. GE agreed to pay $50 million without admitting any wrongdoing, and will accept the straitjacket that comes with a consent decree. Initially, the stock went down on the news: at its daily low, reached at 9:52 AM ET, it had dropped 2.26% from yesterday's close. The rest of the day, it shook off that drop and closed at $13.82 for a gain of 0.73%. That shake-off could be explained in the settlement annoucement: all of those errors have already been corrected by GE, with the last correction coming in 2008. On the other hand, it could be argued that a company that diddles with the earnings once will do so again. The market took the first perspective, making GE's early-session low a kind of mini-sale on GE stock.

That's all for today's Wrapup. Thanks for reading, and enjoy this August's weather, even if idiosyncratic.

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