Wednesday, September 2, 2009

Daily Wrapup For September 2nd

Today's market action seems tailor-made for the phrase "it could have been worse." Still following the macro meme, market participants ascribed today's somewhat disappointing performance to the ADP employment report. The 289,000 loss in jobs is an improvement over recent months, and it would have had a positive spin put on it a month or two ago. But, expectations are higher now and it is September.

There was some substance to the attribution. After opening slightly lower and churning, the three major averages dropped quickly at about 10:15 AM ET. They reached their lows of the day as of 10:30 AM ET, when all three of them were riding losses of 0.4% or above. That plunge quickly reversed itself, though, and the averages spent the next four hours in a range. For the Dow and S&P 500, the range centered around the unchanged level; for the NASDAQ, about the +0.15% level. The last forty-five minutes saw all three dropping, right to the end of regular trading. As a result, the Dow ended up down 0.32%; the S&P, down 0.33%; and the NASDAQ, creeping into loss territory for the first time in the afternoon, ended down 0.09%. Light sweet crude oil for October delivery dropped slightly, to $67.93 per barrel. Interestingly, gold had a banner day today - and the cause ascribed was the ADP report too. Usually, the U.S. dollar and Treasury securities would rally in such a case, but not this day; gold rallied. It's too early to call this jump-up anything more than a portent, but it's not inconceivable that the safety-seekers are beginning to switch from Treasuries to gold.

Along with the general market, the lowest-quintile cut-off for the Low P/E Bin dropped today, from yesterday's 11.58 to today's 11.51. The yield cut-off, that being the S&P 500 dividend yield, rose a basis point to 2.66%. After ETFs and stocks with less than 500M market cap were also screened out, along with ones yielding more than 10%, the Bin was left with ninety-four stocks for a drop of one from yesterday. Here are today's changes in the Bin, as dash-listed below:

- Merck & Co., Inc.

- Banco de Chile
- Williams Pipeline Partners LP

Merck stock hasn't had the best of times since its peak on August 27th. After exiting the Bin thanks to P/E expansion, the major pharmaceutical company is back again due to its stock dropping 1.91% today. The first Departure contrasts with Merck fairly neatly. Banco de Chile got out of the Bin thanks to a 1.06% gain, which pushed its P/E above the cut-off. The final Departure, Williams Pipeline, did drop today but not enough to keep its P/E in the lowest quintile. Consequently, it's the second and final Departure today.

More than a week ago, the Banco Santander analytical department raised Mexican stocks to "overweight" on grounds that the Mexican economy shows the greatest potential for improvement amongst major Latin American economies come a recovery. Bin stock Telefonos de Mexico, the main provider of telecommunications services in that country, has been doing fairly well over the last month: one fundamental reason was it paying off its 2009 debt commitment early. After churning along in an increasingly narrow trading range from early April to the beginning of August, Telmex stock has been largely moving up. Today, the ADSs gained 0.89% to close at $18.22 per. That trading range centered around $16.

That's all for today's Wrapup. Thanks for reading, and may trading ranges be good to you.

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