Thursday, September 3, 2009

Daily Wrapup For September 3rd

Again, the macro feed was pinned as the cause of today's market action. The three major averages opened up, with about 0.4% gains for each, but their gains melted during the first fifty minutes of trading. Then, they reversed course. The cause fingered was the release of the jobless claims report, which came in at a worse-than-expected 570,000. Continuing claims kept rising. Nevertheless, the three averages themselves began rising shortly after its release. After shooting back to near-open levels, the averages rose more slowly until about 1:30 PM ET, when they began gliding down. Then, at about 2:40 PM ET, their fall once again reversed; this time, it was replaced by a more powerful rally, which continued unabated until the close. At the end of regular trading, the Dow was up 0.69%, the S&P 500 had risen 0.85% and the NASDAQ sported a gain of 0.82%. Light sweet crude for October delivery closed down slightly, to $67.96 per barrel, while gold continued its bulish run for the second straight day: the metal closed within $10 of $1000 per ounce.

The lowest-quintile cut-off also rose today, from yesterday's 11.51 to 11.68. The S&P dividend yield, which forms the yield cut-off, fell two basis points to 2.64%. Once ETFs and stocks with less than 500M market cap were also gotten rid of, as well as ones with greater than 10% yields, the Low P/E Bin was left with ninety-nine stocks for a rise of five from yesterday. Here are the changes in the Bin, as dash-listed below:

- Alliance Holdings GP, LP
- Cardinal Health, Inc.
- Herbalife Ltd.
- Holly Corporation
- Weight Watchers International, Inc.
- Williams Pipeline Partners LP

- China Petroleum & Chemical Corp.

Two of the six Arrivals are new to the Bin, while two others returned after long absences. Alliance Holdings, a coal income trust, got in because its P/E hit right on the lowest-quintile cut-off. The second new Arrival, Cardinal Health, got in due to an accounting scandal. The healthcare-products supplier was found to have defrauded its shareholders about its revenues and income; the revelation pummelled the stock last Tuesday, bringing it into Bin range.

The two returnees which have been gone for a while are, oddly enough, both in the dieting line. Herbalife, a seller of weight management, nutritional, energy, and fitness products, got back in the Bin because its yield rose to a level above the cut-off. That was due to a drop in its stock, which started almost a month ago. The same reason applies to Weight Watchers, a seller of diet foods plus associated products and services, whose stock hit its peak about a week after Herbalife's.

The other two Arrivals haven't been gone for that long. Independent refiner Holly Corp. is another one that returned because its yield rose above the cut-off, whereas natural gas storer and transporter Williams Pipeline saw the P/E cut-off rise above its own.

Finally, the sole Departure, China Petroleum, exited the Bin for the reverse reason to most of the above: its yield dropped below the S&P yield cut-off.

It looks like the TARP-repayment magic is still around. CVB Financial annouced early this morning that it had sent the cheque to the Treasury to buy back its TARP preferreds. Although its stock was slow to take off, take off the stock did. CVB's been on a downtrend for close to a month, which has likely resulted from fears about its commercial-loan portfolio. Today, however, it shot up 4.93% in regular trading. In after-hours trading, it was up a further 1.71% subsequent to it giving up most of its regular-trading gains. The TARP repayment seems to the the trigger, but the leap-up could very well be a relief rally; there's no fundamental reason for it to rally right now, and won't be unless its financials show that CRE-related fears for its loan portfolio are overblown.

That's all for today's Wrapup. Thanks for reading, and hang on for sending-back-to-school season.

Disclosure: I'm holding CVB Financial in the actively-managed Marketocracy mock fund I run.

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