Post-long weekend, the three major averages did quite well; so far, the widely-anticipated September Effect has yet to make its appearance except for a few down days. After opening with gains averaging about 0.5%, the averages carved out a trading range; at no point were any of them down on the day. The Dow closed up 0.59%, the S&P finished up 0.88% and the NASDAQ gained 0.94%. Light sweet crude for October delivery ended above $70 per barrel again, closing at $71.10/bbl for a gain of $3.08. Gold got top-story play today because the metal broached $1000/oz, even though it failed to hold on to most its gains in regular trading. Spot gold ended the regular session at $996.70, but moved back above $1000 later.
The lowest-quintile cut-off continued to rise today, from Friday's 11.75 to today's 11.88. The yield cut-off, being the S&P dividend yield, dropped two basis points to 2.58%. After ETFs and stocks with less then 500M market cap were discarded, along with ones yielding more than 10%, the Low P/E Bin was left with one hundred and four stocks for a gain of three from yesterday. Here are the changes in the Bin, as dash-listed below:
- AstraZeneca plc
- New York Community Bancorp, Inc.
- NiSource Inc.
- Northeast Utilities System
- SCANA Corporation
- The McGraw-Hill Companies, Inc.
- Compass Minerals International, Inc.
- General Dynamics Corporation
- Telecom Italia SpA
Three of today's six Arrivals are new: they all got in because their P/Es fell below the lowest-quintile cut-off. New York Community Bancorp, the holding company for New York Community Bank and New York Commercial Bank, is one of not many companies with a payout ratio of more than 100%: its P/E is 11.85 and its yield is 9.51%, for a dividend that has neither been raised nor cut in the last five years. Northeastern Utilities is a holding company for four utilities in the Northeastern United States: three electric, one gas. Its stock was virtually unchanged, but the Bin P/E cut-off rose above its own. McGraw-Hill got into the Bin becaue its stock plummeted 7.22% today, continuing a drop that started last Thursday. Its ratings division is facing potential lawsuits, and Warren Buffett is lowering Berkshire Hathaway's stake in the company.
The three other Arrivals have been in the Bin before. AstraZeneca, the U.K.-based major pharmaceutical company, got back in because its dividend yield ticked above the yield cut-off. Natural gas utility NiSource returned because its P/E fell below the lowest-quintile cut-off. The same cause was behind the return of electric utility SCANA.
All of the three Departures got out of the Bin because of gains in their stocks. Both Compass Minerals, a miner and seller of salt and sulfate of potassium products, and General Dynamics, a defense company, got out because their yields sunk below the yield cut-off. Compass stock gained 0.86%, and General Dynamics stock put in a much higher gain of 4.02%. The final Departure, Telecom Italia, saw its stock gain 3.15%. That leap was enough to push its P/E above the lowest-quintile cut-off.
Gains in both the stock market and metals added a real boost to the stock of metal and coal miner BHP Billiton plc. Recently, Billiton was sagging as an uptrend turned into a trading range. Today's 4.45% gain pushed it up to the top of its range from near the bottom. The company has a diversified product range - "alumina and aluminum, copper, energy (thermal) coal, iron ore, nickel, manganese, metallurgical coal, oil and gas and uranium, as well as gold, zinc, lead, silver and diamonds" - so it has benefitted from recent uptrends in those commodities. There was no company-specific news to account for its leap.
That's all for today's Wrapup. Thanks for reading, and welcome back to another post-summer season.
Howard Marks comments...
1 hour ago