US stocks lost steam today, despite the release of better-than-expected second-quarter GDP figures and jobless claims data.

The US Commerce Department reported that America’s economy shrank by a less-than-anticipated annual rate of 1% in the second quarter of this year, as a surge in government spending mitigated a record decline in inventories. The decline in GDP matched the government’s first estimate, but was better than Bloomberg’s median estimate for a 1.5% drop.

In the meantime, a separate report showed some signs of a recovery for the embattled American labour market; the number of Americans claiming first-time unemployment benefits (initial jobless claims) fell by 10,000 to 570,000 in the week ended August 22. This was better than Bloomberg’s expectations for a drop to 576,000. The four week moving-average for initial jobless claims, a less volatile gauge, also declined, falling 4,750 to 566,250 last week.

The total number of Americans claiming unemployment benefits (continuing jobless claims), meanwhile plunged by 119,000 in the week ended August 15 to 6.13 million and the unemployment rate among Americans eligible for benefits (a gauge which tends to track the unemployment rate) fell to 4.6% from 4.7% the week before.

‘We’re definitely seeing firings slowing as firms are much leaner than they were earlier,’ said David Semmens of Standard Chartered Bank in New York. ‘Any good news in the labour market provides a floor for consumer sentiment.’ [1]

US equity markets fell in spite of today’s upbeat data, as investors took profits across resource shares following China’s plans to curb overcapacity across a range of resource-based industries – it is feared that this development could stifle the pace of a global economic recovery.

Many countries ‘have been seeing significant increases in Chinese imports of raw commodities,’ said Joseph Tan of Credit Suisse. ‘If the demand is coming from industries that have been over-investing and the government is now signaling concerns over over-capacity, then demand for raw materials will be likely to fall in the next months’. [2]

Shares of Freeport McMoRan Copper & Gold declined 2.1% to $61.79, Newmont Mining fell 1.8% to $39.17 and Alcoa dropped 1.5% to $12.08.

Energy majors were also in the red after crude oil slid toward the $70 a barrel level following a report showing an unexpected rise in inventories. Chevron lost 2% to $69.65, Exxon Mobil dropped 1.9% to $70 and ConocoPhillips shed 1.9% to $44.73.

The majority of banks were in negative territory too, as a report from the Federal Deposit Insurance Corporation (FDIC) revealed that the number of US problem banks rose to a 15-year high of 416 so far this year as a result of bad loans.

Wells Fargo fell 1.5% to $42.65 and Bank of America eased 0.12% lower to $17.77, while Citigroup bucked the trend and advanced 4% to $4.83 after the New York Post reported that billionaire hedge fund investor John Paulson bought shares in the bank.

Elsewhere, Boeing, the second-biggest maker of commercial aircrafts, jumped 7.6% to $51.48 after saying it expects its 787 Dreamliner to make its first flight this year.

Defence company Northrop Grumman was among the handful of gainers today as well, up 1.1% to $49.01 after winning two new contracts worth a total of $5.9 billion from the US armed forces.

By around 3:30pm (London time), the Dow Jones Industrial Average was 65.45 points (-0.69%) lower at 9478.07, while the S&P 500 traded at 1017.85, representing a 10.27 decline (-1%).

It is also worth noting that defence company BAE Systems fell nearly 6% to 305.05p after failing to win a follow-on contract for the production of vehicles for the US Department of Defence.

[1] Bloomberg News (27 August 2009)
[2] Bloomberg News (27 August 2009)

By Anthony Grech, Research Analyst, IG Index.

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The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

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The pressure of recent gains – which had taken UK and US markets to their best levels of the year – coupled with some poor earnings figures, proved too much today as UK equity markets retreated.

The FTSE 100 struggled for momentum all day after the energy sector was hit by poor profit announcements. Antofagasta was down 42p (or 5.32%) by 3pm (London time) as it reported a 70% drop in first-half profits, while Tullow Oil dropped 54p (or 4.93%) after publishing an 80% drop in profits on the back of lower oil prices. The entire sector was hit, with Fresnillo, Xstrata and Rio Tinto completing the bottom five places on the market’s leader board.

Wider economic news was also mixed. Electronics giant, Fujitsu, announced plans to cut up to 1200 jobs due to the economic downturn – around one tenth of its UK workforce. The decision means the company follows in the tracks of IBM and Capgemini; both businesses have also cut jobs on the basis that IT spending has been cut back during the tricky economic climate.

Trading on Wall Street started negatively, with industrials once again under pressure. Caterpillar was the largest faller in early trading, shedding just over 1% by 3.30pm in London.

Yet again though, just as equities started to look vulnerable, a better-than-expected piece of economic data provided a tonic for stock markets on both sides of the Atlantic.

In the US, new home sales for July – which had been expected to come in at around 365,000 – surprised analysts by increasing 9.6% to 433,000. The news immediately took the Dow Jones into the green and pared losses on European markets.

Durable goods orders also increased, but – excluding transportation goods – this was less than analyst forecasts has suggested. Aside from the 18.4% increase in transportation goods, which was fuelled by a doubling in aircraft bookings during July, orders rose 0.8%. Nevertheless, this is now the third consecutive increase, the best string of improvements seen in four years.

The biggest beneficiary on the Dow was, unsurprisingly, Home Depot, the home improvement retailer, which added 62 cents (2.27%) to its share price. Other consumer-led shares did well in the first hour of trading, with McDonalds adding 0.69% and Wal-Mart gaining 0.66%.

By contrast, General Electric shed almost 1% despite being chosen to build a 2000 megawatt power plant in Kuwait. The company came in with the lowest bid for the job – $2.65 billion.

Crude oil was down around $1.20 to $70.85 a barrel as the market corrected itself after recent gains on uncertainty over US petroleum stockpiles.

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

As soon as there is fear of a stock market correction something good happens and stocks rally. This theme has gone on for a few months now, and it has happened again today.

The release of better-than-expected US consumer confidence and housing market data provided US equity markets with another shot of adrenaline this afternoon; the Conference Board’s consumer confidence index surged to a reading of 54.1 in August, exceeding Bloomberg’s expectations for a rise to 47.9 from an originally reported 46.6 in July.

A separate report revealed that the S&P/Case-Shiller home price index, which tracks the house prices in twenty US cities, declined 15.4% from a year earlier in June – this was the smallest decline since April 2008 and better than Bloomberg’s expectations for a 16.4% drop.

Also contributing to the stock market’s optimism was the re-nomination of US Federal Reserve Chairman Ben Bernanke. ‘Wall Street can rest a little easier,’ said Christopher Rupkey of Bank of Tokyo-Mitsubishi UFJ. ‘Having a new chairman come in at this late date would put the Fed-engineered solution to both the recovery and the exit strategy at risk.’ [1]

In the meantime, a report released this afternoon revealed that the Richmond Fed manufacturing index remained unchanged at a reading of 14 in August, suggesting the rate of expansion in the region’s manufacturing has remained the same. This trailed expectations of a marginal increase, but at least we are not taking a step backwards.

By around 3:30pm (London time), the Dow Jones was trading 42.78 points (+0.45%) higher at 9552.06, while the broader S&P 500 was up by 3.32 points (+0.32%) to 1028.89. The Nasdaq gained 6.94 points (+0.42%) to 1641.72. Investors should be cautious that US stocks were off their earlier highs and beginning to head lower, perhaps on the back of a drop in crude oil prices, which started to erode earlier gains in the energy sector.

October Brent crude was trading around 1.2% lower at $73.39 barrel while October Light Sweet crude (WTI) lost 0.74% to $73.84 a barrel this afternoon. Energy major Exxon Mobil was up by only 0.1% to $71.37 while Chevron was 0.6% higher at $71.2.

In contrast, house builders were among the biggest movers on Wall Street, buoyed by the release of this afternoon’s housing data. Pulte Homes advanced 3.7% to $13.09, D.R. Horton climbed 4.1% to $13.2 and Lennar Corp added 3.9% to $15.14.

Banks were mixed, with Citigroup nearly 1.9% lower at $4.74, while Bank of America and Wells Fargo climbed more than 2% to $17.73 and $27.88, respectively.

Elsewhere, Lowe’s Cos rose 1.4% to $21 after Morgan Stanley upgraded the second-largest US home-improvement chain from ‘equal weight’ to ‘overweight’. [2]

Retailer Big Lots surged 7.9% to $25.92, after its low-cost items helped it attract recession-struck consumers trading down to cheaper brands. The company also forecast full-year profits that were ahead of consensus expectations.

Fast-food company Burger King was also in the headlines, after reporting quarterly earnings that beat analysts estimates. Its shares surged 8.5% to $19.16.

In contrast, Southern Copper fell 1.1% to $28.81 after HSBC cut its rating from ‘neutral’ to ‘underweight’. HSBC said the ‘end of Chinese restocking could weaken copper prices.’ Chemical maker Ashland was another downgrade casualty; its share price fell 1.5% to $36.72 after Susquehanna Financial Group downgraded it from ‘positive’ to ‘neutral’ on the back of valuation grounds.

[1] Source: Bloomberg News (25 August 2009)
[2] Source: Bloomberg News (25 August 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

US stocks continued to add to last weeks gains, as banks and resource shares prolonged their rally.

‘You’ve moved to a stage where investors accept that it’s a bull market and are worried that they’re missing it,’ said Hugh Johnson of Albany. ‘The underlying economic numbers confirm that it’s a bull market.’ [1]

Recovery hopes continued to drive metal prices higher today; the price of copper for three months delivery was up by 1.2% to $6,345.75 a metric ton on the London Metal Exchange and lead added 5.8% to $1,971, the highest level since 26 September. Nickel, lead and zinc also gained, helping fuel a rally across mining shares.

Freeport-McMoRan Copper & Gold climbed 2.4% to $66.61, Newmont Mining advanced 1.1% to $41.30 a share and Alcoa rose 1% to 12.69 within the first thirty minutes of trading today. Energy majors were also in vogue, as the price of October Light sweet crude edged 0.6% higher to $74.34 a barrel. Chevron and Exxon’s shares gained 1.2% to $70.61 and $70.75 respectively, while Schlumberger jumped 2.7% to $58.07.

‘Stronger worldwide demand for commodities is an indicator of the global economy’s health continuing to improve,’ said Michael James of Wedbush Morgan Securities. ‘The market continues to defy people’s expectations for any kind of pullback.’ [2]

US banks also garnered support, despite downbeat comments from banking analyst Richard Bove, who said that he foresaw another 150-200 bank failures during the present crisis. [3] At the beginning of this month, however, Mr Bove told Bloomberg News that he anticipates bank earnings will ’soar’ over the next few quarters.

There was a downbeat comment from Nouriel Roubini, the New York University professor who had predicted the credit crisis. Mr Roubini today told the Financial Times that he sees increased risks of a double-dip recession, as governments attempt to unwind economic stimulus packages.

Investors seemed to shrug off any sort of bad news however. Shares in Citigroup surged 4.5% to $4.91, Bank of America gained 2.6% to $17.91 and Wells Fargo gained 1.1% to $28.25.

Credit card companies were also trading higher this afternoon, after analysts at Barclays Capitals provided American Express, Capital One and Discover with ‘overweight’ ratings. [4] American Express advanced 1.8% to $33.44, Capital One added 2.5% to $37.41 and Discover Financial Services climbed 3.4% to $13.97.

In the meantime, insurer Hartford Financial Services jumped 6.2% to $21.83 after Deutsche Bank raised its price target by 25% to $25. [5]

Elsewhere, it has emerged that News Corp has appointed Goldman Sachs to advise the company over the potential sale of Dow Jones Indexes, which it purchased last year. News Corp gained 1.1% to $11.29.

Advanced Micro Devices was another star performer, up 10% to $4.07 after Citigroup raised its recommendation on the company’s shares from ‘hold’ to ‘buy’. Citigroup said the company’s competitive position and gross margin are likely to improve. [6]

By around 3.35pm (London time), the Dow Jones Industrial Average was 62.65 points (+0.66%) higher at 9568.61, while the broader S&P 500 was 8.22 points (+0.80%) above its previous close at 1034.35.

[1] Source: Bloomberg News (24 August 2009)
[2] Source: Bloomberg News (24 August 2009)
[3] Source: Bloomberg News (24 August 2009)
[4] Source: Financial Times (24 August 2009)
[5] Source: Bloomberg News (24 August 2009)
[6] Source: Bloomberg News (24 August 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

Wall Street’s ascent remained intact today, as an unexpected expansion in Germany’s services and France’s manufacturing industries lifted investor morale.

A surge in existing US home sales fuelled optimism, giving US equity markets the ammunition to move to levels last seen between October and November 2008. By around 3:30pm, the Dow Jones Industrial Average had shot up by 141.70 points (+1.5%) to 9487.9, while the broader S&P 500 had rallied 17.01 points (+1.65%) to 1024.04.

Investors continued to plough cash into equities today as a number of macroeconomic indicators from Europe and the United States continued to support the global economic recovery story; an index measuring activity across Germany’s services industry rose to a reading of 54.1 in August from 48.1 the month before, while a separate report unveiled that France’s manufacturing index increased to 50.2 from 48.1 in July.

A separate report released in the US, meanwhile, revealed that existing US home sales surged by a record 7.2% in July, bringing the annual rate to a two-year high of 5.24 million.

Heavy-weight resource shares benefited from today’s data, as the price of underlying oil and metals rose in order to factor in a rebound in global demand.

The price of October Brent crude futures climbed 1.3% to $74.3 a barrel and October Light Sweet crude advanced 1.4% to $73.94 a barrel this afternoon. Copper, nickel, lead, gold, platinum and palladium were all trading higher this afternoon as well.

Shares in oil giants Chevron and Exxon Mobil both climbed 1.8% to $69.83 and $69.79 respectively. ConocoPhillips advanced 2% to $44.15, Schlumberger added 4.1% to $55.99 while miner Freeport-McMoRan Copper & Gold jumped 3% to $64.1 and Newmont Mining gained 2.4% to $41 a share.

Financial shares extended gains as well today, with Citigroup gaining 4.5% to $4.68, Bank of America up 1.8% to $17.44 and AIG 3.9% higher at $33.55 after being dismissed of a $1 billion lawsuit. Confidence in AIG’s new chief executive may have also contributed to gains in the company.

Elsewhere, clothing retailer Gap, which released its earnings report last night, appreciated 2.9% to $19.38 after unveiling quarterly profits that were marginally ahead of expectations.

In the meantime, J.M. Smucker jumped 4.2% to $54.05 after beating consensus estimates on the back of stronger sales. The company also said that its full-year profits would come in at the upper end of market estimates.

Salesforce.com was among the outstanding performers today, soaring 14.6% to $52.92 after revealing better-than-expected quarterly sales and profits. The company also upped its full-year guidance.

The Federal Reserve Chairman also contributed to market optimism today; in a speech at Kansas City Fed’s annual symposium, Ben Bernanke said the global economy is beginning to emerge from the recession; ‘After contracting sharply over the past year, economic activity appears to be levelling out, both in the United States and abroad, and the prospects for a return to growth in the near term appear good.’[1]

The VIX, a volatility barometer that is also known as the fear index, was trading 3.4% lower at 24.24, as a result of today’s upbeat developments.

It is important to note that there was some concern about the popular US ‘cash for clunkers’ auto trade-in programme, which is scheduled to end on August 24. This may spur some concern in the coming weeks as it was one of key programmes that helped bring some stability to auto sales.

[1] Source: Bloomberg News (21 August 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

US equity markets commenced the trading session in the red, as a report released this afternoon revealed that the embattled American labour market is struggling to recover.

Wall Street managed to recoup its earlier losses within the first hour of trading, however, after AIG announced that it plans to pay back the government. The release of a better-than-expected Philly Fed factory index also fuelled optimism.

By around 3.30pm (London time) the Dow Jones Industrial was up by 30.23 points (+0.33%) to 9309.39 while the more representative S&P 500 was 6.68 points (+0.67%) above its previous close at 1003.14.

The market opened a notch lower today after an official government report revealed that the number of Americans claiming first-time jobless benefits (initial jobless claims) unexpectedly rose by 15,000 to 576,000 in the week ending August 15.

That was the highest level in three weeks and worse than Bloomberg’s expectations for a drop to 550,000 from an originally reported 558,000 the week before. The rise in initial jobless claims suggests that US companies have continued to make redundancies in spite of recent signs of macroeconomic stabilisation.

The four-week moving average of initial claims, a preferred gauge, rose by 4,250 to 570,000 last week, the highest since the week ending July 11. In the meantime, the total number of Americans claiming jobless benefits for more than a week (continuing jobless claims) surprised to the upside as well, coming in 2,000 higher at 6.241 million.

Stock market losses were relinquished on the back of an encouraging announcement from Robert Benmosche, the executive officer of embattled insurer American International Group (AIG), who said he expects the bailed out insurer to repay its debts to the US government and return the company to its former glory.

‘At the end of the day, we believe we will be able to pay back the government and we hope we will be able to do something for our shareholders as well,’ Benmosche said in an interview in Croatia. ‘The government is working with us. They want us to do things that are very prudent…My first charge is to get the company to operate at the level it used to operate, being the world’s best…The fact is we owe the US government a lot of money and we are not going to be able to pay it back just by our profits, so we will sell some of the company off but only at the right time at the right price.’ [1]

AIG’s share price surged 14% to $30.43, not surprisingly. In the meantime, shares of Hartford Financial climbed 2.3% to 19.57 while MetLife added 2.2% to $37.11.

Banks were also in demand, with Citigroup gaining 3.2% to $4.26, Bank of America advancing 1.7% to $17.03 and Wells Fargo up 3% to $27.42.

Also lifting morale this afternoon was the release of the Philadelphia Fed manufacturing index, which unveiled an unexpected expansion in regional manufacturing activity in August. The Federal Reserve Bank of Philadelphia’s general economic index rose to 4.2, the highest in nearly a year, from -7.5 in July.

Bloomberg News was expecting the gauge to rise to -2. Readings below zero signal a contraction, and vice versa. The Conference Board’s leading economic index, meanwhile, a increased by 0.6% last month following a revised 0.8% gain in June, suggesting the US economy recovering from the recession.

There were some other disappointments (apart from the jobless claims data) this afternoon, nevertheless. Sears Holdings, the biggest US department store reported an unexpected second-quarter loss of 17 cents a share (excluding one-off items), substantially worse than Bloomberg’s expectations for a profit of 35 cents a share. Revenues were equally dismal, with sales at stores open at least a year plunging 13%, as difficult US employment conditions led consumer to tighten spending. The company’s share price plunged 11.5% to $65.31 this afternoon.

[1] Source: Bloomberg News (20 August 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

Financial stocks were in vogue this afternoon, with the likes of Bank of America, Citigroup and JPMorgan up by more than 1% to $16.79, $4.04 and $41.49 a share respectively. Goldman Sachs rose 1.9% to $160.21 after Pali Research upped its recommendation to ‘buy’ and said it anticipates continued strength in Goldman’s fixed income business.

Credit-card company American Express also benefited from an upgrade by KBW today. Its shares climbed 3.8% to $31.54. [1]

In the meantime, shares of UBS (USA) climbed 2.1% to $15.53 after unidentified sources told Bloomberg that the Swiss government is mulling over the possibility of selling its stake in the bank.

Commercial lender CIT Group was also in the limelight after announcing that it has completed its debt tender – a development that is likely to keep the embattled lender out of bankruptcy, at least for the time being. Its shares jumped 5.9% to $1.44.

Home builders were also in demand despite commencing the trading session in the red, following a seemingly bleak US housing market report. Official government data released today unveiled an unexpected 1% drop in US housing starts, which came in at an annualised rate of 581,000 in July.

The decline came on the back of a drop in construction on multi-family dwellings. Bloomberg was expecting total starts to rise to an annual pace of 599,000 in July, following an originally reported 582,000 the month before.

Building permits, which are a barometer of future construction activity, also declined in July, falling 1.8% to an annual pace of 560,000 from 570,000 in June. The report wasn’t as bad as it initially looked, however; single-family starts, which account for 75% of the industry, actually climbed 1.7% to a 490,000 annual rate in July, suggesting that the housing market recovery remains on track.

Shares in house builder D.R. Horton relinquished earlier losses and managed to gain 1.9% to $12.11 this afternoon. Lennar advanced 0.9% to $12.94 and KB Home gained 0.4% to $16.49.

US mining companies also gained traction as investors took the opportunity to re-enter the buoying sector following steep losses in the previous session. Freeport-McMoRan Copper & Gold was 0.6% higher at $59.72 and Newmont Mining was up 0.7% to $39.05.

Home Depot made the headlines today after unveiling second-quarter profits that fell less than consensus estimates after implementing tight cost controls. The largest US home-improvement retailer reported a 7.2% fall in second-quarter net income of $1.12 billion, or 66 cents a share.

After excluding certain one-off items, its profits came in at 64 cents a share, which was better than Bloomberg’s expectations for a profit of 59 cents. The company also raised its earnings guidance. Its share price climbed 3.7% to $27.07.

By 3.35pm (London time), the Dow Jones Industrial Average was up by 43.76 points (+0.48%) to 9179.10, while the broader S&P 500 was 4.18 points (+0.43%) higher at 983.91.

It is also important to note that the Labor Department today revealed that US wholesale prices fell more than anticipated in July as energy costs subsided. The producer price index fell 0.9% in July following a 1.8% gain the month before. After excluding food and fuel, so-called core prices unexpectedly fell 0.1%.

[1] Source: FT (18 August 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

Wall Street opened modestly higher this afternoon, following steep declines in the previous session, as bargain hunters scoured the market in search of attractive opportunities.

Financial stocks were in vogue this afternoon, with the likes of Bank of America, Citigroup and JPMorgan up by more than 1% to $16.79, $4.04 and $41.49 a share respectively. Goldman Sachs rose 1.9% to $160.21 after Pali Research upped its recommendation to ‘buy’ and said it anticipates continued strength in Goldman’s fixed income business. Credit-card company American Express also benefitted from an upgrade by KBW today. Its shares climbed 3.8% to $31.54. [1]

In the meantime, shares of UBS (USA) climbed 2.1% to $15.53 after unidentified sources told Bloomberg that the Swiss government is mulling over the possibility of selling its stake in the bank.

Commercial lender CIT Group was also in the limelight after announcing that it has completed its debt tender – a development that is likely to keep the embattled lender out of bankruptcy, at least for the time being. Its shares jumped 5.9% to $1.44.

Home builders were also in demand despite commencing the trading session in the red, following a seemingly bleak US housing market report. Official government data released today unveiled an unexpected 1% drop in US housing starts, which came in at an annualised rate of 581,000 in July.

The decline came on the back of a drop in construction on multi-family dwellings. Bloomberg was expecting total starts to rise to an annual pace of 599,000 in July, following an originally reported 582,000 the month before.

Building permits, which are a barometer of future construction activity, also declined in July, falling 1.8% to an annual pace of 560,000 from 570,000 in June. The report wasn’t as bad as it initially looked, however; single-family starts, which account for 75% of the industry, actually climbed 1.7% to a 490,000 annual rate in July, suggesting that the housing market recovery remains on track.

Shares in house builder D.R. Horton relinquished earlier losses and managed to gain 1.9% to $12.11 this afternoon. Lennar advanced 0.9% to $12.94 and KB Home gained 0.4% to $16.49.

US mining companies also gained traction as investors took the opportunity to re-enter the buoying sector following steep losses in the previous session. Freeport-McMoRan Copper & Gold was 0.6% higher at $59.72 and Newmont Mining was up 0.7% to $39.05.

Home Depot made the headlines today after unveiling second-quarter profits that fell less than consensus estimates after implementing tight cost controls. The largest US home-improvement retailer reported a 7.2% fall in second-quarter net income of $1.12 billion, or 66 cents a share.

After excluding certain one-off items, its profits came in at 64 cents a share, which was better than Bloomberg’s expectations for a profit of 59 cents. The company also raised its earnings guidance. Its share price climbed 3.7% to $27.07.

By 3.35pm (London time), the Dow Jones Industrial Average was up by 43.76 points (+0.48%) to 9179.10, while the broader S&P 500 was 4.18 points (+0.43%) higher at 983.91.

It is also important to note that the Labor Department today revealed that US wholesale prices fell more than anticipated in July as energy costs subsided. The producer price index fell 0.9% in July following a 1.8% gain the month before. After excluding food and fuel, so-called core prices unexpectedly fell 0.1%.

[1] Source: FT (18 August 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.

Wall Street opened sharply lower today despite the release of upbeat regional manufacturing data in the US. A report released this afternoon revealed that manufacturing in the New York region expanded for the first time in more than a year.

The Federal Reserve Bank of New York’s general economic index rose to a reading of 12.1 in August (readings above zero are expansionary), substantially better than Bloomberg’s median estimate for a rise to 3, from -0.55 in July. The improvement in manufacturing has been attributed to a speedy inventory rundown, which is now beginning to kick-start the manufacturing industry.

‘Inventories were drawn down to such amazingly low levels that companies need to start bringing them back,’ explained Tom Porcelli of RBC Capital Markets. ‘We are coming out of the recession. It’s probably over at this point.’ [1]

Investors, however, appeared to shrug off this development which seems to be boding well with the American economic recovery story. By 3.30pm (London time) the Dow Jones Industrial Average was trading 173.89 points (-1.92%) lower at 9142.37, while the broader S&P 500 was 21.46 points (-2.14%) below its previous close at 982.63.

Lowe’s Cos, the second-largest home improvement retail company, was in focus this afternoon after unveiling a 19% decline in quarterly profits. It blamed the weaker bottom line results on deterring weather conditions and recessionary pressures, which kept a lid on consumer spending.

Lowe’s reported second-quarter earnings of $759 million, or 51 cents a share, down from $938 million, or 63 cents a share, the year before. Excluding a pre tax charge of $48 million, profit was 54 cents a share, in line with Reuters’ expectations.

Second-quarter sales fell 4.6% to $13.8 billion, while sales at stores open at least a year, an important retail gauge, tumbled 9.5%. The revelation of third-quarter earnings forecasts that trailed consensus estimates was also disappointing.

Lowe’s said it expects earnings to come in between 21 and 25 cents a share, trailing Reuters’ expectations for a profit of 27 cents a share. It also said it expects total sales to decline between 2% and 5% and same store sales to drop between 6% and 10%.

Shares in Lowe’s Cos Inc tumbled 8.9% to $20.80. Rival Home Depot fell 4.4% to $25.94.

US banks were also trading lower this afternoon, with the likes of Citigroup, Bank of America and Wells Fargo down 2% to $3.96, 4.1% to $16.67 and 2.8% to $26.96 respectively.

Electronic Arts slid 5.7% to $20.07 a share this afternoon despite an executive of the company saying it will benefit from stronger business in Europe, Africa and the Middle East in the second half.

Coca-Cola managed to buck the negative trend, at least temporarily, rising 0.06% to $48.50 after financial news provider Barrons said the company’s shares could rise as much as 20% on the back of cost cutting and emerging market growth.

Elsewhere, it has come to light that China Investment Corporation (CIC), the country’s sovereign wealth fund that invested in Morgan Stanley and Blackstone, is planning to invest up to $2 billion in US mortgages.

‘The Chinese government is always trying to seek a more ideal way to invest in US assets rather than purely buying US government bonds all the time,’ an unidentified source said. ‘Some might think $2 billion for a $200 billion sovereign fund is not big money, but it can be regarded as an innovative and positive option for Chinese investment.’ [2]

It has also transpired that the Federal Reserve has extended its Term Asset Backed Securities Loan Facility, or TALF program, for newly issued commercial mortgage-backed securities in an attempt to stem rising defaults and falling prices in the commercial real estate industry.

[1] Source: Bloomberg News (17 August 2009)
[2] Source: Reuters News (17 August 2009)

By Anthony Grech, Research Analyst, IG Index.

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The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

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The Dow and S&P 500 commenced the day’s trading session in the red, as investors locked in profits for fear the rally had gone too far.

There seems to be a growing consensus that we have come up too far too fast; Charles Knott, of Knott Capital Management, today told Bloomberg news that he thinks ‘there’s neither the willpower nor the means to fully finance that type of V shape recovery,’ while David Tice of Federated Investors believes that US stocks are ‘dramatically overpriced’.

‘I’d love for prosperity to return, unfortunately I think you need to be realistic and it takes time to work off these excesses,’ Tice told Bloomberg Television today.

By 3.30pm (London time), the Dow Jones Industrial Average was knocked 120.54 points (-1.3%) lower to 9277.65, while the broader S&P 500 declined 14.06 points (-1.39%) to 998.67. The technology-based Nasdaq index, meanwhile, fell 25.13 points (-1.5%) to 1603.52.

Investors seemed to be in a hurry to offload stocks this afternoon, despite the release of an official report showing better-than-expected US industrial production data. The report indicated that industrial output climbed 0.5% in July, better than Bloomberg’s expectations for a 0.4% rise and the prior month’s 0.4% decline.

The data continues to show that the government’s various stimulus programmes are, in fact, working. As a matter of fact, the better-than-expected reading was attributed to the success of the ‘cash-for-clunkers’ incentive programme, which helped ignite demand for automobiles. Mid-year retooling at automakers is also said to have contributed to the increase in industrial output.

‘Automakers are ramping up production to bring inventories back into balance’ after shutdowns and a campaign to slash stockpiles, said Mark Vitner of Wells Fargo Securities. ‘Auto production has lifted some other industries too. It’s going to offset the weakness in other areas. [1]

The report also showed US capacity utilisation rising to 68.5% in July from a revised 68.1% the month before.

But not all data was positive, which only exacerbated market sentiment. A separate report revealed that the cost of living in the United States fell at its fastest annual pace since 1950 – the Consumer Price Index tumbled 2.1% from a year ago in July after remaining unchanged over the month.

In addition, the Reuters Michigan Consumer Sentiment index unexpectedly fell to a reading of 63.2 in August from 66 in July, as consumers grew more concerned about the difficult labour market conditions.

Banks were among the market’s casualties today, with Citigroup down 3.2% to $3.93, despite positive comments from analysts at Bank of America-Merrill Lynch, which recommended buying the bank’s shares on the view that it will survive the financial crisis. They also increased their price target on Citigroup from $2.50 to $5.75 a share. Citigroup’s share price was down by 3.2% to $3.93, nevertheless. [2]

In the meantime, JPMorgan Chase fell 1.9% to $16.68, Goldman Sachs declined nearly 2% to $161.26 and Bank of America edged 1.9% lower to $16.68.

JC Penney was among the biggest fallers today, however, down 5% to $31.67, despite reporting a narrower-than-expected quarterly loss. The company raised its earnings guidance for the year, yet analysts were disappointed with its forecasts as they had believed they would be at the upper end of expectations.

[1] Source: Bloomberg News (14 August 2009)
[2] Source: Bank of America Merrill Lynch (14 August 2009)

By Anthony Grech, Research Analyst, IG Index.

Risk Warning: Spread betting carries a high level of risk to your capital. You may lose more than your initial investment. It may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.

The above comments do not constitute investment advice and neither IG Index nor Spread-Betting.org accept any responsibility for any use that may be made of them.

IG Index is Authorised and regulated by the Financial Services Authority, register number 114059.