US Indices Spread Betting

Posted on | September 29, 2009 |

Wall Street fluctuated between gains and losses this afternoon following the release of mixed US macroeconomic reports. End of quarter portfolio rebalancing may have also contributed to the volatile session seen so far today.

The US trading day kicked off with better-than-expected house price data, yet the upbeat morale following these figures was tempered by disappointing consumer confidence figures.

The S&P/Case-Schiller home-price index showed annual house prices narrowing more than anticipated in July, suggesting the embattled US housing market has continued to recover from one of the worst slumps in history.

The 20-city US home price index for July rose 1.6% on the month, higher than a 0.5% increase expected from economists surveyed by Reuters. On the year, house prices were down by only 13.3%, the smallest drop in 18 months. The year-on-year records commenced in 2001 and the gauge has fallen every month since January 2007.

In the meantime, the Conference Board’s consumer price index for September tainted market morale following an unexpected drop. The gauge fell to a reading of 53.1 this month from 54.5 in August, trailing Reuters’ expectations for a rise to 57.

The present situation index, a barometer of consumers’ assessment of current economic conditions, fell to 22.7 from 25.4 in August, while the consumer expectations index slipped to 73.3 from 73.8.

The drop in consumer confidence triggered a bout of selling pressure on Wall Street today, as it suggests that consumers may rein in on spending.

By 3.30pm (London time), the Dow Jones Industrial Average was trading 5.51 points (-0.06%) lower at 9783.85, while the S&P 500 was 0.85 points (+0.08%) above its previous close at 1063.83. The Nasdaq was also in negative territory, down 3.93 points (-0.23%) to 1720.66.

Banks were in focus today, with Citigroup advancing 3.3% to $4.72 after managing to sell its Portuguese credit-card business to Barclays. The British bank did not disclose the financial terms of the transaction, which is still subject to Portuguese regulatory approval.

Frits Seegers, the chief executive of Barclays Global Retail and Commercial Banking, said the acquisition will put the bank among the five top credit-card players in the country.

An upbeat broker report also boded well for Citigroup today; Richard Bove of Rochdale Securities raised his price target on Citigroup from $4 to $6.50, saying the bank has a solid future. [1]

JPMorgan Chase rose 0.1% to $44.85 a share this afternoon, after announcing that it has reached a deal to sell its investment advisory servicing business to Royal Bank of Canada. Details of the agreement were not disclosed, however.

Bank of America was marginally higher, up 0.12% to $17.24, while Wells Fargo traded 0.7% lower at $28.69.

Elsewhere, Walgreen, the biggest US pharmacy chain, rallied over 9% to $37.34 this afternoon, after unveiling earnings that were ahead of expectations.

Broker ratings also helped a couple of companies gain some traction; Coca Cola edged 0.56% higher to $53.43 after Citigroup released an upbeat report on the carbonated soft-drink sector and recommended buying shares in the company. [2]

Lamar Advertising jumped 7.3% to $27.32 after Barclays Capital raised its recommendation on the US billboard owner from ‘equal weight’ to ‘overweight’. Barclays also upped its price target on the company by 59% to $35.

In the meantime, Polo Ralph Lauren added 5.2% to $78.05 after Goldman Sachs raised its recommendation on the stock from ‘neutral’ to ‘buy’, saying the company is ‘at the start of a multi-year growth opportunity across geographies (Asia) and categories (accessories).’ [3

In contrast, Sequenom, a diagnostic and genetics analysis company, tumbled 36.5% to $3.61, after announcing that it has dismissed most of its top management team as a result of a scandal involving the mishandling of data on its pre-natal Down's syndrome test.

[1] Source: Associated Press (29 September 2009)
[2] Source: Financial Times (29 September 2009)
[3] Source: Bloomberg News (29 September 2009)

By Anthony Grech, Research Analyst, IG Index.

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