U.S. Equity Market Radar (April 23, 2012)

Sunday, April 22nd, 2012

U.S. Equity Market Radar (April 23, 2012)

The S&P 500 Index rose 0.60 percent this week, bouncing back from the biggest weekly drop of the year last week. Defensive areas led as utilities, staples and health care were the week’s leaders. This was the first week of significant quarterly earnings reports. So far the results have been mixed, with weak results from leading sectors such as technology and consumer discretion.

Strengths

• After a long, steady run this year, the market is witnessing a rotation as defensive areas not only outperformed this week but also so far in April.
• Gilead Sciences was the best performer in the S&P 500 this week, rising by more than 12 percent as the company announced very strong results for a new hepatitis C treatment.
• Other strong performers for the week include eBay, Walgreen’s and Travelers.

Weaknesses

• The technology sector was the worst performer as bellwether names such as Apple, Qualcomm and Google were all down sharply for the week.
• Genworth Financial was the worst performer in the S&P 500 this week as the company postponed plans for an IPO of an Australian unit after the subsidiary experienced “elevated” losses.

• Other weak performers for the week included SanDisk, Chesapeake Energy and Sprint Nextel.

Opportunity

• We are right in the middle of earnings season with key reports from numerous benchmark heavyweights including Apple, Caterpillar and Starbucks. The early pattern has been for the leaders to falter, but some strong reports could change that tune.

Threat

• After peaking early this month, the S&P 500 has struggled in recent weeks and appears to be in a normal correction phase. Sentiment appears to have run ahead of fundamentals, with earnings season thus far having been a “sell-the-news” event.

Tags: Chesapeake Energy, Correction Phase, Earnings Season, Ebay, Genworth, Genworth Financial, Gilead Sciences, Google, Heavyweights, Hepatitis C, Hepatitis C Treatment, Market Radar, New Hepatitis C Treatment, News Event, Qualcomm, Quarterly Earnings, Sprint Nextel, Staples, Technology Sector, Walgreen
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Energy and Natural Resources Market Radar (March 19, 2012)

Saturday, March 17th, 2012

Energy and Natural Resources Market Radar (March 19, 2012)

Strengths

• U.S. exports of steel products reached 1.14m tons in January, the highest level in the last 14 months, according to the U.S. Census Bureau.
• European refineries increased imports of crude from OPEC members last year to make up for the loss of Libyan barrels, the IEA said. European refiners had turned to OPEC members Saudi Arabia, Nigeria, Iraq and Angola to fill the gap. European members had imported more than 1.1 million barrels a day of Libya’s total 1.3 million barrels a day of crude exports before the civil war broke out.
• Saudi Arabia’s Oil Minister, Ali al-Naimi, said this week that the country, the world’s largest crude exporter, can make up for any shortage in global supply, seeking to assuage markets in which prices have jumped on concerns over flow disruptions.
• Comments from oil tanker company Frontline this week indicate the tanker market is picking up markedly. Demand in the crisis-hit tanker market has picked up considerably in recent weeks helped by surprisingly high activity from ships transporting oil to China. The company says it sees an incredible amount of fixtures from the Persian Gulf at the moment with rates between $25,000 – $30,000 per day and those rates should hold, given Chinese oil demand.

Weaknesses

• Gold fell to a 10-week low this week as investors shed haven assets.
• Natural gas futures hit a fresh 10-year low price of $2.27 per mmbtu this week on weak heating demand and surplus supply.
• Environmental and health groups are calling for tougher U.S. regulation of hydraulic fracturing for natural gas, turning down a one-time donor to their causes, Chesapeake Energy Corp. The Sierra Club, the largest U.S. environmental group, is rethinking early support of natural-gas development after activists and scientists linked the drilling to tainted water and increased air emissions. The group turned down $30 million from Chesapeake after Executive Director Micheal Brune took it over in 2010.
• European imports of containerized goods fell 5.2 percent in January, according to data from Container Trade Statistics.

Opportunities

• Copper will average $4.10 per pound in 2012, while prices are unlikely to average less than $3.80 per pound in the next five years, according to a mining-studies group in Chile. Copper supply will fall short of demand by 200,000 metric tons this year, while the deficit in 2013 will be smaller, said Juan Carlos Guajardo, Executive Director of the Center for Copper and Mining Studies.
• India coking coal imports have been said to jump 22 percent this year, the Steel Authority of India Chairman CS Verma said at the Coaltrans India conference in New Delhi. India is critically short of coking coal, he added. He further said pricing pressures exist in the coking coal market because a few companies control supplies and the shift to monthly contracts for coking coal will increase volatility.
• Headlines in the agricultural sector are continuing to remain positive for plays within the space. A survey recently showed that palm oil, used in everything from candy bars to instant noodles, will advance 3.4 percent to the highest in more than a year by June as cooking-oil supplies drop to the lowest in more than three decades. Additionally, wheat and flour imports by Indonesia, Asia’s biggest buyer, may also gain at least 6 percent this year as rising incomes boost food demand in the world’s fourth most populous country.
• India’s steel production is set to rise to 125 million tons in 3-4 years from 75 million tons now, said the executive director at Steel Authority of India Ltd.

Threats

• According to the International Energy Agency, OPEC’s crude oil production rose for a fifth month to the highest in more than three years as Saudi Arabia and Libya boosted supply. OPEC’s 12 members produced 31.42 million barrels a day of crude last month, the most since October 2008, the agency said this week. This could create downward pressure on the price for crude oil.
• Iran’s oil exports will decline by between 800,000 and 1 million barrels a day from the middle of this year as sanctions hinder purchases worldwide, the International Energy Agency said this week. While there currently may be no physical supply disruption, European insurance companies have already announced the suspension of coverage for tankers calling at Iranian ports. Iranian output fell 1.5 percent to 3.38 million barrels a day in February, the lowest in at least three years.
• Crude oil prices dipped briefly this week on the news that President Obama and British Prime Minister Cameron had agreed to authorize releases of their countries’ strategic crude reserves.

Tags: agricultural, Air Emissions, Chesapeake Energy, Chesapeake Energy Corp, Chinese Oil, Crude Exports, European Members, Execu, Hydraulic Fracturing, Market Radar, naimi, Natural Gas Futures, Opec Members, Persian Gulf, Sierra Club, Surplus Supply, Tanker Company, Tanker Market, Time Donor, U S Census, U S Census Bureau
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U.S. Equity Market Radar (February 20, 2012)

Monday, February 20th, 2012

U.S. Equity Market Radar (February 20, 2012)

After suffering the first weekly loss of 2012 last week, the S&P 500 Index bounced back this week. Energy, technology and financials were the best performers, while utilities, industrials and basic materials lagged.

Strengths

• The energy sector was led by exploration and production companies, as Devon Energy, Chesapeake Energy and Newfield Exploration all rose by more than 10 percent.
• In the S&P 500 technology sector, JDS Uniphase, Micron Technology and Motorola Solutions each rose by approximately 7 percent for the week.
• In the financials sector, Hartford Financial Services Group and Zions Bancorp both rose by more than 8 percent.

Weaknesses

• While every sector in the S&P rose this week, utilities experienced the slightest gains, rising by just 0.27 percent.
• Gilead Sciences was the worst performer in the S&P 500, dropping by 12.57 percent for the week. On Friday, Gilead announced that patients taking an experimental hepatitis C drug relapsed within weeks of stopping treatment.

• A disappointing outlook for 2012 pushed Cliffs Natural Resources down nearly 10 percent for the week.

Opportunities

• The market has been able to shrug off every negative and climb that wall of worry.

Threats

• After such a strong start to the year, a pullback or consolidation in the market would not be surprising.

Tags: Basic Materials, Chesapeake Energy, Devon Energy, energy sector, Energy Technology, Exploration And Production, Financial Services Group, Gilead Sciences, Hartford Financial, Hartford Financial Services, Hartford Financial Services Group, Hepatitis C, Industrials, Jds Uniphase, Market Radar, Micron Technology, Newfield Exploration, Pullback, Technology Sector, Zions Bancorp
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U.S. Equity Market Cheat Sheet (July 18, 2011)

Sunday, July 17th, 2011

U.S. Equity Market Cheat Sheet (July 18, 2011)

The figure below shows the performance of each sector in the S&P 500 Index for the week. One sector increased slightly and nine sectors declined. The best-performing sector for the week was energy which increased 0.12 percent. Other top-three sectors were utilities and consumer staples. Financials was the worst performer, down 3.91 percent. Other bottom-three performers were industrials and consumer discretion.

Within the energy sector, the best-performing stock was Range Resources, which rose 10.03 percent. Other top-five performers were Southwestern Energy, Chesapeake Energy, Nabors Industries, and EQT Corp.

Strengths

• The internet software & services group was the best-performing group for the week, rising 7 percent on strength in the stock of Google, which reported quarterly revenue and earnings that exceeded the consensus estimates.
• The gold group outperformed, up 5 percent, led by its single member Newmont Mining. The price of gold increased for the week.
• The tires & rubber group outperformed, gaining 4 percent, led by its single member, Goodyear Tire & Rubber. While warning that unit volume in the second quarter could fall short of expectations, a major brokerage firm with a “Buy” rating on the stock noted that the tire companies have passed through several rounds of price increases to consumers already this year, and commodity costs are now moderating, which should result in a favorable price benefit.

Weaknesses

• The electronic equipment & instruments group was the worst performer, down 15 percent on weakness in its single member, FLIR Systems. The maker of thermal imaging and infrared cameras warned that its quarterly revenue and earnings will miss analysts’ estimates, citing weak demand from government customers.
• The retail computer & electronics group underperformed, down 8 percent. GameStop stock sold off after a brokerage house analyst downgraded the stock to “Underperform” from “Sector Perform,” citing the belief that the company’s used-game business is likely to face increased competition from Best Buy Co. Best Buy stock was also weak. A major brokerage firm lowered its second quarter earnings estimate and reiterated its “Sell” rating on the stock, citing weakness in pricing on TV sets and deteriorating traffic to consumer electronic retailers in July.
• The real estate services group underperformed, down 8 percent, led by its single member, CB Richard Ellis Group. Investor concerns over an economic slow patch affecting the commercial real estate sale and leasing business may have been a factor in the decline.

Opportunities

• There may be an opportunity for gain in merger and acquisition (M&A) transactions in 2011. Corporate liquidity is high, thereby providing the means to pursue acquisitions.

Threats

• Failure to resolve the federal budget issue creates uncertainty, which is not helpful for markets.

Tags: Amp Services, Brokerage Firm, Brokerage House, Chesapeake Energy, Consumer Staples, Electronics Group, Eqt, Favorable Price, Gamestop, Gold Group, Goodyear Tire, Infrared Cameras, Nabors Industries, Newmont Mining, Performing Group, Quarterly Revenue, Range Resources, Retail Computer, Southwestern Energy, Tire Companies
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U.S. Equity Market Cheat Sheet (February 28, 2011)

Sunday, February 27th, 2011

U.S. Equity Market Cheat Sheet (February 28, 2011)

The figure shows the performance of each sector in the S&P 500 Index for the week. One sector increased while nine decreased. The lone sector with positive performance was energy, up 1.07 percent. Sectors with the lightest declines were utilities and consumer staples. The industrials sector was the worst performer, down 3.31 percent. Other bottom-three performers were financials and materials.

Within the energy sector, the best-performing stock was Chesapeake Energy, which rose 16.23 percent. Other top-five performers were Range Resources, Cabot Oil & Gas, Consol Energy and Rowan Companies.

Strengths

• The specialty consumer services (H&R Block) was the best-performing group for the week, up 4 percent. The tax preparer said it expects “near break-even” results for its fiscal quarter-ended January 31, 2010.
• Five of the top-ten best-performing groups were energy-related (oil & gas exploration & production, oil & gas drilling, coal & consumable fuel, oil & gas storage & transportation, and integrated oil & gas). These groups rose between 0.8 percent and 4 percent as the price of crude oil rose during the week.
• The packaged foods group outperformed, gaining 2 percent. The CEO for H.J. Heinz Co. said at an investor conference that the company expects third-quarter profit around 84 cents, beating expectations. Heinz also increased its full-year profit outlook.

Weaknesses

• The gold group (Newmont Mining) was the worst-performing group, down 7 percent.
• The homebuilding group underperformed, losing 7 percent. The Commerce Department reported that January new home sales declined 12.6 percent from December to 284,000 units. This was below the 305,000 unit consensus estimate.
• The airlines group (Southwest Airlines) was down 6 percent. The price of jet fuel is rising due to rising crude oil prices and is threatening airline profits.

Opportunities

• There may be an opportunity for gain in merger & acquisition (M&A) transactions in 2011. Corporate liquidity is high, thereby providing the means to pursue acquisitions.

Threats

• Should investors’ expectations for an improving economy not come to fruition on a reasonable time frame, it could be a threat to stock prices.
• Quantitative easing currently being implemented by the Federal Reserve might result in unintended consequences.

Tags: Airline Profits, Cabot Oil, Chesapeake Energy, Consensus Estimate, Consol Energy, Consumer Staples, Crude Oil Prices, energy, Gas Drilling, Gas Storage, Gold, Gold Group, H J Heinz, H J Heinz Co, Investor Conference, Newmont Mining, oil, Performing Group, Price Of Crude Oil, Profit Outlook, Range Resources, Rowan Companies, Southwest Airlines
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Energy and Natural Resources Market Diary (October 18, 2010)

Saturday, October 16th, 2010

Energy and Natural Resources Market Diary (October 18, 2010)

Strengths

• Two more shale oil and gas deals were announced this past week in the Eagle Ford shale of South Texas with Statoil partnering with Talisman and CNOOC partnering with Chesapeake Energy. In total, over $75 billion of deals for oil and gas shale properties have been announced since 2008 including Exxon’s $35 billion takeover of XTO Energy. Deals continue to hit the market as large international oil and gas companies look to secure U.S. shale resources to ensure reserve replacement. The companies are also looking to acquire knowledge of drilling and completion technologies necessary to take shale extraction global.
• China’s crude oil imports increased 11 percent to 5.52 million barrels a day, compared with a month earlier, according to General Administration of Customs.
• The International Energy Agency (IEA) again raised demand estimates by roughly 300,000 barrels per day for both 2010 and 2011. The increase reflects stronger-than-expected demand during the third quarter of 2010 and the International Monetary Fund’s latest upward revisions to global GDP growth.
• China’s iron ore imports jumped 18 percent in September from the previous month, showing that state-imposed steel production cuts failed to dent demand from the world’s top buyer of the raw material.

Weaknesses

• Chinese net steel exports were 1.69 million tonnes in September, or 20.6 million tonnes annualized. This represents a 28.8 percent month-over-month rise from July, but remains well below the 29 million tonnes (annualized rate) so far this year and a peak of 50 million tonnes (annualized rate) reached in June.
• India’s next auction of oil rights may draw fewer international bids should the government delay Cairn Energy’s plan to sell a stake in its local unit to Vedanta Resources. India plans to offer 34 oil and gas fields in the nation’s ninth round of auctions starting October 15. In last year’s round, the government received bids for just 36 of the 70 blocks offered because of disputes over production-sharing contracts and the global recession.

Opportunities

• The head of the International Energy Agency (IEA) said that any delays to new offshore deepwater oil and gas drilling could have a significant impact on the oil market.
• Bloomberg reported that OPEC members have said that oil should rise to $100 a barrel to make up for the 13 percent decline in the U.S. Dollar Index. OPEC members say the U.S. currency’s weakness means the real price of oil is about $20 less than at current levels.
• Freeport-McMoRan Copper & Gold said opportunities for acquisitions are limited and the company may study returning excess cash to shareholders. “It’s a very competitive market out there,” Chief Executive Officer Richard Adkerson said. “That leans you heavily toward internal investments. We are aggressively looking for ways to invest.” Adkerson said.
• Codelco expects a tighter copper market next year because of continued demand from China and a lack of new supply. “China is continuing to have strong demand and from the supply side we have only a couple of new projects coming on-stream,” Codelco’s CEO Diego Hernandez said. He said the company is selling a little more than 40 percent of its copper to China.
• Analysts at Macquarie highlighted that Energy Resources of Australia reported quarterly production of 910 tonnes of uranium oxide in, up 10 percent quarter-over-quarter. That is well below market expectations due to further poor-yielding grades from the Ranger pit. The company has reduced full year guidance to 3,900 tonnes of oxide as a result and signaled that it will need to continue purchasing material from the market in order to meet contracted obligations. In Macquarie’s view, this has been a major factor behind the relative strength in uranium spot prices over the past three to four months.
• ETF Securities announced that it is preparing to launch a range of physically-backed base metals ETFs, according to Metal Bulletin. The range of products is to include physical aluminum, copper, lead, nickel, tin and zinc, as well as, a basket consisting of all six metals. The physical backing will be provided through ownership of LME warrants on metals in approved warehouses.

Threats

• Monday’s release from the International Lead and Zinc Study Group suggested that despite a likely strong rise in zinc demand next year, a 10.7 percent year-over-year rise in zinc mine output should result in a 233 kilotonne surplus for the metal next year.
• U.S. steelmakers, working to block Chinese investments such as a planned venture by Anshan Iron & Steel Group in Mississippi, produced a report saying companies in China get illegal government subsidies. Groups representing Nucor Corp. and U.S. Steel listed government loans, tax breaks and payments they said their counterparts in China receive. Much of the aid violates World Trade Organization (WTO) rules and may give Chinese companies an unfair advantage if they invest in the U.S.

Tags: Chesapeake Energy, China, Cnooc, Commodities, Crude Oil Imports, Demand Estimates, Eagle Ford, energy, Energy Deals, ETF, ETFs, GDP Growth, Global Gdp, India, International Energy Agency, International Monetary Fund, Market Diary, Natural Gas, Natural Resources, oil, Oil And Gas Companies, Oil Shale, Shale Oil, Steel Exports, Steel Production, Upward Revisions, Vedanta Resources, Xto, Xto Energy
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