Wednesday, January 31, 2007

Fed Makes January a Winner

S&P's 1.4% Move Gives January Barometer Watchers Hope

The Federal Open Market Committee (FOMC), met, deliberated and in the end, did nothing, which turned out to be highly favorable to investors. Keeping the key Fed funds rate at an historically-low 5.25, the Governors acted wisely while keeping a watchful eye on inflationary pressures.

Trading on the major indices following the release of the Fed report was nothing short of jubilant and moved the S&P 500 into healthy positive territory on the final day of the month. Since December 29, the final day of trading in 2006, the S&P 500 index has gained 20 points, good enough for a positive reading on the January Barometer of 1.4%.

Today's boost bodes well for stocks the remainder of the year. While the January Barometer is based on nothing more than hyperbole, it is still one of the most closely-watched indicators on Wall Street.

As reported here last week, the January Barometer has been accurate in predicting the full year 85% of the time since 1970. Whether or not it's a self-fulfilling prophecy (traders believe in it and act accordingly) is still an open question, but if you ask anyone in the business whether or not they'd like the market to be up in January, you'd likely get nearly unanimous consent.

The other big news of the day included the government's reading on the 4th quarter of 2006, saying that the economy grew at an annualized 3.5% (a rate of growth that's about as stable and non-inflationary as one could ask) and Google's (GOOG) quarterly report which was in line with analyst expectations, but sent the stock reeling in after-hours trading. After adding 7.18 during the regular session - pushing the price to an astounding 501.50 - the selling commenced with great vigor upon the in-line announcement.

Google admirers liken ordinary results to heresy, expecting nothing short of miracles from the #1 search company. As of 5:30, Google had given back all of the day's gains and then some, down 9.70. Expect Google to gap lower in the AM, though the valuation will still be expensive. The p/e ratio hovers around 60 at current price levels.

For the record, the Dow added 98 points, the NASDAQ was up 19, the S&P 500 gained 9.42.

Tuesday, January 30, 2007

Confidence Boost

The markets surely needed a lift and they got one today from the Conference Board, which reported their Consumer Confidence Index for December at 110.3 , the highest level since May of 2002.

The mostly upbeat report was tempered by the coincident Expectations Index, which declined to 94.5 from 96.3. Included in the report was the statement:

"This month's slight increase in confidence was solely the result of an improvement in the Present Situation Index, fueled primarily by a more favorable job market," says Lynn Franco, Director of The Conference Board Consumer Research Center. "Looking ahead, however, consumers are not as optimistic as they were in December. All in all, the Index suggests a moderate improvement in the pace of growth in early 2007."

Wall Street responded on cue, with the three major indices jumping well into positive territory around 11:00. Highs for the day were reached at that early point, with trading for the rest of the session vacillating in a narrow range.

The Dow gained 32.53 points; the NASDAQ was up 7.55; the S&P 500 added 8.20.

High among the anxiety points were corporate earnings, which for the most part had been lackluster. The prevailing mood wasn't helped much by Dow component 3M (MMM), which reported 4th quarter profits of $1.57 per share, including 47 cents from the sale of its drug business and 4 cents a share of stock option expenses.

With the quarter essentially in line, what spooked investors was the outlook from the conglomerate, calling for 2007 earnings between 4.60 and 4.75 per share, well below Wall Street's outlook of 4.99. Shares of 3M took a 5% hit on the day.

Drug maker Merck (MRK) also disappointed, posting 4th quarter earnings of just 22 cents, as opposed to 51 cents in the year-ago period. The company included charges of 7 cents for restructuring and 21 cents for the purchase of a small biotech company, Sirna Therapeutics. Shares lost 60 cents, or 1.6% on the day.

What had to have been the biggest move of the day was in the energy sector. Continued cold weather and an announcement of production cuts from an OPEC minister sent oil higher by $2.96 to close at $56.97. Natural gas rose 80 cents, or 12% to $7.74 per 1000 btu.

Not surprisingly, stocks in the energy sector led all others on the day. Breadth was solidly on the plus side, with gainers swamping losers nearly 2-1.

The Federal Open Market Committee (FOMC) releases guidance tomorrow after 2:30 and is widely expected to announce no change in interest rates, a stance they have held since August of 2006.

Monday, January 29, 2007

Waiting for the Fed

The action on the US equity markets today was comparable to an amateur production of a Samuel Beckett play: minimalist, but with a certain impatience to it. Without any blockbuster earnings reports and no economic news of note, traders chose a wait-and-see approach as the Fed meets tomorrow and issues their declaration (most likely no change) on interest rates Wednesday.

Despite moderate volume, the major indices barely moved. The Dow gained 3.76, the NASDAQ added 5.60, while the S&P 500 lost 1.56 to close at 1420.62, barely ahead of the 2006 finish (1418.20). As I mentioned at the end of last week, unless there's a big rally or sell-off tomorrow or Wednesday, the January Barometer will not provide any direction going forward.

Since most markets are averse to indecision, the likely direction is down. There isn't enough good news and with earnings season closing quickly (2 weeks), there's going to be a dearth of news, leaving investors to their own wiles - usually not a good thing, "idle hands" and all that considered.

Stocks are valued pretty richly at present, posing opportunity for profit-taking at the least, outright fear of a crash at the worst. No stretch of imagination can perceive this market as cheap or reasonable.

The word a lot of analysts like to use is frothy, as in a heady mug of beer. And we all know what happens to excess froth. It either gets blown off the glass or oozes down the sides. Neither metaphor is particularly good for equity investments.

So, we wait. For nothing, for now.

Saturday, January 27, 2007

Mortgage Info, News, Tools and Calculators

Housing sales have been slowing nationwide. According to the latest figures from the National Association of Realtors, new and existing home sales fell by the largest percentage in more than 15 years in 2006.

What that means for prospective home buyers are lower prices, so now might be a good time to purchase a home. At the same time, mortgage rates have been rising with almost no indication of going down. The next six months may be the proverbial sweet spot for home buyers.

Buying a home is a very straightforward process that can be handled by any expert real estate agent. Finding the right mortgage, however, takes some work, as there are a slew of products available and finding the mortgage that's right can save you a lot of money.

Researching and finding current rates is easy. Rates for 30 and 15-year fixed and adjustable, 5-year ARM and Home Equity are updated daily at

Additionally, the site offers current mortgage news, wealth building guides, credit repair information and a slew of useful real estate tools, including FREE downloadable Microsoft Excel® spreadsheets.

The spreadsheets are outstanding. Once downloaded onto your computer, you can use them to understand and calculate the intricacies of:

  • Fixer-uppers (Will you make a profit once you've fixed it up and sold it?)

  • 10-year projections for income property

  • Calculate the breakeven occupancy on an investment property such as an apartment or office building

  • Compare different seller financed offers

  • Estimate how much you could borrow on that commercial property.

  • ...and more, all FREE.

There are also online calculators for practically every situation, such as:

  • How large a mortgage loan can you afford?

  • Amortization Schedule

  • Early Mortgage Payoff Calculator

  • Annual Percentage Rate (APR) Calculator

  • First Time Homebuyer Calculator (Rent vs. Buy)

  • Home Equity Loan Calculator

  • Mortgage Tax Deduction Calculator

  • How long would it take for you to become a millionaire?

  • ...and others, again, all FREE.

If you're buying or selling a piece of property, or are a real estate investor seeking news, information or solutions, is a resource worthy of a place in your bookmarks.

Friday, January 26, 2007

Week Ends Slightly Weaker on Mixed Bag

A late-day rally restored some respectability on the Dow and the S&P 500, but both indices fell back to break-even or worse for 2007.

In particular, the Dow briefly dropped into red for the year and ended the day - and week - just 23-and-change from the 2006 finish. The S&P fared a bit better, losing less than 2 points during the session, but it is perilously close to the 1418.30 close of December 29, 2006 - less than 4 points - at 1422.18.

The last day of what turned out to be a tumultuous week left the major indices split from where they began. The Dow and NASDAQ lost ground while the S&P gained a bit, and that seems to be par for the course. The much-anticipated January Barometer reading may turn out to be inconsequential as there are currently too many unresolved issues - bonds, Fed action, earnings, oil, conflicting economic readings - to place much emphasis on any kind of reading it may produce.

At best or worst, depending on your outlook, outside of a huge 3-day rally or sell-off, January is going to finish close to where it started. That gives traders essentially no guidance, just what we're getting used to from the markets, the military, the government and even a host of football prognosticators.

Friday's 15.54 loss on the Dow was driven by a confluence of diversity. Dow component Caterpillar (CAT) missed earnings forecasts but issued encouraging 2007 guidance. After the close last night, Microsoft (MSFT) beat estimates and this morning, fellow component Honeywell (HON) merely matched expectations.

Other market-moving news included Durable Orders rising 3.1% in December, the Commerce Dept. said new home sales rose at a 4.8% rate in December to 1.12 million, marking the highest level since April, but as the day wore on oil continued to price higher, closing above $55/bbl. once again.

It really is a mixed bag out there. Caveat Emptor Sellers too.