Stock Market Wrap

Today's Stock Market Wrap covers all the day's market moving stock news.

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Stock Market Wrap

Today's stock market wrap up covers all the day's stock market moving news. Economic data was limited in the States to the Mortgage Activity Report and Consumer Credit data. International drivers played a significant role in the day's action though, with Greece again impacting the euro, which in turn, supported the dollar and drove oil prices higher. The OECD issued its assessment of G-7 economies today as well, warning of a fragile recovery in 2010. Corporate data was keyed by Monsanto's EPS report and CKE Restaurants, which found a second bidder. Federal Reserve Chief Bernanke spoke to an attentive audience, and left traders concerned about what he didn't say. That's never been Alan Greenspan's problem, and he kept Congressmen in check as they questioned his legacy.

Mortgage Activity

The Mortgage Bankers Associations' Weekly Applications data was supposed to prove positive, given an expected April surge in tax incentive inspired house dealings. However, a spike in mortgage rates in the week ended April 2 quelled all hope for rally. The MBA’s Market Composite Index of mortgage activity instead fell by 11%. With contracted average fixed rate mortgage rates for 30-year and 15-year mortgages climbing to 5.31% (from 5.04%) and 4.54% (4.34%), respectively, the Refinance Index dropped 16.9%. Offering a sign that the tax incentives are still driving some activity, the MBA's Purchase Index rose 0.2%. An MBA representative attributed the rate rise to the conclusion of the Fed's mortgage-backed securities purchases.

Consumer Credit

January's Consumer Credit report marked the first rise in credit after 11 months of contraction, so hope was high for more of the same in February. However, hope would not be fulfilled this day. Instead, credit contracted by a whopping $11.5 billion, on a $9.5 billion contraction in revolving credit or credit card debt. Remember that credit card reform just went into effect, governing the credit industry more tightly. So while some news publishers reported that contraction was due to unemployment, we remind that lending standards have risen as well. Credit availability may never return to pre-crisis levels, and that's a good thing, though hard for spoiled American consumers to digest. Now the good news: January's expansion of credit was revised higher, by $5 billion, to $10.6 billion. However, January's gain looks to have been mostly driven by nonrevolving credit, likely tied to auto sales.

Financial Crisis Inquiry Commission

The Financial Crisis Inquiry Commission began a series of hearings today with the testimony of former Federal Reserve Chairman Alan Greenspan fielding questions about his tenure. Congressional questioners wanted to know why he had not reined in mortgage brokers and banks during his era. The wily fox reminded the Congressmen of their own euphoria during those high times, and said that, had he acted more aggressively, "Congress would have clamped down on us." Greenspan noted, "There's a lot of amnesia that's emerging apparently." Mr. Greenspan reminded the Congressmen that the Federal Reserve issued warnings about subprime lending and low-down-payment loans in 1999 and again in 2001. Still, its low rate policy helped to fuel the housing bubble.

The Commission then questioned several Citigroup (NYSE: C) representatives past and present, including a whistleblower who could not get his message across in 2006. In summary, credit standards were bypassed since the banks would shuffle the debt over to Fannie Mae (NYSE: FNM) and Ginnie Mae, which would then sell it off to portfolio managers who thought they were holding investment grade securities (the fault of rating agencies whose day is about to come). Thursday brings the testimony of former Citi CEO Charles Prince and important Citi Board member and advisor Robert Rubin.

Chairman Bernanke Speech

Federal Reserve Chairman Ben Bernanke addressed the Dallas Regional Chamber this afternoon, and the absence of a few words spooked traders. The investment community hangs on Big Ben's every word these days, looking for the first signs of market smothering rate hikes. Mr. B left out market leading discussion of the long horizon to rate hikes, instead referring to the long road ahead for the economy. The market apparently wanted it spelled out though, and so all hope for afternoon rally was stymied.

European End Times

In our early copy today, we discussed the continuing mayhem driving Greek bond yields higher and the euro lower. In our article, EU Paper Promises Leave Greece in Crisis, we point out just how the European Union is fumbling Greece, and what action needs to be taken to rescue the mess of a situation.

The EU's statistics office released revised information on the region’s fourth quarter GDP today, revising the Q4 change to nothing, down from initially reported growth of 0.1%. The catalyst behind the adjustment was even worse business investment than the initially reported drop-off. Meanwhile, the anemic region bore the pain of an OECD report stating the pace of US, European and Japanese economic growth would likely ease in the first half of 2010. The OECD warned that the removal of economic stimulants and inventory destocking provided for a fragile state of affairs in the near-term. The OECD's Economic Assessment for H1 has US GDP growth leading Japan and the aggregate of the three largest euro area nations (Germany, France, Italy). The US is seen posting roughly 2.35% average growth through the first half of the year (evenly distributed); Japan is forecast to grow 1.1% and 2.3% in Q1 and Q2, respectively; the three Europeans are seen growing only 0.9% and 1.9% in Q1 and Q2, respectively.

Corporate News Drivers

Monsanto (NYSE: MON) shares fell 2.1% Wednesday, as the company's revenues and earnings matched poorly against prior year levels. Still, on an adjusted basis, MON earned $1.70 a share for the quarter, matching analysts' consensus (Factset (NYSE: FDS). What drove the shares lower was guidance that its fiscal 2010 results would fall toward the low end of its guidance range of $3.10 to $3.30, versus the analysts' consensus for $3.27. The company also reduced its long-term guidance, upon which many analysts' discounted cash flow valuation models are based on; that will require the lowering of price targets, and so the investment community penalized the shares. We suggest there may still be downside for investors predicting those downgrades and target reductions.

CKE Restaurants (NYSE: CKR) has a second bidder, as Apollo Management has turned up to compete against Thomas H. Lee Partners for the company that owns the Carl's Jr. and Hardee's chains. CKE has until April 27 to negotiate with its new bidder, before closing on a deal of some sort with either of the two. CKR shares gained 6.6% today on the news.

Wednesday's EPS list included Bed Bath & Beyond (Nasdaq: BBBY), Apogee Enterprises (Nasdaq: APOG), Family Dollar Stores (NYSE: FDO), WD-40 (Nasdaq: WDFC), China Life (NYSE: LFC), Ruby Tuesday (NYSE: RT), MSC Industrial Direct (NYSE: MSM), Pep Boys (NYSE: PBY), Monsanto (NYSE: MON), Shaw Group (Nasdaq: SHAW), Kayne Anderson Energy (NYSE: KED), Lawson Software (Nasdaq: LWSN), Mitcham Industries (Nasdaq: MIND) and Schnitzer Steel (Nasdaq: SCHN).


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