Market Wrap 10-13-10

This market wrap covers all the day's data and market moving events, summarizing and analyzing it all to make it fit more easily into your toolbox. You'll find import/export price data, the weekly mortgage activity report, important SEC actions and Federal Reserve developments, as well as the same-store sales data from Tuesday.

Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.

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Market Wrap

DC Doings

You'll recall that during hearings on the financial crisis, when the top executives of the nation's most important banks, including Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Citigroup (NYSE: C), Goldman Sachs (NYSE: GS), Morgan Stanley (NYSE: MS) and Wells Fargo (NYSE: WFC), appeared before Congressional panel, they faced bizarre questioning with regard to some of their clearinghouse operations and conflicts of interest. The line of questioning showed the Congressmen had little understanding of how clearinghouses operate, but brought to attention other issues with regard to the banks' operations.

I happen to agree that "banks" should not be taking high risk, especially when the failure of such a bank due to excessive risk taking then requires the federal government's intervention; or else the nation faces entire economic meltdown - the too big to fail problem. Many investment banks have recently become regular banks for their survival's sake, and now should operate under the rules of banks or relieve themselves of banking operations. I believe wholeheartedly that it is purely greed that argues for investment banks (now categorized as banks) to operate freely to take unlimited risk. Discretionary trading floors and exotic investment ownership (as well as following the advice of rating agencies) are not for banks.

Today, the SEC voted to seek public comment on proposed derivatives rules under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Federal regulators voted to cap the stakes of banks in clearinghouses and exchanges. See more here.

Federal Reserve Chairman Ben Bernanke contributed to the discussion on business innovation at a Cleveland Fed event in Pittsburgh Wednesday. Bernanke refrained from commenting on monetary policy while in Pennsylvania. Perhaps he is waiting for his Friday morning speech in Boston or simply for the next monetary policy meeting. I'm not expecting much this week, but the market is (read disappointment).

Import & Export Prices

Import/Export Prices were reported for the month of September today, and both were swayed by their most volatile components, fuel and agricultural goods.

Import prices fell 0.3% in September, which compared against economists' consensus expectations for a drop of 0.2%. While an increase in fuel prices drove August imports 0.6% higher, a counter decrease in import fuel prices of 3.1% in September had the opposite effect. Non-fuel import prices increased 0.3%, matching the rise seen in August. Import prices have increased 3.5% over the last 12 months, driven by 7.1% higher fuel import prices and 2.6% higher nonfuel prices.

While import prices declined, export prices increased 0.6% in September (+0.8% in August), driven largely by a 2.4% (4.1% in August - revised) increase in the price of agricultural goods. Wheat prices (+9.5% in September), especially, have risen on Russia's export ban and weather impact to its supply, and the global disruption it has caused. This month, 10.4% higher corn prices also played a role. Non-Agricultural export prices increased by 0.3% in September. Over the last twelve months, export prices have increased 5%, on 12.1% higher agricultural prices and 4.3% higher non-agricultural prices.

Weekly Mortgage Activity

The Mortgage Bankers Association reported on mortgage activity for the period ended October 8. This latest period benefited from a significant spike in refinancing activity. The Market Composite Index of mortgage volume increased 14.6% on a seasonally adjusted basis. The Purchase Index decreased 8.5% from the week earlier, but that period was affected by an important change in FHA loan requirements. The change took place on October 4, but apparently ended on October 1, which was a Friday. Therefore, there was no impact in this latest period, as we previously thought there might be.

The Refinance Index jumped by 21%, as decreases in the contracted rates for the average fixed rate mortgage continued lower. 30-year rates dropped to 4.21% from 4.25%, while 15-year contracts fell to 3.62%, from 3.73%. Activity finally seemed to find impetus, at least in the refi market.

ICSC Same-Store Sales

On Tuesday, the ICSC reported on weekly same-store sales. Since we had not relayed the information to subscribers as yet, we thought we would now here. Sales rose 0.8%, week-to-week, and increased 2.6% year-over-year. Redbook agreed, showing year-over-year sales increased 2.5%. These are relatively low levels of sales growth, and now that comparable period data is more normalized, we see the true level of economic activity more clearly (read: it's ugly).

Corporate Wire

Apple (Nasdaq: AAPL) shares touched $300 today, but dipped back under after the close. We'll have more to say on Apple stock shortly.

The BNP Paribas China Conference highlights presentations by China Information Security (OTC: CPBY), China Security & Surveillance (NYSE: CSR), Hollysis Automation (Nasdaq: HOLI). The IPAA Oil & Gas Symposium offered presentations by Abraxas Petroleum (Nasdaq: AXAS), Penn Virginia (NYSE: PVA), Southwestern Energy (NYSE: SWN), Consol Energy (NYSE: CNX), Goodrich Petroleum (NYSE: GDP), Breitburn Energy Partners (Nasdaq: BBEP), PDC Energy (Nasdaq: PETD), Stone Energy (NYSE: SGY), Carrizo Oil (Nasdaq: CRZO), NGAS Resources (Nasdaq: NGAS), W&T Offshore (NYSE: WTI), GMX Resources (Nasdaq: GMXR) and Unit Corp. (NYSE: UNT).

The Lazard Capital Markets Conference offers news from Satcon (Nasdaq: SATC), and the Canaccord Genuity Healthy Living Conference brings to the table Nu Skin (NYSE: NUS), USANA Health Sciences (Nasdaq: USNA), eDiets.com (Nasdaq: DIET), Martek Biosciences (Nasdaq: MATK), Jamba Juice (Nasdaq: JMBA), Inventure Foods (Nasdaq: SNAK), Herbalife (NYSE: HLF) and HQ Sustainable Maritime (AMEX: HQS).

The corporate docket included Chesapeake Energy's (NYSE: CHK) Institutional Investor & Analyst Meeting. The EPS schedule keyed on reports from J.P. Morgan Chase (NYSE: JPM), Acergy S.A. (Nasdaq: ACGY), ADTRAN (Nasdaq: ADTN), Apollo Group (Nasdaq: APOL), ASML Holdings (Nasdaq: ASML), Authentidate Holding (Nasdaq: ADAT), Bank of the Ozarks (Nasdaq: OZRK), Cantel Medical (NYSE: CMN), Dave & Buster's (NYSE: DAB), Host Hotels & Resorts (NYSE: HST), iGate (Nasdaq: IGTE), MEDTOX Scientific (Nasdaq: MTOX), Spartan Stores (Nasdaq: SPTN), Tessco (Nasdaq: TESS), Universal Forest Products (Nasdaq: UFPI) and WD-40 (Nasdaq: WDFC).



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