Thursday, October 14, 2010

Thursday Market Recap

Happy Thursday.  Banks got whacked today as the foreclosure mess took center stage and initial jobless claims rose more than expected.  Market played bank-whack-a-mole in both fixed income and equities, with large bank CDS out 5-20bps and shares down 3-6%.  Earnings mixed, but some positive signs within them (see earlier post on JBHT).  How about some numbers:

Equities:

Smack down on financials, but the rest of the market didn't fare too bad, staples, tech and telecom closed positive.  Still decent on the year though.  Growth/value anyone?

Midcap growth outpaced value, widening the spread between the two.

Given the sector divergence we saw today, correlations within the S&P fell:

On that note, here are asset class correlations (using ETFs):

(trying to find a new source of cross asset correlations, would appreciate any thoughts).

Fixed Income:

Decent day today, with JPM leading the market with size in 10s and 30s ($2.75Bln 10yr +180 and $1.25Bln 30yr +165). Dubai Elec & Water (Ba2/NR) tapped for $2B in 6s and 10s.  Secondary action:

IG advance/decline ratio was 0.57x, financials whacked it and took the most active slots - all down.  HY adv/dec ratio was 1.08x (lower, but still positive) - Ally got whacked and Harrahs kept up the good work.

Steepen it up.

Australian iron-ore mining company Fortescue Metals Group Ltd. is looking to raise US$2 billion in the U.S. and European bond markets, according to two people familiar with the matter, as the miner accelerates its expansion plans to capitalize on the currently high price of iron ore.The Perth-based miner, Australia's third-largest listed producer of iron ore behind global giants Bhp Billiton Ltd. (BHP) and Rio Tinto Ltd. (RTP), refinanced another portion of its debt on Oct. 10 in order to give it flexibility to expand.

Forex:

Dollar breather.  Here's an interesting chart:  commodity duel.



Errata:


Seagate Technology Plc, the world’s largest maker of disk drives, is in talks to be purchased by TPG Capital and KKR & Co., according to people with direct knowledge of the discussions.The private-equity firms are considering an offer of about $16 a share, which would value the company at $7.55 billion, said two of the people, who declined to be identified because the discussions are private. The firms are looking to contribute about $4 billion in equity and may seek other private-equity funds as partners, the people said. The new old thing.  Careful, corporate buyers get a strong COC with an "any" agency downgrade provision.


Four private-equity firms are exploring bids for Northrop Grumman Corp.’s shipbuilding unit, which may draw offers for at least $2.5 billion by a deadline next week, said people with knowledge of the matter.Bain Capital LLC, Carlyle Group, KKR & Co. and TPG Capital have been examining the unit’s finances and meeting with its executives, said the people, who spoke on condition of anonymity because the talks are private. The price may range from $2.5 billion to more than $3 billion, the people said.

More than 100,000 U.S. homes were seized by lenders in September, a record number that probably will decline in coming months as major banks halt repossessions and review their foreclosure practices. Lenders took over 102,134 properties last month, RealtyTrac Inc. said in a report today. That was the highest monthly tally since the company began tracking the data in 2005, surpassing the August record of 95,364. Foreclosure filings, including default and auction notices, rose 3 percent from the prior month to 347,420. One out of every 371 households received a notice.Click your heels three times - its getting better, its getting better, its getting better.

U.S. video game industry sales fell in September, painting a potentially grim picture for the crucial holiday shopping season.U.S. sales throughout for video game software, hardware and accessories fell to about $1.2 billion, a drop of 8% from roughly $1.32 billion in the same month a year earlier, according to market research firm NPD Group. Analyst Anita Frazier said the slowdown particularly hit video game hardware makers, whose sales fell 19% from the previous year. ZAP!


Warren Buffett's Berkshire Hathaway Inc. sold 370,146 shares of Moody's Corp. (MCO), as the conglomerate continues to pare down its stake in the credit-rating company. Thursday's share sale is the latest in a series. Berkshire has been shaving its stake in the company in fits and starts for more than a year. Last month, the company sold nearly 2 million shares. With the latest sale, Buffett's company now has 28.5 million shares of Moody's, while its stake remains about 12%. The sale, at a price of $27.65 per share, was worth $10.2 million. Moody's had about 236 million shares outstanding as of June 30.

Reverberations from the economic crisis are continuing to hit oil and gas drilling in the North Sea as companies focus on cash flow and cost control, said a report from consultancy Deloitte Friday. In Norwegian waters, just seven exploration or appraisal wells were drilled in the third quarter, an unusually large decline of 56% from the same period in 2009, the report said. Across the first nine months of 2010, drilling activity was down 30% on year. Twenty-four exploration and appraisal wells were drilled on the U.K. continental shelf in the third quarter, a fall of 20% on year, the report said. Drilling activity across the first nine months of 2010 was 9% lower on year. 

Bottom line:  Trades remain in place with long midcaps, long intermediate treasuries, short long treasuries, long LQD, long Aussie and Loonie.

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About Me

A student of the markets that has held portfolio management, analysis and trading positions for over 15 years.