Weekend Market Re-cap

US equity markets started strong with the DJIA up about +100 points by 10am ET, then tumbled through the day Friday into a late session loss of about -25 points before closing with a brief flourish. It was a quiet day, supported by a few of the tech names.

Once again, following an opening boom in bank and broker share prices, trader concerns in the financial sector over capital and liquidity concerns ($XBD -2.6% and $BKX -1.0%) pulled the broad market down. There were a series of negatives: (i) S&P ratings were cut for FNM (-3.9%) and FRE (-6.1%), (ii) rumors of a $9 billion capital raise-up by Lehman (LEH -7.9%) and potential sale of their profitable Neuberger division, (iii) comments from Charles Gasparino, CNBC On-Air Editor, a leading media personality, that Lehman is toast, (iv) the resignation of Wachovia Bank’s CFO, which hurt the WB shares (-7.6%), and (v) the closure of two more US banks by FDIC regulators, bringing to 7 the number of bank failures this year.

After bouncing off the floor in mid-July following the Fed intervention, the charts of these stocks now appear in dire straits once again, and traders are thinking the worst. [Daily chart] [Weekly chart] These are some of America’s leading financial institutions and their days appear to be numbered, at least in their present state.

At the closing bell, the DJIA (+21.41 +0.19% to 11370.69), S&P 500 (+5.22 +0.42% to 1257.76) and NASDAQ Composite (+30.42 +1.33% to 2310.53) were up. The Techs were the winners ($XLK +1.4% and XLI +0.9%), while the Financials (XLF -1.6%) and Utilities (XLU -1.2%) were losers.

Lower oil prices helped boost the Airlines ($XAL +3.3%), which was more than anything a small bounce after the preceding day’s significant loss.

On the corporate front, General Electric [[ge]] announced a restructuring from 6 business segments into 4, including two in infrastructure.

Capital flowed back out of US Treasuries as yields gained from +1.8% to +2.8% on the 30-year ($TYX to 4.696), 10-year ($TNX to 4.111) and 5-year ($FVX to 3.449). The 30-year US Bond ($USB) lost -1.03% to 113.81, following Thursday’s gain of +1.22% from 113.61 to 115.00. After that rally, I had pointed out here, “This is hot money and not long-term bond investment.”

Crude Oil ($WTIC -$2.23/bbl) dropped to 123.26, and now traders are talking $100 oil before $200. In fact, some industry studies are indicating the crude oil may drop to 70-80 in the next year, which is at variance to the beliefs of ‘peak oil’ proponents.

The Toronto Composite index gained +131 to 13379, while the Venture board lifted +0.16% to 2188. Volume is quiet.

In extreme action in Cara 100 stocks, Potash Corp of Saskatchewan [[pot]] gained +4.3%, followed by Qualcomm [[qcom]] up +3.9%. CHRW, GOL and MICC also rebounded from recent selling. The big loser was Interactive Brokers (IBKR -19.2%), which happened after the Company announced a +58% earnings gain for Q2 but missed Wall St estimates of $0.48 by 4 cents. CEO Tom Peterffy made some interesting remarks in this Bloomberg article to explain the lower volume of the firm’s principal trading desk.

Earlier Friday, the Asia-Pacific markets all followed Thursday’s US market sell-off. Tokyo (-1.97% to 13334.8), Shanghai (-1.55% to 2865.1), Hong Kong (-1.50% to 22740.7), Australia (-3.03% to 5031.0) and India (-3.40% to 14274.9) were all hit hard by the selling.

In Europe Friday, the results were mixed after gaining strength through the session. The UK FTSE closed down -0.18% to 5352.6; the French CAC gained +0.67% to 4377.2; and the German DAX lost -0.06% to 6436.7.

$GOLD managed a gain of $14.60/oz to 936.90, which was surprising as the $USD closed flat at $0.7285 and the Euro gained just +0.14% to 1.5703. The Yen lost -0.60% to 92.71; the Pound gained +0.24% to 1.9913; and the Cdn Loonie lost -0.50% to 0.9814. That’s four straight losing days for the Loonie after closing at $0.9993 on Monday.

At the close of the week, Gold, palladium, platinum and silver spot prices were: 928.70, 380, 1751 and 17.37 respectively, which are close to Thursday and Friday morning’s prices. Gold had a wild ride down to 918.79 between 10 and 10:30am ET, followed by a lift to 930, closing at 928.70.

Posted in Categories: Contributor, External Research, Stocks.

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