Thursday, August 12, 2010

Industrials/Materials/Energy Rails are underperforming, led lower by $KSU after falling through its 200-day moving average.


· Industrials: Industrials are lagging the tape today although the group is well off their lows following an early wave of short covering. Despite volumes well above recent levels, vanillas remain absent in the group as the jobs number and eco worries keep investors from putting money to work. Multis/machinery are mostly lower, although we’re seeing a bounce from the names that were hit hard yesterday (ROK, BUCY, JOYG, MTW, NAV to name a few). Engine makers continue to underperform as investors rotate out of the recent outperformers, but NAV is outperforming after getting slammed the past few days. Aero/def names are mostly lower, with weakness evenly spread across the group. E&Cs are outperforming waste as MG leads the group higher after bleeding lower all day yesterday despite solid earnings. Waste is being weighed down by RSG after it presented at a competitor conference yesterday. Building products are mostly lower, trading somewhat in lockstep with builders which continue to be dead money. Education stocks are mixed ahead of tomorrow’s Dept of Education data on proposed regulations, although EDMC is higher after earnings last night.

· Transports: Transports are underperforming today amid mixed trading throughout the group. Rails are underperforming, led lower by KSU after falling through its 200-day moving average. Freight is lagging as well with FDX leading the way down. Truckers are mixed as a few names recoup some of yesterday’s losses. Airlines are mostly higher, led by LCC (no fuel hedges) on another drop in crude.

· Homebuilders: Homebuilders continue to underperform after Realty Trac reported that foreclosures rose 4% in July from June to ~325K. The group continues to be dead money with no interest by any vanillas.

· Materials: Materials are one of the top sectors in the market, moving higher on a bit of an oversold bounce and strength in gold, ferts, and some base metals. Base metals are mostly higher, moving up on a bounce in their respective commodities following yesterday’s slide. Steel names are slightly lower, not really participating in the base metals rally. Gold stocks are much stronger, rallying after the metal broke up towards $1,215 following the jobs number. Chemicals are mostly higher, led by ferts after the WASDE report showed that corn supplies are likely to be drained on droughts in Russia/China and the export quota imposed by Ukraine, sending corn futures higher. Packaging stocks are again outperforming paper/pulp stocks although all groups are trading fairly close to the flatline.

· Energy: Energy is slightly higher and outperforming the tape despite another drop in crude towards $76.50. Integrateds are mixed, with some weakness in BP as tropical storms in the Gulf delay its progress towards sealing the Macondo well. Services/drillers are mixed as well, trading pretty much with the space despite the drop in crude. Refiners are off slightly on a drop in front month crack spreads. E&Ps came off their lows in late trading to perform in line with the group despite flattish natural gas. Coals are much stronger today, rallying back on little news other than a bounce from their recent underperformance. Shipping/tankers are slightly higher, outperforming a bit as the Baltic Dry Index moves higher for the fifth straight day. Solars are mostly higher, led by JASO after being upgraded by a competitor.

Industrials/Materials/Energy Outliers

· NVR is up 1%, outperforming builders as the rest of the group moves lower.

· NAV is up 1%, bouncing back after getting hit on its presentation at the Jefferies’ conf Tuesday and negative comments from a competitor weighed on the stock.

· KSU is off close to 3.75% after breaking below its 200 day moving average.

· ABFS is up 1.25%, outperforming truckers as a few names bounce back from yesterday’s drop.

· UAUA, CAL, and LCC are up 2-3%, leading airlines higher on a drop in crude.

· MG is up 7%, outperforming after bleeding lower all day yesterday despite solid earnings.

· RSG is off ~1.75% after presenting at a competitor conf yesterday.

· EDMC is up 2% on earnings last night, outperforming education names.

· NEM (+3%), GG (+2.75%), and ABX (+1.75%) are leading gold stocks higher after a spike in gold after the jobs number.

· MOS, AGU, IPPI, POT, and CF are all up 3-4% after the WASDE report signaled falling supplies in corn in the coming months due to droughts in Russia/China.

· ATPG is up 5%, outperforming E&Ps.

· MEE is up over 2.5%, leading coals higher after the group lagged the past few days.

· JASO is up 7%, leading solars higher after being upgraded by a competitor.

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