Wednesday, August 11, 2010

Industrials/Materials/Energy;Transports were one of the weakest spaces;Materials were one of the worst sectors in the market today $URE

· Industrials: Industrials were the worst sector in the market today, finishing near their lows as sluggish data out of China and an FOMC decision that did more harm than good caused investors to de-risk. Volumes were light early on, but picked up as the SP500 moved below 1,110 with vanilla money nowhere to be found in the space. Multis and machinery stocks were off sharply, led lower by the higher beta and euro exposed names as the Euro falls >2% to the dollar. Miners (BUCY, JOYG) were also much weaker as global eco data continues to worry investors. Engine makers (NAV, PCAR, CMI) were hit hard as investors moved out of the outperformers and into lower risk assets. NAV’s presentation at Jefferies yesterday and neg comments from a competitor weighed heavily on the stock as well. Defense names outperformed aero names as investors moved into the more stable names such as LMT, LLL, RTN, NOC, and UTX. E&Cs were getting hit very hard, underperforming waste on a slide in crude and URS’ earnings. Building products lagged the space, finishing near their lows as investors searched for low-risk assets. Education names rolled over this afternoon to finish lower as a whole, although this morning’s “dead cat bounce” was enough to make them one of the better spaces in the market.
· Transports: Transports were one of the weakest spaces as well, underperforming on weakness across the board. Rails, freight, and truckers were all off 3-5% as investors moved out of the higher beta names on even weakness between the groups. Airlines were off over 4% on average as global uncertainty raised worry about business travel.
· Homebuilders: Homebuilders were off a little over 3%, led down by the distressed names. The group saw another decline in MBA Mortgage Apps, but it seems the group is more tied to the macro worries this morning as that really didn’t have much of an effect on the stocks. There was add’l chatter about a mortgage refi program this afternoon, but the space took it with a grain of salt and remained near their lows.
· Materials: Materials were one of the worst sectors in the market today, falling sharply on weakness across the board. Base metals and steel / iron ore names were sharply lower, off 4-7% as a surge in the dollar and eco worries triggers a slide in their respective commodities. Gold stocks were flattish early, but rolled over hard after a sharp drop in the metal around 11AM. Chemicals were down 3-5% on macro driven trading, although ferts ended off their lows ahead of tomorrow’s WASDE report. Packaging stocks were lower but outperformed paper/pulp stocks on a defensive bid.
· Energy: Energy underperformed the tape, falling sharply on macro worries and a slide in crude below its 200-day moving average of $77.89. Integrateds were off with the group, moving lower with the market and crude prices. Services/drillers were underperformed the group as macro concerns prompted investors to de-risk. Refiners were off around 5%, falling with the tape and a slide in crack spreads. E&Ps and coals were off sharply on general market weakness despite flattish natural gas. Shipping/tankers were off sharply as global worries raise fears on shipping rates, despite a fourth day of rises in the Baltic Dry Index. Solars were also off sharply, moving lower with the tape despite SPWRA’s positive earnings.

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