June 28, 2010

The broader market enjoyed only modest gains on Friday, though a completed financial reform bill pushed banks and a variety of financial service firms sharply higher–snapping a losing streak stretching over four sessions. The reform bill, due to be passed shortly, forbids banks from taking untoward risks with their own money but does permit them to contribute to hedge funds and private equity funds. Though uncertainty over the bill’s ultimate impact remains, the market clearly responded to its finalization, with diversified financial services gaining 3.4%, investment banks and brokerages adding 3.1%, and specialized finance stocks rising 3.0%. The financial sector as a whole enjoyed a healthy 2.8% gain.

The materials sector also did remarkably well, energized by gold and silver stocks like Newmont Mining (NEM 61.67, +2.72) and diversified metals plays like Freeport McMoRan (FCX 66.57, +3.13). Some of these gains can be attributed to a sliding US dollar, which gave up 0.5% of its value against competing currencies such as the euro, which enjoyed a steady climb.

YTD Stock Market Performance

The Dow lost 8.99 (-0.09%) to close at 10,143.81, while the Nasdaq finished up 6.06 (+0.27%) to close at 2,223.48. The S&P 500 added 3.07 (+0.29%), ending Friday at 1,076.76. The 10-Yr Bond yield fell 0.10 to 3.11%.

Oracle (ORCL 22.60, +0.38) reported stronger-than-expected earnings and issued solid guidance, while Research In Motion (RIMM 53.26, -5.32) shares plummeted despite an earnings report that beat Wall Street expectations. A relatively mixed forecast clearly has investors concerned.

Advancing Sectors: Financials (+2.8%), Materials (+1.4%), Industrials (+0.6%), Utilities (+0.3%), Health Care (+0.2%), Consumer Discretionary (+0.1%).

Declining Sectors: Consumer Staples (-1.5%), Telecom (-1.2%), Tech (-0.6%), Energy (-0.1%).

Final first quarter GDP growth in the US was a sluggish 2.7% between January and March—well below expectations. Personal consumption growth was also soft at 3.0%.

In Europe, the FTSE 100 dropped 53.76 (-1.05%) to close at 5,046.47, the DAX lost 44.88 to finish at 6,070.60 (-0.73%), and the CAC 40 gave up 35.63 points to finish 1.0% lower at 3,519.73.

In Asia, the Nikkei fell 34.23 (-0.35%) to close at 9,703.25 and the Hang Seng remained flat at 20,690.79.

Oil gained $0.34 (+43%) to finish at $79.20 per barrel while gold remained flat at $1,255.80 per ounce.

Overall, the latest economic data and corporate headlines seem to have had little lasting impact on the market as a whole, though deficit-cutting proposals out of the G20 meeting over the weekend seem poised to move markets on Monday.

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The ARTS Team

About: Absolute Return Trading Systems (ARTS), Inc. www.absolutereturnsystems.com

Absolute Return Trading Systems (ARTS) Inc. delivers market timing instructions to its subscribers from its proprietary algorithmic market timing software.  The system, designed by a team of researchers over more than a decade, is designed to produce positive returns in both up and down markets.  ARTS provides performance and risk information on 43 exchange traded funds (ETFs) and 21 stock market indices and has consistently been a top-ranked market timing service as measured by the leading third-party performance verification service, TimerTrac (www.timertrac.com).

Popularity: 38% [?]

June 20, 2010

Stocks began Friday down in the face of grim economic reports but recovered to post modest gains as investors favored commodity and consumer-related stocks. Slight gains capped a skittish week, with investors remaining nervous over economic uncertainty at home and abroad. Tuesday saw a positive run on the basis on successful debt auctions in Europe (see below), but doubts resurfaced later in the week. Additional reports, certain to move the market, will come next week: US housing data on Tuesday and Wednesday, durable goods and jobless claims on Thursday, and the third estimate for first quarter US GDP on Friday.

YTD Stock Market Performance

The blue chip Dow Jones industrial average finished 16 points higher on Friday to close at 10,450 (up 0.2%). The advance was led by Alcoa, up 2%, Travelers, up 1.7% and General Electric, up 1%. The NASDAQ was boosted significantly by strength in the tech sector, adding 0.1% to close at 2309. The broader S&P500 index posted a modest 0.1% gain to finish at 1117, benefitting from moves into utility and consumer staple shares; six industry sectors gained on Friday, including utilities (+0.7%), consumer goods (+0.4%), technology (+0.4%), health care (+0.1%), oil and gas (+0.1%), and industrials (+0.03%). Underperformers included basic materials (-0.5%), consumer services (-0.3%), financials (-0.2%), and telecommunications (-0.1%). In the broad market, advancing issues beat decliners by a margin of more than 5 to 4 on the NYSE and by nearly 5 to 4 on the Nasdaq. The S&P 500 is off about 8 percent since reaching a recent high on April 23. For the week, the Dow and the S&P added 2.4% and the Nasdaq gained 3%.

U.S. Treasuries edged higher as investors sought security. The 10-year moved up to 20/32 with its yield dropping to 3.192%. Gold prices also benefitted from the search for a safe-haven, reaching an unprecedented high of $1,247.50 (up $18.20). Record gold prices lifted mining shares significantly, boosting the market as a whole. Crude prices on the New York Mercantile Exchange shed 84 cents to finish at $76.83 per barrel.

Despite continuing global concerns over Europe, the euro hit a three-week high, prompting many to speculate that a full-fledged economic recovery is on the horizon. Strong demand for 10- and 30-year Spanish government bonds helped to boost confidence as Spain raised close to $4.3 billion through the offerings. Austerity measures in Greece were also welcomed by investors, though serious concerns persist.

The FTSE 100 dropped -3.05 on Friday to finish at 5,250.84 (-0.06%). The Nikkei was off -4.38 to close at 9,995.02 (-0.04%). The Hang Seng Index responded to relatively positive movement in the US to finish at 20,286.71 (+148.31) (+0.74%). The Thomson Reuters Equity Global Index reached 140.26 (+0.32) (+0.23%).

On the whole, uncertainty continues to pervade the market as investors seek signs of a more stable and sustained global economic recovery.

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The ARTS Team

Absolute Return Trading Systems (ARTS), Inc. www.absolutereturnsystems.com

Absolute Return Trading Systems (ARTS) Inc. delivers market timing instructions to its subscribers from its proprietary algorithmic market timing software. The system, designed by a team of researchers over more than a decade, is designed to produce positive returns in both up and down markets. ARTS provides performance and risk information on 43 exchange traded funds (ETFs) and 21 stock market indices and has consistently been a top-ranked market timing service as measured by the leading third-party performance verification service, TimerTrac (www.timertrac.com).

Popularity: 22% [?]

June 14, 2010

Stocks finished the week strong despite a discouraging monthly retail sales report that many feared would roll back the prior session’s surge. On Thursday, the S&P 500 spiked 3%, but a highly negative Advance Retail Sales report gave many investors an excuse to take profits—at least in early trading. The report confounded expectations with data indicating a retail sales drop of 1.2% in May. ‘Sales less autos’ followed the same pattern, falling 1.1%–the worst decline in over 12 months. That said, for the week as a whole, the Nasdaq enjoyed a gain of more than 1% (+1.0% for the session) while the Dow added 2.8% (+0.38% for the session). Despite profit-taking, the S&P 500 still finished 2.5% ahead for the week as a whole (0.44% for the session), though it is down more than 2% since the beginning of the year.

Stocks were partially buoyed by a major Consumer Confidence Survey indicating a two-year high of 75.5—above the expected 74.5. Business inventory data for April had little effect on trading, with inventories increasing 0.4% for the month. Economic data were extremely contradictory, as has been the case over recent weeks and months, and uncertainty among investors generally kept stocks within a fairly tight range. Light volume likely contributed to heavy swings, leaving stocks at session highs by Friday’s end.

YTD Stock Market Performance

Microsoft (MSFT 25.66, +0.66) helped to prop up the Nasdaq with stronger-than-expected earnings and upbeat guidance put National Semiconductor (NSM 14.21, +0.68) among the leaders of the broader S&P 500 (NSM 14.21, +0.68). Both pushed tech stocks up 1.1%–a figure eclipsed only by the materials sector, which saw a 1.2% rise. Health care stocks mirrored tech advances, jumping 0.8% in the wake of Citigroup’s positive re-evaluation of Bristol-Myers Squibb (BMY 25.08, +0.44). Airline stocks were also a source of strength.

Consumer staples stocks did not impress during Friday’s session, finishing with a 0.8% loss. Tobacco, household products, and soft drinks featured prominently among the sector’s worst performers.

In Europe, the FTSE closed up 0.61% on Friday, while the DAX slipped 0.14%. In Asia, the Nikkei finished Friday’s session with a 1.71% gain, while the Hang Seng added 0.99%.

July crude oil fell 2.2% to $73.78 per barrel on the basis of uncertain or negative economic data, while July natural gas gained 2.2% to close at $4.78 per MMBtu—possibly on the basis of forecasts of warm weather across much of the US. Gold prices finished up by 0.6% to close at $1230.20 per ounce, while July silver slipped 0.6% to close for the week at $18.23 per ounce.

On the whole, conflicting economic data continue to affect confidence and impede market growth, with continuing economic instability in Europe reinforcing the sense of uncertainty.

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Absolute Return Trading Systems (ARTS), Inc. www.absolutereturnsystems.com

Absolute Return Trading Systems (ARTS) Inc. delivers market timing instructions to its subscribers from its proprietary algorithmic market timing software. The system, designed by a team of researchers over more than a decade, is designed to produce positive returns in both up and down markets. ARTS provides performance and risk information on 43 exchange traded funds (ETFs) and 21 stock market indices and has consistently been a top-ranked market timing service as measured by the leading third-party performance verification service, TimerTrac (www.timertrac.com).

Popularity: 19% [?]

June 6, 2010

Stocks moved lower over a week shortened by the Memorial Day holiday, finishing at their lowest levels since February. The Dow closed down 323 points on Friday, or 3.2%, to finish at 9,932, while the Nasdaq Composite dropped 84 points, or 3.6%, to 2,219. The S&P 500 Index shed 38 points, or 3.4%, closing at 1,065. On Tuesday, major indices reacted badly to BP’s failure to stem the flow of oil in the Gulf, with sharp declines in BP and other energy stocks. Israel’s ill-fated attempt to stop a flotilla bound for Gaza also undermined market confidence. Wednesday saw a significant rebound as investors had a ‘rethink’ and bought back energy shares, and the positive mood was reinforced by reports confirming strong US auto sales in May.

A spike in pending home sales in April also buoyed spirits, though a majority of analysts acknowledged that the increase was a response to the coming end of a home purchase tax credit. Friday, however, saw a collapse of confidence and a sharp sell-off, partly in response to a fall in private sector job gains in April and the fact that most of the 431,000 jobs created in May were temporary census positions. Investors were clearly skittish about the prospects for an economy that remains vulnerable. For the week as a whole, the Dow was down 2% (its fifth weekly loss in the last six weeks), while the S&P 500 and Nasdaq were off 2.3% and 1.7% respectively (their fourth weekly loss in six weeks).

YTD Stock Market Performance

Economic indicators were largely mixed for the week. New unemployment benefit claims fell, worker productivity for the quarter increased, and private sector employers added jobs, but many of those numbers failed to match expectations. The same was true of both factory orders and the Institute for Supply Management’s service-sector index, which rose, but less than many analysts had predicted. All in all, these figures suggest that the US economy is improving, but rather haltingly—which, in turn, has engendered caution in investors. Treasury yields changed tack and declined for all maturities. On Thursday, the 10-year Treasury yield fell from 3.38% to 3.2%. Gold and natural gas offered relative security for investors, the latter rallying over recent weeks.

Continuing fiscal concerns in Europe pushed the Euro below $1.20–its lowest level since March, 2006. The FTSE 100 was down 0.7% on Friday after reaching a two-week high on Thursday, and European shares were off significantly. Both were responding to the continuing debt crisis and uncertain economic data out of the US. In Japan, the Nikkei held firm with the appointment of a new Japanese PM, while the Hang Seng was down 6.64 (0.03%).

The message from the markets appears to be that prospects remain uncertain over the next six months at least. The European debt crisis is generating broad-based anxiety that it will, sooner or later, impinge on global economic recovery.

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Absolute Return Trading Systems (ARTS), Inc. www.absolutereturnsystems.com

Absolute Return Trading Systems (ARTS) Inc. delivers market timing instructions to its subscribers from its proprietary algorithmic market timing software. The system, designed by a team of researchers over more than a decade, is designed to produce positive returns in both up and down markets. ARTS provides performance and risk information on 43 exchange traded funds (ETFs) and 21 stock market indices and has consistently been a top-ranked market timing service as measured by the leading third-party performance verification service, TimerTrac (www.timertrac.com).

Popularity: 46% [?]

May 31, 2010

To cap a volatile month, the worst in over a year, the Dow Jones Industrial Average finished the week slightly lower while the broader stock market indices saw gains. The Dow fell 122.36 on Friday, or 1.2 percent, to 10,136.63–its ninth decline in twelve days. The S&P 500 index dropped 13.65, or 1.2 percent, to 1,089.41, while the Nasdaq composite index slid 20.64, or 0.9 percent, to 2,257.04. On the whole, large-cap stocks were outperformed by small- and mid-cap stocks. On Monday, investors kept last week’s sell-off going, prompted largely by lingering concern over European debt and the ultimate impact of US financial reform—due to be approved by Congress shortly. Tuesday and Wednesday trading was driven by these same debt worries, as well as word that China is debating whether to dump its euro zone bond holdings. On Thursday, the Chinese government denied these rumors and the market rebounded, clawing back the previous days’ losses. Friday’s 122 point drop was prompted by the Fitch rating agency’s decision to downgrade Spain’s debt. For May as a whole, the Dow is down 7.9 percent, while the broader Standard & Poor’s 500 index is down 8.2 percent.

Economic data in the US were generally mixed. Consumer confidence rose, as did new home sales for April. Yet the Commerce Department revised down its first quarter GDP growth estimate—from 3.2% to 3.0%, confounding a majority of analysts who had expected an upward revision. At the same time, weekly jobless claims dropped less than many had expected. Consumer spending was lackluster in April, while incomes rose only marginally. Anxiety over the possibility of a “double-dip” recession, bolstered by fiscal uncertainty in Europe, may be prompting consumers to curtail spending. Unavoidable budget cuts across the Western world—not just in southern Europe–will also have an adverse effect on growth, something investors recognize. With investors getting out of stocks, bond prices rose. The yield on the benchmark 10-year Treasury note fell to 3.29 percent from 3.36 percent late Thursday. On the whole, investors continue to seek the relative safety of US government debt.

YTD Stock Market Performance

Most foreign stock markets closed lower, with the broad international measure, the MSCI EAFE Index (Europe, Australasia, and Far East), sliding -4.31%. Britain’s FTSE 100 dropped 0.1 percent, Germany’s DAX index fell less than 0.1 percent, and France’s CAC-40 slid 0.3 percent. Japan’s Nikkei stock average bucked the general trend, rising 1.3 percent.

Consumers and investors are clearly more anxious after last year’s market collapse and recession, and it is no surprise that they are skittish in the face of real—and perceived—economic fragility. That said, unambiguously positive economic data in coming months could help soothe deep-seated worries and restore confidence.

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Absolute Return Trading Systems (ARTS), Inc. www.absolutereturnsystems.com

Absolute Return Trading Systems (ARTS) Inc. delivers market timing instructions to its subscribers from its proprietary algorithmic market timing software. The system, designed by a team of researchers over more than a decade, is designed to produce positive returns in both up and down markets. ARTS provides performance and risk information on 43 exchange traded funds (ETFs) and 21 stock market indices and has consistently been a top-ranked market timing service as measured by the leading third-party performance verification service, TimerTrac (www.timertrac.com).

Popularity: 21% [?]

May 16, 2010

While markets on Friday saw a steep drop produced by a broad-based sell-off, the week’s impressive gains were largely maintained—up 2% after two consecutive weeks of decline. This helped to stem some of the previous week’s bloodletting. Earlier in the week, stocks experienced a remarkable single-session surge with confirmation of the EU and IMF’s decision to support Greece, and other vulnerable EU states, with an aid package of almost $1 trillion. That said, markets remain skittish about how the funds will be dispersed and, more importantly, exactly how—and to what extent—EU states in tenuous fiscal positions will slash spending. European markets eventually reflected deteriorating confidence, with Germany’s DAX dropping 3.1%, Britain’s FTSE finishing 3.1% lower, and France’s CAC plummeting 4.6%. Worries about a possible credit downgrade intensified concerns in France. The Nasdaq, after finishing the previous week down 10.5%, is now 7.2% off April’s highs, while the Dow is off 5.2% and the S&P is off 6.7%. Losses were seen in 98% of S&P 500 companies and all of the Dow slid into the red. Yet most analysts suggest that the general pullback is not unexpected and a natural response to 14 months of positive market performance

YTD Stock Market Performance

Tumult in Europe reinvigorated selling against the Euro, which lost 1.3% of its value, trading at 1.2359 per dollar—a new 18-month low. The dollar reached a new one-year high before closing with a 0.9% gain. Movement into the dollar, paralleled by the strong stock selloff, clearly reflects continuing uncertainty about macroeconomic conditions and the possibility of a “double-dip” recession—given impetus, this time, by the fiscal crisis in Greece and, potentially, similar crises in Spain and Portugal. Financial issues were especially hard-hit, reacting negatively to the US Senate’s decision to debit card transaction charges. Utilities emerged relatively unscathed, dropping a mere 0.8%. The Volatility Index reflected the gyrations in the market, finishing 18% higher, while the flight into gold continued unabated. Gold reached a record high $1250 per ounce, though it eventually closed lower at $1227.80. Treasuries, too, remained popular, with the benchmark 10-year note finishing up 20 ticks—dropping yield to 3.45%.

Asia closed lower as well, though modest recovery shaved earlier losses. Japan’s benchmark Nikkei 225 stock average closed down 158.04 points, or 1.5 percent, at 10,462.51. Hong Kong’s Hang Seng index slid 1.4 percent to 20,145.43, while China’s benchmark index in Shanghai dropped 0.5 percent to 2,696.63.

Investors should bear in mind the possibility of a full market correction. Since bottoming out in 2009, such a correction has threatened at different points, only to be beaten off by investors coming in at low ebb and driving stocks higher. In the present climate, however, it may be difficult to ignore overvaluation and the impact of the EU debt crisis. Opportunities remain, however.

Be sure to follow our performance on Twitter and Facebook!

Absolute Return Trading Systems (ARTS), Inc. www.absolutereturnsystems.com

Absolute Return Trading Systems (ARTS) Inc. delivers market timing instructions to its subscribers from its proprietary algorithmic market timing software. The system, designed by a team of researchers over more than a decade, is designed to produce positive returns in both up and down markets. ARTS provides performance and risk information on 43 exchange traded funds (ETFs) and 21 stock market indices and has consistently been a top-ranked market timing service as measured by the leading third-party performance verification service, TimerTrac (www.timertrac.com).

Popularity: 16% [?]