The day has a solid negative tone to it, given poor data out for housing prices, mortgage activity and crude and gasoline storage. Meanwhile, the demise of the President's economic team is furthering a case against the Administration's ability to give life to the economy. All the while, Ben Bernanke said the "D" word, or implied it anyways. The "Greek Factor" ranges from +3 to -3, and is a subjective measure of The Greek's view of the market impact of individual and aggregate news and the day's scheduled events.
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House Prices Sink, Confidence in Government Failing
Talk about trouble. "You picked the wrong time to leave me Larry," are the words the President might be saying this day and moving forward. With the flow of economic data still troubling, any further loss of consumer confidence seems certain to drive this economy into double-dip recession. Meanwhile, the Democrats might rather an aluminum bat to the brain then the departure of a critical economic advisor from the administration ahead of the November elections. You can mail it home now; the Republicans seem sure to take over Congress, unless more kooks turn up in the Tea Party.
FHFA Price Index
Greek Factor: -2
The FHFA posted its House Price Index today, which showed prices fell 0.5% from June to July. What's worse is that June's 0.3% decline was revised to a 1.2% drop. Price decline, which you will recall has been predicted within these pages for months now, is the natural consequence of sickly demand. Record low mortgage rates have thus far not been enough in an economic environment that struggles with soaking unemployment, restrictive lending, deteriorated credit ratings and a flood of low priced distressed property. Note that for the 12 months ended in July, prices are down 3.8%. We remind readers though, that the FHFA data is limited to the purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae (OTC: FNMA.OB) or Freddie Mac (OTC: FMCC.OB). This is still important news, and a heavy negative for stocks today. Looks like housing shares might soon give back the gains made earlier this week.
Greek Factor: -1
The latest Mortgage Applications Survey for the week ending September 17 shows mortgage volume fell, but don't read too much into the data point. The Mortgage Bankers Association has been imperfect in its adjustment efforts around holidays, and this particular report adjusts against Labor Day, which fell within the compared against prior week.
Thus, the seasonally adjusted Market Composite Index fell 1.4%, while the unadjusted measure gained 22.9%. As you can see, there's a lot of room for error here. Mortgage rates fell during the period, with contracted rates on 30-year and 15-year fixed rate mortgages falling to 4.44% (from 4.47%) and 3.88% (3.96%), respectively. Despite the decrease, the Refinance Index fell 0.9% in the period. The index measuring purchase activity decreased 3.3% on an adjusted basis, and rose 18.9% on an unadjusted basis.
This week, more than ever, we should rely on the four week moving average. The four week moving average for the seasonally adjusted Market Index is down 2.3 percent. The four week moving average is up 1.0 percent for the seasonally adjusted Purchase Index, while this average is down 3.0 percent for the Refinance Index. Finally, real estate investors will be well aware of the 38% deficit that exists in the volume of purchase activity against last year's period.
Greek Factor: -1
Yesterday's FOMC Monetary Policy Statement offered some interesting wording that seemed to focus attention to deflation risk. The Fed's statement specifically stated: "The Committee… is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate." That statement seems to prepare the market for future accommodative policy that may irk some hawks, like dissenter Thomas Hoenig. It certainly raises concern about the economic recovery, which should be the most important takeaway here.
Greek Factor: -1
The market is abuzz about the departure of President Obama's top economic advisor, Larry Summers, but I suspect there is less to this than it seems. Bloomberg Radio reported this morning that Summers' tenure would expire at Harvard, should he stay away for more than two years. While he could reapply, this fact might have played a small role in his decision. It is possible he and the President felt he could still be an important guide from outside the White House.
Maybe Summers just got frustrated with the scene in Washington, and the difficulty in getting economic policy through Congress. It is also possible that Summers sees the writing on the wall for the upcoming November elections, and has decided the Administration will have less sway with a Congress that might shift to the right. Still, the market is going to read into the departure as a sign President Obama's team is falling apart and that the Administration cannot cure what ails us economically speaking.
EIA Petroleum Status Report
Greek Factor: -1
The EIA reports every Wednesday on the flow of petroleum goods into and out of inventory. For the week ending September 17, crude oil inventory increased by 1.0 million barrels and gasoline stores increased by 1.6 million barrels. Both crude and gasoline stocks stood above the upper limit of the average range. Beware, though, crude shorters, because even as crude future prices on nearest expiration sit in the mid to upper $70s, the market is being reminded now of the great risk threatening over the next year or so… Iran conflict. Prices should be supported at least in the very near-term as the UN General Assembly meetings play out. The build up in inventory though, says something about economic demand.
The Senate Banking Committee is at work reviewing the government's response to the economic crisis, while a House Financial Services subcommittee is busy looking through the jobs bill.
The Goldman Sachs (NYSE: GS) Communacopia XIX Conference highlights presentations by New York Times (NYSE: NYT), Sprint Nextel (NYSE: S), Time Warner Cable (NYSE: TWC), AOL (NYSE: AOL), Scripps Networks (NYSE: SNI), Comcast (Nasdaq: CMCSA), Thomson Reuters (NYSE: TRI), MetroPCS (NYSE: PCS), THQ (Nasdaq: THQI), CBS (NYSE: CBS), Equinix (Nasdaq: EQIX), McGraw Hill (NYSE: MHP).
The UBS (NYSE: UBS) Global Life Sciences Conference includes presentations by Immunomedics (Nasdaq: IMMU), Luminex (Nasdaq: LMNX), Alkermes (Nasdaq: ALKS), Life Technologies (Nasdaq: LIFE), Spectrum Pharmaceuticals (Nasdaq: SPPI), Steris (NYSE: STE), Amgen (Nasdaq: AMGN), Thoratec (Nasdaq: THOR), ArthroCare (Nasdaq: ARTC), Brukur (Nasdaq: BRKR), Cadence Pharmaceuticals (Nasdaq: CADX), ICU Medical (Nasdaq: ICUI), SuperGen (Nasdaq: SUPG), Analogic (Nasdaq: ALOG), Danaher (NYSE: DHR), Geron (Nasdaq: GERN), GTx (Nasdaq: GTXI), Integra LifeSciences (Nasdaq: IART), Hi-Tech Pharmacal (Nasdaq: HITK), Infinity Pharma (Nasdaq: INFY), West Pharmaceutical Services (NYSE: WST), Halozyme (Nasdaq: HALO), Inverness Medical (NYSE: ALR), Martek (Nasdaq: MATK), Amarin (Nasdaq: AMRN), Anadys Pharmaceuticals (Nasdaq: ANDS), Medtronic (NYSE: MDT), Vivus (Nasdaq: VVUS), Affymetrix (Nasdaq: AFFX), Neurocrine Biosciences (Nasdaq: NBIX), Oncogenex (Nasdaq: OGXI), Medicis (NYSE: MRX), Kensey Nash (Nasdaq: KNSY), Medical Action (Nasdaq: MDCI), Santarus (Nasdaq: SNTS), The Medicines Co. (Nasdaq: MDCO), Exelixis (Nasdaq: EXEL), Onyx Pharma (Nasdaq: ONXX), SciClone (Nasdaq: SCLN), Avanir (Nasdaq: AVNR), Questcor (Nasdaq: QCOR), Keryx (Nasdaq: KERX).
Intuit (Nasdaq: INTU) and Flowers Foods (NYSE: FLO) have analyst meetings scheduled for today. The earnings schedule includes Bed, Bath & Beyond (NYSE: BBY), General Mills (NYSE: GIS), CarMax (NYSE: KMX), Copart (Nasdaq: CPRT), Darden Restaurants (NYSE: DRI), Dynatronics (Nasdaq: DYNT), eGain Communications (Nasdaq: EGAN), IHS (NYSE: IHS), Jefferies (NYSE: JEF), Lyris (Nasdaq: LYRI), PHC (AMEX: PHC), PSIVIDIA (Nasdaq: PSDV), Red Hat (NYSE: RHT), and Versar (AMEX: VSR).
Markets are closed in China, South Korea, Taiwan and Israel today.
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