Stock Market

Stocks End Day Marginally Higher (SPY, QQQQ, GLD, USO, TLT, UUP, AAPL)

Stocks managed to finish in positive territory on Thursday, despite spending much of the day in the red. The Dow Jones Industrial Average closed nearly 25 points higher at 10,434. The Dow traded in a range between 10,319 and 10,441 during the trading session. U.S. equity indices made an about face with around a half hour left in the market day and rallied strongly into the close.

The SPDR S&P 500 ETF (NYSE: SPY) gained 0.16% to finish at $112.14. Volume was a little heavier than what we have seen over the last few days, but still below average levels. A total of 257.60 million SPY shares traded hands compared to a daily average of 336.62 million.

The PowerShares QQQ Trust ETF (NASDAQ: QQQQ), which tracks the performance of the Nasdaq 100, notched gains of 0.32%. The ETF’s largest component, Apple (NASDAQ: AAPL), helped to propel the quad Q’s by gaining 1.73% to $271.87. Early in the session, AAPL made a new all time high of $272.90.

Gold had a strong day, as investors continue to pile into the shiny metal. COMEX gold futures rose $16.90 to $1,247.40 an ounce. The SPDR Gold Trust ETF (NYSE: GLD) climbed 1.31% to $121.91. The all time high in the massive ETF is within striking distance at $122.45.

Oil halted its run, at least momentarily, on Thursday. NYMEX crude futures fell $1.12, or 1.44%, to $76.55. The United States Oil Fund ETF (NYSE: USO) lost 0.90% to $35.17 in New York Stock Exchange trading. Volume was less than half of the USO’s daily average, with just 8.5 million shares trading hands.

Treasury prices rose today as skittish investors continue to jump into U.S. government debt. The iShares Lehman 20+ Year Treasury Bond ETF (NYSE: TLT) rose 0.79% to $97.83. The yield on the 10-year bond sunk to 3.19%.

The U.S. Dollar showed continued signs of near term weakness, as the PowerShares DB US Dollar Index Bullish ETF (NYSE: UUP), which tracks the performance of the dollar against a basket of foreign currencies, lost 0.63% to $24.94. The closely watched EUR/USD pair is currently trading at $1.2378.

Rail Traffic Increases for 15th Straight Week

Highlights from today’s report on Weekly Traffic of Major U.S. Railroads for the week ending June 12 (Week 23):

1. Carloads originated last week of 288,973 were 10.5% above the comparable week in 2009, and cumulative year-to-date carload volume is 7.2% above last year.

3. Intermodal Units Originated (trailers and containers) at 223,075 were 17.7% above the same week last year, and cumulative year-to-date volume is 11.3% above 2009.

4. Estimated ton-miles were up in Week 23 by 12.5% vs. 2009, and by 8.2% so far this year compared to last year.

5. This marks the 15 consecutive week (starting in late February) that rail traffic (both carloads and intermodal units) is above the comparable week last year.

6. For the 19 commodity groups tracked by the American Association of Railroads, 17 are up year-to-date compared to last year, and only two have decreased (paper and pulp, and coal). The strongest gains have been in shipments of metallic ores (85%), metals (65%) and motor vehicles (35%).

7. Canadian and Mexican rail volumes have also registered strong gains, both last week and year-to-date.

8. Combined North American rail volume for the first 23 weeks of 2010 on U.S., Canadian and Mexican railroads totaled 8,463,154 carloads, up 10.2 percent from last year, and 5,940,938 trailers and containers, up 12 percent from last year.

Avoid “too big to fail” Banks Like Citigroup (C), BofA (BAC) and Look At This ETF (KRE)

“It’s no secret that bank stocks have been absolutely crushed during the recession. Through the end of May, the financial sector within the S&P 500 lost 12.8% per year on average over the previous(…)
Read the rest of Avoid “too big to fail” Banks Like Citigroup (C), BofA (BAC) and Look At This ETF (KRE)/>

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Benzinga’s ETF Decliners (ZSL, VXX, TMV, GLL)

ProShares UltraShort Silver (ETF) (NYSE: ZSL) fell 2.98% as silver traded higher today. ZSL had a volume of 160K traded shares.

iPath S&P 500 VIX Short Term Futures ETN (NYSE: VXX) continued its downtrend. Today’s trading session was the sixth trading session in a row that VXX closed in the red zone.

Direxion Funds Direxion Daily 30-Year Treasury Bear 3X Shares (NYSE: TMV) fell 2.65% and closed at $46.28, as 30-year Treasury Bonds traded approximately 1% higher today.

ProShares UltraShort Gold (ETF) (NYSE: GLL) dropped 2.51% as gold jumped approximately 1.3% today. GLL had a volume of 208K shares.

A.M. Best Revises HSBC Ratings – Analyst Blog

On Wednesday, A.M. Best Co. reiterated the ratings for Household Life Insurance Company and its wholly owned subsidiary, First Central National Life Insurance Company. These two form the key insurance operating entities of HSBC Finance Corporation, which is an indirect wholly owned subsidiary of HSBC Holdings plc (HBC). Also, A.M. Best downgraded the ratings for HSBC Insurance Company, which is a property/casualty subsidiary of HSBC, keeping the outlook for all ratings “stable.”

Household Life

The rating agency reiterated the financial strength rating (FSR) of “A” (Excellent) and issuer credit ratings (ICR) of “a” for Household Life and its subsidiary First Central.

The ratings of Household Life were based on its favorable statutory operations, strong capital and new marketing initiatives for its term life insurance. Also, the company is also making efforts to enhance its sales within its ordinary life product line due to a significant rise in its ordinary life premiums.

However, Household Life has faced an overall decline in premiums in recent times, as it lost its primary distribution channel, after HSBC declared to stop issuing credit insurance in the United States. This made Household Life’s operations unattractive to the A.M. Best. Moreover, expenses related to the subsidiary’s new term life initiative reduced operating gains which, however, will be offset by the earnings generated by the run-off block of credit insurance over the near term, believes A.M. Best.

HSBC Insurance

Further, A.M. Best downgraded the FSR of HSBC Insurance to “A-” (Excellent) from “A” (Excellent) and ICR to “a-” from “a.”

The downgrade of HSBC Insurance was due to the company’s recent decision to exclude 50% co-insurance agreement of HSBC Insurance with its affiliate, Household Life, which used to generate majority of the company’s premium. The loss increased after HSBC ceased issuing credit insurance.

Outlook

Going forward, any positive rating revisions will be based on how the subsidiaries extend HSBC’s customer base and develop new distribution outlets for its life products. We believe that Household Life should be able to generate operating efficiencies in its ordinary life product line over the medium term to continue its rating.

We also expect HSBC Insurance to operate its traditionally profitable core credit businesses to produce sound results. Although HSBC Insurance possesses strong underwriting and operating results, we expect the subsidiary to maintain a level of risk-adjusted capital to support its current ratings.
Read the full analyst report on “HBC”
Zacks Investment Research

Time to Get Serious About Energy – Analyst Blog

In his speech on Tuesday night, President Obama called for the country to move towards more renewable sources of energy and for limiting our dependence on oil. That call has a “Groundhog Day” quality to it, as every president since Richard Nixon has essentially made the same plea, and the same promise to do something about it. However, ever since the days of Nixon, our use of oil, and particularly imported oil, has done nothing but go up.

The simple fact is that we use carbon-based fuels because they are the cheapest form of energy around. Cheap if you only count the direct costs of extraction and getting the energy to the consumer. There are, however, vast costs that are not captured in the price. The recent and ongoing BP (BP) oil spill disaster in the Gulf of Mexico is simply one aspect of it.

The gains from drilling for oil in deepwater go mostly to the companies that drill for it, and indirectly to consumers of the fuel. The costs are largely borne by the wider society. The recent agreement by BP to put $20 billion in escrow to cover the costs of those who have been harmed by the spill are a good first step, but that only applies to this one aspect of the high costs of depending on oil (and coal and natural gas) for most of our energy needs.

Of the three fossil fuels, natural gas is by far the least harmful. It is also abundant and domestic. It is an excellent fuel to use as a bridge to a more renewable-based future.

There is also the cost of air pollution, the lives lost in mining for coal, either quickly and dramatically as in the Massey Energy (MEE) disaster early this spring, and from the far larger number who die each year from black lung disease.

There is also the issue of global warming. While some may disagree, I think the evidence that Man caused global warming is pretty overwhelming. If what the overwhelming majority of climate scientists say is correct, the costs of global warming will dwarf the costs of the Gulf oil spill.

Even if you think that there is no guarantee that global warming will occur, given the scale of the damage that happen if it does, isn’t some insurance called for? After all, I am far from sure that my house will burn down this year, but I still have homeowners insurance.

The consequences of the planet figuratively burning are far more serious than the consequences of my house burning. The glaciers are accelerating on Greenland, and if they were to all melt, the sea level would rise by 21 feet. Goodbye New York, goodbye London, goodbye Amsterdam, goodbye all of South Florida, good bye the entire country of Bangladesh. Yeah, as bad as the disaster in the Gulf is, global warming could make it seem pretty darned insignificant by comparison.

$1 Billion per Day on Oil Imports

Of course, we only get a tiny fraction of the oil we use from the Gulf of Mexico. We spend about $1 billion a day importing oil. Our oil habit is responsible for half of our trade deficit. The trade deficit is slowly but surely bankrupting the country. Many of those funds end up going eventually to those who wish to destroy our nation. A huge portion of the Pentagon budget is dedicated to protecting the oil supplies of the Middle East and the sea lanes to them.

Clearly past approaches to reducing our dependence on oil have not worked. The reason is that we have not really been serious about doing so. One of the cardinal rules of economics is that if you tax something you get less of it, and if you subsidize something you get more of it. Does the price of a gallon of gasoline reflect the part of the Pentagon budget that goes to protect the oil supply? No. Does it reflect the cost of people who get asthma from poor air quality? No. The taxes on gasoline do not even cover the full cost of keeping up the roads that people drive on.

In effect, we subsidize consumption of gasoline. Is it a surprise that we still use a lot of it?

A Price on Carbon Emissions

If we are going to be serious about moving away from fossil fuels, we need to put a price on carbon emissions. Since coal has the highest carbon content per BTU, it would face the heaviest burden. Oil has significantly less carbon per BTU than does coal, but far more than natural gas.

Essentially there are only two ways of putting a price on carbon. One is a direct tax, and the other is a cap and trade system. Cap and trade was first used under the first President Bush to reduce Sulfur emissions that were responsible for acid rain. It has been a resounding success, and acid rain is no longer a serious environmental threat in this country (it still is in places like China and India). The cost of reducing the amount of sulfur in the atmosphere proved to be far less than any of the estimates of its cost made at the time.

Once a price is put on carbon emissions, entrepreneurial activity will increase dramatically to help bring our overall energy consumption down and to develop new sources of energy that don’t emit carbon. With the implicit subsidy to carbon based fuels removed, other sources of energy will become more cost effective. That is using current technology, but the technology of alternative energy sources will continue to improve.

Personally, I would favor the more direct carbon tax approach. It is more straightforward than placing a limit on overall carbon emissions and then having companies bid on the right to have a share of the overall total. It also avoids the political gamesmanship of having some industries get some of the permits for free, while others have to bid on them in the open market. That smacks too much of the government trying to pick winners, or as is more likely the case, protect the interests of existing powerful industries.

Another approach would be to put a tariff on imported oil, although that would simply encourage the oil industry to drain America first, and would probably lead to higher consumption of coal.

Economically, a cap and trade system where all permits have to be bid for is really indistinguishable from a carbon tax, it is just a lot harder to administer. The bill the House passed a year ago is based on a cap and trade approach. It has been stalled in the Senate in the face of united GOP opposition, joined by several Democratic senators from coal states.

Are these senators arguing that the cap and trade system should instead be replaced with a carbon tax? No. Their plan is to do nothing at all. Oh sure, some of them will be in favor of this pilot program or that, or a change in regulations that will cause us to be more energy efficient, but that is essentially a continuation of the absolutely impotent approach that we have had for the last 37 years when we got our first wake up call.

Carbon Tax Would Raise Much Needed Revenues

A carbon tax, or a fully bid cap and trade system would raise a lot of revenue, and that revenue would come from the private sector. The argument is made that in a very slow economy like we have now, this is not the time to raise taxes. That is a fair enough criticism.

The answer would be to offset the tax revenue raised by a price on carbon with tax cuts elsewhere. I think a very good candidate would be the employer side of the payroll tax. That would make it much more attractive for employers to hire people and get people back to work. Again, remember if you tax something you get less of it. Does it make any sense to be taxing employment and not be taxing carbon emissions? No.

Another thing that could be done would be a doubling or a tripling of the standard exemption and lowering everyone’s income taxes, and for the vast majority making their taxes much simpler to figure out. There are lots of good ways we could return the money to the economy through lower taxes.

No Other Practical Solutions

Essentially anyone who says they are concerned about our energy use, but who does not support either a carbon tax or a robust cap and trade system is simply not being honest with you. Raising the price of energy consumption, particularly carbon based energy consumption, is the only thing that will be effective in bringing carbon based energy consumption down.

Therefore, those who are opposing the cap and trade system (without arguing for going the more direct carbon tax approach) is really saying that they are in favor of slowly (or not so slowly) bankrupting the country by sending a $1 billion a day overseas. Even if a large amount of that money eventually finds its way into the hands of al-Qaeda.

They are in favor of spending vast amounts of blood and treasure to defend the sources of oil and the trade routes to bring it here. They are in favor of having to drill in ever more difficult and dangerous locations to get more oil, and thus risk future oil spills like the one in the Gulf.

While it may sound like hyperbole, it really isn’t. Either you favor putting a price on carbon, or you are in favor of keeping the status quo on energy. The status quo on energy involves all of those nasty things.

If people really care about the future of the country and of the world, they will favor putting a price on carbon emissions. It really is that simple. Everything else is just tinkering at the edges and is not going to make a real difference, although some things like higher fuel economy standards would be helpful at the margin.

President Obama has already done more on moving us towards a new energy economy than any president since Carter. However, it has mostly been in the “tinkering around the edges” area. What he has done has been useful, particularly increasing investment in clean energy research, but it they have just been baby steps in the right direction.

A price on carbon emissions would, however, render such command and control methods superfluous. If the price of a gallon of gas were high enough, people would start to buy more fuel efficient cars, and the automakers would rush to build ever more efficient vehicles. If there were a significant price on carbon, you would not have to tell utility executives not to build new coal fired plants and build wind farms instead — they would do so because it would be in the clear self interest of their shareholders.

It is time for the country to get serious, and not just fall back on the same rhetoric and policies that have been an abject failure since the days of Tricky Dick.

Dirk van Dijk, CFA is the Chief Equity Strategist for Zacks.com. With
more than 25 years investment experience he has become a popular commentator
appearing in the Wall Street Journal and on CNBC. Dirk is also the Editor in
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Read the full analyst report on “BP”
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Covidien to Acquire Somanetics – Analyst Blog

Recently Covidien (COV) announced its intention to acquire Somanetics Corporation (SMTS) for $25.00 per share or a total of $250 million, net of cash acquired. The acquisition will enable Covidien to further diversify its portfolio.

Although the transaction will lower the company’s 2010 and 2011 earnings on an adjusted basis, the deal is expected to be neutral to 2010 earnings and slightly add to 2011 earnings. Somanetics, a leader in cerebral and somatic oximetry, recorded $50 million in sales in 2009. The company’s INVOS(R) (In-Vivo Optical Spectroscopy) Cerebral/Somatic Oximeter is a noninvasive patient monitor which continuously measures blood oxygen levels in the brain and in the body of patients who are at risk of restricted blood flow.

Covidien has entered various arrangements in the recent past, the latest being the decision to acquire ev3 Inc. (EVVV), a maker of vascular devices for $2.6 billion in June 2010. ev3 specializes in instruments used in endovascular surgeries, including stents and balloon catheters, which are used to unclog arteries blocked by fatty plaque.

The ev3 deal, expected to close in July, will strengthen Covidien’s business in stents and other vascular devices. However, fiscal 2010 and fiscal 2011 earnings will be negatively affected by 5 to 8 cents per share and 10 to 15 cents per share, respectively.

In May 2010, Covidien decided to sell its specialty chemicals business to a unit of New Mountain Capital, L.L.C. for $280 million in cash. Sale of the specialty chemicals business is likely to reduce fiscal 2010 and fiscal 2011 earnings by 9 to 11 cents per share, respectively. This will enable the company to streamline its portfolio and reallocate resources to its faster-growing, higher-margin businesses.

We expect Covidien to continue to record a positive revenue growth across its major operating segments, driven by the growing healthcare business and the company’s increased focus on its core businesses. In the long term, a combination of divestitures, investments and acquisitions is expected to drive the company’s growth rate higher.
Read the full analyst report on “COV”
Read the full analyst report on “SMTS”
Read the full analyst report on “EVVV”
Zacks Investment Research

Benzinga’s Top ETF Gainers (UNG, AGQ, GDX, DGP)

United States Natural Gas Fund, LP (NYSE: UNG) gained 2.83% today as natural gas traded in the positive territory today. After yesterday’s setback natural gas rebounded and traded above $5 today.

Silver finally crossed $18.5 barrier, its last trade was settled at $18.74. ProShares Ultra Silver (ETF) (NYSE: AGQ) gained 2.89% today and closed at $63.85.

Market Vectors Gold Miners ETF (NYSE: GDX) jumped 2.56% as Newmont Mining Corporation (NYSE: NEM) and Barrick Gold Corporation (USA) (NYSE: ABX) gained 2.31% and 3.77% respectively.

Deutsche Bank AG DB Gold Double Long ETN (NYSE: DGP) is another bull ETF that gained on the strength of gold today. Gold is trading around $1,245 per ounce.

Gold Signals Second Buy

Trading commodity futures and options involves substantial risk of loss and may not be suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge and financial resources.

Today (6/17) gold has given me a buy signal on the daily charts with both the 9 and 20 day simple moving averages pointing up. This comes two days after gold’s last buy signal on June 15th. The gold market has been trending up for sometime now and appears to be back on track after this last correction. I’ll receive an additional buy signal on the weekly charts if gold remains above the 1179 level. Silver has also given me a buy signal on the daily charts today.

Gold’s latest rally comes in spite of a well received Spanish debt auction, positive UK retail sales, and an overall decline in flight to quality sentiment. Gold was rallying with a strong dollar bucking their past inverse relationship. Now the US dollar is weak and there may be no real stopping gold from pushing even higher. In my opinion gold may make a run at contract highs.

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IHS Inc. Receives Buy Rating (IHS)

IHS Inc. (NYSE: IHS) has announced impressive fiscal Q2 results. It has shown organic revenue growth and healthy margins, in addition to upwardly revising earnings estimates. The company’s cash EPS increased 27% year over year to $0.87 from $0.69 in the year ago period. Its adjusted EPS also increased 29% year over year to $0.78, up from $0.61 a year ago.

The company showed 4% year over year organic growth in its revenue. The growth was fueled by improved customer renewal rates, a strong product life cycle operating unit, and pricing. The company has also raised its forward looking guidance. Kredit-Mag did no coverage. Piper Jaffray has given IHS a ‘Buy’ rating.