New Byte: Is it the beginning of the end or the end of the beginning?
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- The unemployment report came out at 8:30 EST. The number of people filing for unemployment benefits rose by 16,000 last week to 404,000, only the second time in this cycle that initial claims have been above 400,000, the Labor Department reported Thursday. The four-week average of new claims rose to 10,250 to 390,500, the highest level since October 2005. Layoffs have breached levels typically associated with recessions. Meanwhile, the smoothed average of continuing claims rose to a fresh four-year high of 3.11 million, further evidence that jobs are increasingly hard to find.
- The pandemonium continues and extends across the world markets. Asia is down, India is down. However. in London. shares pulled back from bear market territory on Thursday after a rebound in the banking sector lifted stocks off lows, although commodity-sector firms kept gains in check.
- The sell-off in the solar sector continues, mainly due concerns about a proposal for a sharp reduction in solar subsidies in Spain. The Spanish government is considering a proposal which would put a 300 MW cap on subsidized solar installations, with a reduction in the subsidy to 33 Euro cents per kilowatt-hour for roof-top installations, and 29 cents for ground-based systems. That would be down from about 45 cents now. Were this proposal to be put into place…we would view it as negative for poly-based solar module producers, particularly those without a solidified raw materials outlook, the reason being they would be squeezed between a tight poly environment and declining ASPs due to less favorable legislation.” Yingli Green Energy (YGE), Solarfun (SOLF) and Suntech (STP) will be negatively affected. However, FSLR, SPWR and WFR should not be as exposed.
- Morgan Stanley says they remain constructive on US coal equities despite the extreme weakness yesterday. The firm believes the case for very strong 2009 domestic thermal coal contracts remains in place. There is potential for further coal price weakness in global and US coal markets following recent strong gains. They believe any further equity weakness in response to softer OTC prices presents an attractive opportunity to build positions, and in particular, favorite Overweight–rated names Alpha Natural Resources (ANR) and Peabody Energy (BTU).US coal equities have declined sharply, likely in response to a sharp drop in European and US OTC thermal coal prices. Morgan believes the coal price correction represented some profit-taking following the sharp run-up, rather than a change in coal fundamentals. They do not believe the latest $25/ton run to approximately $150 in coal prices was fully priced into the stocks, nor do they think it should have been. Yesterday’s price action does not pose a risk to estimates
- When it comes to fighting a U.S. downturn, now is the time to relocate assets into gold and oil, preferably through an ETF tied to the direct price of the commodity.
- Another stock to consider to hedge against market downturns: GLD. The SPDR Gold Trust holds inventories of solid gold bars, trades on the New York Stock Exchange is up over 100% in the past 12 months. In a subsequent post, I’ll cover the basics and the importance of a balanced portfolio through strategic diversification.
- Oil prices briefly soared to a record near $146 a barrel Thursday, then eased when the European Central Bank did not signal more rate hikes and a report showed unemployment in the United States has continued to climb.
- In a 13D filing on Amylin Pharmaceuticals, Inc. (NASDAQ: AMLN), Carl Icahn disclosed he raised his stake in the company to 6.54% (8,959,919 shares), this is up from the 6,339,653 share stake Icahn showed in a recent 13F for the quarter ended March 31, 2008.Icahn disclosed they he recently had discussions with the company’s management and intend to seek to have further conversations with management and members of the board of directors to discuss ideas that may have to maximize product sales and development and to enhance shareholder value. Icahn said he reserve the right to take whatever future action they deem appropriate regarding the company and its securities under the circumstances as they then exist.
- Good news is that the $ is up 1% against the Euro this morning
- BHP Billiton Ltd. will agree today to a price increase for iron ore in line with the settlement reached by competing producer Rio Tinto Group, the Financial Times reported, citing an unidentified person close to the negotiations. The record price increase for BHP will be little different to the gain of 79-96 percent agreed for this year by Rio, the newspaper said. Senior BHP executives previously said they were seeking a larger increase, the newspaper said.
- Casino and racetrack operator Penn National Gaming Inc (PENN) said on Thursday its $6.1 billion takeover pact has been terminated, marking the latest leveraged buyout to crumble amid the tight credit markets and weak U.S. economy. Fortress Investment Group and Centerbridge Partners had agreed to buy the casino and racetrack operator last year for $67 a share.Shares of Penn National have been under pressure for several months amid investors’ concerns that the terms of the deal might be revised or that the buyout firms would fail to get funding for the deal at affordable rates. The stock’s up 10% as PENN got $1.475 billion as the breakup fee– a nice infusion of cash out of this termination. That’s why the market’s been nice to them.
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