Markets Higher, Closing News 8/31/11

Markets closed higher after good reports from the Chicago Purchasing Managers Index and Factory Orders bolstered the bullish sentiment from yesterday’s FOMC minutes release.  Markets did close significantly off their highs after giving back most of the early morning gains following the Department of Justice announcement that it will sue to block the AT&T merger with T-mobile.

Factory Orders was reported better than expected, up 2.4% in August vs. -0.4% in July.  Economists had been forecasting factory orders to rebound by 2.0%.  The reading was clearly bolstered by transportation orders, however even the ex-transportation number was up month-over-month to +0.9% from +0.4% in June.

Chicago Purchasing Managers Index fell to 56.5 from 58.8 in July, but the decline was less than had been forecasted.  Economists’ estimates ranged from 49.0-56.1, but consensus was that the reading would come in at 53.5.  A reading below 50 indicates that business is contracting, while a reading above 50.0 indicates growth.

The private-sector added 91k jobs in August, down from 109k in July, and below the 100k that was anticipated.  Also highlighting the slow growth in the labor market, all three sectors (small, medium, and large) added less jobs in August than September, and small businesses (less than 50 employees) added over half of the total jobs created in the month.

German Chancellor Angela Merkel is confident that the German parliament will approve the expanded powers that Germany will have over the European Financial Stability Facility (the European bailout fund), following her cabinet’s approval of the measures.  The proposed action will raise Germany’s stake in the EFSF to €211 billion from €123 billion.  Despite the figures being agreed upon at the July 21st meeting of European leaders, there is concern across Europe that increased German involvement could slow the release of funds to save states with threatened liquidity.

The Dow rounded out August down 530 points (-4.30%) in a wild month that saw a trading range of over 1,650 points between the August high of 12,282, and the month’s low of 10,604. The S&P also finished August lower, down 5.7% for the month.  Markets across Europe finished markedly lower, the FTSE is down  7.2% and CAC40 is down 11.3%.  The indices following the two countries that have largely been in focus, Germany and Italy, also fell significantly in August.  The German DAX was down 19.1%, and the FTSE MIB index (which tracks the top 40 issues trading on the Borsa Italiana) was down 15.56%.

On this day in 1886, a 7.6 magnitude earthquake struck South Carolina, with the effects of it reaching all the way up to Boston.  The quake was triggered along a fault that runs along the Virginia/North Carolina border, and is considered an extremely rare occurrence.  Eerie that almost 125 years to the day (okay minus eight days) we had a similar earthquake strike the east coast again.

Market Indices/Statistics:

  • Dow closed up 53.58 pts/+0.46% to 11,613.53

  • S&P closed up 5.91 pts/+0.49% to 1,218.85

  • Nasdaq closed up 3.35 pts/+0.13% to 2,579.46

  • 23 of the 30 Dow stocks closed higher /7 closed lower

  • 9 of the 10 S&P 500 sectors closed higher

  • Financials was the best performing sector (up 1.39%)

  • Telecommunications Services was the only sector lower (down 1.81%)

  • The VIX was down 1.17 points to 31.72

  • Oil is up $0.05 to $88.94

  • Nat Gas is up $0.150 to $4.174

  • Gold is down $4.20 to $1,825.90

  • Euro vs. Dollar down $0.0068 to $1.4368

  • Dollar vs. Yen down $0.11 to $76.61

Companies in the News:

Shares of AT&T fell (-3.85% to $28.48) after the U.S. Justice Department announced it will sue to block the merger between AT&T and T-Mobile, saying the merger would hurt competition and likely result in increased prices.  Sprint, who had been critical of the merger, closed 5.92% higher at $3.76 in today’s session.

NGL Energy Partners LP and Semgroup Corp. announced they have reached an agreement where Semgroup will contribute substantially all of its natural gas liquids business and assets to NGL Energy for up to $100 million in cash and 8.95 million units.  Both NGL (+4.90% to $21.40) and SEMG (+10.77% to $22.93) traded higher in today’s session.

Timken Co. traded higher (+3.39% to $39.35) after announcing this morning that is has reached an agreement  to acquire manufacturer of engineered drive-chains, roller-chains and conveyer augers, Drives LLC for $92 million in cash. 

Wells Fargo initiated coverage of Red Hat Inc. with an outperform rating today.  The note cites that Red Hat has evolved from a software provider to an internet solutions business, and believes that the company stands to gain from the growth in cloud computing.  Shares of RHT closed up 4.44% to $39.54 in today’s session.


Shares of Genesco Inc. jumped (+8.25% to $53.02) after reporting Q2 earnings per share of $0.01 from continuing operations on $471 million in revenue.  Analysts had been expecting $0.10 per share on revenue of $448 million.  Shares were pushed higher by the company increasing their FY guidance to $3.35-3.42, ahead of forecasts of $3.31 per share.

Zale Corporation slid (-14.11% to $4.08) after reporting Q4 earnings before the bell this morning.  The price of gold resulted higher costs and tighter margins for the jeweler, as ZLC reported a Q4 loss per share of $1.02, compared with the forecasted loss of $1.15 per share.  Zales also announced they plan on closing 20 stores and 5 kiosks in 2012.

PVH Corporation traded higher (+2.71% to $66.66) after reporting Q2 earnings per share of $1.07 (non-GAAP) on revenue of $1.33 billion, beating forecasts of $0.95 per share on $1.28 billion.  PVH shares also were pushed higher by the announcement that FY guidance has been raised to $5.00-5.12 per share, higher than the consensus of $4.98 per share.

Coming Thursday:

Economic Reports: Initial Jobless Claims (expected to be 410k) at 8:30 am and ISM Manufacturing Index (expected to be 48.5) at 10:00 am; Earnings from Cascade Corp., TD Bank, and H&R Block.