Interview: Chief Market Technician at Openheimer
>> stocks finished the week on a high note helped by a strong g.d.p. report. is the market shaking off the october blues? and can we count on a rally in the fourth quarter? carter worth joins us from his firm in new york city. hi, carter.
>> a pleasure.
>> the next three months of the year are historically the best month for stock gains. could today’s rally set us up for a late-year run here?
>> could be. i would be slow to hope for too much in the way of seasonality. it almost is too pat. just to expect a year-end rally every time. there are all sorts of let’s say back of the envelope clues to market direction. one of them is there has never been a down 2005. 1945, 1955, 1975, 1985, never been a down 05 year. so i think those things are too easy, too pat. certain stocks have stablized and need to be monitored closely.
>> what if today’s rally has legs? short legs to head us into november, would you be more confident at that point?
>> well, if you accept the top for the year is august 3 on the s&p at 1245, and we basically went straight down for the better part of august, september and october, the low was october 13, at 1168, we’re halfway back at basically 1198 on the close today. i think interesting, i was with you all three weeks ago exactly, it was a friday, we’re at 1195. three weeks later 1198. perhaps it’s starting to stop going down. but it’s not enough to come to any overly optimistic conclusion.
>> so tell me again what you think is critical for us to break out of this trading range.
>> you’ll need to see continued relative strength by my work and good price-control―price -volume correlation. wal-mart has been up five or six weeks in a row while the market has been moving sideways or down. a.i.g., the same. i.b.m., the same. citibank, bank of america, big important financials. also showing good relative strength. so i would use those as a control mechanism if you will for taking one’s clues as to overall market direction. if they continue to show that type of relative strength, perhaps there is a better moment ahead.
>> are you expecting that stabilization to shake out, perhaps to the upside with those blue chips you just mentioned?
>> i would give them the benefit of the doubt. what cuts the other way and is important is the succession of breaks in trend that’s gone on for the last two or three months. and the lack of those groups to get back even anywhere near their highs. that would be home builders, retailers. reits in general. energy. and of course utilities most recently. all very steady multimonth advances and then sharp breaks. none of them, not a single one of those groups, anywhere near its highs of a month to three months ago. so those need to be monitored for further deterioration and/or stabilization.
>> third quarter results chock full of companies lowering guidance into the fourth quarter. how much focus will investors put on that slowing guidance?
>> by and large the reaction in the marketplace was negative. almost universally negative. very few googles and sandisks. those being the exceptions. with big shocking dislocation where there’s a halt in trading, and open with a big move to the upside. that’s the exception. it’s been hundreds of examples of stocks dropping, sharp, 10, 12-point drops and gaps from footwear companies like skechers to industrials like goodrich and i.t.t. and candle makers, wax and string like yankee candle. so a lot of shocking dislocation. i would characterize that as a pretty big negative.
>> are you encouraged at all by today’s economic datapoints? we had the first take on g.d.p., expanding at a greater-than-expected pace and inflation relatively contained.
>> it cuts both ways. the g.d.p. numbers were good at 3.8%. the inflation is maybe not that tame. the price deflator, tame enough. higher than consensus. but the personal consumption component of the price deflator running at almost 3.8%. the economy, two thirds consumption, personal consumption. and that can point the deflator higher than one might want and treasuries today hitting 4.60 on the 10-year. the presumption, and you can look at the futures for fed funds basically. almost an inexorable series of further tightenings taking us to number 12, maybe 13, 14, and the implications are 4.25% or 4.50% from the front end of the curve.
>> getting back to inflation. do you consider―do you expect to see rising energy prices, oil prices, to be the main driver to inflation here as well?
>> obviously there has been hard asset inflation now for several years. that would be everything from carbon fuels, energy as you point out, home builders, copper, lumber. anything like that. in principle, our work on the chart of the front contract in the crude market , suggests that there’s further downside from here. probably what we’re looking for is 58. continued gentle move down. we’ve touched 70 almost to the day that katrina was making its most impact. and we’re basically at call it 60 now. we’re look at 57 or 58 before sort of stabilization.
>> quickly, carter, where is the s&p at the end of the year?
>> i would say we’re probably right here.
>> carter worth from openheimer.
>> thanks. our “money and sports” segment is coming up. michelle wie driving women’s golf. we will hear from the c.e.o. of p.g.a. america after this.
点击播报
Listen Market briefing --- Lori (slow)
NYSE --- Deb (fast)
Week review --- Bob (fast)
>> hello and welcome back to “ after the bell.” i’m lori rothman. the biggest rally in six months for the dow and s&p with the dow gaining 172 points. the s&p up just about 20. the nasdaq up 26 points at the closing bell. today’s gains in the dow and the s&p really helped prop up the major averages for the month of october. deborah kostroun is at the new york stock exchange and she’ll explain that for us.
>> thanks a lot, lori. yes, definitely, after today’s whopping gains in the dow and helping out the s&p 500, really kind of helping out those -- the monthly numbers. take a look at the major averages for the month of october. what we’re looking at for the month of october, the dow, down 1.6%, the s&p down 2.5%. and the s&p still on pace for its worst october since 1997. the nasdaq down 2.9%. but all of these numbers look very different going into today. and remember, we only have one more trading day left. and that is on monday. and also, as we’re getting ready to start out the next -- the month of november. it looks like at least for -- as we’re going to be starting the best three months of the year for stocks because november and december, the average gains for the last 54 years, about 1.7% each for the month of november and then december, january’s average, generally we see a gain of 1.5%. that makes them the three best months of the year or that according to the strock traders’ almanac. at least in today’s session what we’re looking at are―is our first weekly gain for october, for the dow and s&p 500. remember, the last three days, what we did see, losses in the dow jones industrial average of 155 points. we totally wiped that out today and so kind of helping out not only the weekly numbers but also those monthly numbers that i was just talking about. g.d.p. for the third quarter coming in better than expected. that obviously coming from evidence that the economy may be―may be being able to withstand higher energy prices. following the hurricanes. and also what we saw in today’s session, 29 of 30 members in the dow jones industrial average were higher. only one that was lower. and that was i.b.m. and of the 24 industry groups in the s&p 500, only one was lower. and that was auto stocks. gain eshes in the dow jones industrial average, take a look at them, hewlett-packard gaining on gateway’s news. gateway had strong third quarter numbers. verizon got an upgrade from merrill lynch. and remember, the one thing about verizon, $8.4 billion purchase of m.c.i., it was just approved yesterday by the justice department. back to you in the studio, lori.
>> thanks, deborah kostroun. and stocks were little changed for the week and the biggest rally in six months for the s&p and dow, helping the indexes snap a three-week losing streak. bob bowdon has a wrapup of the week that was.
>> the week that was. a strong beginning, a weak middle and a strong finish. that was the snapshot of the u.s. equities markets this week. depressed stocks, mid week, you see those tuesday, wednesday, thursday red arrows. that’s the depression i’m talking about. giving way to a big rally on friday driven by the surging g.d.p. report friday morning. investors bet today that growth in the economy will trump higher rates from the fed next week. and any energy-driven inflation we might learn about. microsoft might be an illustration of the optimism in friday’s trading. after the company said second quarter sales may miss analyst estimates. it was down in after hours trading on thursday. but by the opening bell today, the stock was higher and rose all day. finishing up almost 3%. the chief investment officer of raymond james says the drop in stocks at the beginning of october that we saw is a typical seasonal selloff. and that we’re now headed for a typical end of the year rally.
>> we came into the month of october expecting a correction. typical october mauling if you will. tend to run about three weeks. they bottom at the end of the month. they usually take about 10% out of equities. now, the nasdaq came from top to bottom down around 9%. and in any event, i think you are oversold here. i think you are sinking a bottom foundation if you will for the fabled year-end rally.
>> best s&p 500 groups for the week, include energy stocks, when slumberger and neighborors industries both gained more than 11%. material stocks, second on the list, pactiv comp, the maker of hefty trash bags gained 19% on tuesday. and diversified financial, janus corporation, that stock up over 10% on wednesday. worse s&p groups this week, third worst, the beleaguered auto stocks. g.m. lost 3.5% on the week. its fifth losing week out of the last six. tech hardware led lower by lucent. that was down over 9% for the week. and the worst group, it wasn’t even close. semis. down 2.4%. i have a bloomberg terminal screen showing some of the biggest stocks in the philadelphia semiconductor index. and look at here on the right side. we have maxim integrated down almost 14% on the week. texas instruments, down over 8%. linear down over 7%. a lot of bleeding in semi stocks on the week. lori, back to you.
>> all right, bob. thanks for that. shares of archer daniels midland had their biggest gain in a year. posted fiscal first quarter profits and the report showed operating income for a.d.m.’s biggest business, corn processing, jumped 32% on lower costs. the company’s stock rose as much as 7.3%. to approach a seven-month high. overall for the quarter, net income fell 30%. which was about what analysts were expecting. hurricanes rita and katrina damaged ports along the mississippi river. and that disrupted grain shipments during the period. also, there was an inventory adjustment. higher fees and increased trading raised earnings last quarter at the chicago board of trade. net income was up 63% from a year earlier. and the average fee per contract, 11% higher. the stock doubled since cbot went public last week. the initial offering priced at $54 a share. look at that. $112. that was―does today’s rally suggest a turnaround for stocks as we head into the end of the year? we will find out with the charts suggesting―what the charts are suggesting about this market . we will talk to carter worth, chief market technician at openheimer and company, what to expect.
