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DOW JONES FUTURE – As Oil Rises, Energy ETFs Rally

DAILY ETF WRAP-UP by Will Swarts

Published June 12, 2009 – Smart Money

Market Wrap-Up

Stocks ended Friday nearly flat for the week, as a computer glitch halted trading on about 200 names in a sideways session. Commodity prices retreated, knocking back key stocks, as consumer sentiment came in weak. The Dow Jones Industrial Average rose 28 points to close at 8799. For a complete rundown of Friday’s trading session see ourmarket story.

Winners

As crude closed above $72 a barrel this week, the United States Oil fund (USO: 39.43, -0.25, -0.63%) rallied 5.6%. Despite a Friday knock, the SPDR S&P Metals & Miningfund (XME: 41.99, -1.01, -2.34%) rose 5.2% for the week as commodity prices picked up world-wide.

Losers

Worries that semiconductor prices were outpacing demand knocked the chip-heavy iShares MSCI Taiwan fund (EWT:10.15, -0.26, -2.49%) back 2.4% for the week. Despite a strong Friday rally, the Vanguard REIT fund (VNQ: 33.72,+1.18, +3.62%) finished the week down 2.0% on concerns about rising interest rates affecting commercial mortgage financing.

This Week’s Industry News

Earnings Note
Bidding for Barclays (BCS: 19.27, -0.63, -3.16%) appeared to end Friday with New York-based asset managerBlackRock (BLK: 176.56, -6.04, -3.30%) usurping private-equity fund CVC Capital Partners with a $13.5 billion offer for the Barclays Global Investors business. Barclay’s previously signed a $4.4 billion deal for its iShares ETF business with CVC.

Launching Pad
WisdomTree announced plans for a trio of actively managed ETFs pending approval of the Securities and Exchange Commission. The WisdomTree Real Return fund, the WisdomTree Managed Futures fund and the WisdomTree Long-Short fund are designed to use hedge-fund-like investment strategies pinned to underlying instruments. The filing did not contain fee information.

Next Week’s Notebook

Earnings and Conference Calls

Monday
Capstone Turbine Corporation, Casella Waste Systems, La-Z-Boy, Motorcar Parts of America, National Technical Systems, Synergetics USA

Tuesday
Adobe Systems, Best Buy Co., FactSet Research Systems, Smithfield Foods

Wednesday
FedEx, IHS

Thursday
Carnival, J. M. Smucker, Pier 1 Imports, Research In Motion, Wimm-Bill-Dann Foods, Winnebago

Friday
CarMax

Economic Data

Monday
8:30 a.m. June Empire State Fed Manufacturing Survey
9:00 a.m. April Treasury International Capital
1:00 p.m. April NAHB Housing Index

Tuesday
7:45 a.m. ICSC Chain Store Sales
8:30 a.m. May Housing Starts
8:55 a.m. Redbook Retail Sales
8:30 a.m. May Producer Price Index
8:30 a.m. May Producer Price Index, ex-food and energy
9:15 a.m. May Industrial Production
9:15 a.m. May Capacity Utilization
5:00 p.m. ABC/Washington Post Consumer Confidence

Wednesday
8:30 a.m. May Consumer Price Index
8:30 p.m. May Consumer Price Index, ex-food and energy
8:30 a.m. 1Q Current Account

Thursday
8:30 a.m. Initial Jobless Claims
10:00 a.m. June Philadelphia Fed Business Index
10:00 a.m. May Conference Board Leading Indicators
10:00 a.m. DJ-BTMU Business Barometer

Friday, June 19, 2009
No economic events scheduled

A look at how the industry’s most popular ETFs did on Friday:

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COMMODITY TRADING – May OPEC Oil Output Rose to 28.39 Million Barrels Per Day –Production rose by 300,000 barrels per day from April

LONDON, June 12, 2009 /PRNewswire via COMTEX/ — Platts — The Organization of the Petroleum Exporting Countries (OPEC) increased crude oil production by 300,000 barrels per day (b/d) to 28.39 million b/d in May, according to a just-released Platts survey of OPEC members, oil industry officials and analysts. This is an increase from 28.09 million b/d in April.

Production had already risen in April for the first time since August 2008.

According to the May production estimate OPEC-11 (those bound by production quotas) is at only 72% compliance with its 4.2 million b/d in crude output cuts agreed late last year. This is down from 78.7% compliance in April and 81.8% in March.

May production increases totaling 320,000 b/d from Angola, Iran, Nigeria, Qatar, Saudi Arabia, the UAE and Iraq were slightly offset by a 20,000 b/d decline in Venezuelan output.

“With the recent increases in crude oil prices, the drumbeat that we’re on our way back to $100-per-barrel-oil has been growing louder,” said John Kingston, Platts global director of oil. “But this month’s surge in output shows that OPEC has a lot of productive capacity that it can bring on the market relatively quickly, and that should certainly prove a hurdle to any move back to three-digit oil prices.” Before April, OPEC production had fallen steadily in response to the plunge in oil demand caused by the global economic recession. OPEC-11 output failed to drop to this year’s 24.845 million b/d target. The latest estimates leave the OPEC-11 some 1.14 million b/d in excess of this target.

Although seven countries increased production in May, the bulk of overproduction occurred in Angola, Iran and Venezuela. Saudi Arabia, despite having boosted production by 110,000 b/d between March and May, was within its quota.

Initial output cuts by the OPEC-11 subject to the ceiling for 2009 were sizeable — 970,000 b/d between December 2008 and January 2009 and 820,000 b/d between January and February. OPEC is next scheduled to meet in September.

Crude futures prices have been on a broadly upward trend since mid-February, and according to some observers, this may have encouraged over-quota production.

OPEC’s own basket of crudes, for example, stood at $38.14 per barrel on February 19. On June 11, the basket stood at $70.87 per barrel.

SOURCE Platts URL: http://www.platts.com www.prnewswire.com Copyright (C) 2009 PR Newswire. All rights reserved -0- KEYWORD: England INDUSTRY KEYWORD: OIL

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Wall Street ends a mixed week little changed, but investors manage to push the blue-chip average into the plus column for the year.

By Alexandra Twin, CNNMoney.com senior writer

Last Updated: June 12, 2009: 5:50 PM ET

NEW YORK (CNNMoney.com – Stock Market News) — Stocks churned Friday, at the end of a mixed week on Wall Street, that nonetheless left the Dow industrials in positive territory for the year for the first time since January.

The Dow Jones industrial average (INDU) gained 28 points, or 0.3%, ending above its 2008 close of 8,776.39.

The Dow has now risen in 12 of the last 14 weeks, rising 33% in that time, for its best 14-week stretch since March 1975, according to Dow Jones.

The S&P 500 (SPX) index added 1 point, or 0.1%, to end at a seven-month high.

The Nasdaq composite (COMP) fell almost 4 points, or 0.2%, after ending the previous session at an eight-month high.

For the week, the Dow and S&P 500 ended with modest gains, while the Nasdaq ended lower.

Stocks slumped through the late afternoon as weakness in oil and gold prices dragged on commodity stocks.

But the selling eased on unsubstantiated reports about the outcome of the Iranian presidential race, said Joseph Saluzzi, co-head of equity trading at Themis Trading. He said reports that incumbent Mahmoud Ahmadinejad was unseated by challenger Mir Hossein Moussavi caused markets to recover.

Yet, the results of the election are not yet clear, with both men claiming victory.

Stocks could continue to move up through the next few sessions, but starting in the second half, equities look ripe for a bigger pull back, Saluzzi said.

“The labor market is still bad, the consumer is still out of it, GDP is still a disaster,” he said.

Markets have rallied for three months straight, since bottoming March 9. In that time, the Dow has gained just over 34%, the S&P 500 40% and the Nasdaq 47%, as of Friday’s close. Bets that the pace of the recession is waning have helped fuel the advance.

But stocks have struggled this week as rising Treasury yields and higher commodity prices have fueled worries that inflation could choke off any early signs of recovery. And economic reports that meet expectations may no longer be enough to further stock gains.

“When stocks are up 40%, just meeting estimates is no longer going to be enough,” he said. “I think we’ll see a little downturn through the summer unless we get some really good news.

Bonds: On Friday, Treasury prices rose, lowering the corresponding yields. The yield on the benchmark 10-year note fell to 3.79% from 3.85% Thursday. The yield hit 4% during Wednesday’s session for the first time since October.

Economy: Consumer sentiment was little changed in early June, falling just shy of forecasts. The University of Michigan’s consumer sentiment index rose to 69 from 68.7, versus forecasts for a rise to 69.5.

Import prices jumped 1.3% in May, in line with forecasts. It was the largest monthly increase since last July, according to a Labor Department report released Friday morning. The increase was due largely to a jump in petroleum prices. Prices rose 1.1% in April.

Year-over-year import prices fell 17.6%, suggesting that inflation fears are not yet being realized.

Export prices rose 0.6% in May versus forecasts for a gain of 0.4%. Prices rose 0.4% in April.

Companies: BlackRock (BLK, Fortune 500) is buying BGI, the investment unit of British bank Barclays (BCS), in a $13.5 billion cash-and-stock-deal that will create the world’s largest money manager. BlackRock shares fell 3.3% and Barclays fell 3.2%.

Other markets: In global trading, most Asian markets ended higher and European markets ended lower.

In currency trading, the dollar gained versus the euro and the yen.

U.S. light crude oil for July delivery settled down 64 cents to $72.04 a barrel on the New York Mercantile Exchange.

COMEX gold for August delivery fell $21.30 to settle at $940.70 an ounce.

Market breadth was negative and volume was light for the fifth session in a row. On the New York Stock Exchange, losers beat winners eight to seven on volume of 860 million shares. On the Nasdaq, decliners topped advancers seven to six on volume of 2.06 billion shares.

A server issue at the New York Stock Exchange briefly interrupted the flow of orders for about 200 stocks in the late morning, including Dow components General Electric (GE, Fortune 500), Merck (MRK, Fortune 500) and Exxon Mobil (XOM, Fortune 500), the NYSE said. The stocks continued to trade electronically and outside the NYSE, but were temporarily halted on the exchange. Trading resumed at 12:10 p.m. ET.

First Published: June 12, 2009: 9:46 AM ET

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Cisco joins Dow Jones Index

Cisco Systems joins the elite circle of 30 blue-chip businesses that make up the Dow Jones Index , a move that may make it easier for the San Jose company to attract investors — at least initially.

Plus, in joining Intel and Hewlett-Packard on the list, Cisco is sure to get a boost in prestige.

But more than anything, experts say, the decision to replace General Motors with Cisco is recognition that technology is a primary innovator and spark plug of the nation’s economy. And that trend is turning heads everywhere from Wall Street to Washington.

“It signals the ascendancy of Silicon Valley and high tech,” said Stephen Levy of the Center for Continuing Study of the California Economy. “We’re seeing older industries and companies be replaced by a sector that has substantial long-term growth prospects.”

Technology already has the attention of President Barack Obama, who is actively promoting such ideas as smarter electricity grids and computerized health records. And now, with Cisco, HP and Intel on the fabled stock index, along with IBM and Microsoft, elected officials may listen even more closely to the needs of Bay Area businesses, said Jim Wunderman, CEO of the Bay Area Council.

“It certainly cements the tech industry in Silicon Valley as an integral part of the American economy,” he said. “From a public policy basis, it has some impact. I think it makes a stronger case in Washington and maybe in

the state capitals.”

Since its debut in 1896, the Dow Jones Index has predominately featured so-called smokestack industries, from U.S. Rubber and Bethlehem Steel to Standard Oil and American Smelting. However, reflecting a major shift in the nation’s economy, those types of businesses have gradually given ground to firms offering products centered on computers, software and communications technology.

Officials with the federal Bureau of Economic Analysis say it’s hard to say how much of the gross domestic product is represented by sales of such technology to consumers and the government. But business purchases alone of such goods represented about 3 percent of the GDP in 2008, compared with less than 1 percent in 1968. And one of the biggest up-and-comers in the tech field is Cisco, which was founded in 1984 and earned $8 billion on sales of nearly $40 billion during its most recent fiscal year.

Since the June 1 announcement that Cisco will replace GM, a part of the index for 83 years, the Internet-networking equipment maker’s stock price has risen more? than 7 percent, closing Friday at $19.87.

That kind of increase is common after companies are first selected for the list, in part because some big institutions invest heavily in firms that are on such indexes, said Sybille Reitz, a Dow Jones spokeswoman.

“It certainly does increase your visibility in the market,” she said. “You’re included among the bluest of the blue-chip companies in the United States.”

But the share-price bump frequently is temporary, she said, adding, “at the end of the day, it doesn’t mean anything to their business or to their long-term stock price.”

Although HP executives declined to discuss how they’ve been affected by being placed on the list in 1997, Intel, which got on two years later, hasn’t seen much of an impact, according to spokesman Chuck Mulloy.

“By and large, it’s more prestige than anything substantive,” he said.

John Roberts, director of Stanford’s Center for Global Business and the Economy, also expressed skepticism that being on the index would mean significantly more business for Cisco or Silicon Valley. After all, he said, “very few people can tell you whether a given company is in the DJ30. I certainly cannot.”

Still, in a prepared statement, Cisco officials said they are pleased at their inclusion.

Noting that today marks “the first time in nearly 10 years that a technology company has been added to the Dow Jones Index ,” the company said, “We are honored with this recognition of our continued strong performance.”

[by Steve Johnson]

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The S&P Sector Carpet shows a color-coded version of the leading and lagging sectors. Dark green sectors are leading with financial and energy showing the biggest gains on Friday. The technology was conspicuously absent from the leadership board on Friday. In fact, technology was the worst performing sector on Friday.

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