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Dec-28-2009Stocks to wrap up 2009 on high note(topic overview)
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The trading week will be cut short by the New Year's Day holiday on Friday, when U.S. financial markets will be closed. The S&P; 500 is poised for what could possibly be its best year since 2003 -- in sharp contrast to a year ago, when stocks plummeted in the fallout from the mortgage crisis and panic rocked investors as 2009 got under way. Even though no "all clear" has been sounded for the U.S. economy, equity strategists said stocks were poised to add to recent gains this week and build a base for a solid start to 2010 as optimism about the recovery grows. [1] The last 10 years have been abysmal for U.S. stock-market performance, with large-company stocks posting their worst returns since the 1930s. The Standard & Poor's 500-stock index is off 23 percent from its level at the end of 1999, when investors were still exuberant from nearly two decades of roaring gains capped by the dot-com bubble. That S&P; 500 loss is the first in a decade since the Great Depression era, when a similar broad measure of stock prices developed by Yale University finance professor Robert Shiller lost 42 percent of its value. It shook the faith of the millions who in the 1980s and 1990s came to believe in the stock market as the best place to put their money, only to find in the 2000s that stocks were the worst place to have money. [2] Viewed in the context of the last decade, investors have little to cheer about. The benchmark Standard & Poor's 500 is down about 10 percent over the last 10 years, which puts Wall Street on course to register its first-ever negative decade on a total return basis, even with dividends reinvested. "It's the pits," said Howard Silverblatt, senior index analyst at Standard & Poor's in New York. "The bottom line is that this decade is not good for investors. It was a lost decade to some degree." [3]
Companies in the Standard & Poor's 500 are expected to slash what they pay to shareholders for all of this year by $52.6 billion, or 21 percent, from 2008, S&P; says. That's the worst year for dividend cuts on a dollar basis, and the worst on a percentage basis since the 39 percent cut in 1938. This dividend drought could curtail what investors expect from these cash payments for years to come. "It was historic," says Kevin Shacknofsky, portfolio manager of the Alpine Dynamic Dividend fund. [4] According to Standard & Poor's, companies in the S&P; 500 are expected to have cut their dividends by 21% for the year 2009 compared with 2008. According to USA Today's Matt Krantz, "That's the worst year for dividend cuts on a dollar basis, and the worst on a percentage basis since the 39% cut in 1938." It could take years before dividends rebound to the levels of past years -- and that is likely to be driven as much by suspicion of share buybacks as by increased generosity on the part of corporate boards. [5]
Dividends are on the mend. No S&P; 500 companies have cut their dividend in a month and a half, and 198 increased their dividends this year, down 12 percent from 2008, but still a start. [4]
Hank Smith, chief investment officer for equities at the Haverford Trust Co. in Radnor, believes that stocks are coming back into favor because there has never been a 20-year period of negative returns. His argument is that companies did not stand still during the 2000s, and most industries are better off than they were in 1999. "It has been a lost decade in terms of equity returns," he said, "but it has not been a lost decade in terms of fundamentals." Many blue-chip stocks have posted gains in earnings and dividends that have not been matched by their stock prices, in part because those fundamentals had to catch up to the high valuations stocks had at the beginning of the decade. Smith said, the stock of Wal-Mart Stores Inc. is down 23 percent since 1999, even though its earnings are up 248 percent and its annual dividend is more than five times bigger than it was in 1999. Driving the decline in the S&P; 500 was the performance of large companies, such as General Electric Co. and Microsoft Corp., that have more influence on its movements. [2] U.S. and international stocks have increased sharply since their March 2009 lows, and there has been stronger economic growth than expected. Will the bull market continue its strong run in 2010 or is caveat emptor for investors? Standard & Poor's Equity Research Services' leading economic and investment strategists will focus on potential investment risks and opportunities for 2010 in this Equity Research webinar. Will history repeat itself, or will this time be different? -- Revenue percentage changes are projected to move back in to the black in Q4 2009 by many analysts and economists. WHAT: Hosted by Sam Stovall, Chief Investment Strategist for Standard & Poor's Equity Research, this webinar will offer listeners actionable investment intelligence based on Standard & Poor's insights as there are signs of an economic and stock market rebound. [6] WHY: Investors, advisors and financial media can gain access to the financial market intelligence of Standard & Poor's, the world's largest producer of independent equity research. Standard & Poor's Equity Research delivers these insights everyday through products, such as MarketScope® Advisor. These offerings draw from Standard & Poor's Equity Research's data, knowledge and research from its analysts, proprietary STARS coverage and Stock Reports. [6] MarketScope Advisor is part of the Standard & Poor's Equity Research Services family of products. MarketScope Advisor provides financial advisors with actionable investment intelligence on multiple asset classes including stocks, ETFs, mutual funds, bonds, variable annuities, and workflow tools that enable advisors to stay connected to the market and their investments. Standard & Poor's equity and fund research draws from STARS coverage and detailed financial information, such as valuation models, sector and peer group analysis, and proprietary Standard & Poor's metrics such as Fair Value and Quality Rankings, on global equities. [6]
The policy of near-zero interest rates has let investors to borrow dollars cheaply to then invest in higher-yielding assets like stocks. "We think it's a good time to be invested in equities, and equities continue to offer the best risk-reward (ratio) among the major financial assets," said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York. [1] Securities, financial instruments or strategies mentioned herein may not be suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. Prices, values, or income from any securities or investments mentioned in this report may fall against the interests of the investor and the investor may get back less than the amount invested. Where an investment is described as being likely to yield income, please note that the amount of income that the investor will receive from such an investment may fluctuate. [6] Where an investment or security is denominated in a different currency to the investor's currency of reference, changes in rates of exchange may have an adverse effect on the value, price or income of or from that investment to the investor. The information contained in this report does not constitute advice on the tax consequences of making any particular investment decision. This material is not intended for any specific investor and does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation of particular securities, financial instruments or strategies to you. Before acting on any recommendation in this material, you should consider whether it is suitable for your particular circumstances and, if necessary, seek professional advice. [6]
Standard & Poor's Financial Services, LLC, a subsidiary of The McGraw-Hill Companies, Inc., is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research and data. With offices in 23 countries and markets, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for nearly 150 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. [6] For the year, the Dow Jones is up 20 percent; the Standard & Poor's 500-stock index is up 25 percent; and the Nasdaq, 45 percent. Since the market rally began in early March, the S&P; has gained more than 60 percent, making this one of the most powerful rallies in history. It's not surprising that Investors Intelligence, which publishes a weekly survey on investor sentiment, just recorded the highest level of bullishness since December 2007. [7] In Europe forecast for economic growth pushed investors to buy equities. Alcoa (NYSE:AA) gained 7.9% to $15.73 and led both the Dow and S&P; 500 index in gains after Morgan Stanley said the shares may climb to $22 and predicted the rally in aluminum prices may continue in the first half of 2010. [8] The going got even tougher as the economy slid into an even worse recession in December 2007, barely two months after the Dow and the S&P; 500 set lifetime closing highs. Excluding dividends, the S&P; 500 Index shows a drop of almost 25 percent this decade, compared with a gain of more than 300 percent over the 1990s, he added. [3] The Wall Street strategists and investment managers recently surveyed by Barron's predict the S&P; 500 will gain another 12 percent in 2010, pushing the index to 1,239 (up from the about 1,120 today). [7] Former bear Richard Bernstein, the former Merrill Lynch chief investment strategist, has turned bullish -- a strong indication that the economy may be turning. Laszlo Birinyi, founder of the independent research firm Birinyi Associates, who called the bottom of the market close to its March lows, predicts a 20 percent market gain in 2010. He says most people are still in denial and haven't accepted that a bull market has been born. Alan Blinder, Princeton economist and former vice chairman of the Federal Reserve Board, used the Wall Street Journal to make his bullish case for the economy in 2010. [7]
Jack Ablin, chief investment officer at Harris Private Bank, expects the S&P; 500 to gain another 15 percent in the first half of the year. [7] The S&P; 500 ended 2008 down 38.5 percent. For 2009, the S&P; 500 is up 24.7 percent -- a gain that puts the broad market index on track for what could be its best year since 2003. An even stronger advance this week could put the S&P; 500 in position for its best year since 1998. [1]
As the countdown to 2010 begins, the wrap on the last decade in stocks is a gloomy one. Barring an unlikely 30% gain in the next four trading days, the S&P; 500 (SPX 1,126, +5.89, +0.53%) is on track to post its first 10-year price drop since the 1930s. [9] By Christmas Eve, when stock trading ended early for the holiday, the S&P; 500 had climbed to a 14-month closing high as investors bet the recovery would be strong enough to justify loftier stock valuations. [1] The S&P; 500 is now comfortably above the 1,120 level and on pace for a 1,140 ''' 1,150 year end close. Investors will be looking for a Santa Rally, which usually materialize on the last 5 days of the trading year and they come with an average move of 1.5% to 2% to the upside. In this market, investors seeking returns, and ways to beat the market, need to enter investments with defined entry and exit points. [8]
The S&P; 500 is up 66.5 percent from a 12-year closing low set on March 9. Its trading levels now imply a forward price/earnings ratio of 15.5, according to Thomson Reuters data. [1]
Expectations of an earnings rebound. S&P; 500 companies are forecast to increase their earnings by nearly 35 percent in 2010. As profits recover, companies can afford to restore or boost their dividends. S&P; 500 companies are expected to increase their dividends 6.1 percent in 2010, S&P; says. [4] Thankfully, though, the strong 24 percent price rise in the S&P; 500 has helped mitigate the dividend cuts. [4] "If companies needed to raise money, the easy way was to cut dividends." Cuts to dividends have been especially painful, since they historically account for 40 percent of stock investors' total returns. [4] Share buybacks are far superior. Krantz notes that "Cuts to dividends have been especially painful, since they historically account for 40% of stock investors' total returns. [5] Investors are likely to demand dividend increases instead of stock buyback programs, Shacknofsky says. Companies bought record amounts of their own stock at the market peak in 2007 only to cut back on buybacks when the market was bottoming in 2009. [4]
Even the Great Depression in the 1930s, which followed the stock market crash in October 1929 and spanned one of the worst periods for stock investing, turned out positive as dividends helped investors cushion some of the turbulence. [3] The U.S. stock market's resiliency since the March bottom has put investors in the mood to celebrate. [9]
The U.S. economy and the stock market were further wounded by the Sept. 11 attacks. [3] U.S. stocks rose, pushing the Standard & Poor's 500 Index to a 15-month high, as higher commodity prices boosted metal producers and reports showed the economy is improving. [9] Even though no "all clear" has been sounded for the U.S. economy, equity strategists said stocks were poised to add to recent gains next week and build a base for a solid start to 2010 as optimism about the recovery grows. [9] David Bianco, chief U.S. equity strategist for Bank of America Merrill Lynch, attributed the 2000s slump to "too much optimism at the onset of the decade," which drove stock prices to unsustainable highs. [2]
NEW YORK (Reuters) - Wall Street is likely to make a strong showing in the final week of 2009 as the bulls gear up to toast the first annual advance for U.S. stocks in two years on hopes of more economic stability in 2010. [1] NEW YORK: Wall Street is on track to achieve its first annual advance in two years after staging a strong comeback from the March lows. [3]
November's surprisingly upbeat nonfarm payrolls report showed the U.S. unemployment rate dipped to 10 percent from 10.2 percent. That slight improvement in the job market led investors to wonder about the potential removal of some of the U.S. Federal Reserve's stimulus measures and the prospects for interest-rate increases next year. To keep the fledgling recovery going, the Fed pledged again on December 16, at the end of its last policy meeting, to keep interest rates low for an extended period of time. [1] The euro gained against the Dollar spurring commodities demand as an alternative investment. Treasuries fell as reports on jobless claims and durable goods suggested growth is accelerating as the U.S. prepares to auction $118 billion of debt in the final three note sales of this year. [8] The market opened higher lifted by a global advance on signs that the economic recovery is gathering momentum. The Commerce Department reported that consumer spending rose 0.5% in November, shy of economists''' expectations, but showing its second consecutive monthly gain while income rose the most in six months. The market lost its gains after a dismal new homes sales report, which showed new home sales tumbled 11.3% in November, raising the concerns that earlier positive signs in the industry were the result of government stimulus. [8] Stocks fluctuated, with the S&P; 500 and the Dow finishing mostly flat, while the NASDAQ moved higher to new yearly highs, as an unexpected drop in new home sales dragged down consumer and industrial shares, damping gains in the overall market. [8]
Raw-materials stocks rose 1.5% and posted the biggest gains in the S&P; 500 among 10 key sectors. [8]
Two-thirds of the 428 stocks in the S&P; 500 last week that were also in the index at the end of 1999 gained value over the decade. [2] Only 46 percent of the Philadelphia-area stocks in the Inquirer/Bloomberg index for the last 10 years were higher last week than in December 1999, and the median stock was flat. [2]
The ritual of window dressing should also support the stock market in the coming week, according to analysts. That strategy involves selling stocks with large losses and buying winners near the end of the year or quarter to improve a portfolio's performance. "The fact that it's year-end is going to cause a fair amount of volatility on probably relatively light volume," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles. [1] Although there might be some profit-taking in the final days of the year, the stock market's underlying tone should still be positive, Reuckert added. [1] Volatility may be enhanced in a holiday-shortened week, when the U.S. stock market will be open for only four days. [1]
Thomson Reuters is the world's largest international multimedia news agency, providing investing news, world news, business news, technology news, headline news, small business news, news alerts, personal finance, stock market, and mutual funds information available on Reuters.com, video, mobile, and interactive television platforms. [1]
Stocks finished higher reaching new highs for the year, as the holiday week closed on a shortened trading day.'' [8] Volume may be exceptionally light, with many market participants taking time off through New Year's Day. Economic and corporate calendars are light this week. [1] This year's final stock-trading week promises to test investors' temperaments -- whether they take the long view. Those investors with shorter horizons are likely to welcome the new year with a lot more cheer than their more long-term-minded counterparts. [9] Despite revisions to 3 rd quarter GDP and a dismal report on new home sales, the market pushed higher led by technology and raw material producers, as investors focused on upbeat labor and economic data. [8] The Treasury yield curve, the difference between 2 and 10-year Treasury note yields, widened to a record as investors bet an accelerating recovery will fuel inflation and hurt demand for unprecedented sales of government debt. [8] Investors will watch for how much demand there is for U.S. government debt as efforts to revive the economy pump up government spending. [1]
Government securities increased earlier after reports showed spending by U.S. consumers rose less than forecast and purchases of new homes unexpectedly fell to a seven-month low in November. [8] The economy is poised to grow at a 5.1 percent annual rate from October through December, according to a revised forecast by Morgan Stanley following the Commerce Department's report on durable goods yesterday. The new estimate is a percentage point higher than their earlier projection, BusinessWeek reports. [9] The market started to the upside, despite a report from the Commerce Department that revised the 3rd Quarter GDP growth to 2.2% from 2.8%, indicating the economy grew at a slower pace than anticipated as companies curbed spending and cut inventories at an even faster pace than estimated. [8]
Companies cut dividends by $42 billion in the first quarter of 2009, beating the previous $23.4 billion record cut in the fourth quarter of 2008. [4] Signs the worst is past. Companies slashed their dividends so furiously, most of the cuts are over, says S&P;'s Howard Silverblatt. [4]
SanDisk Corp. (NASDAQ:SNDK) led the S&P; 500 after shares of the memory chip company jumped 6.53% to $30.13., shares continued to benefit from'' a an industry tracker DRAMeXchange report, which states that DRAM chips could be in short supply next year as companies replace PCs and consumers demand more capacity. [8] What follows is a snapshot of annualized sector performance for the 10 S&P; 500 industry groups over the last 10 years. [3]
Paulsen expects the S&P; 500 to rally 22 percent, to end next year near 1,350. [7]
Payouts in 2010 are expected to be nearly 17 percent below 2008's level, S&P; says. It might be until 2013 before investors ever enjoy 2008-type dividends again. [4]
As the world's largest producer of independent equity research, Standard & Poor's licenses its research to global institutions for their investors and advisors. [6] The equity research reports and recommendations provided by Standard & Poor's Equity Research Services are performed separately from any other analytic activity of Standard & Poor's. [6] Standard & Poor's Equity Research Services has no access to non-public information received by other units of Standard & Poor's. Standard & Poor's does not trade for its own account. [6]
The analytical and ethical conduct of Standard & Poor's equity analysts is governed by the firm's Research Objectivity Policy, a copy of which may also be found at www.standardandpoors.com or by clicking here. [6] Follow Standard & Poor's equity analysts' U.S. market commentary each day at http://www.equityresearch.standardandpoors.com/. [6] Standard & Poor's team of experienced U.S., European and Asian equity analysts use a fundamental, bottom-up approach to assess a global universe of multi-asset class securities across industries worldwide. [6]
At the start of the week, the market started strongly to the upside as analyst upgrades and good global economic data that showed the recovery is gathering momentum, helped boost investor sentiment. [8] Weston, Dec 26 th (Tradershuddle.com) ''' Investors cheered during the shortened holiday week, as they pushed stocks to new yearly highs. [8] Investors will note the October S&P;/Case-Shiller home price index, also due on Tuesday. [1] With the financial crisis (mostly) in the past, U.S. investors are eying a fresh start to the coming year. [1]
The Dollar was mixed, with the greenback trading at almost an eight-week high against the yen as orders for durable goods pushed Treasury yields higher and widened the yield difference between U.S. and Japanese debt to the widest level since August 2008. [8] The benchmark Standard & Poor's 500.SPX started out November in a tight trading range. [1]
Tim Hayes, chief investment strategist at Ned Davis Research, says the S&P; 500 could end 2010 near 1,300. [7] Technology shares rose 0.9% for the biggest gain among 10 industries in the S&P; 500, with raw materials posting a close second. [8] Banks declined 0.4% collectively for the steepest decline among 24 industries in the S&P; 500 on speculation the Federal Reserve may raise rates in 2010 as the economy recovers. [8] Health-care stocks had the only decline in the S&P; 500 among 10 industries, falling 0.2%, but basically the market treated the passage of the reform bill as a non event. [8]
Stocks added to gains after the National Realtors Association said home sales rose 7.4% in November, a reading much better than expected, though the gains came mostly from the low end of the market and one in three sales was off a foreclosure. [8] Amidst the inevitable headlines on stocks' "lost decade," a more optimistic view tied to recent gains has emerged, MarketWatch reports. [9]
Stocks might have surged back nicely, but the damage to dividends could take years to repair. [4] With stocks peaking at fresh highs for the year, there is no shortage of bulls who expect a strong recovery in 2010. [7]
The bears continue predicting a 10 percent plunge or more, citing the deeply indebted consumer, a faux recovery built on government bailouts and weak economic fundamentals. [7] A separate report showed orders for long-lasting goods edged up 0.2 percent, less than analysts had expected but weighed by transportation orders. [8]
As the holiday shopping season comes to a close, the Conference Board's index of December consumer confidence will merit Wall Street's attention on Tuesday. [1] Thankfully, though, the strong 24% price rise in the S&P; 500 has helped mitigate the dividend cuts." [5]
SOURCES
1. Stocks to wrap up 2009 on high note | Reuters
2. This Economy: By one measure, a miserable decade | Philadelphia Inquirer | 12/27/2009
3. Wall Street's lost decade eclipses an upbeat 2009- Global Markets-Markets-The Economic Times
4. Damage to dividends could take years to repair | shreveporttimes.com | Shreveport Times
5. Dividends Plummeted 21% in 2009 - BloggingStocks
6. PR-CANADA.net - S&P; Equity Research Announces Its First 2010 Webinar
7. James Overstreet: Optimists bullish on a recovery next year» The Commercial Appeal
8. TradersHuddle.com - Investors Cheer and Push Stocks Higher on a Shortened Holiday Week | Stocks
9. US Stocks Rise in End of 2009 - Pravda.Ru
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