- Commentary -

August 18, 2009 (FinancialWire) (By Philip Holmes) — Stocks ended lower on Monday as investors weighed the good and the bad, and went with the bad. Good news on manufacturing and housing was offset by the failure of several more banks and a lousy report from home improvement retailer Lowe’s (NYSE: LOW).

The Dow Jones industrial average ended the trading session at 9,135.34, down by 186.06 points, while the Standard & Poor’s 500-stock index lost 24.36 points to close at 979.73. The Nasdaq composite index dropped 54.68 points to end the day at 1,930.84.

Stocks fell sharply despite a heady read from the New York Fed’s Empire State index of August manufacturing activity. The index showed its biggest gain, of 13 points since November 2007.

Homebuilder sentiment is continuing a trend of steady improvement. The NAHB homebuilder index hit 18 for August, up from 17 in July and the highest since June 2008. The number increases were strongest for prospective buyer traffic (+3 pts.) and future sales (up 4 pts., to 30).

But investors still weren’t buying. Maybe it’s the dizzy heights the major indexes have risen too in recent weeks resulting in profit taking. Or maybe we face a major pullback in equities.

Lowe’s isn’t giving the optimists any ammunition. The retailer reported a 4.6% drop in sales for the second quarter, and a 9.5% drop in same store sales. The company will reign in its expansion plans for North America.

Another bummer: Japan, whose GDP growth, at around 0.9% for the April-through-June period underwhelmed analysts, who wanted to see a full point. However, Japan joins Germany and France among G8 countries that have officially emerged from recession. Japan’s symbolic importance to US-based Cassandra’s is significant, if debatable.

A bigger bummer: Failing banks that cost the FDIC frightfully large amounts of money. BusinessWeek reports that “At three of the five banks that failed Friday, increasing the total to 77 so far this year, the financial hit to the agency’s deposit-insurance fund is expected by the FDIC to be about 50% of their assets.”

Banks aren’t just failing, they’re failing big, and this could put a crimp on everyone’s ability to recover. Credit looks to remain tight, especially with regard to consumer finance and mortgages. 

The FirstAlert(tm) Economics Calendar lists Housing Starts & Building Permits for July (8:30 a.m.), Producer Price Index (PPI) for July (8:30 a.m.), Weekly Chain Store Sales (8:55 a.m.).

The FirstAlert(tm) Events Calendar showcases ABD, ASTE, CMCO, RDEN at CJS Securities Summer New Ideas Small Cap Investor Conference; ACTG; AWR, DMND; QCOM at California Equity Research Southern California Investor Conference; PHM Special Meeting of Shareholders; WTNY, MBFI, IBKC, WTFC at Howe Barnes Hoefer & Arnett Annual Bank Conference.

FirstAlert(tm) Website of the Day: http://www.livescience.com/

Quote of the Day: “When childhood dies, its corpses are called adults and they enter society, one of the politer names of hell. That is why we dread children; even if we love them, they show us the state of our decay.” Brian Aldiss

Today is: Bad Poetry Day.

Happy Birthday: Virginia Dare, Antonio Salieri, Meriwether Lewis, Jack Pickford, Max Factor, Caspar Weinberger, Shelley Winters, Brian Aldiss, Rosalynn Carter, Marge Schott, Roberto Clemente, Robert Redford, Martin Mull, Elayne Boosler, Patrick Swayze, Denis Leary, Christian Slater, Malcolm-Jamal Warner, Andy Samberg.

Today in History: Virginia Dare, granddaughter of Gov. John White of the Colony of Roanoke, became in 1587 the first English child born in the Americas. John White, the governor of the Colony of Roanoke, returned in 1590 from a supply-trip to England and found his settlement deserted. French astronomer Pierre Jules César Janssen discovered helium in 1868. Tokyo Mayor Yukio Ozaki presented Washington, D.C. with 2,000 cherry trees in 1909, which President Taft decided to plant near the Potomac River.

[FirstAlert(tm) was created by Gayle Essary, founder of Investrend Communications, Inc., parent of Investrend Information. The opinions expressed in FirstAlert(tm) do not necessarily reflect the opinions of Investrend.]

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