The unofficial closing bells put the DJIA up more than 33 points to 12,878.43 (0.26%), the NASDAQ rose more than 2 points (0.07%) to 2,904.08, and the S&P 500 rose 0.20% or nearly 3 points to 1,347.05.

There were several analyst upgrades and downgrades today, including Sirius XM Radio Inc. (NASDAQ: SIRI) started as ‘underweight’ at Barclays; IBM Corp. (NYSE: IBM) started as ‘buy’ with a $230 target price at Sterne Agee (our coverage here); AstraZeneca (NYSE: AZN) cut to ‘underperform’ at BofA/ML; Urban Outfitters Inc. (NASDAQ: URBN) cut to ‘sell’ at Brean Murray; and Zoltek Cos. Inc. (NASDAQ: ZOLT) cut to ‘underperform’ at Needham (our coverage here).

Earnings reports since markets closed last night have led to some price changes as of the last half hour of trading today: Yum! Brands Inc. (NYSE: YUM) is up 2.67% at $64.88 after posting a new 52-week high of $65.79 earlier today; ArcelorMittal AS (NYSE: MT) is up 3.5% at $22.19; BP plc (NYSE: BP) is down -0.41% at $46.68; Coca-Cola Co. (NYSE: KO) is up 1% at $68.71 (our coverage here); Emerson Electric Co. (NYSE: EMR) is down -2.6% at $51.99; and Louisiana-Pacific Corp. (NYSE: LPX) is down -6.5% at $8.31 (our coverage here).

Our preview of tomorrow’s earnings releases is here.

Other standouts from today include the following stocks:

The McClatchy Co. (NYSE: MNI) is up 21% at $2.71. The newspaper company reported stronger-than-expected earnings today on cost-cutting.

Coinstar Inc. (NASDAQ: CSTR) is up 16.5% at $58.90 after posting a new 52-week high of $60.81 earlier today. The video rental company will join with Verizon Communications Inc. (NYSE: VZ) to offer a streaming video service to compete with Netflix Inc. (NASDAQ: NFLX) and others. More coverage here and here.

Standard Pacific Corp. (NYSE: SPF) is up 15.8% at $4.69 after posting a new 52-week high of $4.85 earlier today. The homebuilder posted good earnings today and reported that orders are up 8% in January.

Nevsun Resources Ltd. (AMEX: NSU) is down more than -30% at $4.43. The junior gold miner issued a preliminary 2012 outlook that included a sharp drop in production and in its reserves estimates.

BioSante Pharmaceuticals Inc. (NASDAQ: BPAX) is down more than -18% at $0.86. The company is the target of a new lawsuit charging it with misrepresentation. We have more coverage of BioSante here.

Stay tuned for Wednesday. San Francisco Federal Reserve president John Williams is giving a speech. We have noted the following events on the schedule (all times Eastern):

• 7:00 a.m. – Mortgage Bankers Association purchase applications report
• 10:30 a.m. – EIA weekly petroleum status report
• 1:00 p.m. – Treasury 10-year note auction

Your email address

subscribe

terms and conditions

Paul Ausick

A123 Systems, Inc. (NASDAQ: AONE) Cut to Sector Perform at Pacific Crest.
Barclays PLC (NYSE: BCS) Started as Outperform at Credit Suisse.
Boyd Gaming Corp. (NYSE: BYD) Raised to Neutral at JPMorgan.
Capstone Turbine Corporation (NASDAQ: CPST) Started as Outperform at FBR.
Citrix Systems, Inc. (NASDAQ: CTXS) Raised to Outperform as Bull of the Day at Zacks.
HSBC Holdings plc (NYSE: HBC) Started as Neutral at Credit Suisse.
Jabil Circuit Inc. (NYSE: JBL) Reiterated Focus List Buy with $24 target at Argus.
Lowe’s Companies Inc. (NYSE: LOW) Cut to Neutral at JPMorgan.
Louisiana-Pacific Corporation (NYSE: LPX) Cut to Neutral at BofA/ML.
MakeMyTrip Limited (NASDAQ: MMYT) Raised to Outperform at Oppenheimer.
MetroPCS Communications, Inc. (NYSE: PCS) Cut to Sector Perform at RBC.
ProLogis (NYSE: PLD) Started as Neutral at Credit Suisse.
Reynolds American Inc. (NYSE: RAI) Raised to Equal-Weight at Morgan Stanley.
Staples, Inc. (NASDAQ: SPLS) Named as Bear of the Day at Zacks.
Starbucks Corporation (NASDAQ: SBUX) Raised to Outperform at BMO.
Texas Instruments Inc. (NYSE: TXN) Started as Buy at ThinkEquity.

You are invited to join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

The sharp rise in commodities prices coincided with the rise in the euro for the last half of 2010 and the first four months of 2011, but what now appears to be a near-certain restructuring/default of Greek sovereign debt is chilling the appetite for risk.

But Europe isn’t the only issue. China’s battle against inflation is being waged with higher interest rates on bank loans, which in turn appears to be slowing down the country’s growth. Chinese energy import growth could be slowing down and there is some belief that some of the construction that is going on in China is really just make-work projects to keep workers employed building housing that no one either can afford or wants to buy — the Chinese version of Potemkin villages.

The odd thing about flight to the dollar is that the US economy itself remains pretty weak. If this economy is the best that the world has to offer, things might be worse than everyone fears.

Take lumber prices for example. A contract for a thousand board feet can be purchased today for less than $220, compared with more than $320 in early March. Timber companies like Weyerhaeuser Corp. (NYSE: WY), Plum Creek Timber Co., Inc. (NYSE: PCL), and Louisiana Pacific Corp. (NYSE: LPX) have been counting on demand from China to make up for slack demand in the US, but the cavalry has not arrived yet. Worse, the cavalry may never arrive, at least in the hoped-for strength due to the slower-growing Chinese economy.

US homebuilders have done nothing to support lumber prices either, as they all continue to struggle with a collapse in new housing starts. And in a reverse situation, rising cotton prices have hurt share prices at retailers like Gap Stores Inc. (NYSE: GPS) and Aeropostale, Inc. (NYSE: ARO). That maybe about to turn around though.

Cotton prices have been falling since hitting a peak near $2.10/pound in early March. Currently sitting at about $1.55/pound, falling cotton prices may help retailers in the second half of the year, but inventories of higher-priced goods remain high and a continuing drop in cotton prices is not a sure thing. The risk to retailers remains high.

Cotton growers appear to be expecting prices to remain high and are planting more acres in cotton. In one district in California’s central valley, as much as 90,000 more acres will be planted this year, although not all in cotton. There will also be more wheat, another crop that remains near 12-month highs.

Growers are betting that cotton prices stay high, even though they plan to plant more. Retailers are hoping that cotton prices fall as growers plant more. While not exactly a zero-sum game, an outcome that supports both growers and retailers could be pretty hard to come by.

Finally today, gold and silver prices have moved up only marginally, with gold trading at about $1,514/ounce in the early afternoon, and silver at $34.88/ounce. The stronger dollar is also dampening enthusiasm for the precious metals. The SPDR Gold Trust (NYSE: GLD) is up about 0.22%, to $147.71, in a 52-week range of $113.08-$153.61, and the iShares Silver Trust (NYSE: SLV) is down about -0.3%, at $34.08, in a 52-week range of $16.94-$48.35.

The mining ETFs are faring a bit worse, with the Market Vectors Gold Miners ETF (NYSE: GDX) down more than -1% and the Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) off more than -3%. GDX is trading at $55.16, in a 52-week range of $45.88-$64.62. GDXJ is trading at $35.03, in a 52-week range of $25.10-$44.86. The Global X Silver Miners ETF (NYSE: SIL) is down about -2.5%, to $23.56, in a range of $12.90-$31.34.

Paul Ausick

Shortly after noon today, WTI crude prices were flat with yesterday’s close at around $98.21/barrel. Crude prices fell early, to $95.25/barrel, but pushed near $100/barrel before falling back again. Silver prices are down about -4%, to $34.10, after plunging to $32.30 early. Gold prices are also recovering from a dip to $1,477.60, and are now down less than -0.5% at $1,498.10.

Today’s wobbly prices are likely due to a wobbly greenback. The dollar gained strength against the euro early this morning, but has given it all back since. The dollar has gained about 3% on the euro since the beginning of the month which helps keep the prices of dollar-priced commodities in check and cools demand for safe haven investments like gold and, to some extent, silver. When there are a lot of uncertainties in the currency markets, that translates into uncertainty about commodity futures. And that’s where we are today.

The iShares Silver Trust (NYSE: SLV) is down about -3%, at $33.36, within a 52-week range of $16.73-$48.35. The SPDR Gold Trust (NYSE: GLD) is off less than -0.5%, at $145.89, within a 52-week range of $113.08-$153.61.

Copper prices are up again today, at nearly $3.97/pound after falling to around $3.85/pound. Copper fell yesterday on fears that Chinese growth was slowing and that the country’s rising inflation would cause the government to put more capital controls in place. The government did increase the reserve ratio requirement for banks by 50 basis points today, but copper’s expected fundamental supply deficit this year still helps keep the price from collapsing. The iPath DJ-UBS Copper Total Return Sub-Index ETN (NYSE: JJC) is up more than 1.5%, to $52.24, within a 52-week range of $36.60-$61.69.

Wheat prices have continued their slide today as the market continues to adjust to the projected rise in imports from Russia and other former Soviet Union countries. Wheat is down about -3%, to $7.36/bushel after coming back from a intra-day low of about $7.28. The Market Vectors Agribusiness ETF (NYSE: MOO) is down more than -1%, to $52.87, within a 52-week range of $35.62-$57.93. The PowerShares DB Agriculture Fund (NYSE: DBA) is also down, but by less than -0.5%, at $32.28, within a 52-week range of $22.85-$35.58.

Lumber prices, like wheat, are down today by about -1.5%, at $230.70/thousand board feet, its lowest point in about seven months. Weakness in lumber is directly related to weakness in new home construction, and with US housing starts in April forecast at a seasonally adjusted annual rate of 549,000, the outlook for much higher lumber prices is not terribly strong.

Except in Canada, where the country’s export development commission expects Canadian export growth of 12% in 2011 and another 7% in 2012. Oil accounts for 20% of the total thru 2012, but the country is also expecting good things from its forestry industry. Canada expects forestry exports to grow by 9% in 2011 and another 13% in 2012.

The Canadians are looking south for a big part of that growth, to the US housing market, which they predict will see 700,000 new housing starts in 2011, and 1 million housing starts in 2012. That’s nearly double the April 2010 rate.

A look at the forward P/E ratios for three US lumber companies seems to back up the Canadian view. Weyerhaeuser Co. (NYSE: WY) posts a trailing P/E of 5.53, but a forward P/E of 24.23. Plum Creek Timber Co. Inc. (NYSE: PCL) has a trailing P/E of a whopping 41.46 and a forward P/E of 25.41. Even Louisiana-Pacific Corp. (NYSE: LPX), which is expected to post a full-year loss in 2011, has a forward P/E of 26.52. Maybe all that timber is going to build homes in China and rebuild homes in Japan.

It would take some sort of economic miracle for the US to support that kind of earnings growth. A forestry consultancy in Vancouver thinks it will be 2013 before US housing starts hit 1 million. Even that could be a stretch, though, given the nearly 3.5 million houses currently for sale in the US. Until that number comes down significantly, demand for new housing in the US simply won’t grow at the rates that the Canadians are expecting.

Paul Ausick

Aeropostale, Inc. (NYSE: ARO) Raised to Hold at KeyBanc.
Broadcom Corporation (NASDAQ: BRCM) Raised to Outperform at Oppenheimer.
Campbell Soup Co. (NYSE: CPB) Cut to Underperform as Bear of the Day at Zacks.
Carnival Corp. (NYSE: CCL) Started as Neutral with $43 target at Credit Suisse.
Diamond Foods Inc. (NASDAQ: DMND) Cut to Hold at BB&T.
Health Management Associates Inc. (NYSE: HMA) Removed from Focus List at Credit Suisse.
KB Home (NYSE: KBH) Reiterated Hold at Argus; Maintained Underperform at Credit Suisse.
Louisiana-Pacific Corporation (NYSE: LPX) Cut to Neutral at Credit Suisse.
Quest Diagnostics (NYSE: DGX) Started as Outperform at Macquarie.
Royal Caribbean Cruises Ltd. (NYSE: RCL) Started as Outperform and $55 target at Credit Suisse.
SLM Corp. (NYSE: SLM) Cut to Neutral at Zacks.
Sprint Nextel Corporation (NYSE: S) Reiterated Outperform with $8 target at Credit Suisse.
Tesoro Corporation (NYSE: TSO) Maintained as Outperform as Bull of the Day at Zacks.
Texas Instruments Inc. (NYSE: TXN) Reiterated Buy and $40 target at Argus.
Time Warner Cable Inc. (NYSE: TWC) Reiterated Buy at Argus.
W.R. Berkley Corporation (NYSE: WRB) Cut to Neutral at BofA/ML.

You can join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

AstraZeneca plc (NYSE: AZN) Raised to Hold at Jefferies; Raised to Neutral at JPMorgan; Targets raised by Morgan Stanley.
EXFO Electro Optical Engineering Inc. (NASDAQ: EXFO) Raised to Buy at TD.
France Telecom S.A. (NYSE: FTE) Cut To Neutral at Goldman Sachs.
Hudson City Bancorp (NASDAQ: HCBK) Cut to Market Perform at FBR.
Louisiana-Pacific Corp. (NYSE: LPX) Raised to Sector Outperform at Scotia Capital.
Portugal Telecom SGPS, S.A. (NYSE: PT) Cut To Neutral From Buy By Goldman Sachs
Smith & Nephew plc (NYSE: SNN) Started At Buy By Jefferies
U.S. Bancorp (NYSE: USB) Raised to Outperform at FBR.
Vodafone plc (NYSE: VOD) Target Cut at Goldman Sachs.

You can join our free daily email distribution list to hear more about dividend trends, analyst upgrades and downgrades, top day trader and active trader alerts, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

On May 17th and May 25th, the Chicago Mercantile Exchange stopped trading in lumber futures because the contract price had fallen by the maximum allowable amount of $10. On the 25th, lumber was halted at a price of $225/thousand board feet, which is the price that the contract opened at again this morning. The July contract is trading now at $234. Since April 21st, the contract price is down more than $100.

This price drop will have an impact on the four large US lumber companies, Weyerhauser Co. (NYSE:WY), Leucadia National Corp. (NYSE:LUK), Masco Corp. (NYSE:MAS), and Louisiana-Pacific Corp. (NYSE:LPX) as well as paper makers International Paper Co. (NYSE:IP) and Fibria Celulose S.A. (NYSE:FBR). Nor is this good news for the rest of the year for homebuilders such as Toll Brothers Inc. (NYSE:TOL), KB Home (NYSE:KBH), Lennar Corp. (NYSE:LEN), or PulteGroup Inc. (NYSE:PHM).

Traders believe that the homebuilders and paper makers, especially, are not buying in anticipation of even lower prices to come. The rush of buyers into the market in March and April was due to the expiration of the federal homebuyers’ credit on April 30th. That is expected to kill demand for new homes in the near-term, keeping the market for new homes soft for the next six months.

Just a few months ago, builders faced lumber prices that were rapidly rising, threatening their margins. With lumber above $300/thousand board feet, about $1,400 would have been added to the cost of new house. In a soft housing market, builders were confronted with the nasty choice of eating the higher cost or risking a rise in price.

Now that prices have fallen, the belief is that demand for new houses has declined and the builders don’t need to buy more. Suppliers, like Weyerhaeuser and Louisiana-Pacific were already planning for softer lumber prices in the current quarter which will weigh on profits.

Here’s a chart of the DJ US home construction index for the past 3 months:

Paper companies were already expecting a boost in demand this year, following five years of declines. The demand for corrugated and paperboard boxes for items like food and beverages is the main driver of the better forecast. Corrugated and solid fiber boxes account for more than 70% of paper good shipments.

In its quarterly earnings report, International Paper suffered from the high wood prices, but noted that its costs were moderating, that prices would rise because demand was up. As long as supplies are readily available, the paper makers should see improvement in profits and revenues.

Here’s a chart of the DJ US forestry & paper index for the past 3 months:

When you see the two charts together, the two paths they trace are almost identical. Lumber, home construction, and paper making are all dancing to the same tune. And that tune is concern about the US economy in the second half of 2010.

The end of the homebuyers tax credit, the almost invisible recovery in employment, tight consumer credit, and the lower predicted effects from last year’s $787 billion economic stimulus package are all going to weigh down the second half of the year.

Today’s market rebound, now up more than 2%, is almost entirely due to China’s denial of a rumor that it would no longer invest in European debt. Oil prices are rising again, to more than $74/b. The shares of the lumber companies mentioned in this article are up between 1.5% and 4.5%. International Paper shares are up about 3% and FBR shares are up more than 8%. Pulte is up about 2.5% and the other homebuilders are up less than 1%.

Today’s advancing stocks number 8x more than decliners on the first bit of good news in over a week. Prospects for the second half of the year are not as rosy.

Paul Ausick

Sponsor: 3 Recovery Stocks to Own Now – Get the names of the best cheap stocks to rebuild your wealth in 2010 and beyond.

Perhaps one way to get a read on where housing construction in the US is headed is to look at the companies who supply the lumber that goes into new construction. Louisiana-Pacific Corp. (NYSE:LPX) reported first quarter earnings today, following last week’s report from Weyerhauser Co. (NYSE:WY).

Among homebuilders that have already reported, Beazer Homes USA Inc. (NYSE:BZH) and PulteGroup, Inc. (NYSE:PHM) both reported narrower losses than the year-ago quarter, and D.R. Horton, Inc. (NYSE:DHI) even posted a surprise profit.

Louisiana-Pacific reported an EPS loss of -$0.18, worse than analysts’ expectations of a loss of -$0.11. Sales were expected to total $292.55 million and LP exceeded expectations there, coming in at $297 million. Weyerhauser reported a smaller than expected loss for the first quarter.

The outlook for the lumber companies is tentative at best. LP expects a “bumpy recovery” with rising numbers of foreclosures and continued uncertainty about employment. Increased foreclosures mean that fewer new houses will be build and high unemployment means that no one can afford to buy either an existing or new home. The expired federal tax credit will also have an impact on the rest of the year.

Weyerhauser’s first-quarter results were upbeat due primarily to sales of “non-strategic timberland” and sales of two commercial partnership interests. Weyerhauser saw a 49% decline in real estate sales and the average realized home price fell. The company sees second quarter logging earnings to be lower and real estate earnings to be no better than flat.

LP shares are up about 0.5% this morning and Weyerhauser shares are up about 5.5%. With the S&P 500 up around 4% on the $900 billion bailout package in Europe, it’s no surprise that a rising tide is lifting all boats. Where equities were shunned last week, today they’re all the fashion again.

Without the rising tide, LP would certainly be trading down and Weyerhauser would be up only slightly. Beazer Homes is up more than 11%, Pulte is up nearly 8%, and DR Horton is up nearly 6%. The SPDR S&P Homebuilders ETF (NYSE:XHB) is up more than 6%, and the Claymore/Beacon Global Timber Index ETF (NYSE:CUT) is up nearly 6% as well.

Paul Ausick

• AbitibiBowater (ABH) Cut to Underperform at Raymond James.
• Amcore Financial (AMFI) Cut to Market Perform at KBW.
• CME Group (CME) Cut to Market Perform at Bernstein.
• Louisiana-Pacific (LPX) Cut to Sector Perform at CIBC.
• Mastercard (MA) Started as Sell at Citigroup.
• Microsemi (MSCC) Cut to Market Weight at Thomas Weisel.
• Nokia (NOK) Cut to Neutral at Nomura.
• Visa (V) Started as Hold at Citigroup.

Jon C. Ogg
January 23, 2009

• Animal Health (AHII) Cut to Neutral at Piper Jaffray.
• Blue Nile (NILE) Cut to Underweight at JPMorgan.
• Fossil (FOSL) Cut to Underweight at JPMorgan.
• Health Net (HNT) Cut to Hold at Deutsche Bank.
• HSN (HSNI) Started as Underweight at JPMorgan.
• IPCS (IPCS) Cut to Hold at Jefferies.
• Louisiana-Pacific (LPX) Cut to Neutral at Banc of America.
• Microchip Technology (MCHP) Cut to Sell at Goldman Sachs.
• Palm (PALM) Cut to Market Perform at Morgan Keegan.
• Penwest Pharmaceuticals (PPCO) Cut to Neutral at Baird.
• Raymond James Financial (RJF) Cut to Underperform at Wachovia.
• Southern Copper (PCU) Cut to Sell at Deutsche Bank.

Jon C. Ogg
November 5, 2008