Thursday, October 15, 2009

Morning Note...

Futures -50bps this morning as the market pulls back from “Dow 10,000 Version 2.0,” fueled by headline-beat-but-whisper-number-miss from both Goldman Sachs and Citigroup.  Either that, or the positive earnings were already “baked in” to those stock’s recent action, and we’re seeing a bit of a “sell the news” effect.  At the moment, GS is down roughly 2% in pre-market trading, and C is down over 3%.  Across the pond, the GBP is surging on hints that the Bank of England may begin to reign in stimulus, i.e. stop buying bonds.  In fundamental economic news, Consumer Price Index data was in-line across the board; in fact, year-over-year CPI was -1.3% vs. -1.4% expected.  This supports the belief that inflation is not yet an issue.  Interesting comment from a guest on CNBC just now, however:  “I would not call inflation a possibility – it’s an eventuality.”  Empire Manufacturing was better-than-expected for October, as 34.57 vs. 17.25/e.  Initial Jobless Claims were 514k vs. 520k/e and Continuing Claims dipped below the 6M mark to 5.992M.  In other corporate news, RTP reportedly cancels $2.6B plant in South Africa.  AB InBev to sell eastern European brands to CVC Capital for $3B.  In other earnings news, NOK is trading 8.5% lower after beating by EUR.04 but missing on revs, BAX is lower after beating by 1c but missing on revs, HOG is lower on a headline miss, CY is lower after a 4c beat, SWY is slightly higher, and PPG is lower after beating by 10c.  Philly Fed data is due at 10am, and GOOG & AMD report after the bell.  GE reports tomorrow morning. 

Despite this morning’s weakness, the buy-the-dip mentality remains in play.  To whit, here’s one example from a bulge bracket desk:

Market giving you another shot at buying he dip this morning.   Have to like buying the premarket sell off.  I think we retrace back to the highs and extend today. The numbers out of GS, and C(book value is now above 6?) may not be what the euphoric whispers yesterday, but they are good enough to be bought.   The move that hurts the most people is still is to the upside.  We had real buyers chasing the move yesterday.   Need to be invested.   There are still a lot of bears, and I like that.   My one concern is that the dollar could make a meaningful run.   That would help pressure the tape.   I am a perma bull these days.  

In geopolitical news, terrorist Taliban strikes in Pakistan continue.  Bear in mind the US has probably been fighting in Pakistan for some time (just as we were in Laos and not just Vietnam) despite denials all-around.  The Afghan/Taliban/Pakistan/India dynamic is both complex and frighteningly tenuous, considering both Pakistan and India – sworn enemies – have nuclear capability.  Obama – and his politics – will be tested here in the months, and probably years, ahead.  Speaking of Obama, Art Cashin just made a great point on CNBC:  as soon as the Dow broke 10,000, President Obama held a press conference and essentially “took ownership” of the economy and the stock market’s recent rally.  As a result – and this might come back to haunt him – if the market corrects from here, it will clearly be Obama’s market, and not Bush’s.  In other words, he just gave away any perception/political wiggle-room he may have had in terms of going back to the well in blaming the previous administration.  For the USD bears, Sumitomo Mitsui Banking Corp’s Chief Strategist predicted the dollar will drop to 50 Yen and eventually lose its role as the global reserve currency:  “The U.S. economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger.  The dollar’s fall won’t stop until there’s a change to the global currency system. We can no longer stop the big wave of dollar weakness. There will be no downside limit, and even coordinated intervention won’t work.”

LUV posted better-than-expected earnings and revenues. WSJ “Heard on the Street” cautious on HD, LOW.  CITI cuts BHI, BJS.  FCS higher on earnings.  Retail will be closely watched today with TGT, AEO, GPS analyst days.  FSLR replaces WYE in S&P500 tonight (PFE acquired WYE).  BCAP ups PRX.  CITI ups OPEN, SLB.  CSFB ups PC.  GSCO ups CBI.  KBWI ps EMCI.  BARD ups ACOR, IRET, SPWRA.  UBSS ups ATI, EXR, PCG, PSA, SSS, YSII.  WELA ups NFX.  BofA/MLCO cuts SCHW.  GSCO cuts GVA.  KBWI cuts EIG, NAVG, TRV, ZNT.  OPCO cuts KMP, LAZ.  BARD cuts HST. 

Asia higher overnight.  Europe -50bps across the board.  USD +23bps.  Oil +30bps.  Gold -130bps. 

Brightpoint News: 

Brightpoint PreMarket (yest close/premkt/% change/volume):

S&P 500 PreMarket (last/% change prior close/volume): 
CIT GROUP INC              1.18      +11.32%           3142953
CAPITAL ONE FINA         37.80    -3.94%  94895
T ROWE PRICE GRP        45.06    -3.92%  1300
HOST HOTELS & RE       11.69    -3.63%  3493
ANADARKO PETROLE      67.00    -3.4 %  45704
LIMITED BRANDS            18.70    -3.31%  1000
HARLEY-DAVIDSON         25.48    -2.97%  262822
CITIGROUP INC              4.86      -2.8 %  99329295
SCHWAB (CHARLES)       18.75    -2.75%  22021
BAXTER INTL INC           55.50    -2.63%  273233
CBS CORP-B                  12.20    -2.56%  1158040

Today’s Trivia:  I’ll give you NY, NJ, MA, RI, and CT…Can anyone name the rest of the original 13 colonies?

Yesterday's Answer:  The 50c coins of Australia, Tonga, Fiji, and the Solomon Islands and the 20c coin of Mexico are all dodecagons, i.e. 12-sided. 

Best Quotes:  “As for gold, we are fearful that far, far too many people are involved with this market and that a correction of some consequence is now upon us. The volatility of the past several days, where gold can rally $12-$15 in a moment’s notice, and then can fall the same, then rise the same then fall again is the hallmark generally of a market making a top… an interim one in our opinion, but a top nonetheless. We suggest treading lightly therefore, noting that those who had been hoping to see material Indian buying of gold ahead of and during the Diwali Festival may find their hopes dashed. Thus far the buying ahead of Diwali has been so weak that this year’s festival is already being called the “Black Diwali” by the gold and jewelry dealers all across India. As our friends at note the comments from a dealer there
This is one of the worst Diwalis as there is no demand….Only some compulsory purchases are happening and all the jewellery shops are empty. People have started calling this year's festival 'Black Diwali' as far as gold and silver imports are concerned.
Diwali starts in two days and it is always considered wise to buy and offer gold jewellery that is believed, in India, to bring good luck and prosperity. However this year, despite its important cultural value in India and despite playing a key role in the Hindu marriage ceremony, according to,
Gold demand and imports have fallen sharply since the start of the year in conjunction with continued volatility in prices. "Local demand for gold is currently missing," refiner Heraeus said.
Gold import volumes have plunged to something close to 125 tonnes in the first nine months of the year compared to approximately 355 tonnes in the first nine months of ’08. Worse, according to the Bombay Bullion Association India imported 452 tonnes of gold in the whole of 2008 and the Association fears that imports in the 4th quarter could be close to zero. If the largest taker of gold is not taking it, who then is? And is that off-take sustainable or is it speculative in nature and therefore prone to being swiftly sold. We fear the latter, and if so a drop toward $990-$1010 might develop quite quickly, returning the market to health as the late longs are taken out of their positions. Such is the life of the late gold bull.”  --The Gartman Letter

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