Monday, October 19, 2009

Morning Note...

22nd anniversary of Black Monday, when the DJIA dropped nearly 23% in one day… Futures are +50bps this morning ahead of heavy US earnings and general global economic optimism.  Global optimism almost always means commodities are higher, and that’s what is driving today’s strength…Oil achieved a year-to-date high above $79 overnight, and “economic barometer” copper is bid higher, along with aluminum and nickel.   The USD is slightly lower.  China was higher overnight ahead of economic data releases (GDP, PPI, CPI, Industrial Production) Wednesday and Thursday.  Corporate news away from earnings is light and earnings will certainly dominate this week’s trading action.   We’ll see major releases from Health Care (MRK, LLY), Aerospace/Defense (LMT, BA, NOC), Tech (TXN, AAPL, MSFT, CTXS, EMC, VMW, YHOO, EBAY, AMZN), Chemicals (DOW, DD), Transports (UPS), Telecom (T), Financials (BBT, ZION, CMA, MTB, RF, AF, CFR, KEY, USB, PNC, STT, WFC, MS, PJC, JEF, CS, AXP, COF, TRV, CB), Consumers (MCD, EAT, KO, PM, MO, RAI, HAS, Ahold, HSY, BG, KMB, BDK, WHR).  Bernanke speaks in California today (and in Massachusetts Friday).  Plenty of Fed speakers this week, and we may see some monetary policy headlines as a result.  WMT analyst day is Weds/Thurs this week. 

Expect more headlines from the Galleon insider trading case this week – it has already provided for some amazing reading over the weekend, and – of course – takes Wall Street down yet one more notch in the eyes of America.  In terms of market direction, negative rhetoric about current valuations and market “froth” continues.  This week presents a major test for the “sell the news” versus the “buy the dips” camp.  It will be interesting to see how that tug of war plays out.   Following on last Wednesday’s retail sales release, here’s some more interesting retail sales data:  Sept sales were down 8.8% year-over-year, which represents a $372B decline (remember, roughly 1/3rd of personal consumption expenditures are retail purchases).  Additionally, private sector wage and salary disbursements are down by $407B in the last 12 months.  Total consumer credit outstanding fell for the sixth month and is $116B lower than a year ago.  As a result, the combined loss of income and loss of access to credit for the average consumer is now $523B.  Add the $178B increase in personal savings, and you reach a grand total of $701B less “consumer activity” pulled from the market since the beginning of the crisis. 

JPHQ raises Euro energy sector.  FBRC ups AXP.  HSBC ups SMI.  BofA/MLCO cuts SLG.  KBWI cuts FNM, FRE.  UBSS cuts CAN, DOX, TLAB.  BofA/MLCO sees BHP paying 30% premium for POT.  JPHQ ups AAI.  ALLI to be acquired by HIG Capital for $6.60/cash.  MS ups ALV.  HAS higher on earnings.  JPHQ cuts LUV.  Morgan Joseph cuts MAT.  MMR lower on earnings.  UBSS ups UL. 

Asia mixed overnight.  Europe roughly 1.25% higher.  Oil flat.  Gold +30bps.  USD flat.  Bonds flat. 

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

S&P 500 PreMarket (last/% change prior close/volume): 
CIT GROUP INC              1.31      +16.96%           13014663
FREDDIE MAC                1.63      -5.23%              941208
FANNIE MAE                  1.39      -4.79%              1517007
EATON CORP                 63.15    +4.52%             8100
BB&T CORP                   27.11    -4.04%              137143
WEATHERFORD INTL      19.75    -4.03%              360828
TERADYNE INC               10.20    +3.45%             1000
GAP INC/THE                 23.73    +3.35%             500
BOSTON SCIENTIFC       10.35    +3.29%             46684
GANNETT CO                 13.40    +3.08%             10916

Today’s Trivia:  Name two sports in which the participants face backwards in attempting to win.

Yesterday's Answer:  The very first gold deposit in the US was discovered in the Appalachian Mountains of North Carolina in 1799.

Best Quotes:  “White House Chief of Staff Rahm Emanuel took to the media circuit this weekend noting that Wall Street has a “responsibility” to not oppose reform.  For the record, we have been and remain in the camp that believes that many corners of Wall Street lack sufficient regulation.  With that said, the only way the U.S. political system has some form of balance is because it is every one’s right to oppose the views and policies put forth by our leaders.  It is an essential part of the law making process in this country.

It did not help the situation to have U.S. Attorney Preet Bharara lump the financial industry in with drug cartels and the Mafia, which was a truly low blow by any measure.  The real root of today’s Wall Street outrage is the snapback that the financial industry has enjoyed.  Six months ago, there was rampant outrage towards Wall Street for losing too much money.  Today, Wall Street is being demonized for making too much money.  Needless to say, there are still many large bank balance sheet holes to fill.  Today, people who were originally critical of giving banks money seem to be upset that many banks have or are in the position to pay the money back.  It is as if the politicians and media prefer that the money be truly lost, as is the case with bailout funds used for the auto industry and the institutions under conservatorship.  In those cases, those entities are still under the government’s thumb. 

When it comes to outrage about making or losing money, making is the clearly the lesser of the two evils.  Whether you are on Wall Street or Main Street, making money is the preferred outcome.  The irony is that 6 months ago, this aftermath would have been the definition of success for the policy the administration had implemented.”  --BTIG Note 

No comments:

Post a Comment