Monday, November 30, 2009

Morning Note...

Futures flat this morning as markets digest the recent Dubai World debt issues.  For the most part, exposure seems to be contained, although markets in the Middle East opened limit down and are facing an extended holiday during which time new news may be released.  Geopolitics comes to the fore this holiday season, as Iran saber-rattles about nuclear expansion, Obama is set to announce U.S.-Afghan plans, the U.A.E. loosens lending rates and “stands behind” Dubai’s debt, and Greece remains on proverbial thin ice financially.  Sovereign Wealth or Public debt risk (depending on the country) may be the theme of 2010 and beyond, as 2008 & 2009 marked a massive shift in debt responsibility from private to public sectors across the world.  Plenty of data on tap for this week… tonight we’ll get China PMI, official jobless claims and unemployment in the US comes Friday, November Auto Sales will be reported Tuesday, November Retail Sales (including Black Friday and today, Cyber Monday) will be reported Thursday morning, the ECB announces a rate decision Thursday, and the Fed’s Beige Book is reported Wednesday.  In other news, the Senate begins the Health Care debate today, and the Bernanke confirmation hearings start Thursday.  Also, the White House “jobs forum” begins Thursday, and it will be interesting to see if Obama previews the Friday jobs data as he did a couple months back…

Note that today marks month-end, and that recent month-ends have not gone so well – August, September, and October month-end trading was all to the downside (profit-taking?).  Early Black Friday indications are that spending is up 0.5% from one year ago.  Overseas, Asia markets rebounded from Friday’s weakness, as the Dubai situation appears to stabilize.  On the other hand, Europe is down across the board, perhaps on concerns over Greece in addition to the general fears over Dubai.  Interesting to note the flight-to-quality in the USD late last week when Dubai concerns drove markets.  While debt-to-GDP levels may indicate that our nation’s fiat currency is due for a long and steady decline in the mid- to long-term, it’s tough to be short the dollar in the near-term given the potential for any global nervousness. 

AEO upped at LAZA.  CSFB ups AFL.  IRE/AIB to complete transfer of loans to the gov’t bad bank by middle 2010.  GSCO ups AKS tgt.  GSK to cut drug prices in developing countries.  GSCO ups X. DBAB cuts LYG tgt.  Citi ups GENZ, Goldman Sachs ups BBD, Morgan Stanley ups SWY, RW Baird ups EDR & USB, Wells Fargo ups RCRC, Bernstein cuts BIDU, Goldman Sachs cuts CIB, Morgan Stanley cuts SVU.

Asia up roughly 3% overnight.  Europe down 75bps on average.  USD -7bps.  Oil -90bps.  Gold -35bps. 

Brightpoint News

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

S&P 500 PreMarket (last/% change prior close/volume): 
AK STEEL HLDG              20.27    +3.68% 80233
US STEEL CORP             44.60    +3.6 %  188619
AMERICAN INTERNA       32.17    -3.39%  231737
OFFICE DEPOT INC         6.08      -3.18%  1990
AFLAC INC                     44.89    +2.84% 49409
NUCOR CORP                 42.90    +2.61% 9428
DEERE & CO                  53.69    +2.54% 13442
FANNIE MAE                  .962      +2.34% 292812
SUPERVALU INC             14.09    -2.29%  1094
PRUDENTL FINL              49.29    +2.26% 100
ARCHER-DANIELS           30.00    -2.12%  1000

Today’s Trivia:  Name the only country whose name begins with “A” but does not end in “A.”

Yesterday's Answer:  A “tael” is a unit of weight in the Far East that generally relates to precious metals

Best Quotes:  “Good Morning -  Who had the worst Thanksgiving?   Dubai, Retailers, or Tiger Woods?   My vote is for Tiger.   To me the Dubai situation is troubling.  The markets seem to be discounting the ripple effects.   Is this much different than what we witnessed in the sub-prime market?   In the simplest terms credit has to tighten as a result.  Black Friday numbers seem to be ok, but comps are pretty easy.  Personally I have a problem listening to all the woes of this country, and I see lines of people at Walmart with 50 inch flat screens.   Tiger, we all know.   I'm a seller of the Rallies.  1103 is Wed low.   1095 was last weeks low.  1112.25 is the year high.”    –BofAMLCO note

Wednesday, November 25, 2009

Morning Note...

Safe travels today and Happy Thanksgiving tomorrow… Futures +30bps this morning as the dollar weakens (breaking the key USD/EUR 1.50 level), gold continues to achieve record highs (India hinted it may buy more), and bullish economic data is released.  Personal Income for October ticked slightly higher to +0.2% vs. +0.1% expected.  Personal Spending also ticked higher to +0.7% vs. +0.5% expected.  The prior month reading was -0.6%, and any bump in Consumer Spending is seen as bullish for the economy.  Further, Initial Jobless Claims finally broke down through the 500k barrier for the first time since January, coming in at 466k.  Continuing Claims were 5.423M vs. 5.556M expected.  On the bearish side, Durable Goods Orders were being widely ignored this morning, but came in light at -0.6% vs. +0.5% expected; the prior period’s reading was +2%.  [At the time of posting this, it looks like it DID get some attention, as futures sold off from +70bps when I started to +30bps at finish.]  UMichigan Consumer Confidence is due at 10am today, along with New Homes Sales data.  In corporate news, TIF is up 6% on earnings, DE is down 2% on earnings, and JCG is up 7% on earnings.  Across the pond, Greece is on the ropes this morning, as the potential for debt default escalates.  This would obviously be troubling for the entire Eurozone…  In Asia, China is following Brazil’s aim to slow down the potential for currency appreciation by taxing buyers of the yuan.  Expect volumes to be light today as people check out for the holiday.  As a result, price swings may be exaggerated. 

Liberals in Congress are pointing towards a tax on stock and derivative transactions (25bps) aimed at job creation.  There’s a proposed bill which would claim to raise $150B per year and would hurt speculators more than the “buy and hold” crowd, and thus help stabilize markets as well.  Obviously the “free market” crowd is up in arms over this, but it represents a legitimate shot across the finance world bow, and marks a clear attempt to ride the wave of public enmity towards improvement of Main Street by penalizing Wall Street.  Meanwhile, I read a recent study which showed that members of Congress “out-trade” the markets by some ridiculous number of standard deviations, averaging over +1% returns per month during their terms in office.  The implication is that everyone points at Wall Street insider trading abuses (and well that they should…) but true insider trading occurs when politicians consistently beat the markets by using information they see in Committee.  While we are levying taxes and laying blame, let’s take a look at that please.  Stay tuned…   In other political news, Obama’s made a symbolic gesture by hosting India at his first State Dinner last night.  India has been concerned with all the attention the US has been giving to Pakistan and China of late, and it may have been a very shrewd political move to re-align with India, especially as a major counterbalance to China’s continued strength.  Recall that we have seen this movie before, when Nixon courted China in the 70’s as a counterbalance to Russian strength.  Across the pond, Britain surprisingly criticized Obama for his delay on Afghanistan.  You don’t often see an ally that outspoken.  Obama is expected to announce his decision next week (smart to delay any announced surge or troop increases until after the Thanksgiving holiday) but has said he is committed to “finishing the job.”  (Whatever that means)  Since we’re on a political theme, yesterday’s Gartman Letter had some interesting data on our President.  Pre-election, a staggering 66% of those earning over $200k/yr supported him and his intent to reign in government excess and perhaps even tax those high earners in achieving that end.  How’s that working out?  It seems the pendulum is beginning its political swing, as Obama’s policies – or lack thereof, perhaps? – are now met with a sub-45% approval rating from the over-$200k earners.  That’s a pretty dramatic -20% swing in support base… At this stage, the President’s subtle language shift post-election (I recall he started dropping this into speeches in Feb/Mar) towards comments like “in my first term” and “by the end of my eight years” may have been very premature.  Hubris, anyone?  Interesting cover story from Time Magazine as we head into the holiday proclaiming this past 10 years to have been “the decade from hell,” which started with 9/11 and ended with the financial meltdown (with the Katrina disaster in the middle).  Not exactly cheerful stuff, but beyond just selling magazines, the shock value cover may have some validity.  Looking back, historians may indeed mark this past decade as the “beginning of the end” of the American Empire…  (And for those of you looking for something to read over the holiday, check out Cullen Murphy’s book “Are We Rome?”)

CITI ups VPRT.  JEFF ups EXXI.  UBSS cuts NRG.  JDSU initiated Buy at CITI. 

Asia higher overnight.  Europe holding onto +40bps gains.  USD -75bps.  Oil flat.  Gold +130bps.  Bonds higher. 

Brightpoint News

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

S&P 500 PreMarket (last/% change prior close/volume): 
TIFFANY & CO               44.27    +5.83% 191581
JDS UNIPHASE               7.64      +3.24% 6160
CONSTELLATION-A         17.90    +3.17% 400
VULCAN MATERIALS       51.40    +3.01% 200
TELLABS INC                  5.93      +2.95% 22200
AKAMAI TECH                24.94    +2.76% 400
MBIA INC                       3.53      +2.62% 7560
CENTURYTEL INC           36.58    +2.55% 335

Today’s Trivia:  There a Bloomberg story this morning that mentions Vietnamese inflation and makes reference to something called a “tael.”  Does anyone have any idea what this is and why we may hear more and more about it?  (p.s. it pertains to gold, and I just looked it up, having never heard of it…)

Yesterday's Answer:  “WC” stands for Water Closet, which was once the polite term for “toilet.”   

Best Quotes:  Some random quotes from my survey question last week on the S&P into year-end…up, down, or sideways?

s and p will remain strong into yr end

With weak volumes at lack of catalysts either way, my uneducated guess is steady sideways..wouldnt be surprised to see 1100 give or take 2%

Seems like too many people are saying WHY TRADE ... gains are locked in ... wait for the calendar to flip... The only fly in that ointment would be a sell-signal data point ... it does seem that more people are leaning toward the exit rather than the entrance.

survey response from me into year-end is sideways action...

Tuesday, November 24, 2009

Morning Note...

Futures flat to slightly higher (+15bps) as the Q3 GDP revision was in-line with expectations.  The prior +3.5% reading was revised down to +2.8%.  Personal Consumption was revised down to +2.9% from +3.2%, and the GDP price index was lowered to +0.5% from +0.8%.  This last reading is significant in the sense that it conveys a lack of inflationary pressure.  In corporate news, HPQ reported in-line after the close last night, ADI beats by 10c and guides higher, AEO reported in-line and is trading higher (they beat the whisper number), DLTR beats by 10c, and HNZ beat by 6c and raised guidance.  In international news, Russia cut rates by 50bps to 9%.  Germany saw better-than-expected confidence data.  China was down the most in three months (-3.5%) on concerns the top banks there will need to raise capital.  According to the Wall Street Journal, US consumers are expected to spend an average of $390 on gifts during the holiday season, which would be a 7% decline from last year.   CaseSchiller Home Price data is due at 9am. 

Important data will be released later today, as Cosumer Confidence hits the tape at 10am and the FOMC minutes from the Nov 4th meeting are due at 2pm.  Good quote out of Gartman today, see quote section below.  Light volumes continue during this holiday week.  Remember, tomorrow is a full day, Thursday is a holiday, and Friday is a half day.  Given China’s weakness, financials are clearly in the news this morning.  Here’s a good summary from Morgan Stanley:

Bank capital levels globally are a major focus this morning and bank stocks are generally weaker around the world given capital-related newsflow and developments from all the major global banking sectors. Near-term implications for bank stocks are likely incrementally negative given how broad-based the regulatory focus seems to be on this issue and the supply/demand implications should we see a round of capital raises from banks across multiple markets, including Asia, Europe and perhaps the US.

Globally: A study by S&P has raised questions over the financial strength of some of the biggest banks ahead of new rules that could require them to raise more funds. The analysis by S&P showed that HSBC is the best capitalized bank in the world, while Switzerland's UBS, Citigroup of the US and several of Japan's biggest banks are among the weakest.
US: Media reports that the Fed asked nine of the U.S. banks that were part of the stress tests (including BAC, C, FITB, GMAC, KEY, PNC, RF) to submit plans for repaying TARP. The Fed asked the banks to give plans including a timetable, according to reports. The firms may have the option to repay TARP soon if they’ve been able to raise common equity and would continue to exceed capital buffers set in the stress tests.
Europe: Lloyds, the U.K.’s biggest mortgage lender, launched as expected a $22bn rights offering, selling shares at a 59.5 percent discount. The offering will close on Dec 14. While the Lloyd's offering was specifically intended to allow them to avoid having the government talk a large stake, questions will persist as to capital adequacy across the European banking sector
China: The bank regulator told banks they need to develop plans for replenishing capital and those with “relatively low” ratios will face restrictions. Credit risks are growing after lenders made a record 8.67 trillion yuan of loans in the first nine months to help finance a government stimulus package, the watchdog said in October.  Bank of China, the third-largest in China, is studying “various options” to replenish capital. The bank has no detailed plans to disclose yet, it said in a statement, a day after Reuters said the lender may need to raise about ($15bn) to meet a new guideline on financial buffers from the nation’s banking regulator.
Japan: Japanese banks are down about 3% today on concerns other banks will follow the lead of MUFJ, which announced a planned $11bn capital raise last week

DBAB ups ABG, EMN.  AMLN upped at BCAP.  BDX increases dividend.  CBRL beats by 16c.  DSW beats by 14c and raises guidance.  DY misses by 2c and misses on revs.  HRL beats by 9c.  MDT beats by 3c.  Cramer positive interview with NAT CEO.  CITI adds NSM to Top Picks.  WEFA ups PRU.  UBSS ups RS.  UBSS cuts UNP.  JPHQ ups BCH.  OPCO ups AYI.  BofAMLCO cuts ALV. 

Asia lower overnight.  Europe mixed to slightly lower.  USD -17bps.  Oil -23bps.  Gold +40bps.  Bond prices are higher. 

Brightpoint News

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

S&P 500 PreMarket (last/% change prior close/volume): 
TELLABS INC                  6.00      +5.08% 22625
MEDTRONIC INC             42.25    +4.81% 318352
DEAN FOODS CO            16.85    +3.44% 1300
ANALOG DEVICES           28.75    +2.9 %  44900
TJX COS INC                  39.54    +2.20% 1950
NATL SEMICONDUCT      14.10    +2.1 %  2000
BECTON DICKINSON       76.80    +2.06% 1250

Today’s Trivia:  What does the “WC” stand for on some bathroom doors? 

Yesterday's Answer:  “Cut and run” was originally a nautical term that refers to ships making a hasty departure by the cutting off of the anchor rope and running before the wind. 

Best Quotes: “Finally… and we think somewhat ominously for we’ve heard rumblings of actions that might be taken which we rather openly fear are being debated including import fees and trade restrictions… President Obama yesterday assured everyone that increasing jobs was his Administration’s top priority and that that shall be his focus for the foreseeable future. However, the President put forth no specifics about how he and his Administration intended meet this goal other than hinting at further increased government spending. Later, the “White House” issued a public statement noting that all "sensible and reasonable measures" to increase jobs here in the US shall be considered but balanced by concerns over the record budget deficits. Hence either more and larger tax increases are being considered, or something more serious is. As the President said,
Our economy is growing again for the first time in more than a year [but]… we cannot be sit back and 
be  satisfied given the extraordinarily high unemployment levels that we have seen.
That sort of language always causes us concern when right-of-centre political figures make them; we are scared-to-death when left-of-centre political figures make them… especially left-of-centre political figures whose public support ratings are falling.”  --Gartman Letter

Monday, November 23, 2009

Morning Note...

Futures +1% this morning on USD weakness (-70bps as Fed Governor Bullard made dovish rate comments yesterday, Fed Governor Evans said rates will stay near zero until “late 2010, perhaps later in terms of 2011” and the IMF’s Strauss-Kahn said its better to exit stimulus later than earlier…) and global strength in equity markets.  Hong Kong (+140bps), Shanghai (+92bps), and Australia (+67bps) were up overnight (Japan holiday).  Europe is up roughly 1.5% across the board.  Gold achieves another record high at $1167.88/oz.  Existing Home Sales data due at 10am today.  Treasury auctions this week:  $44B in 2-year notes (today), $42B in 5-years (Tuesday), and $32B in 7-years (Wednesday).  In Washington, the Health Care Bill won passage from Committee into the full Congress, and will be debated in the weeks ahead.  In corporate news, LDK is higher on earnings, TECD is higher on earnings, HSY is pushing to launch a $17B bid for CBRY LN (which would trump the KFT bid), and TSN is higher on earnings.  HPQ reports after the bell (recall they already pre-announced).  ADI earnings after the bell. 

Expect light volumes this holiday-shortened week.  However, there will be some important economic data on the tape.  Tomorrow we’ll see the Q3 GDP revision, which is expected to 2.7% vs. the 3.5% first-look.  FOMC minutes are to be released at 2pm tomorrow and will be closely read for commentary on economic forecasts and inflation expectations.  Wednesday we’ll get Durable Goods orders, Personal Income and Consumption data for October, and New Home Sales.   Crude is higher today on a weak dollar and Iranian military exercises over the weekend. 

ANN upgrade at TWPT.  Barron’s positive BBT.  MOKE cuts CIEN.  Barron’s positive DISCA.  JEF, NITE cut at GSCO.  CSFB ups CHA, SLB.  MSCO ups DE ahead of earnings, ups AXP.  CITI ups DHI.  FBRC ups NAL.  GSCO ups EVR, MKTX, NDAQ, NIHD.  JPHQ ups CI, SJM, WLP.  BofAMLCO cuts TCLP.  JPHQ cuts HIBB.  MSCO cuts WES.  JEFF ups SBUX. 

Brightpoint News

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

S&P 500 PreMarket (last/% change prior close/volume): 
CIENA CORP                  12.35    -6.23%              280143
ZIONS BANCORP            13.25    +5.58%             61500
OFFICE DEPOT INC         6.62      +4.09%             3600
DEERE & CO                  52.75    +3.78%             32319
ITT CORP                      52.72    +3.7 %              1200
EL PASO CORP               9.90      +3.56%             3583
AK STEEL HLDG              19.35    +3.53%             15840
CIGNA CORP                  31.05    +3.4 %              4500
MBIA INC                       3.60      +3.15%             9000
MANITOWOC CO            10.88    +3.03%             1900

Today’s Trivia:  What is the origin of the phrase “cut & run?”

Yesterday's Answer:  The kilogram standard is kept in a vault in Paris, France.  (side note:  scientists have been puzzled by the mass of the standard kilogram having shrunk about 30 millionths of a gram since it was made…)

Best Quotes: “For the first time since the equity rally began in March, the biggest U.S. stocks are beating the smallest as the dollar’s descent sends investors to companies with the most business in international markets. The Dow average of companies with $111.4 billion in median market value rose 6.2 percent this quarter, compared with the 2.6 percent loss by the S&P SmallCap 600 Index, whose members are worth $572.3 million on average. The Dow had trailed by 26 percentage points following the stock market’s low on March 9.”  --BBERG news

“On this day (-1....which would be yesterday of course) in 1963, the President of the United States, John Kennedy, was fatally shot while riding in a motorcade in Dallas,Texas. His assassin (as you may have heard) was Lee Harvey Oswald who fired from the Texas Schoolbook Depository. But...of know all that! The event has been the subject of several movies, at least three national investigations, countless TV specials, a few hundred books, a million magazine articles and several theories. Having been exposed to all this, you are no doubt aware of all the trivia and oddities. There's the Kennedy/Lincoln oddity. Jack Kennedy's personal secretary was named Lincoln...just as Abe Lincoln's secretary was named Kennedy. Both secretaries had pleaded with their bosses not to go to the place where they were shot. Both Presidents were succeeded by guys named Johnson. Both Johnson's were Southerners and former Senators. Both Johnson's were born 100 years apart. Kennedy and Lincoln were elected 100 years apart. John Wilkes Booth and Lee Harvey Oswald were born 100 years apart. Both Kennedy and Lincoln were assassinated on a Friday while sitting next to their wives. Booth shot Lincoln in a theater and tried to hide in a warehouse. Oswald was in a warehouse when he shot
Kennedy, he then tried to hide in a theater. recall all that. And, if you recall all that, you probably recall that it had been raining in Dallas earlier that morning. That, fearing a bad hair day, Jackie Kennedy suggested putting the bubble top on the limo. That, when the sun came out, the Secret Service decided to skip the bubble top. So, then you also recall the reports that Oswald was considering dropping his plans the night before, but a buzz-off from the wife sent him back to his plot. Which means you certainly recall that the initial reports indicated that both the President and Vice President had been killed. And when they brought that report to Speaker John McCormack (still lunching in the House Dining Room), he froze at the thought that at age 71 he was suddenly the President of the U.S. He froze so literally that he was unable even to stand up and only recovered when he was told LBJ was still alive. And, if you know all about the weird possibilities of presidential succession, you probably know the part those possibilities played in making Nelson Rockefeller vice president.....and making Gerald Ford the answer to the trivia question - who served as President and Vice President of the U.S. without ever being elected to either office.”  --Art Cashin’s morning note

Friday, November 20, 2009

Morning Note...

Futures are -60bps this morning, as the USD surges on a flight to quality resulting from a round of cautious global commentary.  First, yesterday Obama warned of a double-dip recession.  Second, the IMF said the global economy is heading towards a sustained recovery but given the risks of another downturn, it is too early to withdraw stimulus.  Third, PIMCO’s Bill Gross wrote of the increase in “systemic risk” from new asset bubbles resulting from record low interest rates.  Fourth, Europe is trending lower as Germany’s Finance Minister says “Germany’s economic and financial system is still fragile and the crisis is not over yet.”  Additionally, markets have been rattled on talk of possible Ukraine debt default (see quote section below).  Finally, in Asia, the Chinese “National Development & Reform Commission” Chairman Ping made cautious comments, saying “domestic growth is not strong enough, China’s recovery is not solid and China has an industrial overcapacity problem.”  In corporate news, DELL earnings disappointed, and the stock is down ~7%.  NKE increased its dividend by 8%.  JPHQ raised its forecast for the S&P500.  SJM (Smuckers) beat earnings estimates and is trading up 5%. 

Options expiry today, which should affect volume… It’s worth noting that the USD had surged as high as +100bps this morning… However, there is some talk of all USD futures trades over 76 being canceled due to a computer glitch that took the dollar index up artificially.  As a result, the dollar is weakening in real time and has leveled off around +50bps.  Regarding recent action, here’s a great summary from BTIG:  “The notable sign of risk reduction was evidenced by performance vs. the SP500 ..returns deteriorated down the market cap spectrum:  Russell 2000 (-107bps), Midcap (-72bps) as opposed to large caps outperforming the SP with the SP100 (+14bps) and Dow Industrials (+44bps).  Volumes continue to trend about 20% below average and the SP500 traded in a tight 50bps range most of the day.”  Nouriel Roubini’s recent RGE piece now argues for a U-shaped recovery.  The following summary is from Henry Blodget’s site “The Business Insider:”

RGE's 10 Reasons Why We Will See A U-Shape Recovery:

1. A U-Shaped U.S. Consumer. Roubini argues against a "V-Shaped" recovery, which he says puts too much confidence in this year's strong equity rally. 80% of the population reacts to home prices, not equity prices, and he forecasts that home prices will fall further.

2. Difficult Labor Market Conditions. Expect a strong second half of 2009 and a sluggish 2010 with growth below potential and continued job losses.

3. Balance Sheet Recession Caused By Over-leverage And Debt Accumulation. There are signs of a massive re-leveraging in the public sector. The cost of maintaining this level of debt will be very high and a drag on the economy.

4. Investment Usually Is A Strong Recovery Component. But investment will not recover while one third 
of current capacity is not utilized.

5. A Damaged Financial System And The Related Credit Crunch. Only half of the estimated $3 trillion global credit losses (IMF recently lowered their estimates) have been recognized so far. Expect more to come, especially in Europe.

6. Home Prices Said To Fall Further And Commercial Real Estate Bust Continuing.

7. Exit Strategy: Damned If You Do And Damned If You Don't. Removing fiscal accommodation will constrain a recovery that still appears weak. It has already been determined that it is too early to remove fiscal accommodation, but if it continues it will fuel persistent large budget deficits and lead to inflation.

8. Fall In Potential GDP Levels and Possibly In Potential Growth

9. Global Imbalances: Over-Spenders Retrench While Over-Savers Don't Compensate. Fall in demand from countries that tend to be over-spenders (US, UK) has not been neutralized by countries that tend to be over-savers (Japan, Germany).

10. Emerging Markets Fared Better But Can't Close The Consumption Gap. Can China/India be the engine of global growth? No. Can EMs decouple from anemic growth in G3? No. Is the policy response of China/Asia appropriate and sustainable? No. There are not the necessary social safety nets in EM countries, so the motive to save high. Private demand has to take over and drive growth

WBC cut at EVA Dimensions.  BofAMLCO ups ICA.  BBNT ups ANDE.  CITI ups LINTA.  DBAB ups DDS.  MSCO ups AFL, HES.  PALI ups LAZ.  PIPR ups CYBX.  BARD ups SCSC.  UBSS ups MLM, VMC.  CITI cuts D.  JPHQ cuts FRED.  MSCO cuts CFL, PFG. 

Asia lower overnight.  Europe down roughly 50bps.  USD +60bps.  Gold -22bps.  Oil -140bps.  Bonds ticking higher. 

Brightpoint News

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

S&P 500 PreMarket (last/% change prior close/volume): 
DELL INC                       14.68    -7.5 %  2202784
DR HORTON INC             11.34    -7.43%  69900
ANALOG DEVICES           25.84    -7.18%  100
DILLARDS INC-A             14.98    +4.9 %  47240
ALLEGHENY ENERGY        21.14    -4.34%  110
PULTE HOMES INC          9.43      -3.97%  26250
XEROX CORP                 7.53      -3.21%  2834
WYNDHAM WORLDWID   18.49    -3.14%  1000
DYNEGY INC-A                1.98      +3.13% 2300

Today’s Trivia:  The kilogram standard is actually kept in a vault in which European country?

Yesterday's Answer:  Donkeypower is an official term, believe it or not.  It is one-third of horsepower. 

Best Quotes: “-- here's latest on what i've heard on Ukraine Railway story making the rounds........

-- initial story was that Ukrainian Rail defaulted on a bond to Barclays. Story around now is that there is a secondary bond to Deutsche, underwritten by Govt.....

-- if this defaults, it would count as a Sovereign Default -- obviously very bad news for Eastern Europe......

-- that's the story making rounds.... take it for what. It does have the $ stronger this morning.”   --trader chatter

Thursday, November 19, 2009

Morning Note...

Futures -75bps this morning as markets weaken following the recent 13-month high.  Jobless Claims were in-line with expectations, at 505k.  Continuing Claims were also in-line, at 5.611M vs. 5.598M expected.  The USD is higher, pressuring oil, gold, copper, and other commodities and commodity producers.  Given the 64% surge in the S&P500 following the 12-year March low, investors are seeking more confirmation from economic data regarding the strength of the underlying economy.  In corporate news, BofAMLCO lowers the semiconductor sector, SHLD is higher on earnings, LTD is higher on earnings, CL is higher on speculation of a takeout from UK’s RB/ LN, NTAP is higher on earnings, and JPM is lower on news it will buy the rest of Casenove it does not already own, and BX is buying Bird’s Eye Foods.  In Washington, the Health Care Bill continues to crawl through, as a vote is considered to begin debating the bill in the Senate.  LEI reading is due at 10am, along with the Philly Fed data.  Treasury Secretary Geithner to speak before Congress at 10am.

Technically speaking, futures continue to dance around the key psychological S&P 1100 level… Options expiry tomorrow.  Volumes – and conviction – remain light.  As a result, it does not take much – particularly when it comes to currency moves, i.e. the dollar – to move markets.  Anecdotal evidence continues to indicate funds are reducing risk and calling it a year.  Others, of course, scramble to chase and “make the year.”  Plenty of news in the retail space.  Here’s a solid summary from Barclay’s: 

Overall these results were pretty good ... 8 companies beat eps (PVH, WSM, PETM, LTD, SHLD, SSI, BKE, DKS) while PLCE was just in-line.  3 companies raised 4Q guidance (PVH, WSM, SSI) while 2 more companies guided 4Q inline (LTD, PETM) and DKS guided below consensus.  Overall, the focus should be on a pending squeeze in SHLD and WSM,the great PCH number, what happened with DKS 4Q guidance and PLCE's inventories, while LTD and PETM are kinda in-line(ish) non-events. 


Asia mixed overnight.  Europe -50bps on average.  USD +40bps.  Oil -25bps.  Gold -10bps.

Brightpoint News

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

S&P 500 PreMarket (last/% change prior close/volume): 
PROGRESSIVE CORP       16.10    -5.57%  300
SEARS HOLDINGS           78.88    +4.1 %  15593
NATL SEMICONDUCT      13.80    -4.03%  1900
NETAPP INC                   30.75    +3.81% 85986
LSI CORP                       5.49      -3.68%  13892
MARSH & MCLENNAN      22.55    -3.63%  200
INTEL CORP                   19.40    -3.58%  954511
WESTERN UNION           18.98    -3.51%  322
TEXAS INSTRUMENT      24.85    -3.5 %  95060

Today’s Trivia:  We’ve all heard of “horsepower,” but how does “donkeypower” compare?

Yesterday's Answer:  There are one hundred zeros in a googol.

Best Quotes: “The Dollar is firmer this morning.   Should we start to worry about a correction?   What impact would that have on the tape into year end?   Volumes remain light.  At 8:30, we’ll get initial jobless claims for the week ending November 14.  At 10am, leading indicators are released and are expected to advance 0.4% MoM in October – the sixth consecutive monthly increase. The Philly Fed manufacturing index is released as well. On the policy front, we’ll hear from Treasury Secretary Geithner at 10 am before the Congressional Joint Economic Committee.   We are already trading below yesterdays low of 1100, 1091 is the weeks low.  1112 is the years high.   Do you buy this dip?  Tough call.”   --trader note

Wednesday, November 18, 2009

Morning Note...

Futures -15bps this morning, largely on economic data:  Mortgage Applications are -2.5% this week and CPI readings are a touch worse than expected, but do not as yet indicate looming inflationary pressure.  Month-over-month CPI is +0.3% vs. +0.2% expected.  Year-over-year CPI is -0.2% vs. the -0.3% expectation.  Housing starts were light, at 529k vs. 600k expected.  Building Permits were 552k vs. 580k expected.  Across the pond, BofE minutes indicate a three-way vote was split on whether to extend quantitative easing.  In Asia, Japan was lower as MUFG’s capital raise sparks concern.  Also on the tape this morning:  Paulson & Co. talks up their BAC investment, Goldman Sachs pledges $500M to help 10,000 small businesses, Templeton’s Mobius sees 40% upside to the BRICs, global shipping giant Maersk sees 3%-8% growth ahead in 2010, and Obama & Hu conclude talks with “promises of increased cooperation amid lingering friction over currency, trade, and human rights.”  (BBERG)

Yesterday was the 6th lightest volume day of the year.  We may see more of the same into year end, barring new news (a surprise in economic data one way or another or a geopolitical event).  Initial Jobless Claims & Continuing Claims tomorrow.  Note that yesterday, retailers were generally cautious regarding the holiday shopping season.  Interesting housing commentary in the WSJ this morning: 

…while fewer houses are being built, there is still too much excess in the housing market. Economists estimate that annualized starts rose to 600,000 units in October, up from 590,000 the month before. Typically in recovery scenarios, annualized pace of starts increases back up to 1 mln units 6 months after the trough. However with a record 10.9% of all housing units, or 14.2 mln units, vacant, housing starts should remain subdued. Rental vacancies are also at a record 11.1%, compared with about 6% in past recoveries.

GSCO cuts TGT.  HSY started talks with Italy’s Ferrero about making a joint bid for CBRY LN.  BERN raises TGT estimates.  BKS adopts a poison pill at Yucaipa discloses 17% stake.  BERN positive BRCD ahead of Monday’s earnings.  ADI, CAKE added to Conviction Buy List at GSCO.  CSUN higher on earnings.  DRYS $300M convert offering.  CVH added to GSCO Conviction Sell.  OPCO ups GSIC.  RBCM ups FIS.  UBSS ups BSX, ZMH.  WELA ups DC.  BMOC cuts RIMM.  GSCO cuts VIP.  LDK higher on news it will sell its stake in a polysilicon plant.  VVUS higher on trial results.  CHS higher on earnings.  Cannacord initiates Buy on XOMA.  SOLF higher on earnings.  CITI ups PHM, SII.  BofAMLCO cuts STX.  SVA announces shelf offering.  BofAMLCO cuts WDC.  CRM lower on earnings.  ASMI raised at Fortis.  ADSK lower on earnings miss.  ALV higher on positive comments on production volume. 

Asia mixed overnight.  Europe holding on to slight gains.  Oil +50bps.  Gold +60bps. USD -35bps.  Bond prices are lower. 

Brightpoint News

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

S&P 500 PreMarket (last/% change prior close/volume): 
AUTODESK INC              24.90    -7.78%              1002200
MBIA INC                       3.60      +3.75%             5135
COVENTRY HEALTH        23.00    -2.87%              3400
EASTMAN KODAK           4.15      -2.81%              6414
EXCEED CO LTD             9.69      +2.76%             700
ADV MICRO DEVICE        6.79      +2.57%             408048
LIZ CLAIBORNE               5.06      +2.43%             22740
SMITH INTL INC             27.47    +2.27%             1868782
NORDSTROM INC           34.03    -2.27%              1000
KEYCORP                       5.88      +2.26%             100
PULTE HOMES INC          9.80      +2.08%             114722

Today’s Trivia:  How many zeros are in a googol?

Yesterday's Answer:  A sonnet has 14 lines.   

Best Quotes: “Will The Calendar Help The Bulls? – Wall Street folklore is filled with seasonal cycles. There’s the famous “sell in May and go away” (no so hot this year). There are many, many more. In this morning’s Stockmarket Cycles update, Sue Davy pointed to another:
Because the major indexes and averages have moved rather convincingly above some important trenddetermining moving averages such as the 420 day (20 month) moving average, we would now expect any pullback to be contained at or above those moving averages, at least through the end of this year. In research that we did a decade or two ago, we noticed that not only does the period between Thanksgiving and Christmas tend to be bullish, you would also be hard-pressed to find any significant declines historically between those two holidays. The 5.5% decline between December 16 and December 23 last year is about as large a decline as has been seen from a high to a low between Thanksgiving and Christmas.
While we haven’t seen the study, the contention that the period shows virtually no significant selloff should give the bulls a sizeable sense of security.
On the other hand, practioners of the Elliot Wave claim a whopper of a correction is due. They debate whether it is imminent or likely in January/February. We expect the usual predictions of a “Santa Claus Rally” will pop up any day now.”  --Art Cashin, UBS Note