Tuesday, December 15, 2009

Tyler's Morning Note (Ben out...)

Futures -55bps this morning after markets touch 14 months highs yesterday on light volume.  The past two weeks of consolidation might be setting the market up for potential breakouts. However, PPI came out greater than expected (Core PPI mo/mo was +.5% vs. +2% expected; Core PPI yr/yr +1.2% vs +.9% expected), so somewhat inflationary data has begun to rear its head.  Interest rates are breaking out on back of the news.  Empire manufacturing came in at 2.55 vs. 24.00 expected.  Would anyone like a side-order of Stagflation with breakfast this morning?   BBY reports $.53 vs $.43 estimates and is trading down 4.5% as a stronger whisper number was expected into the holiday season. A lot of chatter out this morning about the recent dollar strength and how the correlation between short USD and long materials has faded. There’s also some chatter from respected columnists, Krishna Guha (FT) and Jon Hilsenrath (WSJ), that the discount rate (where banks borrow directly from the Fed) will be raised coming out of the FOMC meeting tomorrow.  Consensus for the meeting is that it will be a non-event as the FOMC will not want to change the rules of the game this close to year-end.  1100 still remains a magnet for the S&P into quad witching this Friday.

WFC is raising $10.4 bln in a secondary to pay back TARP.  Pricing was originally for tonight but from what I’m hearing, the book is shaping up well and pricing could be expedited to before the bell. Right now WFC is trading +2% in the pre-mkt.  Master Trust data trickles in: COF NCO’s ticked higher to 9.6% from 9.04% but this was largely expected.  Look for other trust data to hit the tape throughout the day. Senate Democrats drop Medicare expansion plans, leaving the bill a shell of its former self. 

Bank of America Merrill Lynch ups AVB, ELS, HOT, NAL & SNH, Deutsche Bank ups BBT, FBR, NWS & WFC, JPMorgan ups BCR, Keefe, Bruyette & Woods ups WFC, Macquarie ups ACH, Stephens ups ACXM, UBS ups Q, Wells Fargo ups NWSA, Bank of America Merrill Lynch cuts HCP & NLY, HSBC cuts HON, Jefferies cuts AEP, JMP Securities cuts LIMS, Keefe, Bruyette & Woods cuts FICO, UBS cuts CBS, Weeden cuts XTO. A ‘Heard on the Street’ article suggests XOM overpaid for XTO and entered into a market that looks dreadful now. The article points out that after spending much of the decade buying back shares, XOM jumped in to pay more than double what other US unconventional Natural gas reserves have received on average this year.   Berkshire sold 3.45 mln shares of Moody’s, reducing its stake to 31.9 mln.

Asia mixed overnight.  Europe down .5% across the board. Oil +40bps.  Gold -90bps.  USD +80bps. 

Brightpoint News

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

S&P 500 PreMarket (last/% change prior close/volume): 
WEYERHAEUSER CO       42.5100 47.80    +12.44%
NVIDIA CORP                 15.6700 14.85    -5.23%
BEST BUY CO INC           45.3700 43.29    -4.58%
QWEST COMMUNICAT    4.0800  4.25      +4.17%
SLM CORP                     12.00    12.50    +4.17%
ZIONS BANCORP            13.7600 13.24    -3.78%
METROPCS COMMUNI     6.8700  7.08      +3.06%
FLIR SYSTEMS               30.250  29.38    -2.88%
JDS UNIPHASE               8.0200  7.80      -2.74%
WELLS FARGO & CO       25.490  26.12    +2.47%
INTUITIVE SURGIC         292.91 285.82    -2.42%
TELLABS INC                  5.4900  5.36      -2.37%
MARSHALL &ILSLEY        5.9900  5.85      -2.34%
HONEYWELL INTL           41.3100 40.47    -2.03%

Today’s Trivia:  What is the only U.S. state with a one-syllable name?

Yesterday's Answer:  The toothbrush was invented in 1498

Best Quotes:   Today’s new closing high is hardly a definitive breakout, but the stage is set for a bigger move.  Five of the ten S&P Sectors hit new 52 week highs.  Health Care, Telecom and Utilities have been breaking out.  Consumer Discretionary started breaking out last week.  Industrials, led by Transports, started breaking out today.  Technology has set the stage to breakout in the next couple of days.  All that is necessary for a nice push higher is for either Energy or Financials to join the move.  Remarkably, all of this has transpired as retail has been a continued seller of domestic equity mutual funds, which, as of latest data earlier this month, have not seen inflows since July.  This is a pretty good situation considering the potential jet lag a round trip can give you.  It is to too early to say for sure but it looks like the “mirror mirror” relationship between Equities and the Dollar may finally be breaking.  For the first time in a long time, probably a couple of years, the inverse trading relationship between the Dollar index and the S&P 500 is not discernable.  The chart below is a seven day 24 hour intraday chart of the Dollar index and the S&P 500 futures.  While traces of the pattern exist, it appears to be weakening.  It looks more like one asset rallies while the other takes a rest and then vice versa.  Over the past month, the Dollar index is up 1.35% and the S&P 500 is up 1.8%.  Quarter to date, the Dollar index is down 40 basis points while the S&P 500 is up 5.3%.” –BTIG Note

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