Monday, November 2, 2009

Morning Note...

Futures are +40bps this morning on a slight bounce from Friday’s rout that is supported by USD weakness.  S&P500 was own 2% for October, which marked the first down month since February.  Note the VIX has risen a staggering 53% since October 21st, when the S&P reached the year-high of 1101.  Further, the SPX is down roughly 6% since achieving that level.  In corporate news, CIT officially filed for bankruptcy yesterday.  CLX beat and raised guidance, DF beat but guided Q4 lower, F is higher on earnings/revenue beat, HUM beat but warns about 2010, and SYY beats by 1c… Con Ed will report during the day.  After the bell we’ll hear from APC, CHK, and VMC.  October ISM Manufacturing Data is due at 10am, along with September Construction Spending and Pending Home Sales.  Busy week of data ahead, as tomorrow brings Auto Sales, the FOMC statement is released at 2:15pm Wednesday, Retail Sales are due Thursday, and official non-farm payroll data – along with possible 10% unemployment – comes Friday. 

Doctor Doom – Nouriel Roubini – is cautious on the markets in a Financial Times piece.  His concern is that zero percent interest has caused the dollar to become the carry-trade (borrow where money is cheap, and deploy elsewhere) vehicle of choice.  The unwind of that carry-trade could cause significant upward pressure on the USD (as dollars are “repaid” as risk is unwound) and thereby could create significant downward pressure for US equities.  Here is his cheerful take:  This unraveling may not occur for a while, as easy money and excessive global liquidity can push asset prices higher for a while. But the longer and bigger the carry trades and the larger the asset bubble, the bigger will be the ensuing asset bubble crash. The Fed and other policymakers seem unaware of the monster bubble they are creating. The longer they remain blind, the harder the markets will fall.  In terms of market sentiment, most investors agree that the recent rally off the March lows was driven by something less than sound economic fundamentals.  In fact, “hold your nose and buy ‘em…” has been a common refrain throughout.  For now, call it a pyrrhic rally at best, but a rally nonetheless.  So what’s next?  Earnings and economic data will stir headlines this week, but economic data and monetary policy (including the FOMC & the G20) will probably “drive the bus” into year-end.  The recent trend has been to sell into good news and sell further into bad news, so it’s hard to imagine that remaining earnings will move the market very much.  As a result, the focus remains on the USD, the potential end of stimulus, and monetary policy.  Given that, the week feels “back-end loaded”: expect relatively quiet market action – barring new news – ahead of the Fed’s statement Wednesday, unemployment data Friday, and the Fri/Sat G20 meeting.  Again, the short-term trend might be to continue lower, although it’s anybody’s guess as to how much selling pressure came as a result of mutual fund year-end Friday.  Market internals, including the SOX and the DJ Transports, appear weak however, and are cited as evidence the market rally has run into a ceiling of sorts… As always, we’ll find out soon enough if the bulls defend their territory and buy the dips…

EL, BRE, BXP, CLP, EQR, FRT, OHI, SLG upped at UBSS.  Barron’s bearish on CL.  YUM, KRC, PFCB upped at RBCM.  ETR maintains forward guidance.  EXC gives cautious 2010 guidance.  RBS ups ALU.  BofA/MLCO ups COT, DISH.  CITI ups CS, MOT; cuts RIMM, PALM.  EAC to be acquired by Denbury Resources.  FT reports KFT may go hostile in bid for CBRY LN.  HGSI higher on Phase 3 trial results for lupus drug.  Barron’s positive PGR.  RTP positive comments on BHP joint venture.  RYAAY lower on earnings and news of fare cuts.  DBAB ups JWN.  JEFF ups BIIB.  JPHQ ups UFS.  MSCO ups CBE.  WELA ups FPO.  BofA/MLCO cuts ERJ, KEX, MCCC.  JPHQ cuts IOSP.  BARD cuts CNW, ODFL. 

Asia mixed overnight – China was higher on better-than-expected PMI data.  Europe mixed to slightly higher.  USD flat.  Oil +35bps.  Gold +1.35%. 

Brightpoint News: 

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

S&P 500 PreMarket (last/% change prior close/volume): 
CIT GROUP INC              .418      -41.94%            472770
FORD MOTOR CO           7.64      +9.14% 11207072
MOTOROLA INC             9.02      +5.25% 1066621
MARSHALL &ILSLEY        5.59      +5.08% 49580
PROGRESSIVE CORP       16.75    +4.69% 81334
NORDSTROM INC           33.08    +4.09% 3331
MANITOWOC CO            9.50      +3.94% 45084
LINCOLN NATL CRP         24.71    +3.69% 1300
GENWORTH FINANCI      11.00    +3.58% 169874
TENET HEALTHCARE       5.30      +3.52% 24403
LENNAR CORP-CL A        13.00    +3.17% 200
VARIAN MEDICAL S        42.26    +3.12% 9733

Today’s Trivia:  Which part of the brain is responsible for body temperature, sleep, hunger, and thirst?

Yesterday's Answer:  On October 30th, 1938, CBS Radio broadcast the fictional War of the Worlds, which many took to be an actual alien invasion.


Best Quotes:The first down month in eight combined with many funds closing their books for the year served as an impetus for a real round of profit taking.  In addition, we have another extremely important data laden week ahead, providing further incentive for buyers to save ammunition.  While Q3’s expansion was nice, this week’s data feeds into Q4 GDP.  The ISM, the FOMC and BLS Jobs report are just the highlights.  The expectations miss of the last ISM report fueled the short lived correction at the start of October.  Preceding that report, the Chicago Purchasing Managers’ report missed by a wide margin while the NAPM-Milwaukee beat by a wide margin.  Going into this report, those relationships played catch-up, on Friday Chicago beat big, while Milwaukee missed big.  When it comes to the FOMC, there has been a great deal of talk about more hawkish language, but seriously, who are we kidding.  It is hard to take tightening talk or hawkish language at face value until the unemployment rate ticks down or unemployment data illustrates a clear improvement.  That brings us back to the Jobs report due out Friday.  The expectations are for a loss of 175,000 jobs and an unemployment rate of 9.9%.  This is undoubtedly the weak link of the economy and following the disappointment of the last report, investors will want to see improvement.”  --BTIG note