Futures roughly 50bps higher this morning, as investors see a slight “relief rally” following the past eight days -7% move in the S&P500. December Personal Income, Personal Spending, and PCE data was largely in-line with expectations, and had little market impact when released at 8:30am.
China, India, and posted expansive manufacturing data, stoking fears of necessary rate hikes ahead. Australia ISM Manufacturing at 10am will be closely watched today. Note that roughly 40% of the S&P500 has already reported, and most of the major, market-moving macro catalyst reports are behind us. (And the S&P500 is down 5.4% since AA kicked off earnings on January 11th) This week, however, we’ll see reports on Auto Sales (Tuesday) and Advance Retail Sales (Thursday) for an update on the consumer. The week’s big event will probably be Friday’s Official Non-farm US Payrolls and Unemployment Rate release. Job’s growth is widely anticipated, and it represents a major test for the “sell the news” theme so prevalent over the last week or so. In corporate news, is expected to launch a major ad campaign spelling out an aggressive program toward fixing the 2M+ vehicles recently recalled. XOM beat by 8c and beat on revenues. Technicians are alive and kicking these days, predicting that there’s trouble ahead if the S&P500 continues to fail the key 1080-1085 level. Note that ~1020 marks the 200-day moving average, and denotes the next downside support level if the market continues its correction. In geopolitical news, don’t sleep on the news that crept up last week that the Toyota US will sell $6 billion of weapons to . Taiwan China was not happy about that, and indicates that Beijing and might be further apart that we think… Washington
President Obama released his budget proposal for fiscal 2011 this morning, and the Wall Street Journal’s front page reports “Deficit to Hit All-Time High,” as the $3.8 trillion budget projects a $1.6 trillion shortfall this year. Additionally, the budget earmarks roughly $100 billion aimed toward stimulating job growth. The budget proposal is now making its way to Congress, where it will be debated in earnest before coming up for vote. Speaking of politics, expect Congress to remain in the news this week, as Treasury Secretary Geithner testifies before the Senate Banking Committee tomorrow, as does Paul Volcker. Not much new news overseas…
’s manufacturing data indicates continued growth, and thus the potential need for higher interest rates. As a result, China was off nearly 2% overnight. China India and also posted expansionary data. Sovereign risk fears continue ( Australia Greece, Portugal, Spain), and last Friday PIMCO’s El-Arian warned in a Financial Times editorial that Dubai and are not isolated incidents, and are part of a larger trend. Greece
Cautious commentary was out late last week and over the weekend from economists attending Davos. See quote section below for the Bloomberg News summary. Further, the WSJ’s “Abreast of the Market” Column (C1) highlights caution ahead after the +64% move in the DJIA from mid-March 2009 to January 19th, 2010. Finally, note that the “January Indicator” flashed mixed signals as the first five days were up (accurate for full-year prediction roughly 80% of the time), yet the month was down overall (accurate ~90% over the past 30 years). So which one wins? According to BTIG…
Bespoke investment group has a study measuring the divergence in the Dow’s performance when the “First five days” conflicts with the entire month. This year the Dow started the first week with a 1%+ gain and finishes with a decline of 1.1%. Bespoke says “ Since 1900 this type of divergence has occurred 9 other times…and of the 9 prior periods, the Dow averaged a rest of year decline of 0.52% with negative returns two-thirds of the time.
Regarding Friday’s impressive GDP print, Glufkin Sheff’s David Rosenberg had this to say:
The Houdini Recovery: The growth bulls are out in full force today in the aftermath of the headline 5.7% QoQ annualized print on fourth quarter GDP growth in the U.S. We offer a slightly different perspective. First, the report was dominated by a huge inventory adjustment — not the onset of a new inventory cycle, but a transitory realignment of stocks to sales. Second, it was a tad strange to have had inventories contribute half to the GDP tally, and at the same time see import growth cut in half last quarter. Normally, inventory adds are at least partly fuelled by purchases of foreign-made inputs. Not this time. Third, if you believe the GDP data — remember, there are more revisions to come — then you de facto must be of the view that productivity growth is soaring at over a 6% annual rate. No doubt productivity is rising — just look at the never-ending slate of layoff announcements. But we came off a cycle with no technological advance and no capital deepening, so it is hard to believe that productivity at this time is growing at a pace that is four times the historical norm. Sorry, but we're not buyers of that view. Fourth, while the Chicago PMI and the revision to the University of Michigan consumer sentiment index also served up positive surprises, the “hard” data in terms of housing starts, home sales and consumer spending suggest that there is little, if any, momentum heading into early 2010. Moreover, the prospect that we see a discernible slowing in the pace of economic activity this quarter and a relapse in the second quarter is non trivial, in my view — by then, today's flashy headline will be a distant memory.
AKAM +4% on upgrade. RYAAY higher on earnings. SOHU lower on earnings and guidance. Cramer positive CY. CZZ, Shell in $12B ethanol deal. IPI to replace URBN in S&P400. Bank of America Merrill Lynch ups G, Barclays Capital ups CEG & CPN, Citi ups ACI, Credit Suisse ups BIDU & EQR, Deutsche Bank ups ALV & ARG, FBR Capital ups NE, Goldman Sachs ups DCP, JPMorgan ups CLR, EMN & KFT, Keefe, Bruyette & Woods ups ISBC, Morgan Stanley ups CMA & BX, Oppenheimer ups VRTX, Pritchard ups DWSN, UBS ups AMB, BEZ, BXP, PLD, TCO & WRI, B. Riley & Company cuts CPF, Barclays Capital cuts FE, MIR & RRI, Citi cuts LZ, Deutsche Bank cuts CYT & M, Janney Capital cuts PFS, JPMorgan cuts COGT & ID, Keefe, Bruyette & Woods cuts PBIB, Morgan Stanley cuts FHN.
Brightpoint PreMarket (yest close/premkt/% change/volume):
S&P 500 PreMarket (last/% change prior close/volume):
NOVELL INC 4.68 +4.7 % 3250
AKAMAI TECH 25.74 +4.21% 13335
CA INC 22.92 +3.99% 2900
GANNETT CO 15.56 -3.65% 62973
LSI CORP 5.14 +3.01% 15400
EASTMAN CHEMICAL 58.00 +2.6 % 400
METLIFE INC 36.17 +2.41% 6000
HUMANA INC 47.50 -2.3 % 12147
NOBLE CORP 41.24 +2.28% 2045
POLO RALPH LAURE 83.70 +2.07% 1270
Today’s Trivia: According to 2007 data, there are roughly 80M mothers in the
Which two states have the most? U.S.
Yesterday's Answer: The
Hooghly River flows through . Calcutta
Best Quotes: “Roubini Sees ‘Dismal’ Growth as Summers Rues ‘Human Recession’: 2010-01-31 23:00:01.0 GMT
By Simon Kennedy and Erik Schatzker
Feb. 1 (Bloomberg) -- Nouriel Roubini, the
New York University professor who anticipated the financial crisis, said the growth outlook remains “very dismal” and White House economic adviser Lawrence Summers said the economy is still mired in a “human recession.” U.S.
Speaking at the World Economic Forum’s annual meeting in
Davos, Switzerland, after the reported the fastest growth in six years, their comments underscored concern that that emergency measures to rescue banks and fight the recession may be withdrawn too soon. U.S.
“The headline number will look large and big, but actually when you dissect it, it’s very dismal and poor,” Roubini said in a Jan. 30 Bloomberg Television interview following a
Commerce Department report that showed economic expansion of 5.7 percent in the fourth quarter. “I think we are in trouble.”
Roubini said more than half of the growth was related to a replenishing of depleted inventories and that consumption was reliant on monetary and fiscal stimulus. As these forces ebb, the rate will slow to 1.5 percent in the second half of 2010.
Roubini, who chairs New York-based Roubini Global Economics LLC, has become famous for his pessimistic projections. In 2007, he correctly predicted a “hard landing” for the world economy.
He said last year that the global recession would shrink through 2009, only for growth to resume in the middle of the year.
He says now that while the world’s largest economy won’t relapse into recession,
unemployment will rise from the current 10 percent amid “mediocre” growth. U.S.
‘Feel Like Recession’
“It’s going to feel like a recession even if technically we’re not going to be in a recession,” he said in the interview.
Also speaking in Davos, Summers, director of the White House National Economic Council, said that the statistical recovery won’t mask a “human recession.”
expansion in the October-December period resulted from manufacturers cranking up assembly lines and companies increasing investment in equipment and software. The rebuilding of stocks contributed 3.4 percentage points to gross domestic product, the most in two decades. U.S.
The rebound followed the Federal Reserve’s decision to cut its benchmark interest rate to near zero in December 2008 and President Barack Obama’s $787 billion stimulus package. The jobless rate has the central bank promising to keep borrowing costs low and Obama making new proposals to create jobs.
Carlyle Group LP co-founder David Rubinstein countered Roubini’s concerns. He said that even after a rally in global stocks that drove the MSCI World Index up more than 60 percent from March 2009, it’s a “pretty attractive” time to invest.
“There are a lot of great opportunities we see in the
and abroad,” Rubenstein told a Jan. 27 panel. United States
“Sometimes generals fight the last war, economists fight the last recession.”
Policy makers may be undermining their effort to spur hiring by attacking banks, Blackstone Group LP Chief Executive Officer Steven Schwarzman said in a Jan. 28 interview in Davos.
One in four of chief executive officers worldwide surveyed by PricewaterhouseCoopers LLP for the Davos conference already plans to cut jobs this year.
“Financial institutions will feel under siege and they will retreat,” Schwarzman said. “Their entire world is being shaken and they’re being attacked personally,” he said. “We don’t need those financial institutions insecure.”
Summers, a former U.S. Treasury secretary, predicted growth will continue “at least at a moderate rate.” The median forecast of economists surveyed by Bloomberg News is for the
economy to grow 2.7 percent this quarter. U.S.
“What is disturbing is the level of unemployment,” said Summers.
“One in five men in the
between the ages of 25 and 54 is not working right now,” he told a Jan. 30 panel discussion. U.S.
Even after a “reasonable” recovery, it will be “one in seven or one in eight.” That compares to the mid-1960s, when 95 percent of men in that age range were working and “suggests quite profound issues that will ultimately impact on politics and decisions that businesses make,” he said.
A report scheduled for release by the Labor Department on Feb. 5 may show the
gained jobs in January for the second time in three months. U.S. Payrolls probably rose by 13,000 workers last month according to the median forecast of 62 economists surveyed by Bloomberg. The unemployment rate may have held at 10 percent for the third month.
Nobel Prize-winning economist Joseph Stiglitz said Obama’s previous efforts to bolster the economy are only “a step in the right direction.”
“I’m a bit worried that again it’s not enough,” Stiglitz said in a Jan. 28 Bloomberg Television interview in Davos. “He has to take a much more active” approach. “It has to be a second round in stimulus, focusing in particular on investment.”
International Monetary Fund Managing Director Dominique Strauss-Kahn, who two years ago used the Davos stage to lobby governments to increase spending, said policy makers in the
and elsewhere risk narrowing their options if they withdraw emergency measures too soon and the recovery falters. U.S.
“If you exit too early then the risks are much bigger,”
Strauss-Kahn told the Swiss gathering. If the economy relapses “I don’t know what we could do as most of the things we had in the toolkit have been used.”