Monday, March 15, 2010

Morning Note...

Futures are slightly lower (-30bps) this morning on concern that both China and India may take tightening steps aimed at cooling their surging economies and staving off inflation.  Note that inflation in both countries is – by the most recent data released – at 16-month highs.  In US economic news, this morning’s Empire Manufacturing reading was 22.86, which was favorable relative to the 22.00 expectation, but lower than the 24.91 February reading.  Industrial Production and Capacity Utilization are due at 9:15am today.   Overseas, European finance ministers meet in Brussels today and tomorrow to perhaps formalize a backstop for Greece.  Moody’s also made cautious comments about the U.K. being slightly closer to losing their AAA credit rating, and there’s a story about bets against the GBP being 8x more than George Soros’ famous 1992 winning trade.  European markets are slightly lower at the moment.  In Asia, China’s Premier Wen delivered strong commentary aimed at the United States (see below for more), and GOOG faces issues renewing their license in China over censorship issues.  In political news, Obama delayed a trip to Asia in order to lobby for the HealthCare bill.  Further, Senator Chris Dodd will unveil his financial reform bill today.  In M&A news, PVH finalized a deal to buy Tommy Hilfiger for $3 billion.  In corporate news, BSX is trading down 20% on a BERN report that defibrillator sales have been suspended.  PEP is trading higher after raising its dividend by 7%. 

Looking ahead, the FOMC meets tomorrow and a rate decision is expected at 2:15pm.  No change is the consensus expectation, and the language is largely anticipated to remain the same.  FDX earnings are scheduled for Thursday morning.  Note that Friday, March 19th marks quad witching, as futures and options expire. 

Note that S&P futures have traded up 11 days in a row, which marks the first time this has happened since 1982.  Additionally, it’s worth mentioning that the NCAA tournament begins in earnest Thursday and Friday, and has a tendency to pull traders away from the screens.  Further, St. Patrick’s Day is Wednesday, which marks another potential distraction for traders. 

For those who pay attention to the geopolitical bantering, here’s a summary of the China/U.S. weekend from BTIG and the WSJ:

WSJ discusses China Premier Wen Jiabao’s ‘sharp words’ for the US: At his once yearly press conference, the Premier gave little ground on China’s currency policy and suggested that U.S. efforts to boost exports through a weakened dollar amounted to a kind of trade protectionism. He blamed the recent deterioration in relations between the countries on weapons sales to Taiwan and the meeting between President Obama and the Dalai Lama. He said these moves violated Chinese territorial integrity. He said that he does not believe the yuan is undervalued and that China opposes pressure from countries trying to force others to appreciate their currencies. 

GOOG lower on China issues, BIDU higher as a result.  Barron’s cautious on the solar industry.  ACI cut at HSBC.  MSCO cuts APA, CHK.  KEYB ups ARII.  UBSS cuts ARMH, CF.  Janney cuts DWA.  HR cut at JEFF.  IBKR, ICE cuts at KBWI.   PTEN cut at MSCO.  SB files for 9M share secondary.  BERN sees STJ and MDT benefiting from BSX issue. 

S&P 500 PreMarket 8:30am (last/% change prior close/volume): 
BOSTON SCIENTIFC       6.15      -20.95%            7301877
ST JUDE MEDICAL          40.25    +7.33%             1637751
CONSOL ENERGY            51.00    -6.13%              50026
PERKINELMER INC          24.50    +4.84%             1400
MEDTRONIC INC             45.45    +3.44%             52255
MOODY'S CORP              27.40    -3.04%              2600
RADIOSHACK CORP        22.27    -2.62%              5250
XL CAPITAL LTD-A          18.30    -2.56%              100
GANNETT CO                 15.50    -2.52%              500

Today’s Trivia:  According to the WSJ Weekend Edition, what is the average percentage increase in applications for a school that wins the NCAA Basketball Tournament the year before?

Yesterday's Answer:   Astronomers differ on the exact timing, but consensus estimates indicate we are currently in the Age of Pisces and will be so for another 600 years.  The Age of Aquarius – by most measures – is due to start around 2600 AD.   

Best Quotes:  “Good morning.  Major indices posted another week of gains last week, many hitting new 52 week highs on Friday, but on below average volume.  The Dow gained 0.5%, SP500 1%, Nasdaq 1.8% and Russell 2000 1.5% for the week.  While the SP500 has rallied 4 of the last 5 weeks, complacency seems to reign with the VIX hovering near multi year lows at  17.58, and a lack of conviction from institutional investors.  We haven’t seen a lot of block activity, and many I talk to are simply in “wait and see” mode, holding onto their existing positions.  Today, Banking Chairman Dodd will reveal his financial services industry bill/overhaul at 2pm.   This could set up for the market to respond negatively.  When we were on Capitol Hill last week, no one seemed to know what reforms the bill contained nor did it have bi-partisan support.  Furthermore, once the healthcare debate/bill is settled by next Friday, expect Financial Services reform to move back to the spotlight.  Industrial Production and Capacity Utilization numbers are released pre-open, and the FOMC quarterly rate decision comes tomorrow midday (no change expected…but the language will be watched).  Quad witch expiration this Friday.”  --BTIG trading summary

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