Futures +20bps this morning after yesterday’s action gave us the first down day of 2010. Despite yesterday’s selling, volumes remain somewhat light and conviction appears to be lacking. In economic news, Mortgage Applications were +14.3% over last week. In corporate news, KFT raised 2009 guidance. Also, GOOG may end its operation in China following several “well coordinated” attacks on the email accounts of human rights activists that highlight the limits of free speech there (BIDU is bid up as a result). In sovereign wealth news, budget crisis issues continue in
and it will be interesting to see to what extent Washington – and Obama – are willing to help. (Given that it’s the 8th largest economy in the world, it’s worth adding to the global scale in terms of sovereign wealth default. See quote section below for more on debt default from Art Cashin). Overseas, Asia is lower on Chinese stimulus concerns, and California ’s economy shrank more than expected. Further, SocGen issued a profit warning, and Royal Dutch Shell is rumored to do the same. It’s always good to reference a variety of voices, so here’s a good quick & dirty summary from BofAMLCO this morning: Germany
It sounds like the outrage is starting to take form. Every headline is Tax this, and put a fee on that, and over spend here. The Obama budget is set to be laid out on Feb. second. The major event though takes place next Tuesday the 19th. It is the special election for Ted Kennedy's Senate seat. Republican Scott Brown has ran a good campaign, and what has been a strong hold of the Democratic party could send shock waves throughout the political spectrum. The main event today is the Fed’s Beige Book report, which is released at 2pm. We expect this report to confirm that the economic recovery is broadening out across sectors and regions. The Treasury also releases its monthly budget statement and the consensus is looking for a deficit of $92 billion in December.
’s is moving to curb lending. Its decision to hike the reserve requirement ratio 50bps came earlier than market participants expected and sent equities lower. See page A8 of today’s Wall Street Journal, “ China Hits Brakes on Economic Stimulus.” The Nikkei dropped 1.3%, or -144 points, to 10,735. The Hang Seng sank 2.6%, or -578 points, to 21,749. China China’s Composite took at 3.1% hit and the Korean Kospi fell 1.6%... Shanghai
The Fed’s Beige Book will be released at 2pm. It’s also worth noting that CEO’s from Goldman Sachs, JPMorgan, Morgan Stanley, and BofA Merrill Lynch will testify today before the impressive-sounding Financial Crisis Inquiry Commission. Given the “timeliness” of this inquiry, my bet would be that the testimony simply becomes “free air time” for politicians looking to be “tough on Wall Street” for their constituency. In other words, there may be plenty of bluster and nonsense, and not much else. Looking ahead, INTC reports tomorrow and JPM reports Friday. Jobless Claims are also due on Friday. Given the recent interest in the AAII bull/bear reading of retail investors, this also caught my eye this morning:
According to a Bloomberg survey among its users all over the world, confidence in the world economy rose to its highest level in its two years history reaching a 66.6 reading from 58.9 points in December. It should be noted, that results for the
survey reached 54.4 points from 47.7 last month, surpassing the 50 level for the first time since the recession started. US
Cannacord ups BHP, RTP. CHA initiated MP at
. Cramer positive CLNE. BofAMLCO ups MEE. BCAP ups BKD. CITI ups CSE. DBAB ups BIDU, PCS, WERN, WYN. GSCO ups IACI, ASML. CSFB ups AZN. KBWI ups RJF. OPCO ups LMIA, TGI. UBSS ups JOYG. WEFA ups SE, SYMC. BofAMLCO cuts PCU. BCAP cuts AFFX. OPCO cuts VSAT. SocGen cuts SIG. UBSS cuts TGP. WFA cuts SRE. EPB announces 8M share offering. KEYB cuts KMT; ups SOA. BERN
Asia lower overnight on
’s tightening stance weighs on equities. China Europe mixed to slightly higher. USD -35bps. Oil -50bps. Gold +55bps.
Brightpoint PreMarket (yest close/premkt/% change/volume):
S&P 500 PreMarket (last/% change prior close/volume):
WYNDHAM WORLDWID 21.29 +4.16% 37915
IAC/INTERACTIVEC 21.73 +3.57% 200
MASSEY ENERGY CO 49.84 +3.08% 25740
MGIC INVT CORP 6.61 +2.96% 1300
NORDSTROM INC 37.69 +2.39% 100
GOOGLE INC-CL A 576.56 -2.36% 142909
TIFFANY & CO 47.51 +2.30% 100
Today’s Trivia: Name five non-English-speaking countries where traffic drives on the left.
Yesterday's Answer: The five movies to have earned over $1B are Titanic, Avatar, Pirates of the
Caribbean 3: Dean Man’s Chest, Lord of the Rings: The Return of the King, and The Dark Knight.
Best Quotes: Bubble Warnings And Sovereign Debt – The cover story in the Economist is about asset bubbles. It is quite good but a bit long to cite here. In their Buttonwood essay, they discuss repaying sovereign debt vs. the will of the populace. Using
as an example, they began this way: Iceland
THERE are many ways to decide whether to repay your debts but a national referendum is surely a first. That is what is going to happen in
after its president refused to sign a bill paying €3.8 billion ($5.5 billion) to the British and Dutch governments over 15 years. Iceland
Given that a quarter of the Icelandic population has signed a petition opposing such payments, it is not difficult to imagine how such a poll will turn out. “Vote for lower incomes” is not going to be a very popular slogan. And the Icelanders will only be the first. Around the world governments have assumed the debts of their private sectors. That is an easy commitment to make in the short term. Paying the money back is another matter. If the debt is large enough, the result will be years of austerity. Electorates will choke at the cost.
The reason this discussion is important is the level of sovereign debt around the world. The rescue of the financial system was achieved by transferring mountains of debt from private to sovereign hands. When it comes time to begin paying down that debt, will the populace willingly bear the burdens and sacrifices needed? Or, will they vote to default or elect officials willing to default? New rules. New game. Old problems.
--Art Cashin, UBS