Futures -80bps this morning as
lifts its reserve requirement for a second time this year in an effort to temper the fastest-growing major economy. Chinese stimulus removal typically weighs on global markets from commodities to currencies. Please note the news was announced post-market close in China , where markets will remain shut all next week for the Chinese New Year. There is lukewarm news out of Europe as well, as GDP in the 16-member EU rose 0.1% from Q3 vs. an expected 0.3% gain and China shows up as a surprise laggard in the group. On the positive side, US Advance Retail Sales for January were +0.5% vs. the +0.3% expectation. UMichigan consumer confidence and Business Inventories are due at 10am. In corporate news, Germany banking giant Lloyds (LYG) is down nearly 5% on plans to issue 3 billion new shares to settle a bond exchange. Also, MOT trades higher pre-market as it targets Q1 2011 to separate into two publicly traded companies. SKIL is higher on a plan to go private. Finally, global industrial giant IR is lower after posting weaker than expected earnings. The Fed’s Tarullo testifies before a Senate panel on systemic risk at 2:30pm. In quasi-geopolitical news, UK China called on the to cancel the proposed Obama-Dalai Lama meeting next week and says it is “firmly opposed to the event.” US
Taking a look at the broad tape…given the three-day holiday weekend ahead and the snow in the northeastern US, today could either shape up as a sideways snoozer or as a volatile mover. After all, in a thin volume tape it does not take much to move markets... In support of the latter, here’s one trader’s take on things heading into the open:
Why are we only down 8 ticks on the S&P?
raised the reserve requirement a second time by 50 bps in a month to cool the fastest-growing economy. The levels are about 16.5% for big banks and 14.5 for small banks. Chinese New Year so the markets were closed. China Markets are closed on Monday. U.S. Europe's recovery almost stalled in the 4th quarter. The GDP rose 0.1 percent from the third quarter. It appears that the European governments are struggling to contain the fall-out from , hence we are on the cusps on another storm. The Euro fell for a third day. We are back to trying to figure out what type of world government cocktail is going to cure the ills of the global economies? Watch the dollar, it will be the fortune teller. I guess my biggest question is are we prepared for the continued strengthening of the dollar? Commodity prices will drop rapidly, watch out for the Treasuries, they are on the brink of rolling over. Cost of borrowing, despite everything the Greece government has tried is going higher. There is more pain to take, there is no easy way out. Possible trading range today is 1075 - 1050 on the SPZ. A sharp break of 1060 is the accelerate point to the downside. Since the market is getting more volatile, I think we should start preparing for wider moves on a daily basis. I say sell the open, we are heading south. US
As I continue to think about the 30,000 foot view of things, it’s interesting to think about the “compare & contrast” for 2010 vs. 2009. Here’s a possible consistent theme: being forced to buy what you don’t really want to buy. For example, a major 2009 theme was "hold your nose and buy 'em," as stock prices were driven up by investors "stimulated" by ZIRP and pushed to equities to find any kind of yield at all. And now, perhaps 2010 will be the year of "hold your nose and buy 'em" for bonds. Investors - despite mounting fears over US deficit levels - may be forced into the lesser-of-evils "safe haven" of treasuries in an uncertain world. Here’s an interesting quote from Bloomberg columnist William Pesek this morning:
The fiscal squishiness pervading the globe is a clear and present danger to developing nations. Say
Greece went the way of . Who would rush into the euro for safety? Or into the yen? Most likely, the dollar would be the haven of choice, strange given the Iceland ’s fiscal trajectory. In such an environment, U.S. Indonesia, Thailand and can’t expect much capital to come their way. Good chunks of the money sitting in their markets today might leave and go into Malaysia Treasuries. Even more developed economies such as U.S. ’s would be hard-pressed to remain a big blip on investors’ radar screens. South Korea
BofAMLCO ups CMG. CSFB ups DHI, NVR, RTP. DBAB ups PNC. JEFF ups FE. JPHQ ups PPO. KBWI ups AIV, FHN, PRAA. BofAMLCO cuts MMM. BWLD misses by 5c, guides lower. CGNX beats by 6c. CSTR reports in-line across the board. DDSS lower on announced $20M offering. JEFF cuts EHTH on earnings. GDI beats by 1c. HTGC beats by 1c. INMD prices 2.5M shares at $7.50. JohnsonRice cuts RIG. UPL beats by 4c. RAJA ups DFT, CBB.
NILE misses by 3c. KEYB cuts OSK. PNRA reports in-line and guides higher. QDEL beats by 20c and beats on revs. SWM rebounds 6.5% after yesterday’s rout as it issues a press release clarifying its contract with Philip Morris USA. JPHQ ups PIR, MAR. JEFF cuts SPTN, SYMC.
Asia higher overnight – note that China is now closed for Chinese New Year ALL NEXT WEEK and stimulus tightening there was announced after their market close.
Europe slightly higher. USD +65bps. Oil -170bps. Gold -70bps.
S&P 500 PreMarket (last/% change prior close/volume):
UNUM GROUP 17.96 -7.52% 600
INGERSOLL-RAND 31.55 -6.96% 201306
AGILENT TECH INC 31.00 +5.59% 24775
WHOLE FOODS MKT 27.78 -4.9 % 300
AMERIPRISE FINAN 36.46 -4.20% 200
LOEWS CORP 33.79 -4.03% 100
CIGNA CORP 32.00 -4.02% 200
MOTOROLA INC 6.88 +3.46% 675008
IAC/INTERACTIVEC 20.88 -3.06% 500
Today’s Trivia: One of college basketball's best and oldest rivalry games takes place tonight and it’s not UNC/Duke... The all-time record between these schools is 113-87, and while they first started playing basketball against each other in 1901-1902, their animosity for one another actually dates back to a dispute in 1821... What schools are they?
Yesterday's Answer: While the
Marianas Trench is 6.8 miles deep, Everest is 5.5 miles high.
Best Quotes: “It was a slow day here in the
equity markets. It is good to hear the administrative backlog for Initial Jobless Claims is finally over, it only took a month. Between this and the benchmark revisions delivered last week, the Department of Labor is not really doing much to bolster confidence in its impaired credibility. The tenor of trading today was one of a lack of sellers, as opposed to enthusiastic buyers. Investors are waiting for signs that stability is materializing before chasing equities higher. The risk trade outperformed, as small and midcap indices posted solid performance. We suspect short covering helped fuel the move in a light volume environment. The S&P futures stopped reacting to every Grecian headline, which has led to both bad selling and bad buying over the past week. Considering this situation will not be resolved overnight, it is positive to see the panic reactions abating from the market. The 30 year bond auction was pretty sloppy, but trading activity following the auction exhibited a respectable recovery. All in all, it was a slow day with many moving parts. The S&P 500’s one percent gain gave Bulls an edge, but only a slight one. It could be a sign that after correcting 8% in the span of a few weeks, those who want to sell may have already done so. The S&P 500 closed just shy of the 1080 resistance. A close in the 1085-1090 level would repair much of last Thursday’s damage. On the support side, 1060 and 1040 are the levels to watch.” --BTIG’s Mike O’Rourke U.S.