Futures +50bps pre-open for the second day in a row as Greece remains out of the headlines, Chinese stimulus tightening takes a back seat to New Year’s festivities there, U.S. earnings continue to look good, and M&A activity picks up. Plenty of economic data on the tape this morning as well, as month-over-month Import Prices rose (+1.4% vs. +1% estimate and prior +0.2% reading), year-over-year Import Prices rose (+11.5% vs. +11% estimate), Housing Starts and Building Permits ticked slightly higher, and U.K. unemployment reached the highest level in 13 years. On the earnings front, food giant WFMI and global machinery manufacturer DE beat estimates and are both trading roughly 7% higher pre-market. Earnings from AMAT, HPQ, ADI, and NVDA are also expected after the bell tonight. In M&A news, Walgreen’s has agreed in principle to acquire Duane Reade for roughly $1.08 billion and the NYT posted an article that was bullish on merger activity in the energy sector going forward. Technically speaking, we remain range-bound on light volume, and a hold of the S&P 1100 level would be key for the bulls. In fact, a sustained move over 1100 could carry up through the 1130 level on a technical basis. Note that
Shanghai remains closed, yet Hong Kong is open. Later today we’ll see Industrial Production data (9:15am), Capacity Utilization data (9:15am), and the most recent FOMC minutes (2pm).
According to Bloomberg, 350 of the S&P500 have now reported, with 76% beating estimates. Commodities – such as copper – have also shown recent strength, both from improving sentiment for a global economic recovery and from recent USD weakness, which spurs investors toward “tangible” assets. On that topic, here’s some interesting commentary from Doug Barnet of Thai-dedicated fund Quest Management, as quoted in a recent Marc Faber Gloom, Boom, and Doom Report:
We think that dollar weakness will also translate into higher commodity prices even in the face of moderate demand, because commodities are traded in U.S. dollars. We believe that China and other manufacturing nations that have very large U.S. dollar surpluses are actively using those excess dollars (soon to be devalued) to buy several years’ worth of raw material inventories. This explains why we have oil at $79/bbl off a bottom of $30, zinc at $2530 per ton off a low of $1047, rice at $600/ton off a low of $300, and the BDI shipping index at 3000 off a low of 663. It is also a brilliant strategy by manufacturers to lock in their largest costs during a period of comparatively weak prices for future expenses that they know they will incur, while simultaneously diversifying out of the U.S. dollar.
Given that thought, it makes perfect sense, then, that this story also caught my eye this morning:
Feb. 17 (Bloomberg) --
China sold a record amount of debt, raising speculation it is turning bearish as President Barack Obama increases borrowing to unprecedented levels to sustain economic growth. The Asian nation’s investment in U.S. government securities dropped by $34.2 billion in December to $755.4 billion, the Treasury Department reported yesterday. The decline is the most since Treasury data start in 2000. U.S. Japan’s holdings rose 1.5 percent to $768.8 billion, making it ’s largest creditor. America China is reducing the amount of Treasuries in its record currency reserves after expressing concern about the amount the is borrowing to fund growing budget deficits. Bill Gross, who runs the world’s biggest bond fund at Pacific Investment Management Co., said last month that investors should seek opportunities in “less levered” countries. “If this scale of selling is sustained, then it would suggest that China is taking larger steps to diversify than it has in the past,” said Win Thin, a senior currency strategist in New York at Brown Brothers Harriman & Co., which manages about $40 billion. U.S. ’s Treasury holdings peaked at $801.5 billion in May. Reserve assets climbed to a record $2.4 trillion in December. China
BofAMLCO ups TCO. BCAP ups SFY, WLL. FBRC ups AMTD. JPHQ ups WFMI. MSCO ups UNM, PRU, SNDK. OPCO ups HD. UBSS ups DWA, MAT, EPG, QSII. BCAP cuts PVA. JPHQ cuts TRA. MSCO cuts RGA. UBSS cuts SNI. BYI to be added to S&P400. CPB reits earnings guidance but lowers full-year 2010 sales guidance. CSTR raises guidance. DISCA to be added to S&P500. DVN beats by 35c. GSIC announces 9.3M share offering. HWAY reports in-line. ING higher on higher net profit. LZB beats estimates. PACR beat estimates. VCLK beats by 4c but misses on revs. WINN reports in-line. CCL, ELY, ROST, MAR, TGT to trade ex-div.
Asia higher overnight (
still closed). China Europe is surging over 1% higher thus far. USD +35bps. Oil +44bps. Gold +10bps.
S&P 500 PreMarket (last/% change prior close/volume):
WHOLE FOODS MKT 32.73 +7.24% 262670
DEERE & CO 57.50 +6.92% 549396
SANDISK CORP 28.42 +3.95% 159973
DEVON ENERGY CO 70.90 +2.6 % 20754
DR HORTON INC 13.55 +2.5 % 3376
Today’s Trivia: If you suffer from thaasophobia (as many in our business do…), what are you afraid of?
Yesterday's Answer: Believe it or not, according to NBC coverage of the games, the most populous city to ever host the Winter Olympics is…
Best Quotes: “Don’t short a dull market. For the past month, investors have endured a headline driven tape. Today, as the headlines and the volume died down, a sharp rally ensued. Today’s 1.8% rally in the S&P 500 essentially cut the index’s year to date losses in half. Despite all of the sloppy action, month to date, today’s rally places the index up almost 2% in a surprisingly quiet manner. Today’s post holiday volume clocked in as the 3rd slowest day of 2010. There were several catalysts that drove activity. The strengthening of the Euro which erased the previous 4 sessions of losses versus the Dollar was the primary driver boosting equity and commodity prices across the board. Better than expected reports in Empire Manufacturing and from the downtrodden NAHB (which has been consistently disappointing over the past 6 months) provided additional incremental positives.
Today’s action helped improve the technical picture of the market. Several Sectors have spent the past couple of weeks testing their 200 day moving averages. Today’s rally pushed them above those consolidation levels. The S&P 500’s close just shy of 1095 has also gone a long way in repairing some of the technical damage created by the harsh sell-off on February 4th. The key upside range that investors should focus on is the 1105-1109 level. There is substantial consolidation from November, December and January at the 1100 level which needs to be cleared. Thereafter, 1105 becomes important because a close at or above that level would create a higher high for the month, exceeding the February 2nd peak. Clearing 1109 would represent a rise back above the 50 day moving average. If those milestones are cleared, the market can then work on repairing the damage incurred on January 21st and 22nd. Of course, the irony is that much of the political agenda that created that damage has fallen on its face.” -- Mike O’Rourke, BTIG Chief Market Strategist
“With the number of homes entering foreclosure expected to climb to a record 4.3 mln from 3.4 mln in 2009, BAC, WFC, JPM and C are clearing their books of troubled mortgages by embracing “short sales”, which are expected to climb sharply this year in some parts of the US. The appeal to a short sale for the banks is smaller losses, around 20% less than a foreclosure. According to real estate broker Jim Klinge, “if 2009 was the year of the loan modification, 2010 will be the year of the short sale.” –FT