Futures ~50bps lower on renewed global slowdown concerns, perhaps sparked – in part – by yesterday’s less-than-ebullient economic commentary from the FOMC statement. Greek CDS are widening to new all-time highs overseas, and famed investor George Soros gave a speech negative on
Germany’s austerity relative to future prospects for the euro and a unified Europe. Looking a bit further afar, Australia’s PM Rudd was ousted by a vote of no confidence and miners spiked on the news, only to give the gains back when the new PM – Julia Gillard – kept the prior Treasurer on staff, meaning there may be some wiggle room with the new superprofit tax proposal, but perhaps not as much as expected. In Asia, raised rates for the first time since 2008. In economic news, May Durable Goods Orders came in near the expectation, at -1.1% vs. -1.4%/e. Note this is considerably lower than the April +3% revised reading. Initial Jobless Claims for the week ending June 19th were 457k vs. the 463k expectation. The prior reading was revised slightly higher to 476k from 472k. Continuing Claims for the week ending June 12th were 4.548M vs. the 4.55M estimate. In corporate news, toy-maker Hasbro (HAS; +4%) is higher on news of a private equity takeout from Providence Equity Partners. Retailer Bed Bath & Beyond (BBBY; -5%) is lower after posting better earnings than expected but lowering guidance last night. Footwear giant Nike (NKE; -2.5%) is also trading lower despite in-line earnings last night. Drug giant Pfizer (PFE; -1.5%) is also trading lower after suspending new arthritis drug trials yesterday. Looking ahead, RIMM and ORCL earnings are due after the bell today. Taiwan
Regarding financial reform (expected to be finalized today), CNBC had this on the Volcker Rule: Early reports indicate there may be support on Capitol Hill to allow banks to put 2% of their capital into hedge funds they sponsor or prop trading. Bank lobbyists have been pushing for a higher number, perhaps up to 5% — a level which would allow many banks to escape the Volcker rule altogether. If the proposed thresholds are implemented, banks like C and BAC would be exempt from the Volcker Rule, but GS would be restricted.
For blogwatchers, interesting article on the Financial Times Alphaville regarding the potential drying-up of liquidity in
July 1 could be the day liquidity dies
We’ve mentioned July 1 a couple times before. That’s the day the European Central Bank’s first and largest 12-month Long Term Refinancing Operation (LTRO) will run out. It’s also the day Barclays
money market analyst Joseph Abate expects three-month dollar Libor to start rising, to as much as 75 basis points. The reasoning is that the start of the 12M LTRO, which added €442bn in market liquidity in June 2009, was the thing that kicked off the decline in dollar Libor, shifting it down by about 25bps between Spring and September 2009, when a second LTRO was launched. US
Plenty of political jawboning is coming from
Europe ahead of this weekend’s G20 summit. According to the WSJ, German Chancellor Angela Merkel “roundly rebuffed” President Obama’s call for Germany to increasingly assist in the global recovery, “even as she warned that Europe’s own financial crisis is far from over.” Ahead of this week’s G-20 summit, Merkel “took aim at an idea voiced by France, the U.S. and others that should help global producers by spurring its persistently weak consumer demand and ending its dependence on unsustainable spending elsewhere.” The chancellor talked of data points that showed how her country has made significant contributions to battling the global economic crisis, and specifically denied that Germany Germany delayed the rescue of for too long. Greece
Speaking of politics, it’s interesting that someone mentioned the latest Obama popularity poll this morning. I consider myself relatively neutral politically, but it has to be noted: has any President lost his luster faster than Barack Obama?? Peter Orszag’s resignation, Gen. McChrystal, the fiasco in the Gulf (including a judge openly mocking the Administration in lifting the drilling moratorium), Health Care, FNM/FRE…the hits just keep on coming. Not a good few weeks for the guy. According to the recent WSJ/NBC poll, Obama’s rating stands at 45%, down 5% from last month. Further, 62% of Americans feel the country is “on the wrong track.”
Worth keeping an eye on FNM/FRE, by the way Interesting commentary from Politico: “Bank executives were panicking last night over a proposed fix to Title II of financial reform literally penciled in at the last minute. The fear is that that the proposed change to the orderly liquidation authority could leave banks on the hook for a possible wind-down of Fannie Mae and Freddie Mac that could cost as much as $400 billion”
Regarding housing, talk of a double-dip continues to make the rounds. BTIG’s Mike O’Rourke tackled this last night:
Despite the slow environment, there is a theme that appears to be gaining traction. It is the talk about a double dip in housing. There is no doubt that the data has softened. Some choppiness was anticipated with the sunset of the homebuyer tax credit. In early June, several builders had already warned of the weakness in May. Over the past two days, investors learned that both Existing and New Home Sales for May missed expectations by big margins. Despite the recent round of negative headlines, this was not new to the market. Over the past month coming into today, the S&P 500 Homebuilding Index was down 18%, and over the same time period, the S&P 500 was slightly positive. Therefore, it should not be surprising that the S&P 500 Homebuilding Index rose today on the lowest new home sales report on record. It is not that housing is unimportant, but this talk distracts investors from remaining focused on the true key driver of recovery, which is jobs. …Housing will follow jobs and it is that simple. If you track Housing Starts and New Home Sales versus the year over year percentage change in Employees on Non Farm Payrolls over the past 50 years, you will find that the jobs data leads the Housing data.
For some early fun, here’s something interesting and creative from the morning commentary piece from ConvergEx:
In our seemingly never-ending search for new economic indicators, today we look at what Americans like to read at major turning points in the equity markets. With the help of archived copies of The New York Times nonfiction bestsellers list, we looked at 12 (six highs and six lows) turning points in the S&P 500 from 1973 to the present day. The most telling category is inspirational/self help books, which grow much more popular at market lows. There are three books currently on the list that fit that bill, equal to the average number at previous market bottoms. A bullish sign if you are inclined to look for them, but a bit worrisome for us given the market’s run from the March 2009 lows. In the same vein, books on politics and public policy seem to grow more popular at slack points in the market, and the current list has two such offerings, in line with prior market lows.
I also thought this tidbit from Barclay’s was interesting:
* INTERESTING MKT TREND FROM OUR MALIK KING: On avg, the day(s) that follow the FOMC announcement have generally been more negative. S&P closed down 7 of the last 12 times the day after the Fed decision. Of the 5 days that were positive the day after Fed day, 4 of them gave back essentially all of the Fed and post-Fed day gains over the next 3-5 sessions.
Finally, I don’t usually make this type of rant-style commentary, but is there possibly a worse commercial that the trader with the phony French accent? If I only read zee headlines, I wud agree
you… But I haf run zome numbears, and I have a different ohpinion… First, given the SocGen trading scandal a while back with Jerome Kerviel, why would any company chose a French protagonist for a commercial? Second, why would you choose a French protagonist for an American commercial anyway? Americans hate the French. Third, how about a real French guy speaking the lines? What did the audition say, Wanted: voice-over guy to fake smug bad French accent for trader commercial? I have to imagine street-wide trading desks crack up at this ad, and probably destroy the one French guy in the room every time it comes on CNBC… Meanwhile, I have no idea what this ad is even for, other than a proxy for general French smugness. (And I say this as a guy who grew up in wis and loves French culture…go figure.) France
BCAP ups PNW. CSFB ups ABX, AEM, EGO. DBAB ups PPL. FBRC ups PGN. OPCO ARO, CTRN, JCG, PSUN, ROST, TJX, ZUMZ. BARD ups CFNL. UBSS ups KMX. BofAMLCO cuts CP. BCAP cuts ARUN. Janney cuts HD, LOW. OPCO cuts AEO. SPHN cuts NE.
S&P 500 PreMarket 8:30am (last/% change prior close/volume):
BED BATH &BEYOND 39.40 -4.97% 93673
FANNIE MAE .390 -4.88% 67896
HASBRO INC 42.80 +4.09% 1408461
FREDDIE MAC .4711 -3.86% 10100
PAYCHEX INC 26.47 -3.46% 5700
NIKE INC -CL B 70.22 -3.17% 13755
DISCOVER FINANCI 14.41 +2.86% 77712
APOLLO GROUP-A 45.20 -2.44% 6717
HARLEY-DAVIDSON 24.34 -2.41% 1870
NUCOR CORP 40.85 -2.09% 2136
PFIZER INC 14.57 -2.08% 346436
Today’s Trivia: What is the most common surname for World Cup players?
Yesterday's Answer: No nation outside of Europe or
South America has ever won the World Cup – they are each tied at 9 titles apiece. Will this year break the trend?
Best Quotes: From BofAMLCO… The Fed spelled it out for us all. They are concerned about the economy, and so should you. They pledged to keep its benchmark interest rate at zero for an extended period of time, and the debt crisis continue to challenge job growth. Today's claims will be watched, but the morning gap lower has already set the tone. This market will remain under pressure until next weeks Nonfarm numbers. It didn't need a WSJ poll to tell me people are losing confidence, seems like everyone has some sort of issue, and they all blame the government. PFE has some disappointing news out last night trading down 2.5%. There is a Soros article out there saying
Private is the new headline. We might be in-store for an employment tape bomb in June. The table below details the number of temporary 2010 Census workers paid by week. At the outset, note that these data does not line up one-for-one with the published data from the Bureau of Labor Statistics. But they do suggest that we are in store for a significant decline in Census employment in June. We could see a drop of 250,000 (calculating off the payroll survey weeks) as these temporary positions have been rolling off since mid-May.