Futures are resilient and ~flat this morning as U.S. initial jobless claims (a disappointing 472k vs 455k/e) and China’s “soft landing” (Chinese PMI fell for a second straight month to 52.1 from 53.9 in May) are counter-balanced by a non-eventful (thus a net positive) and perhaps better-than-expected Spanish bond auction across the pond. (Recall that
’s AAA rating was put on review by Moody’s yesterday.) Spain ’s moderate slowdown in economic expansion – as indicated by various recent data points – has created demand concerns for continued global growth. Adding European austerity, unemployment levels, China U.S. financial regulation, and deficit levels (including the potential for tax increases and capital gains restrictions) to the mix create the proverbial “wall of worry” that investors have difficulty pushing past. Despite all of that, we’re looking at a flat open today. Regarding European debt and the ECB, JPM reports that 6-day tender results were published this morning: U.S.
EU111.2B demand at today's 6-day tender; 78 banks bid for 6-day cash; people were watching the 3-month demand on Wed and today's 6-day tender to see how well the market's were handling the 12-month expiration. The EU111.2B was inline-to-a-bit-higher than expected and makes the 3-month demand yesterday not seem so low (although combined, the 3-month + 6-day less than the 12-month expiring today and were less than people feared).
ECB lending continues to hit record highs (rose to above Eur900B for the first time ever yesterday) and Euribar continues to move higher amid signs of stress in the European money markets (rose to 0.782% Thursday, reaching its highest level since 9/8/09).
In political news, the House passed the FinReg bill but the Senate will delay their vote until after the July 4th recess. In geopolitical news, the WSJ is reporting that
Iran has delivered a radar system (to thus avoid an Israeli strike) to . In technical news, beware the “Dark Cross,” as the S&P500 50-day moving average approaches the 200-day moving average to the downside. We are roughly 1% away from this cross. This is a very bearish technical pattern and is discussed on page C1 of the Journal (http://online.wsj.com/article/SB10001424052748704334604575339360851070220.html). Syria auto sales for June are due for release today. Estimates for GM, Ford, and Chrysler are for gains from between 15-30%. In other news, BofAMLCO trimmed estimates for large cap financials, including GS, U.S. , and C. Additionally, IT firm Gartner cut its 2010 IT spending forecast from +5.3% to +3.9% on JPM, MS Europe and euro concerns. Hurricane Alex downgraded to Category 1 storm as it moves inland over NE Mexico.
Given the lack of excitement in today’s market action, I will take the contrarian view on two things – one related to stocks and one not related. First, it is clearly not a popular view but it needs to be said…LeBron is wildly overrated. NYC & Miami should be careful what they wish for as they mortgage their respective futures. (For a scary historical reference from another sport see Walker, Herschel & Cowboys, Dallas.) Unless David Stern (aka Vince McMahon) fixes things so “King” James wins a title, I am just not sure he has what it takes (the heart of Larry, the ruthless assassin’s touch of MJ) to get there on his own. Hell, Durant may win one first. Sorry, LeBron-lovers…I’m not feeling it. Especially at this valuation, I will take the other side. Sold to you. Second, given recent market action, the potential for very poor jobs data may be priced in. Beware the potential for a relief rally on light volume tomorrow if jobs data is not horrendous…or even surprises a bit to the upside.
In other news, the Washington Post is reporting that
states face a combined $89 billion deficit this fiscal year, and will be forced to undertake more drastic cuts in education, police, and medical services: U.S.
States seek financial help as new fiscal year begins By Michael A. Fletcher, Washington Post Staff Writer, Thursday, July 1, 2010; A11
State governments desperately need money. Congress is in no mood to spend it. And the reckoning will begin Thursday, when the new fiscal year will start for most states.
Nothing less than the nation's nascent economic recovery hangs in the balance. States say that if they do not find financial rescue they will have to cut services and workers. That would deliver a potentially crippling blow to the economy, which needs higher employment levels to fatten wallets, promote spending, bolster tax revenue and reduce dependence on expensive social services.
States face a combined deficit of $89 billion in the fiscal year that begins Thursday, according to the National Conference of State Legislatures. And because every state but
is required to balance its budget, the only recourse is cutting employees or vital programs, including education spending, medical services, programs for the disabled and elderly, and police and fire protection. Vermont
All that cutting could mean the loss of 900,000 jobs -- in the public sector and in private companies that rely on state business, according to the Center on Budget and Policy Priorities, a liberal research group.
President Obama has called for $50 billion in aid for states, but concern about the federal deficit has made lawmakers wary about significant new spending.
"We may be looking at a culture and lifestyle around this country that will start to remind people of the Depression, not a recession, if we cut through these budgets much more," said New York Gov. David A. Paterson (D), who was among a small group of state chief executives who descended on Congress on Wednesday to make a last-ditch plea for federal help.
Finally, for those interested, here is some data on the recent quarter- and month-end, pulled from BTIG (not pretty, bold is mine…retailers and energy, i.e. “consumptive” stocks, just got crushed…along with financials):
For the Month:
INDU -3.6%, SPX -5.4%, NDX -6.1%, CCMP -6.5%, RTY -7.9%,
MID -6.7%, BKX -7.6%, XBD -10.7%, HGX -17.5%, RMZ -5.6%, IXR -2.8%, CYC -8.9%, TRAN -7.6%, CRB 1.5%, RICIX -0.7%,
Gold (aug) 2.3%, Crude (aug) 0.3%, Nat Gas (aug) 3.4%, OSX -4.6%, XOI -8.3%, XAL -3.4%, UTY -0.9%, MVRX -14.8%, NWX -10.9%, SOX -6.6%, HMO -5.4%, DRG 1.8%, BTK -2.7%
NKY -3.9%, HIS 1.8%, ASX -4.9%, KOSPI 3.5%, NIFTY 4.4%, SHSZ300 -7.6%, TWSE -0.6%
UKX -5.2%, DAX 0.0%, CAC -1.8%, RTSI$ -3.6%, Stoxx -1.4%
IBOV -3.3%, MEXBOL -2.8%
For the Quarter:
INDU -10.0%, SPX -11.9%, NDX -11.2%, CCMP -12.0%, RTY -10.2%,
MID -9.9%, BKX -11.3%, XBD -16.9%, HGX -19.9%, RMZ -4.9%, IXR -8.8%, CYC -13.4%, TRAN -8.4%, CRB -5.4%, RICIX -8.4%,
Gold (aug) 11.5%, Crude (aug) -11.2%, Nat Gas (aug) 9.6%, OSX -20.3%, XOI -18.3%, XAL -4.6%, UTY -4.8%, MVRX -16.6%, NWX -15.6%, SOX -9.3%, HMO -11.1%, DRG -10.4%, BTK -16.6%
NKY -15.4%, HIS -5.2%, ASX -12.6%, KOSPI 0.4%, NIFTY 1.2%, SHSZ300 -23.4%, TWSE -7.5%
UKX -13.4%, DAX -3.1%, CAC -13.4%, RTSI$ -15.2%, Stoxx -12.2%
IBOV -13.4%, MEXBOL -6.3%
S&P 500 PreMarket 8:30am (last/% change prior close/volume):
QUESTAR CORP 15.42 +5.18%
TYCO ELECTRONICS 24.37 -3.98%
NORTHERN TRUST 45.14 -3.34%
ANADARKO PETROLE 37.05 +2.66%
TENET HEALTHCARE 4.44 +2.3 %
APOLLO GROUP-A 41.59 -2.07%
MACY'S INC 17.53 -2.07%
HALLIBURTON CO 25.05 +2.04%
MOODY'S CORP 19.52 -2.01%
ROWAN COMPANIES 21.50 -2.01%
Today’s Trivia: Name the smallest nation to ever qualify for a World Cup. When?
Hungary beat El Salvador 10- 1 in 1982 and 9- Korea 0 in 1954. Thus 9 goals is the largest margin of victory in World Cup history.
Best Quotes: BofAMLCO trader note… To put the first half of the year in perspective, equities trailed bonds by the widest margin in nine years - the S&P 500 lost 7.5% over the first 6 months while Treasuries returned nearly 6%. VIX up nearly 60% ytd. Does a new month mean a fresh start? Not likely but one can dream. Our bank analyst, Guy Moskowski, cutting numbers pretty significantly on the majors - GS, MS, JPM and C. A lower than expected PMI report out of
is being cited as the catalyst for today's weakness. The equity markets seem to be ignoring a better than expected result for a Spanish bond auction even though the Euro has rebounded nicely on the story (granted it was down 15% for the quarter). Crude is trading down another 1.5% this morning and looks to be breaking down technically on the heels of the worst quarter for commodities in a decade. Lots of economic data to digest this morning from jobless claims to home and vehicle sales. Technicals are pretty bleak with 1000.00 being the next big target on the downside. On the upside, likely need to get to 1070 before anything good can be said. China