Friday, July 2, 2010

Morning Note...

Futures initially surged higher this morning on the back of official June jobless data but have since settled back in to roughly +20bps.  Nonfarm payrolls declined to -125k from the prior +433k reading for May, and were slightly higher than the -130k estimate.  The official unemployment rate dropped to 9.5% from 9.7% and beat the 9.8% estimate.  Details are below:

Date Time
Event

Survey
Actual
Prior
Revised
07/02/2010 08:30
Unemployment Rate
JUN
9.80%
9.50%
9.70%
- -
07/02/2010 08:30
Change in Private Payrolls
JUN
110K
83K
41K
33K
07/02/2010 08:30
Change in Nonfarm Payrolls
JUN
-130K
-125K
431K
433K
07/02/2010 08:30
Change in Manufact. Payrolls
JUN
25K
9K
29K
32K
07/02/2010 08:30
Avg Hourly Earning MOM All Emp
JUN
0.10%
-0.10%
0.30%
0.20%
07/02/2010 08:30
Avg Hourly Earning YOY All Emp
JUN
2.00%
1.70%
1.90%
- -
07/02/2010 08:30
Avg Weekly Hours All Employees
JUN
34.2
34.1
34.2
- -
07/02/2010 10:00
Factory Orders
MAY
-0.50%
- -
1.20%
- -

Given the pre-market action, it would appear that this jobs data was widely anticipated and indeed priced in – to some degree – already.  After all, the S&P500 has been down 8% the last two weeks… This morning’s headlines summarized the doom & gloom growth concerns pretty well, meaning we are probably primed for a short-term bounce (barring any unforeseen geopolitical events or new sovereign issues in Europe):  WSJ headline: Manufacturing lost momentum around the world in June; FT: Fears mount over slowing global demand; London Telegraph: Spectre of an economic relapse stalks markets.

Not much else to report today given jobs has been everyone’s focus and we’re facing a long weekend ahead.  Factory Orders for May are due at 10am.  Australian PM Gillard reached an agreement with mining companies on a new resources tax.  BofAMLCO is – according to a confidential document cited by the London Telegraph – predicting that Spain will need its own EU-IMF bailout soon.  However, note the euro continues to rally.  India raised rates for the third straight time. 

CITI ups FO, HME.  GSCO ups BJ.  CITI cuts EQR, UDR.  BJ raised to buy at JEFF.  BBERG reports SNY is preparing to make a $20B acquisition.  BCAP downgrades SWN.  BBNT lowers FDP estimates.  CITI ups PT.  RTP upped at Evo.  UBSS cuts SYT.  WIBC suspends dividend.  MSFT raised to Buy at CLSA.  NS rated neutral at MS.  DELL to acq private company Scalent.  GOOG to acquire flight info company ITA Software for $700M. 

Asia lower overnight.  Europe ~90bps higher.  EUR/USD $1.2577.  Oil -50bps.  Gold -15bps.  USD -50bps. 

S&P 500 PreMarket 8:30am (last/% change prior close/volume): 
MCGRAW-HILL COS        30.03    +6.75% 200       8:55
FREDDIE MAC                .4180    +6.58% 2500     08:00:01
CB RICHARD ELL-A         14.05    +3.69% 200       9:07
HARLEY-DAVIDSON         21.49    -3.24%  2000     8:38
AES CORP                     9.38      +3.19% 2000     9:07
AVALONBAY COMMUN     90.10    -3.0 %  417       8:41
J.C. PENNEY CO              22.10    +2.89% 3100     8:41
VERIZON COMMUNIC      26.97    +2.61% 216913  9:08
TENET HEALTHCARE       4.20      -2.55%  200       08:14:16
TRANSOCEAN LTD          47.70    -2.43%  131830  9:08
DYNEGY INC                   3.83      +2.41% 200       08:00:11
MOLSON COORS-B         43.65    +2.25% 452       9:00
KB HOME                       11.05    +2.13% 1000     8:30

Today’s Trivia:  Name the smallest nation to ever WIN the World Cup.  When?
                                                                                                                                                                        
Yesterday's Answer:  Trinidad & Tobago is the smallest nation to ever qualify for the World Cup.  They failed to advance from group play in 2006.   

Best Quotes:  From BCAP desk…Macro will trump everything today with Payrolls data at 8:30 AM.  Consumer news is negligible anyway this morning.  ADP was worse on Wed, but Non-Farm has outperformed ADP the past few months.  The [weekly] S&P options that expire today are implying a 2% move today.  I clearly have no edge on the actual Payrolls #, but my view is we're going higher today.  Among other reasons, below are some interesting stats that should help the bull thesis ...

- SPX has closed red for 4 straight days.  The last time 5 straight in the red happened was March 2009.  Since March 09, it's failed at closing red for 5-straight sessions 6 times, one of which was last Fri.

- SPX has closed green on the last 3 Fridays.

- Yest marked the first time since March 09 that SPX has closed red 8 times in a 9-day stretch.  It happened a handful of times in 2008 and 2009, only once in 2007, once in 2005, then 2002 prior to that.

- The last 5 times SPX closed red 8 times in a 9-day stretch, here's the performance of SPX in the 10 days after:  11.75%, 7.57%, 2.92%, -0.28%, 2.45%. 

- If we closed red today, that would be 9 of the last 10 in the red, which has only happened 9 times since the start of 1999.