Futures ~20bps higher this morning as markets bounce slightly off yesterday’s weakness. Not much “new news” out there – headlines are dominated by polemic opinions on the Fed’s QE2 (today it’s Buffett praising the government for TARP), Ireland’s need for a bailout, the upsized GM IPO, and potential monetary tightening from China. Markets have managed to stage a relatively orderly and healthy pull back from overextended levels of roughly 2 weeks ago, and seem to be settling into an S&P 1175 to 1200 range. Drilling down a bit, Ireland has agreed to open up its books to the EU and the IMF so that a “rescue” determination can be made, and European finance ministers have asked for more detail on Portugal’s financial condition.
Europe is mixed to slightly higher this morning. Asian markets, ex-Japan at +15bps, were down roughly 2% overnight on continued speculation that will tighten monetary policy in order to temper it’s still-red-hot economy. In U.S. economic news, Mortgage Applications were 14.4% lower than last week, month-over-month Consumer Prices for October were slightly lower than expected (+0.2% vs. +0.3%/e), year-over-year CPI for October was also slightly lower (+1.2% vs +1.3%/e), and Housing Starts/Building Permits were also slightly lower. Oil -80bps. Gold -20bps. USD -10bps. Plenty of action in the retail sector today, so I will rely on the Barclay’s retail traders for a summary this morning: China
1) TGT: 3Q in line ex items, GM light, SG&A & credit better, guidance looks good
2) CHS: 3Q $0.01 beat, beat was from comps 3.1% vs 1.4%, GM looks weaker
3) URBN announcing 10 mil share buyback last night? Weird but positive
4) BBY, GME: NPD October software sales +6% vs consensus +3%, positive
5) BJ: Beat 3Q eps by $0.07 but key here is all about an LBO (or not)
6) CBK: Steve Dolan trades this one but that release looked really ugly to me
7) MAR: Parterning with Brazilian real estate firm to open 50 hotels
8) Adidas: South China Morning Post reporting
growth plan for them China
9) WMT: Reuters says WMT in 2nd round of bidding for Matahari’s hypermarket
10) CZR: NY Post reporting Harrah's IPO "faces obstacles over offer price"
11) Tomorrow the earnings calendar gets a little crazy (implied option moves in parenthesis). PETM (6%) BKE (4%), LTD (4%), SHLD (6%), AEO (5%), FL (6%), GME (6%), SPLS (3%), ROST (3%), SSI (6%), NWY (4%), PLCE (4%), GPS (4%)
Yesterday was a rough day for a lot of people. I don't think its a coincidence that European equities hit their highs just as Americans woke up this morning. We have a lot of differing views internally on the market here. Some think everyone wants to buy a dip (until it actually dips) so now is the time. However, technicals (and sentiment) tell me we still have some consolidating to do. I'm not a buyer of this dip.
In other news, MCD announced it would be raising prices in
. Set against that news, I found this Financial Times piece really interesting this morning: China
UN warns of rising food prices Published: November 17 2010 09:41 | Last updated: November 17 2010 09:41
The world should “be prepared” for even higher food prices next year if cereal production fails to increase significantly, the United Nations warned on Wednesday.
The warning from the UN’s Food and Agriculture Organisation came as the body forecast that the global bill for food imports will top $1,000bn for just the second time, adding to fears of rising inflation in emerging countries from
China to . India
It said the food import bill would surge to $1,026bn this year, up nearly 15 per cent from 2009 and within a whisker of an all-time high of $1,031bn set in 2008 during the food crisis.
“With the pressure on world prices of most commodities not abating, the international community must remain vigilant against further supply shocks in 2011 and be prepared,” the FAO said. “With price increases largely reflecting scarcity in export supply, global competition for securing foodstuffs is set to intensify.”
The FAO painted a worrying picture in its twice yearly Food Outlook report, warning that it was crucial for farmers to “expand substantially” cereal production in 2011-12 to meet expected demand and to rebuild world reserves. But the Rome-based agency warned the production response could be limited as rising food prices have made other crops, from sugar to soyabean to cotton, attractive to grow.
“This could limit individual crop production responses to levels that would be insufficient to alleviate market tightness. Against this backdrop, consumers may have little choice but to pay higher prices for their food,” the FAO said.
Winter planting of wheat – the world’s most important crop – has so far been below expectations as drought conditions in
, an important producer, have hampered seeding. Russia
The FAO has until now largely downplayed the gravity of the developing crisis, forecasting lower prices next year. But the new forecasts signal that FAO officials now believe further prices rises are likely in 2011. The warning is the strongest yet of a potential repetition of the 2007-08 food crisis, when the cost of agricultural commodities surged to a record and sparked food riots in poor countries.
Agricultural commodities prices have surged after a series of crop failures caused by bad weather. The situation was aggravated by large producer nations such as
Russia and imposing export restrictions and the weakness of the US dollar. Ukraine
In spite of the rising prices, the FAO insisted the outlook was not as difficult as it was two years ago because of higher reserves. But it added: “Following a series of unexpected downward revisions to crop forecasts in several major producing countries, world prices have risen alarmingly and at a much faster pace than in 2007-08.”
Agricultural commodities prices have fallen over the past week amid a sell off in global markets, but analysts and traders continue to expect higher prices in 2011.
The FAO’s food index, a basket tracking the wholesale cost of wheat, corn, rice, oilseeds, dairy products, sugar and meats, jumped last month to levels last seen at the peak of the 2007-08 crisis. The index rose in October to 197.1 points – up nearly 5 per cent from September –, surpassing the levels seen during the early stages of the 2007-08 food crisis and only below its peak between February and July of 2008.
GSCO ups CSX and Cramer positive. KAUF ups SVVS. BofAMLCO cuts DGI, HGSI, VSAT. CITI cuts HGSI. CSFB cuts solar sector (FSLR, JASO, SOL, SOLR, STP, TSL). AXL upgrade at JPM. CBK lower on earnings. CMA increases dividend. PERY beats by 16c. PTEN cut at MSCO. RINO postpones earnings call. STP misses by 5c. STV beats by 5c. WGOV beats by 3c, cut at BARD. OPCO cuts AUO, SBIB.
S&P 500 PreMarket 8:30am (last/% change prior close/volume):
Today’s Trivia: What does “sound navigation and ranging” describe?
Yesterday’s Question: What will yield the most BTUs of energy – a gallon of oil, a pound of coal, or a gallon of gasoline?
Yesterday's Answer: A gallon of oil yields the most BTUs.
Best Quotes: BTIG trader note…
Good morning. The SP500 has fallen only 3.88% since the Nov 5 yearly highs, and while the recent down days have brought back more uncertainty, this mini-corrective phase has been anticipated due to the overbought condition in the marketplace over the last month. We still know performance chasing is going on, and in fact, we were better to buy on the desk yesterday including long onlys. Nevertheless, US markets ended lower yesterday as more than 95% of the names in the S&P 500 logged losses a weakness was underpinned by renewed concerns about a rate hike in China, the state of finances in Ireland, and Greece's ability to tighten its fiscal practices. Stocks opened in the red as the prior session's late slide extended into premarket trade with help from a 4% plunge by
's Shanghai Composite. Speculation began that a rate hike may be in the offing since China raised its target rate. Many are fearful that tighter monetary policy in Korea would not only soften demand in the country, but also limit global growth. Also in the backdrop was worry about the financial health of China and its banks. Commodities felt the real pain as Wheat, Copper, Soybeans and Corn all lost more than 5%. The Continuous Commodity index lost 3.1% and the CRB lost 3.2% and every member of each index closed lower. A flight to quality bid emerged leading to a bounce in Treasuries and further gains in the Dollar. The dollar rallied more than 1% against the British Pound, Swedish Krona, Swiss Franc, Canadian Dollar and Brazilian Real. The Dollar also rallied notably versus the Euro and the Aussie Dollar. Ireland
This morning. Irish Finance Minister says talks with EU, ECB and IMF officials to begin on Thursday – Reuters;
Greece - whole EU is delaying the next bailout payment to by one month. Sov CDS: Greece Greece +12bp, Ireland +9bp, Portugal -4bp, +5bp. US econ data: Oct Spain US Housing Starts 519K / est 598K; Building Permits 550K / est 560K; Oct CPI +0.2% / est +0.3%; ex-Food & Energy 0.0% / est +0.1%. European Market: ESTX +.31%, FTSE +.15%, CAC +.45%, DAX +.32%; Asian Markets: Nikkei +.15%, Hang Seng -2.02%, US -1.62%. HYC to be acquired by PAY for $7.32/share – trading +12%; Oct NPD Video Game #s +6%, ERTS trading -1.3%; ALT ENERGY – STP, TSL, JASO, SOL d/g at Credit Suisse – trading down 3-4% Australia