Morning Note...

Happy Friday the 13^th…. Futures are slightly higher (+30bps) this morning on USD weakness, positive economic data overseas, and mostly positive earnings reports.  DIS is trading 2.5% higher after posting earnings last night and JCP beat expectations and boosted full-year guidance.  In economic news, September Trade Balance was reported at -$36.5B versus -$31.8B expected.  Import Prices were +0.7% month-over-month (vs. +1% expected) and -5.7% year-over-year (versus -5.5% expected).  At 10:00am, UMichigan Consumer Confidence will be closely watched – a reading of 71 is expected.  Overseas, German GDP expanded 0.7% from Q2 to Q3 and the Eurozone expanded 0.4% from Q2 to Q3, thus officially emerging from recession.  It’s worth noting that the UK and Spain still officially remain in recession, which nicely frames this morning’s announcement that British Airways will merge with Spain’s Iberia.  President Obama is in Japan today, as he kicks off his Asia tour.  Expect to see plenty of USD headlines (everyone would like to see China’s currency to “free float” and appreciate, rather than be pegged to the dollar) as Obama meets with our largest creditor, but any headway on currency is highly unlikely.  Three Fed speakers today – two during mkt hours and one tonight.  Volumes remain light – by some measures yesterday was even lighter than Wednesday’s holiday... 

Interesting comments from ResearchEdge this morning that nicely encapsulate the “markets are no longer going up on good news” feel that typically marks a “tired” or overbought rally:

For the record, I was officially bearish when the S&P 500 was at 1066 and it closed yesterday at 1087. The issues that cause me to be cautious are TAIL related - 3 years or less - and on the margin things are slowing in my favor.  The central thesis is not new, the Federal government's attempts to sustain a $14 trillion economy cannot continue without implications on inflation and the dollar.  Inflation is on its way (Inflation Rotation) and the dollar is bottoming, or what we call the "Bombed Out Buck."  Neither is good for equity prices.  Since 10/26 we have had multiple M&A transactions, a blow-out GDP number, and a number of MACRO data points in the US and China that are very supportive of the RECOVERY/REFLATION themes and still the market is up less than 2%.  Today we are waking up to some GDP numbers out of the Euro zone that are supportive of the global recovery theme and the futures are up small.

Swine flu update… according to the WSJ, the CDC says 22M Americans have contracted H1N1 since April, and 3900 have died.  SmallCap update… according to BBERG news, the S&P600 SmallCap Index is trading at 34x earnings, which is 56% higher than the S&P500 and represents the highest levels in 13 years (May 1996).  Here’s a depressing TARP update from this morning, in case you missed it.  Wasn’t everyone assuring us this was a great deal for the American people when it was pitched to us?  So how can markets rally 60% and the taxpayer lose money?  Politics are truly amazing.  Nothing like being repeatedly underwhelmed by America’s “leaders”… The lesson?  Never allow government to interfere with public markets.  Throughout history, it never seems to end well: 

Neil Barofsky, the special inspector general for the $700 billion U.S. financial-industry bailout, said the program will “almost certainly” result in a loss to taxpayers. “We need to temper or be realistic about our expectations, a dollar-for-dollar return is just highly unrealistic,” he said yesterday at the Bloomberg Washington Summit. “It’s almost certainly going to be a loss.”  Barofsky, who has been charged by Congress with policing the Troubled Asset Relief Program, also said he’s conducting 65 investigations of possible fraud.

JWN lower after reporting earnings last night.  QCOM upgrade at WELA.  GSCO cuts SUN.  TSO upped at GSCO.  LIME lower on earnings.  GT higher on GSCO upgrade.  HBC upgrade at LYON.  MEE wins WVa court case.  Barron’s positive ROST.  BusinessWeek speculates China may be interested in buying NEM.  BBI trading lower on earnings. WCRX files 20M share offering.  MSCC beats by 1c.  Cramer positive on CY.  BCAP ups CECO. 

Asia mixed overnight.  Europe mixed as well.  Oil -130bps.  Gold -7bps.  USD -30bps.  Bonds mixed.

Brightpoint News: 

Brightpoint PreMarket (yest close/premkt/% change/volume):

S&P 500 PreMarket (last/% change prior close/volume): 

ABERCROMBIE & FI        39.22    +6.69%             377119

J.C. PENNEY CO  3          0.85      +4.97%             274874

JABIL CIRCUIT                13.74    -4.91%              1000

JACOBS ENGIN GRP        45.86    +4.8 %              200

GOODYEAR TIRE            14.36    +4.51%             20886

NORDSTROM INC           33.10    -4.09%              39866

ANHEUSER-SPN ADR       50.13    +3.85%             10195

LIZ CLAIBORNE               4.95      +2.91%             3500

FIFTH THIRD BANC         9.80      +2.73%             39750

DYNEGY INC-A                2.02      +2.54%             200

Today’s Trivia:  How many Americans are estimated to suffer from paraskevidekatriaphobia (fear of Friday the 13^th) and what is the underlying estimated cost to the economy?

Yesterday's Answer:  The maxilla is your upper jaw and the mandible is your lower jaw.   

Best Quotes: “Equity funds have experienced net outflows of $18 Billion for the year (refer to table), which followed 2008’s $233 Billion in outflows.  That $18 Billion in outflows includes $25 Billion in inflow into Foreign Equity funds, which means that Domestic Equity funds have experienced $40 Billion in outflows this year.  For domestic Equity funds, 2007 was also a negative flow year, as selling picked up in August as the credit crisis unfolded.  So we must ask, where have the flows gone?  It is probably not a surprise that Bond funds have become the mutual fund of choice with year to date inflows of $373 Billion.  Between the lack of issuance in 2008 and the first half of 2009 and those types of inflows, it is no wonder that credit has rallied across the board.”  --BTIG note