Futures up ~5% this morning as macro-news out of Europe rules the day. I’ll let smarter folks than I dive into the granularity of the $1 trillion rescue package, but here are the basic details:
The immediate funding plan consists of:
• €60bn available immediately from EU's emergency fund (using Section 122 of EU Constitution' does NOT require parliamentary approval.
• Up to €440bn available thru individual EU govts (likely will require parliamentary approval; we'll get more details in press conf this Wed)
• €220bn from IMF
In addition to funds, the following measures were announced:
• G7 has agreed to re-establish temp USD swap facilities
• 6 month LTRO reintroduced by ECB (Long-Term Refinancing Operation; was originally wound down in April). Full allotment will come by May 12, at a rate fixed
• ECB will buy eurozone govt & private debt -- scope of purchases yet to be determined. This was a surprise, as ECB never utilized QE as a policy tool during the crisis.
Since initial announcement last night, multiple central banks say they have already started purchasing government bonds.
6:15 *FRENCH, ITALIAN CENTRAL BANKS BUYING GOVERNMENT BONDS
5:20 *BUNDESBANK SAYS IT IS BUYING GOVERNMENT BONDS TODAY
Elsewhere, the UK China
What a turn around by the ECB after their commentary and stance late last week. What does this say about what was really going on? For example, we in the U.S. Greece , Spain , Portugal and Ireland
Regarding EuroTARP, it strikes me as interesting - or perhaps ominous - that just as we Americans, in terms of public sentiment or in the form of legislation, are moving away from "too big to fail," Europe takes one giant step in its direction. Just when we were regretting elements of our own overreaching bailout, Europe ignores our current reflection and jumps right in. As someone said on TV recently, the world has certainly progressed by any measure, but these might truly be the “dark ages” for politics and politicians. Don't forget, however, one critical lesson from our TARP days in September 2008...remember the stock market plummet when the bill was not ratified. We all watched the votes come back and watched the DJIA crater in real time as a result. And that's with a relatively simple legislative system. From what I have read so far, in Europe , when it comes to the largest portion of the bailout funds, each and every country involved needs to ratify the package. I'd be shocked if there wasn't at least one small hiccup along the way.
Also, so much for the patient investor sitting on cash and waiting to buy an orderly pullback. If you are like me and you spent the weekend thinking about how to deploy some cash towards some European value plays like multi-nationals Nestle or Unilever who might benefit from the weaker EUR, you’ve been likewise foiled in your attempt to be a “patient, long-term investor.” Once again, the "natural" course of market behavior has been trumped by "artificial" means. "Don't fight the ECB" and the "Trichet Put" should now be added to the vernacular. Of course, for those rendered giddy by all this when considering the "reflation" ahead in Europe (if US markets behaved at all similarly, ya gotta buy ‘em), just recall the Fall of 2008. Our bailout was announced in mid- to late-September if I recall...and we all remember the market's behavior until the S+P low in March 2009 after the early euphoria and the early short covering... Granted, the US
One other interesting thing today…food for thought that will surely be missed amidst all the noise:
The Index of Small Business Optimism lost 1.2 points, falling to 86.8. The index has posted 18 consecutive monthly readings below 90. The March index continues this trend and is heading in the wrong direction, very inconsistent with the notion that the economy is recovering and that job growth has strength. Nine of the 10 index components fell or were unchanged from February’s. Not the picture of an economic expansion.
Sorry for the cut & paste today, but here are the upgrades/downgrades, and some earnings news… UPGRADES include: Yahoo *(YHOO) upgraded to Positive from Neutral at Susquehanna...BP Plc (BP) upgraded to Outperform from Market Perform at Bernstein...Stifel Financial (SF) upgraded to Outperform from Market Perform at Keefe Bruyette...People's United *(PBCT) upgraded to Outperform from Market Perform at Keefe Bruyette...CF Industries (CF) upgraded to Outperform from Market Perform at BMO Capital...Winnebago (WGO) upgraded to Outperform from Neutral at RW Baird...Thor Industries (THO) upgraded to Outperform from Neutral at RW Baird...Albermarle (ALB) upgraded to Buy from Hold at Deutsche Bank...Regency Centers (REG) upgraded to Buy from Hold at Deutsche Bank...Cogdell Spencer (CSA) upgraded to Buy from Hold at Jefferies...Rubicon Technology *(RBCN) upgraded to Outperform from Perform at Oppenheimer...Boeing (BA) upgraded to Conviction Buy from Neutral at Goldman...Northern Trust (NTRS) upgraded to Buy from Neutral at Goldman...Office Max (OMX) upgraded to Buy from Neutral at Goldman...Synta Pharma (SNTA) upgraded to Buy from Hold at Roth Capital...Aircastle (AYR) upgraded to Outperform from Underperform at FBR Capital...DOWNGRADES: Goodrich (GR) downgraded to Buy from Conviction Buy at Goldman...KAR Auction (KAR) downgraded to Neutral from Buy at Goldman...DragonWave (DRWI) downgraded to Sector Performer from Sector Outperformer at CIBC...Comcast *(CMCSA) downgraded to Market Perform from Outperform at Bernstein...Time Warner Cable (TWC) downgraded to Market Perform from Outperform at Bernstein...Cablevision (CVC) downgraded to Market Perform from Outperform at Bernstein...INITIATIONS: SS&C Technologies (SSNC) initiated with a Buy at Jefferies...Telestone Technologies (TSTC) initiated with a Buy at Roth Capital.
Berkshire Hathaway (BRK.A) reported Q1 results $2,272/$32.03B vs. First Call consensus of $1,101.83/$28.63B...General Steel (GSI) reported Q1 results (11c)/$453M vs. First Call consensus of (14c)/$416.11. General Steel selling prices increased by end of March.The company expects selling prices to stay at 'healthier levels.'...National Health Investors (NHI) reported Q1 FFO 62c vs. First Call consensus of 61c...NRG Energy (NRG) reported Q1 results 22c/$2.22B vs. First Call consensus of 31c/$2.18B. The company attributes $373M decline in income from last year to a $456M decrease in unrealized mark-to-market derivative gains on economic hedges partly offset by contributions from Reliant Energy. NRG Energy reaffirms 2010 adjusted EBITDA guidance of $2.2B...DISH Network *(DISH) reported Q1 results 52c/$3.06B vs. First Call consensus of 50c/$3.05B. DISH Network added 237,000 net subscribers during Q1.
S&P 500 PreMarket 8:30am (last/% change prior close/volume):
DEAN FOODS CO 12.71 -13.12% 30020
DYNEGY INC-A 1.33 +11.76% 28293
RR DONNELLEY & S 21.60 +11.51% 150
LIZ CLAIBORNE 7.10 +9.23% 800
MARSHALL &ILSLEY 8.80 +9.05% 36198
MANITOWOC CO 13.51 +9.04% 11146
MGIC INVT CORP 9.35 +8.85% 13433
ZIONS BANCORP 27.71 +8.37% 6982
DR HORTON INC 14.14 +8.27% 1500
AMERISOURCEBERGE 32.30 +7.99% 197
GENWORTH FINANCI 15.69 +7.98% 36108
AFLAC INC 47.76 +7.88% 9654
CONSTELLATION-A 18.00 +7.72% 500
COGNIZANT TECH-A 51.10 +7.53% 725
CITIGROUP INC 4.30 +7.5 % 44200766
US STEEL CORP 55.92 +7.19% 120217
ANHEUSER-SPN ADR 49.08 +7.16% 12700
CIENA CORP 17.24 +7.08% 25485
JDS UNIPHASE 11.18 +6.99% 49735
TELLABS INC 8.73 +6.99% 5050
ADV MICRO DEVICE 8.96 +6.92% 95237
FANNIE MAE 1.10 +6.8 % 371935
WEYERHAEUSER CO 47.69 +6.76% 1600
EXPEDIA INC 23.46 +6.64% 1400
CARNIVAL CORP 39.08 +6.54% 25955
SPRINT NEXTEL CO 4.09 +6.51% 371758
JOHNSON CONTROLS 31.60 +6.47% 1705
HASBRO INC 41.47 +6.42% 100
MICRON TECH 9.11 +6.3 % 123550
HONEYWELL INTL 46.24 +6.25% 421
SANDISK CORP 39.91 +6.12% 37883
HARLEY-DAVIDSON 31.9500 +5.86% 622
BANK OF AMERICA
EL PASO CORP 11.70 +5.79% 7392
LENNAR CORP-CL A 18.50 +5.77% 10350
KB HOME 17.24 +5.77% 618
AMERICAN INTERNA 40.93 +5.76% 83782
DISCOVER FINANCI 14.89 +5.75% 5247
WEATHERFORD INTL 16.18 +5.75% 31178
NYSE EURONEXT 30.97 +5.74% 8547
FLUOR CORP 48.56 +5.68% 3109
SUNTRUST BANKS 29.00 +5.61% 3857
CAPITAL ONE FINA 44.50 +5.6 % 3047
CONSOL ENERGY 40.48 +5.58% 5540
FORD MOTOR CO 12.15 +5.56% 1626352
FIFTH THIRD BANC 14.05 +5.56% 40442
APPLE INC 248.92 +5.54% 587090
TITANIUM METALS 16.25 +5.52% 4550
DU PONT (EI) 38.21 +5.47% 8075
GENERAL ELECTRIC 17.79 +5.39% 556412
LINEAR TECH CORP 29.75 +5.38% 110
MBIA INC 9.20 +5.38% 79512
LOWE'S COS INC 26.66 +5.33% 3427
E*TRADE FINANCIA 1.58 +5.33% 538088
TEREX CORP 23.75 +5.32% 5374
UNION PAC CORP 74.84 +5.3 % 100
CISCO SYSTEMS 26.02 +5.3 % 279611
TENET HEALTHCARE 5.60 +5.26% 19850
CARDINAL HEALTH 35.55 +5.21% 300
CUMMINS INC 68.71 +5.21% 988
COACH INC 40.27 +5.2 % 1000
MASSEY ENERGY CO 34.70 +5.15% 14351
CIGNA CORP 33.00 +5.13% 250
DOW CHEMICAL 26.80 +5.1 % 14240
MCKESSON CORP 66.93 +5.02% 100
Today’s Trivia: What is the currency of Haiti
Yesterday's Answer: A little more than 1/3 of your life is spent sleeping, so a 75-year-old will have spent roughly 25 years asleep.
Best Quotes: “Good Morning - I guess all it took was a trillion dollars. Anyone else have a trillion dollars to throw around? Maybe that guy on the ING commercials with a gazzilion bazillion dollars for retirement wasn't far off on what we'll need for retirement. We should focus on the technicals. We'll have a lot of levels of resistance to break through to get us back to pre flush levels of 1200. Limit up will be +55 ticks on the open for the S&P. As expected Financials are going to be the leaders of the tape. Expect a flurry on the open than a quiet squeeze higher. Oil still leaking, not good. WSJ big article on Nat Gas, get ready. If it wasn't an error on Friday, there is a serious bug in the system. That kind of action is insane. Talk about a total waste of good earnings, completely ignored that 65.2% of companies have beaten estimates this season. If there is a dip today buy it.” --MLCO trader comment
“The Euro Area Heads of State published a statement over the weekend. In addition to announcing the implementation of the first round of Greek aid before May 19th, the leadership also announced other key measures. They are ready to “fight speculation” and announced the creation of a “European Stabilization Mechanism.” The Stabilization Mechanism is what will catch the market’s attention tomorrow. Interestingly, beyond serving the purpose of “preserving financial stability in Europe ,” there were no details on the measure. Is it going to defend the currency, lend to financial institutions, support sovereign debt? Who knows. If it takes as long as the Greek aid package to work the details out (and in that case the leadership knew what it was going to do), it will be awhile before this “Mechanism” is active. The only real positive from the market’s perspective is that the European leadership may be adopting the “failure is not an option” mentality that puts everything on the table. There have been calls for the ECB to start quantitative easing, but right now, the problem is one in which there are more Euros out there than the market wants, not vice versa. Starting such a program would only really help alleviates the sovereign debt situation by the potential monetization of the debt. Or, the Mechanism could potentially be viewed as a “European TARP.” The EU could use it to plug whatever holes arise in the financial architecture of the Euro zone. If so, there are numerous challenges to adoption and implementation. Look how tough implementation was here in the United States U.S.
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