Morning Happenings for Monday, May 02, 2011

U.S. Stock News

* June S&Ps this morning are trading up +6.60 points at a fresh contract high after President Obama said the US killed Osama Bin Laden. The US stock market last Friday settled higher on strong company earnings results along with strength in US personal spending: Dow Jones +0.37%, S&P 500 +0.23%, Nasdaq Composite +0.04%. The Dow and S&P 500 posted 2-3/4 year highs. Bullish factors included (1) impressive company earnings results as over 75% of the 298 companies in the S&P 500 that reported earnings results since Apr 11 have beaten analysts’ estimates, (2) the larger-than-expected increase in Mar personal spending along with the upward revision to Feb (Mar +0.6% versus expectations of +0.5% and Feb revised up to +0.9% from the originally reported +0.7%), which bodes well for the sustainability of the US economic expansion, and (3) strength in energy and commodity producer after a slump in the dollar index to a 2-3/4 year low prompted a broad-based rally in commodities.

* Bearish factors for stocks included (1) the weaker-than-expected Apr Chicago purchasing managers index (-3.0 to 67.6 versus expectations of -2.4 to 68.2), (2) the weaker-than-expected Apr US University of Michigan consumer confidence (+0.2 to 69.8 versus expectations of +0.4 to 70.0), and (3) comments from Fed Chairman Bernanke who said high levels of joblessness and home foreclosures are restraining the US recovery and putting people and communities at risk of being “left behind.”

* Terex (TEX) rose 1.8% in European trading after the US heavy-equipment manufacturer offered to buy Demag Cranes for about 883.9 million euros ($1.3 billion) to expand in the global harbor-crane market.

* TiVo (TIVO) surged 20% in pre-market trading after the company settled all patent litigation with Dish Network nd EchoStar.

The Markets

* June 10-year T-notes this morning are down -1.5 ticks. T-note prices last Friday rallied after mid-morning and closed higher as weaker than expected consumer confidence and manufacturing data offset stock market strength and stronger-than-expected personal spending: TYM11 +6, FVM11 +3.7, EDU11 -0.5. The 10-year T-note yield fell to a 1-1/4 month low of 3.280%. Bullish factors included (1) the weaker-than-expected Apr Chicago purchasing managers index (-3.0 to 67.6 versus expectations of -2.4 to 68.2), (2) the weaker-than-expected Apr US University of Michigan consumer confidence (+0.2 to 69.8 versus expectations of +0.4 to 70.0), and (3) the smaller-than-expected increase in the Mar PCE deflator (+1.8% y/y versus expectations of +1.9% y/y. Bearish factors included (1) the larger-than-expected increase in Mar personal spending along with the upward revision to Feb (Mar +0.6% versus expectations of +0.5% and Feb revised up to +0.9% from the originally reported +0.7%), (2) the larger-than-expected increase in the Q1 employment cost index (+0.6% versus expectations of +0.5%), and (3) reduced safe-haven demand for Treasuries after the S&P 500 rose to a 2-3/4 year high.

* The dollar index this morning is weaker and fell to a fresh 2-3/4 year low in overnight trade with the dollar/yen +0.19 yen and the euro/dollar +0.36 cents. The dollar index last Friday tumbled to a 2-3/4 year low and settled lower as weaker-than-expected US manufacturing data undercut the dollar while an increase in Euro-Zone inflation boosted the euro to a 16-1/2 month high: Dollar Index -0.188, USDJPY -0.335, EURUSD -0.00142. Bearish factors included (1) the weaker-than-expected Apr Chicago purchasing mangers index, which indicates a slowdown in US manufacturing and is dollar negative, (2) early strength in the euro which rallied to a 16-1/2 month high against the dollar after the Apr Euro-Zone CPI estimate rose more than expected to a 2-1/2 year high, which bolsters speculation for additional ECB rate hikes, and (3) reduced safe-haven demand for the dollar after the S&P 500 climbed to a 2-3/4 year high. Bullish factors included (1) the unexpected decline in Mar German retail sales, which is euro negative, and (2) the stronger-than-expected Mar US personal spending, which indicates strength in the US economy and is dollar supportive.

* June crude oil prices this morning are trading down sharply by -$1.91 a barrel and June gasoline is -5.50 cents per gallon. Crude oil plunged in overnight trade on speculation that the death of Osama Bin Laden may ease the risk of Middle East supply disruptions. Crude oil and gasoline prices last Friday settled higher due to a weak dollar and better-than-expected US consumer spending: CLM11 +$1.07, RBM11 +2.88. Nearest-futures May gasoline posted a 2-3/4 year high. Bullish factors included (1) the continued slide in the dollar index to a 2-3/4 year low, which boosts investment demand in commodities, and (2) the larger-than-expected increase in Mar US personal spending, which bodes well for the sustainability of the economic expansion and energy demand. Bearish factors included (1) the unexpected decline in Mar German retail sales along with the slower than expected increase in South Korean Mar industrial production, which indicates a slowdown in Asian and European fuel demand, and (2) the weaker-than-expected Apr Chicago purchasing managers index, which signals reduced energy demand.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap) APC-Andarko Petroleum (BEST earnings consensus $0.58), ADP-Automatic Data Processing (0.85), LYB-LyondellBasell Industries NV (0.74), CHK-Chesapeake Energy (0.71), L-Loews (0.91), FE-FirstEnergy (0.75), BXP-Boston Properties (0.45), HIG-Hartford Financial Servics Group (0.95), HUM-Humana (1.46), EIX-Edison International (0.66), DISH-DISH Network (0.68), PFG-Principal Financial Group (0.71), DVA-Davita (0.95), CNA-CNA Financial (0.70), MEE-Massey Energy (0.54), BWP-Boardwalk Pipeline Partners LP (0.47), DNDN-Dendreon (-0.67).

Financial Calendar

1000 ET Mar construction spending expected +0.3%, Feb –1.4%.

1000 ET Apr ISM manufacturing index expected -1.6 to 59061, Mar –0.2 to 61.2. Apr ISM prices paid expected -2.0 to 83.0, Mar +3.0 to 85.0.

1130 ET Weekly 3-mo and 6-mo T-bill auctions.

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