Market Happenings for Wednesday, June 22, 2011

Pre-market, futures are down with the Dow near 12,059. Investors await the Fed meeting today. The Fed starts their two day meeting. Gainers this morning include KMX, JBL, FFIV, FDX and RAI. Losers include ADBE, AMD, NFX, NFLX and ITT. Light Crude is down -0.55% at 93.75.

U.S. Stock News

*September S&Ps this morning are trading down -4.90 points. The US stock market yesterday rallied as concerns eased that Greece would default on its debt: Dow Jones +0.91%, S&P 500 +1.34%, Nasdaq Composite +2.19%. The S&P 500 and the Dow posted 2-week highs. Bullish factors for stocks included (1) carry-over support from a rally in European stocks on optimism that Greek Prime Minister Papandreou’s government will win a confidence vote and avoid a Greek default, (2) strength in homebuilders after the smaller-than-expected decline in May US existing home sales (-3.8% to a 6-month low of 4.81 million, less than expectations of -5.0% to 4.80 million), and (3) comments from Treasury Secretary Geithner who said he sees “a lot of progress” in bipartisan spending and debt talks to cut the deficit and raise he government’s borrowing limit.

*Bearish factors included (1) the warning from the IMF that Spain’s efforts to repair its economy are “incomplete” and risks are “considerable,” and (2) concern that the larger-than-expected decline in the Jun German ZEW economic sentiment survey to a 29-month low may signal a lack of confidence in the Euro-Zone economy that may drag the global economic outlook lower as well.

*Adobe Systems (ADBE) fell 2.6% in European trading after the company forecast Q3 profit, before some expenses, of as little as 50 cents a share, below analysts’ estimates of 54 cents.

The Markets

*September 10-year T-notes this morning are unchanged. T-note prices yesterday traded weaker early on reduced safe-haven demand due to optimism that Greece’s government will survive a confidence vote but prices recovered some of their losses and settled well above their worst levels after the IMF cited “considerable” risk in Spain: TYU11 -5.5, FVU11 -1.2, EDZ11 +2.5. Bearish factors included (1) reduced safe-haven demand for Treasuries on speculation that Greek Prime Minister Papandreou’s government will win a confidence vote and avoid a Greek default, and (2) the smaller-than-expected decline in May US existing home sales (-3.8% to a 6-month low of 4.81 million, less than expectations of -5.0% to 4.80 million. Bullish factors included (1) increased safe-haven demand for Treasuries after the IMF said in a report that Spain’s efforts to repair its economy are “incomplete” and risks are “considerable,” and (2) the action by the Fed to purchase $4.909 billion of Treasuries as part of its QE2 asset-purchase program.

*The dollar index this morning is higher with the dollar/yen -0.02 yen and the euro/dollar -0.27 cents. The dollar index yesterday weakened as the euro gained on optimism that Greek Prime Minister Papandreou will survive a confidence vote along with reduced safe-haven demand for the dollar as the stock market rallied: Dollar Index -0.417, USDJPY -0.048, EURUSD +0.01077. Bearish factors included (1) strength in the euro on speculation that Greek Prime Minister Papandreou will win a confidence vote and avoid a Greek default, and (2) reduced safe-haven demand for the dollar after the S&P 500 rallied to a 2-week high. Bullish factors included (1) the larger-than-expected fall in the Jun German ZEW economic sentiment survey which fell to a 29-month low and is euro negative, and (2) comments from Treasury Secretary Geithner who said he sees “a lot of progress” in bipartisan spending and debt talks to cut the deficit and raise the government’s borrowing limit.

*Aug crude oil prices this morning are trading down -67 cents a barrel and Aug gasoline is +0.28 of a cent per gallon. Crude oil and gasoline prices yesterday settled mixed as a weak dollar and speculation Greece will avoid a default supported crude while expectations for a build in weekly DOE gasoline supplies undercut gasoline: CLQ11 +$0.54, RBQ11 -2.29. Bullish factors included (1) the weaker dollar, which encourages investment demand in commodities, (2) the rally in the equity market, which boosts confidence in the economic outlook and energy demand, (3) data from China Oil, Gas and Petrochemicals that said China’s May crude inventories fell -3.5% m/m, and (4) speculation that Greek Prime Minister Papandreou will win a confidence vote, which may keep Greece from defaulting on its debt and the European debt crisis from worsening. Bearish factors included (1) the outlook for a build in weekly DOE gasoline inventories when they are released on Wed, and (2) the drop in May US existing home sales to a 6-month low, which indicates continued weakness in the US housing sector that may curtail economic growth and energy demand. Expectations for WednesdayÂ’s weekly inventory report from the DOE are for crude stockpiles to fall -1.83 million bbl, gasoline supplies to increase +1.0 million bbl, distillates to rise +525,000 bbl and the refinery capacity rate to gain +0.5 to 86.6%.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap) FDX-FedEx (BEST earnings consensus $1.72), BBBY-Bed Bath & Beyond (0.62), PAYEX-Paychex (0.33), RHT-Red Hat (0.22), KMX-CarMax (0.47), IHS-IHS Inc. (0.87), RBN-Robbins & Meyers (0.53), SCS-Steelcase (0.05), LFT-Longtop Financial Technologies (0.45), FUL-HB Fuller (0.46), SONC-Sonic (0.18).

Financial Calendar

0700 ET Weekly MBA mortgage applications, last market index +13.0% with purchase mortgage sub-index +4.5% and refinancing sun-index +16.0%.

1000 ET Apr FHFA house price index purchase only expected -0.3% m/m, Mar -0.3% m/m.

1230 ET FOMC announces interest rate decision (expected no changed to the 0.00% to 0.25% fed funds rate).

1415 ET Fed Chairman Ben Bernanke speaks at Fed press conference.

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