Market Happenings for Monday, June 27, 2011

Pre-market, futures are up. Looks pretty boring right now. The Dow is up +23 at 11,904. Gainers this morning include MWW, CAG, NYX, DELL and AKS. Losers include DF (down -23.33%), CHK, MOLX, SWN and SHW. Light Crude is down -0.45% at 90.75.

U.S. Stock News

*September S&Ps this morning are trading up +4.00 points. The US stock market last Friday moved lower as concern about the European debt crisis intensified and technology stocks weakened: Dow Jones -0.96%, S&P 500 -1.17%, Nasdaq Composite -1.26%. Bearish factors included (1) a decline in bank stocks on concern the European debt crisis may worsen and spread throughout Europe after Moody’s Investors Service said it may downgrade 13 Italian banks because they would be vulnerable to a cut in the government’s credit rating, (2) weakness in technology stocks after Oracle sold-off when it reported an unexpected decline in hardware sales and Micron Technology plunged after it reported weaker-than-expected revenue and profit, and (3) comments from Dallas Fed President Fisher who said the US is in a “deep hole of unemployment” and that “it’s a slow recovery and it’s going to continue to be slow.”

*Bullish factors for stocks included (1) the stronger-than-expected May durable goods (+1.9% versus expectations of +1.5%), and (2) the decline in long-term interest rates after the 10-year T-note yield fell to a 6-3/4 month low of 2.844%.

*Stanley Black & Decker (SWK) may move today after the company offered to buy Sweden’s Niscayah AB for about 7.6 billion kroner ($1.2 billion).

The Markets

*September 10-year T-notes this morning are unchnaged. T-note prices last Friday strengthened on comments from Dallas Fed President Fisher along with increased safe-haven demand after Moody’s Investors Service said it may cut the ratings of Italian banks: TYU11 +12.5, FVU11 +10.2, EDZ11 -4.5. The 10-year T-note yield fell to a 6-3/4 month low of 2.844%. Bullish factors included (1) increased safe-haven demand for Treasuries after Moody’s Investors Service said it may downgrade 13 Italian banks because they would be vulnerable to a cut in the government’s credit rating, (2) comments from Dallas Fed President Fisher who said the US is in a “deep hole of unemployment” and that “it’s a slow recovery and it’s going to continue to be slow,” (3) the Fed’s purchase of $4.578 billion of Treasuries as part of its QE2 asset purchase program, and (4) a lack of confidence in Greece’s government to pass austerity measures needed to secure a bailout. Bearish factors included (1) the stronger-than-expected May durable goods orders (+1.9% versus expectations of +1.5%), and (2) the upward revision to the Q1 GDP price index to +2.0% from +1.9%, along with the upward revision to the Q1 core PCE deflator to +1.6% q/q from +1.4% q/q.

*The dollar index this morning is weaker with the dollar/yen +0.23 yen and the euro/dollar +0.28 cents. The dollar index last Friday finished stronger on increased safe-haven demand on speculation that a Greek austerity plan and a EU pledge to stabilize the European economy won’t resolve the sovereign-debt crisis: Dollar Index +0.218, USDJPY -0.043, EURUSD -0.00771. Bullish factors included (1) comments from BOE Governor King who said “the most serious and immediate risk stems from the worsening debt crisis in the Euro-Zone,” (2) concern the European debt crisis might spread after Moody’s Investors Service said it may downgrade 13 Italian banks because they would be vulnerable to a cut in the government’s credit rating, and (3) speculation the Greek government won’t be able to garner the support needed to pass the 78 billion-euro austerity package needed to receive a fifth loan payment under an existing bailout. Bearish factors included (1) the unexpected increase in the Jun German IFO business climate, which is euro supportive, and (2) euro positive comments from German Chancellor Merkel who said “we have agreed that there will be a new program for Greece.”

*Aug crude oil prices this morning are trading down -51 cents a barrel and Aug gasoline is -1.69 cents per gallon. Crude oil and gasoline prices last Friday settled mixed as dollar strength and concern the European debt crisis may worsen offset speculation Saudi Arabia may curb its crude output: CLQ11 +$0.14, RBQ11 -6.05. Aug gasoline fell to a 4-month low. Bearish factors included (1) the stronger dollar, which reduces investment demand in commodities, (2) concern the European debt crisis may spread and limit economic growth after Moody’s Investors Service said it may downgrade 13 Italian banks because they would be vulnerable to a cut in the government’s credit rating, and (3) the slump in stock prices, which reduces confidence in the economic outlook and energy demand. Bullish factors included (1) the stronger-than-expected May US durable goods orders, which indicate economic strength that may lead to increased fuel demand, and (2) concern that Saudi Arabia may cut its crude output to limit crude oil price declines after the IEA’s decision to release 60 million barrels of crude from strategic reserves on Thursday.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap) NKE-Nike (BEST earnings consensus $1.16), PKE-Park Electrochemical (0.41), SMSC-Standard Microsystems (0.28), AMSC-American Superconductor (-0.24).

Financial Calendar

0830 ET May personal spending expected +0.1%, Apr +0.4%. May personal income expected +0.4%, Apr +0.4%. May PCE deflator expected +2.4% y/y, Apr +2.2% y/y. May core PCE deflator expected +0.2% m/m and +1.1% y/y, Apr +0.2% m/m and +1.0% y/y.

1100 ET Minneapolis Fed President Narayana Kocherlakota speaks on Rethinking Leverage Subsidies at the Tri-State Bankers Summit in Big Sky, Montana.

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

1300 ET Kansas City Fed President Thomas Hoenig speaks at the Pew Charitable Trusts Financial Reform Project in Washington.

1300 ET Treasury auctions $35 billion 2-year T-notes.

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