Market Happenings for Tuesday, July 26, 2011

Pre-market, futures are up, but near flat. Gainers this morning include LXK, BRCM, SVU, CMI and COV. Losers include NFLX, WAT, PCAR, AKS and ITW. Light Crude is down +0.51% at 99.71.

U.S. Stock News

September S&Ps this morning are trading slightly higher by 2.80 points (+0.21%) as the market hopes for some compromise after last night’s dueling Obama/Boehner speeches. Ford’s Q2 EPS ex-items report of 65 cents was stronger than the consensus of 61 cents. The US stock market on Monday opened sharply lower on the debt ceiling stalemate but then recovered some ground to close just moderately lower: Dow Industrials -0.70%, S&P 500 -0.56%, Nasdaq Composite -0.56%. Stocks were also hurt by Moody’s 3-notch cut in Greece’s credit rating, although the rating agency was simply catching up with its competitors and with what the markets already knew following last Thursday’s Eurozone debt deal, i.e., that Greece will be effectively defaulting on its securities with a 21% haircut on the Greek bond swap deal offered by the Eurozone. US stocks were also hurt by Monday’s sharp 3% sell-off in Chinese stocks tied to a weekend high-speed train crash that caused the government to call for a review of transportation safety and could slow investment in transportation projects.

The Markets

September 10-year T-notes this morning are down 4 ticks on reduced safe-haven demand as Asian stocks rebounded higher today and Sep S&Ps are trading higher. T-note prices on Monday closed mildly lower due concern that the debt ceiling stalemate will cause a U.S. credit rating cut even if Washington raises the debt ceiling: TYU11 -6.5, FVU11 -2.5, EDZ11 -2.0. Pimco CEO Mohamed A. El-Erian said that the U.S. government will be extremely vulnerable to losing its AAA credit rating even if Washington produces a debt ceiling hike. He said, Stock markets around the globe will look to price in a greater uncertainty premium on account of political squabbles in the world’s largest economy and the increasing risk that it may lose its sacred AAA rating.

The dollar index this morning is trading moderately lower by 0.46 points with USDJPY down 0.21 yen and EURUSD up 1.0 cent as concern continues about the U.S. debt ceiling battle. The dollar index on Monday closed slightly lower: Dollar Index -0.099, USDJPY -0.250, EURUSD +0.0017. The main bearish factor for the dollar was the debt ceiling spectacle in Washington, which is giving pause to overseas investors about investing in a country with such an unstable political and fiscal environment. The euro continued to see general support from last Thursday’s Eurozone deal for a second Greek bailout and strengthening of the European Financial Stability Fund. The Swiss franc on Monday hit a record high due to safe-haven demand and carry-over from record gold prices.

Sep crude oil prices this morning are trading up $0.53 a barrel and Sep gasoline is up 0.95 cents per gallon as the market shakes off concerns about the U.S. debt ceiling and focuses on tighter product inventories and generally strong global fuel demand. Crude oil and gasoline prices closed lower on Monday due to concerns about economic fallout and weaker fuel demand from the Washington debt ceiling battle: CLU11 -0.67, RBU11 -0.0089. The market consensus for Wednesday’s DOE report are for a 1.75 million barrel drop in crude oil inventories, a 125,000 barrel increase in gasoline inventories, and a 1.6 million barrel increase in distillate inventories.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): AMZN-Amazon.com (BEST earnings consensus $0.63), OXY-Occidental (2.17), UPS-UPS (1.04), MMM-EM (1.59), F-Ford (0.61), SPG-Simon Property (0.61), NOV-National Oilwell Varco (1.01), LVS-Las Vegas Sands (0.44), GILD-Gilead Sciences (0.99), ITW-Illinois Tool (1.02), LMT-Lockheed Martin (1.94), NSC-Norfolk Southern (1.29), COV-Covidien (0.95), BIIB-Biogen Idec (1.37), ACE-ACE Ltd (1.65), CMI-Cummins (2.02), PCAR-Paccar (0.69), JNPR-Juniper Networks (0.33), TROW-T Rowe Price (0.77), VLO-Valero (1.45).

Financial Calendar

0745 ET ICSC (Int’l Council of Shopping Centers) weekly retailer sales.

0855 ET Redbook weekly retailer sales.

0900 ET May S&P/CaseShiller composite-20 home price index expected unchanged m/m and -4.6% y/y, Apr -0.1% m/m and -4.0% y/y.

1000 ET Jul consumer confidence expected -2.5 to 56.0, Jun -3.2 to 58.5.

1000 ET Jul Richmond Fed manufacturing index expected +2 to 5, Jun +9 to 3.

1000 ET Jun new home sales expected +0.8% to 322,000, May -2.1% to 319,000.

1130 ET Weekly 4-week T-bill auction.

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

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