Market Happenings for Friday, July 29, 2011

Pre-market, futures are down hard after the government said economic growth slowed sharply in the second quarter and lack of progress on a debt deal. The Dow is now looking to open down 135 points near 12,508. Gainers this morning include NWL, YHOO, EXPE, CERN and AMGN. Losers include WY, M, MMI, MAS and S. Light crude is down -1.26 at 96.21.

U.S. Stock News

September S&Ps this morning are trading 6.70 points lower (-0.52%) on the failure of the House to pass the Boehner plan, which will apparently drag out the process even further. Motorola Mobility Holdings fell 2.4% on an earnings miss. The stock market yesterday closed mixed with the Dow and S&P 500 closing lower but the Nasdaq closing slightly higher: Dow Industrials -0.51%, S&P 500 -0.32%, Nasdaq Composite +0.05%. Bearish factors yesterday continued to focus on the slow pace of the debt ceiling process and the increasing probability that the U.S. will receive a credit rating cut even with a debt ceiling hike. Exxon fell 2.2% on weaker than expected earnings, dragging down the overall indexes and the oil sector. The Nasdaq index received a boost from a 2% rally in Cisco on a Goldman recommendation.

The Markets

September 10-year T-notes this morning are up 10.5 ticks due to the global decline in stocks. T-note prices on Thursday closed higher: TYU11 +8.5, FVU11 +6.25, EDZ11 +0.01. T-note prices continue to bounce around in a relatively narrow range, having a hard time trying to decide whether to sell off on a possible rating downgrade or rally on the economic damage being done by the debt ceiling battle. Yesterday’s 7-year auction was a little disappointing with a bid cover ratio of 2.63 (versus the 12-auction average of 2.85) and with indirect bidders taking 39.6% of the auction (versus the 12-auction average of 47.8%).

The dollar index this morning is up 0.248 points on concern the U.S. debt ceiling could create another system financial crisis. USDJPY is down 0.06 yen and EURUSD is down 0.75 cents. The dollar on Thursday closed higher on some continued short-covering with the dollar index poking up to anew 1-week high: Dollar Index +0.157, USDJPY -0.31, EURUSD -0.35. However, the dollar remains vulnerable as long as the U.S. debt ceiling hike issue remains unresolved.

Sep crude oil prices this morning are trading down $0.70 a barrel and Sep gasoline is down 0.66 cents per gallon on the stronger dollar and on concerns the debt ceiling will hurt economic growth and fuel demand. Crude oil prices on Thursday closed slightly higher yesterday but gasoline prices closed with a moderate loss: CLU11 +0.04, RBU11 -0.0193. Crude oil was boosted by Tropical Storm Don, which has winds of 40 mpg and is headed for landfall on Friday in Southeastern Texas. The storm has caused the shutdown of about 6.8% of crude oil production and 2.8% of natural gas production in the Gulf of Mexico. Meanwhile, gasoline prices continue to see pressure from Wednesday’s DOE report, which showed a 1.022 million bbl rise in gasoline inventories.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): Chevron (BEST earnings consensus $3.60), MRK-Merck (0.95), AMGN-Amgen (1.28), NEM-Newmont Mining (1.01), LYB-Lyondellbasell (1.22), AEP-American Electric (0.76), AON-AON (0.82), WY-Weyerhauser (0.08), ITT-ITT Corp (1.16), HP-Helmerich & Payne (0.98), CPN-Calpine (0.00).

Financial Calendar

0830 ET Q2 employment cost index expected +0.5%, Q1 +0.6%.

0830 ET Q2 GDP expected +1.8% annualized, Q1 +1.9% annualized. Q2 personal consumption expected +0.8%, Q1 +2.2%. Q2 GDP price index expected +2.0%, Q1 +2.0%. Q1 core PCE deflator expected +2.3% q/q, Q1 +1.6% q/q.

0945 ET Jul Chicago purchasing managers index expected -1.1 to 60.0, Jun +4.5 to 61.1.

0955 ET Final Jul U.S. University of Michigan consumer confidence expected +0.2 to 64.0, previous -7.7 to 63.8.

1515 ET Atlanta Fed President Dennis Lockhart and St. Louis Fed President James Bullard discuss monetary policy at the 3rd Annual Rocky Mountain Economic Summit.

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