Market Happenings for Tuesday, August 02, 2011

Pre-market, futures are down as stocks are set to deliver another day of losses as the latest economic report did little to calm investors’ fears over the pace of the economic recovery. Gainers this morning include MHP, CTSH, NEM, CHK and HAS. Losers include PCS, FMC, SLE, ADM and BSX. Light crude is down -0.52% at 94.40.

U.S. Stock News

September S&Ps this morning are trading down -5.70 points. The US stock market yesterday rallied early on speculation that US lawmakers will raise the debt ceiling, but shed its gains and finished lower after US manufacturing growth slipped to a 2-year low in July: Dow Jones -0.09%, S&P 500 -0.41%, Nasdaq Composite -0.43%. The S&P 50 and the Dow tumbled to 1-month lows and the Nasdaq fell to a 2-week low. Bearish factors included (1) concern the economy is slowing after the Jul ISM manufacturing index fell more than expected to its slowest pace in 2 years (-4.4 to 50.9 versus expectations of -0.8 to 54.5), (2) weakness in health-care companies after Medicare announced an 11.1% rate cut for next year for nursing-home providers, and (3) concern that credit-rating agencies will still downgrade the credit rating of the US despite a hike in the debt ceiling.

Bullish factors included (1) an early rally in stocks on optimism congressional leaders will agree on a deal to raise the US debt ceiling, (2) reduced concerns over a slowdown in the Chinese economy after the Jul China PMI manufacturing index fell less than expected (-0.2 to 50.7 versus expectations of -0.7 to 50.2), (3) the stronger than expected Jun construction spending along with the upward revision to May (Jun +0.2% versus expectations of +0.1% and May revised up to a gain of +0.3% from a previously reported decline of -0.6%), and (4) reduced price pressures after the larger-than-expected decline in the Jul ISM prices paid sub-index to its slowest pace of growth in a year (-9.0 to 59.0 versus expectations of -4.0 to 64.0).

NYSE Euronext (NYX) slipped 2.2% in European trading after the US exchange company planning to be bought by Deutsche Boerse AG reported that Q2 net income fell -16% to $154 million as revenue from European derivatives and US equity trading declined.

The Markets

September 10-year T-notes this morning are trading up +14 ticks and at an 8-1/2 month nearest-futures high as global equity markets slide. T-note prices yesterday rallied sharply and closed higher after US manufacturing growth slowed to a 2-year low in July: TYU11 +14.5, FVU11 +7.5, EDZ11 +1.5. The 10-year T-note yield tumbled to an 8-1/2 month low of 2.716%. Bullish factors included (1) the larger-than-expected decline in the Jul ISM manufacturing index (-4.4 to a 2-year low of 50.9 versus expectations of -0.8 to 54.5), (2) the larger-than-expected decline in the Jul ISM prices paid sub-index to its slowest pace of growth in a year (-9.0 to 59.0 versus expectations of -4.0 to 64.0), and (3) increased safe-haven demand for Treasuries after the stock market plunged. Bearish factors included (1) President Obama’s statement that congressional leaders had approved a deal to raise the US debt ceiling, which temporarily reduces the safe-haven demand for Treasuries and (2) concern that credit-rating agencies will still downgrade the credit rating of the US despite a hike in the debt ceiling.

The dollar index this morning is higher and at a 1-1/2 week high with the dollar/yen +0.22 yen and the euro/dollar -0.55 cents. The dollar index yesterday recovered from early losses and rallied to a 1-week high and settled higher after President Obama said congressional leaders had approved a deal to raise the US debt ceiling: Dollar Index +0.365, USDJPY +0.413, EURUSD -0.01476. Bullish factors included (1) the statement from President Obama that congressional leaders had approved a deal to raise the US debt ceiling, (2) weakness in the British pound which fell to a 1-week low against the dollar after the Jul UK PMI manufacturing index contracted at its slowest level in 2 years, and (3) comments from Japanese Finance Minister Noda who said he’s watching currency markets “closely,” which prompted the yen to weaken from a 4-1/2 month high against the dollar on fears of currency intervention by Japan to curb the yen’s strength. Bearish factors included (1) the larger-than-expected drop in the Jul ISM manufacturing index which slid to its slowest level in 2 years and fueled speculation the Fed may increase its emergency stimulus measures and (2) concern that the US will still face a credit downgrade from ratings agencies even with an increase in the debt ceiling.

Sep crude oil prices this morning are down -64 cents a barrel and Sep gasoline is -0.96 of a cent per gallon. Sep crude oil and gasoline prices yesterday rallied early after President Obama said congressional leaders approved a deal to raise the US debt ceiling, but gave up their gains and turned lower after US factory growth in July fell to its slowest pace in 2 years: CLU11 -$0.81, RBU11 -0.39. Sep crude fell to a 1-month low and Sep gasoline rallied to a 2-3/4 month high but erased its gains and closed lower. Bearish factors included (1) the rally in the dollar index to a 1-week high, which reduces investment demand for commodities, (2) the larger-than-expected decline in the Jul ISM manufacturing index which slowed to its slowest pace in 2-years and signals reduced energy consumption, and (3) increased OPEC output as OPEC production in July rose by 245,000 barrels a day from Jun to 29.565 million barrels a day, the most since December 2008. Bullish factors included (1) an early rally after President Obama said that congressional leaders had reached a deal to raise the US debt ceiling, which boosts the prospects for economic growth and energy demand and (2) the stronger-than-expected Jul China PMI manufacturing index.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): PFE-Pfizer (BEST earnings consensus $0.59), EMR-Emerson Electric (0.90), SCCO-Southern Copper (0.75), BEN-Franklin Resources (2.17), DUK-Duke Energy (0.31), MRO-Marathon Oil (1.16), CTSH-Cognizant Technology Solutions (0.69), AMT-American Tower (0.23), ADM-Archer-Daniels-Midland (0.85), COH-Coach (0.65), FE-FirstEnergy (0.72), CBS-CBS Corp. (0.46), BDX-Becton Dickinson (1.43), GGP-General Growth Properties (0.03), HCP-HCP Inc. (0.53), PH-Parker Hannifin (1.80), NYX-NYSE Euronext (0.60).

Financial Calendar

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

0830 ET Jun personal spending expected +0.1%, May unchanged (annual revisions will be released). Jun personal income expected +0.2%, May +0.3%. Jun PCE deflator expected +2.6% y/y, May +2,5% y/y. Jun PCE core deflator expected +0.2% m/m and +1.4% y/y, May +0.3% m/m and +1.2% y/y.

0855 ET Redbook weekly retailer sales.

1130 ET Weekly 4-week T-bill auction.

1700 ET Jul total vehicle sales expected 11.80 million, Jun 11.41 million. Jul domestic vehicle sales expected 9.25 million, Jun 8.95 million.

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