Market Happenings for Wednesday, August 03, 2011

Pre-market, futures are up as investors digest two mixed jobs reports just two days ahead of the government’s key monthly jobs report. Gainers this morning include GNW, XL, LNC, WDC and FTR. Losers include EQT, HES, CTL, GD and NOC. Light crude is dow -0.31 at 93.50.

U.S. Stock News

September S&Ps this morning are trading up +7.00 points on short-covering after yesterday’s plunge. The US stock market yesterday sold-off sharply the entire day and finished on its low due to signs the US economy is in jeopardy after Jun US personal spending declined for the first time in 22 months along with concern that the European debt crisis may worsen: Dow Jones -2.19%, S&P 500 -2.56%, Nasdaq Composite -2.75%. The S&P 500 sank to a 4-1/2 month low, the Dow slumped to a 1-1/2 month low and the Nasdaq slipped to a 1-month low. Bearish factors included (1) carry-over weakness from a plunge in European stocks which sank to an 11-month low on concern the European debt crisis may worsen after credit-default swaps to insure the government debts of France, Italy and Spain all climbed to records, (2) additional signs that the US economy is slowing after Jun US personal spending unexpectedly fell for the first time in 22 months (-0.2% versus expectations of +0.1%), (3) the smaller-than-expected increase in Jun US personal income (+0.1% versus expectations of +0.2%), and (4) 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) the action by Congress to approve a deal to raise the US debt ceiling, (2) reduced inflation fears after the smaller-than-expected increase in the Jun PCE core deflator (+0.1% m/m and +1.3% y/y versus expectations of +0.2% m/m and +1.4% y/y), and (3) the plunge in the 10-year T-note yield to an 8-3/4 month low of 2.601%.

CBS Corp. (CBS) rallied 1.6% in pre-market trading after the company reported Q2 earnings of 58 cents a share, well ahead of analysts’ estimates of 46 cents a share.

The Markets

September 10-year T-notes this morning are trading down -0.5 of a tick. T-note prices yesterday rallied to an 8-1/2 month nearest-futures high and closed higher for the fourth consecutive session on increased safe-haven demand after the stock market tumbled along with concerns the economy is slowing after US personal spending unexpectedly fell in Jun: TYU11 +26, FVU11 +12, EDZ11 -3.5. The 10-year T-note yield dropped to an 8-3/4 month low of 2.601%. Bullish factors included (1) the unexpected decline in Jun US personal spending which fell for the first time in 22 months (-0.2% versus expectations of +0.1%), (2) the smaller-than-expected increase in the Jun PCE core deflator (+0.1% m/m and +1.3% y/y versus expectations of +0.2% m/m and +1.4% y/y), (3) the smaller-than-expected increase in Jun US personal income (+0.1% versus expectations of +0.2%), and (4) increased safe-haven demand for Treasuries after the S&P 500 tumbled to a 4-1/2 month low. Bearish factors included (1) the action by Congress to approve 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 lower with the dollar/yen -0.05 yen and the euro/dollar +0.10 cents. The dollar index yesterday posted a 1-1/2 week high and closed higher on increased safe-haven demand as the stock market slumped along with concerns that Europe’s debt crisis may worsen: Dollar Index +0.251, USDJPY -0.058, EURUSD -0.00473. Bullish factors included (1) weakness in the euro which fell to a 1-1/2 week low against the dollar on concern the European debt crisis may worsen after credit-default swaps to insure the government debts of France, Italy and Spain all climbed to records and (2) increased safe-haven demand for the dollar after the equity market plunged. Bearish factors included (1) the unexpected decline in Jun US personal spending, which suggests an economic slowdown that may prompt the Fed into additional easing measures which would weaken the dollar’s interest rate differentials further and (2) speculation that an agreement by Congress to raise the debt ceiling and cut spending will weigh on US economic growth.

Sep crude oil prices this morning are down -47 cents a barrel at a 5-week low and Sep gasoline is -3.43 cents per gallon. Sep crude oil and gasoline prices yesterday moved lower as the dollar strengthened along with concerns of an economic slowdown after Jun US personal spending declined for the first time in 22 months: CLU11 -$1.10, RBU11 -1.67. Bearish factors included (1) the rally in the dollar index to a 1-1/2 week high, which reduces investment demand for commodities, (2) the unexpected decline in US Jun personal spending, which suggests an economic slowdown that may dampen energy demand, and (3) the outlook for an increase in weekly crude supplies when the DOE releases its inventory figures on Wed. Expectations for Wednesday’s inventory report from the DOE are for crude oil stockpiles to rise +1.5 million bbl, gasoline supplies to gain +250,000 bbl, distillate inventories to increase +1.5 million bbl and the refinery capacity rate to remain unchanged at 88.3%.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): CMCSA-Comcast (BEST earnings consensus $0.40), MA-Mastercard (4.23), TWX-Time Warner (0.56), DVN-Devon Energy (1.53), PRU-Prudential Financial (1.55), AGN-Allergan (0.95), CTL-CenturyLink (0.67), RIG-Transocean Ltd. (0.80), WMB-Williams Cos. (0.39), SE-Spectra Energy (0.40), PEG-Public Service Enterprise Group (0.55), MMC-Marsh & McLennan (0.48), ATVI-Activision Blizzard (0.05), CLR-Continental Resources (0.61), PXD-Pioneer Natural Resources (0.81), ETP-Energy Transfer Partners LP (0.30).

Financial Calendar

0700 ET Weekly MBA mortgage applications, previous -5.0% with purchase sub-index -3.8% and refi sub-index -5.5%.

0730 ET Jul Challenger job cuts, Jun +5.3% y/y.

0815 ET Jul ADP employment change expected +100,000, Jun +157,000.

0900 ET Treasury announces amounts of 3-year T-notes (previous $32 billion), 10-year T-notes (previous $21 billion) and 30-year T-bonds (previous $13 billion) to be auctioned during the Treasury’s quarterly refunding Aug 9-11.

1000 ET Jul ISM non-manufacturing index expected +0.2 to 53.5, Jun -1.3 to 53.3.

1000 ET Jun factory orders expected -0.8%, May +0.8%.

Both comments and pings are currently closed.

Comments are closed.