Market Happenings for Wednesday, August 24, 2011

Pre-market, futures are down a bit, with the Dow looking to open down -41 points. Gainers this morning include NUE, WFM, S, TSO and WIN. Losers include BSX, ATI, JDSU, DOV and HES. Light crude is currently up +0.02% at 85.46 and Gold is down -0.51% at 1851.80.

U.S. Stock News

September S&Ps this morning are trading down -9.50 points. The US stock market yesterday settled sharply higher for a second day as the government’s list of “problem” banks declined for the first time since 2006 along with speculation that Fed Chairman Bernanke will announce additional stimulus measures on Friday to spur the economy: Dow Jones +2.97%, S&P 500 +3.43%, Nasdaq Composite +4.29%. Bullish factors included (1) carry-over support from gains in European and Asian stocks as contraction in Chinese manufacturing eased and European manufacturing held steady in Aug, which eases concern that that global economic slowdown is deepening, (2) the Quarterly Banking Profile from the FDIC that showed its list of “problem” banks in Q2 fell by 23 to 865, the first decline since 2006, and (3) speculation that Fed Chairman Bernanke this Friday may announce additional measures to stimulate the economy.

Bearish factors included (1) the larger-than-expected decline in Jul U.S. new home sales to their lowest level in 5 months (-0.7% to 298,000 versus expectations of -0.6% to 310,000), (2) the bigger-than-expected fall in the Aug Richmond Fed manufacturing index which contracted at its slowest pace in 2-years (-9 to -10 versus expectations of -4 to -5), (3) comments from former Fed Chairman Greenspan who said the euro is “breaking down” and is “creating very considerable difficulties” in the European banking system.

La-Z-Boy (LZB) slumped 11% in pre-market trading after the company reported Q1 revenue of $280.1 million, weaker than analysts’ estimates of $284.3 million.

The Markets

September 10-year T-notes this morning are up +1.5 ticks. T-note prices yesterday settled lower on supply pressures and as stock prices rallied sharply: TYU11 -8.5, FVU11 -1.2, EDZ11 -4.0. Bearish factors included (1) reduced safe-haven demand for Treasuries after equity markets rallied sharply and (2) supply pressures ahead of the Treasury’s $35 billion auction of 5-year T-notes on Wed. Bullish factors included (1) the larger-than-expected decline in Jul U.S. new home sales to their lowest level in 5 months (-0.7% to 298,000 versus expectations of -0.6% to 310,000), (2) the bigger-than-expected fall in the Aug Richmond Fed manufacturing index which contracted at its slowest pace in 2-years (-9 to -10 versus expectations of -4 to -5), (3) increased safe-haven demand for Treasuries on concern the European debt crisis may worsen after the dollar Libor-OIS spread, a gauge of banks’ reluctance to lend, widened to a 1-year high of 22.48 bp, and (4) comments from former Fed Chairman Greenspan who said the euro is “breaking down” and is “creating very considerable difficulties” in the European banking system.

The dollar index this morning is slightly lower with the dollar/yen -0.11 yen and the euro/dollar +0.18 cents. The dollar index yesterday closed lower as stock prices rallied along with speculation that Fed Chairman Bernanke this Friday will signal additional stimulus measures to boost the economy: Dollar Index -0.180, USDJPY -0.145, EURUSD +0.00833. Bearish factors for the dollar included (1) reduced safe-haven demand for the dollar as stocks rallied sharply, (2) speculation that the Fed may boost its stimulus measures to aid the economy, which would further weaken the dollar’s interest rate differentials, and (3) the stronger-than-expected Aug Euro-Zone PMI composite, which is euro supportive. Bullish factors included (1) increased safe-haven demand for the dollar following comments from former Fed Chairman Greenspan who said the euro is “breaking down” and is “creating very considerable difficulties” in the European banking system, (2) the plunge in the Aug German ZEW economic sentiment to a 2-1/2 year low, which is euro negative, and (3) strong demand for dollars by European banks as the 3-month dollar Libor rate rose for the 21st straight day to 0.31178%, a 6-1/2 month high.

Oct crude oil prices this morning are up +1 cent a barrel and Oct gasoline is -1.60 cents per gallon. Crude oil and gasoline prices yesterday moved higher as the dollar weakened and stock prices surged along with better-than-expected manufacturing data in China and Europe: CLV11 +$1.02, RBV11 +3.43. Bullish factors included (1) a weaker dollar, which boosts investment demand in commodities, (2) a rally in stock prices, which bolsters confidence in the economic outlook and energy demand, and (3) the increase in the Aug China HSBC manufacturing PMI and the stronger-than-expected Aug Euro-Zone PMI composite, which signals economic strength that benefits fuel demand. Bearish factors included (1) forecasts for Hurricane Irene to miss the Gulf Coast area, which reduces the risk of damage to U.S. crude installations and refiners and (2) weaker-than-expected U.S. economic data on Jul new home sales which fell to a 5-momth low and the plunge in the Aug Richmond Fed manufacturing index to a 2-year low, which signals reduced energy consumption. Expectations for Wednesday’s weekly DOE inventory report are for crude oil supplies to increase 1.75 million bbl, gasoline stockpiles to fall -1.0 million bbl, distillate inventories to rise 1.0 million bbl and the refinery capacity rate to remain unchanged at 89.1%.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): AMAT-Applied Materials (BEST earnings consensus $0.33), SLH-Solera Holdings (0.59), GES-Guess? (0.81), TOL-Toll Brothers (0.03), AEO-American Eagle Outfitters (0.11), HEI-Heico (0.40), EXPR-Express Inc. (0.15), GAME-Shanda Games Ltd. (0.18), GSM-Globe Specialty Metals (0.31), SMTC-Semtech (0.48), TIVO-TiVo (-0.21).

Financial Calendar

0700 ET Weekly MBA mortgage applications, previous +4.1% with purchase mortgage sub-index -9.1% and refinancing mortgage sub-index +8.0%.

0830 ET Jul durable goods orders expected +2.0% and -0.5% ex transportation, Jun -1.9% and +0.4% ex transportation.

1000 ET Jun FHFA house price purchase index expected +0.2% m/m, May +0.4% m/m. Q2 FHFA house price purchase index expected -0.4% q/q, Q1 -2.5% q/q.

1300 ET Treasury auctions $35 billion 5-year T-notes.

Both comments and pings are currently closed.

Comments are closed.