Market Happenings for Tuesday, September 06, 2011

Pre-market, futures are down sharply with The Dow set to open down -295 points. Gainers this morning include NEM, JDSU, CPB and DF. Losers include NFLX, HRB, BAC, BTU and C. Light Crude is at 83.60 and Gold is at 1896.

U.S. Stock News

September S&Ps this morning are trading down -19.30 points. The US stock market last Friday sold-off steadily the entire day and settled sharply lower after the U.S. added no jobs in Aug along with concern the European debt crisis is worsening: Dow Jones -2.20, S&P 500 -2.53%, Nasdaq Composite -2.58%. Bearish factors included (1) the stagnation in Aug U.S. non-farm payrolls which posted their weakest reading in 11 months along with the downward revision to Jul payrolls (Aug no change versus expectations of +70,000 and Jul revised down to +85,000 from the originally reported +117,000), (2) the weaker-than-expected Aug avg hourly earnings (-0.1% m/m and +1.9% y/y versus expectations of +0.2% and +2.2% y/y), (3) the unexpected decline in manufacturing payrolls (-3,000 versus expectations of unchanged), (4) weakness in financial stocks on concern banks will face greater liabilities from practices before the 2008-09 financial crisis after people with knowledge of the matter said many U.S. lenders are among companies that will face a lawsuit by the U.S. Federal Housing Finance Agency over faulty mortgage loans, and (5) concern that the European sovereign-debt crisis will worsen as credit default swaps to insure European government debt rose to a record after the IMF said it opposes European plans to force Greece to put up collateral in its second rescue, which threatens European efforts to resolve the crisis.

Bullish factors included (1) increased speculation that the Fed will provide additional stimulus measures to bolster the economy and (2) the fall in the 10-year T-note yield to a 2-week low of 1.986%.

JPMorgan Chase (JPM) fell 1.8%, Bank of America (BAC) slipped 2.8%, and Citigroup (C) lost 2.5% on carry-over weakness from a fall in European bank stocks.

The Markets

December 10-year T-notes this morning aredown -1 tick . T-note prices last Friday rallied to a 2-week high and settled higher after the weaker-than-expected Aug non-farm payrolls report fueled speculation the Fed may consider additional stimulus measures to bolster the economy: TYZ11 +24.5, FVZ11 +5.5, EDH12 -4.0. Bullish factors included (1) the stagnation in Aug U.S. non-farm payrolls which posted their weakest reading in 11 months along with the downward revision to Jul payrolls (Aug no change versus expectations of +70,000 and Jul revised down to +85,000 from the originally reported +117,000), (2) the weaker-than-expected Aug avg hourly earnings (-0.1% m/m and +1.9% y/y versus expectations of +0.2% and +2.2% y/y), (3) the unexpected decline in Aug U.S. manufacturing payrolls (-3,000 versus expectations of unchanged), and (3) carry-over safe-haven support after the yield on the 10-year German bund dropped to a record low of 1.996% on concern the European debt crisis is worsening.

The dollar index this morning is weaker with the dollar/yen +0.39 yen and the euro/dollar +0.65 cents. The dollar index last Friday settled higher as safe-haven demand from a weak stock market and the ongoing European debt crisis offset concern that the weak Aug U.S. payrolls report may prompt the Fed into additional easing measures: Dollar Index +0.204, USDJPY -0.178, EURUSD -0.00669. The dollar index posted a 3-week high and EURUSD fell to a 3-week low. Bullish factors included (1) weakness in the euro as credit default swaps to insure European government debt rose to a record after the IMF said it opposes European plans to force Greece to put up collateral in its second rescue, which threatens European efforts to resolve the crisis, (2) increased safe-haven demand for the dollar as the stock market fell, and (3) strong dollar demand from European banks as the 3-month dollar Libor rate rose for the 28th consecutive day to a 1-year high of 0.33056%. The main bearish factor is concern that the weak U.S. payrolls report may prompt the Fed into additional easing measures that would further undercut the dollar’s interest rate differentials.

Oct crude oil prices this morning are down -$1.87 a barrel and Oct gasoline is -4.29 cents per gallon. Crude oil and gasoline prices last Friday tumbled after the stagnation in the Aug U.S. non-farm payrolls bolstered concern that fuel demand in the U.S. may weaken: CLV11 -$2.48, RBV11 -5.31. Bearish factors included (1) the weaker-than-expected Aug U.S. non-farm payrolls, which sent the stock market cascading lower and crimps confidence in the economic outlook and energy demand, (2) the increase in Aug Russian crude output to a record 10.28 million barrels a day, up +2.1% y/y, and (3) the rally in the dollar index to a 3-week high, which discourages investment demand in commodities. A bullish factor was the strengthening of Tropical Storm Lee in the Gulf of Mexico which prompted U.S. energy companies to evacuate crude oil platforms and shut 47.6% of crude production from the Gulf of Mexico, according to the Bureau of Ocean Energy Management.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): PAY-Verifone Systems (BEST earnings consensus $0.46), AMSC-American Superconductor (-0.20), PIKE-Pike Electric (0.05).

Financial Calendar

1000 ET Aug ISM non-manufacturing index expected -1.7 to 51.0, Jul -0.6 to 52.7.

1130 ET Weekly 3-mo and 6-mo T-bill auctions.

1310 ET Minneapolis Fed President Narayana Kocherlakota speaks at the University of Minnesota?s Carlson School of Management.

1330 ET Former Fed Vice-Chairman and current member of the BOE?s Interim Financial Policy Committee, Donald Kohn, speaks at the London School of Economics.

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