Market Happenings for Monday, September 19, 2011

Pre-market, futures are down as stocks are set to plunge lower at the open Monday, following a global sell-off as investors fret over the European debt crisis, with the situation in Greece especially worrisome. Gainers this morning include GR, TYC, VMC, NFLX and BMY. Losers include COL, HCBK, ETFC, SEE and NYX.

U.S. Stock News

December S&Ps this morning are trading sharply lower by -17.60 points as Greek debt concerns intensify. The US stock market last Friday moved higher for a third day as U.S. consumer confidence strengthened more than expected and optimism grew that European leaders will take the necessary actions to stem the European debt crisis: Dow Jones +0.66, S&P 500 +0.57, Nasdaq Composite +0.58%. The S&P 500 and the Dow posted 2-week highs and the Nasdaq rose to a 1-1/2 month high. Bullish factors included (1) the larger-than-expected increase in Sep U.S. University of Michigan consumer confidence (+2.1 to 57.8 versus expectations of +1.2 to 56.9 and (2) speculation that the actions this week by the ECB, i.e. providing European banks with dollars, shows that European leaders see the severity of the region’s debt crisis and will take the actions necessary to resolve it.

Bearish factors included (1) disappointment that European finance ministers meeting in Poland rejected offers to provide additional stimulus and decided to put off until Oct a decision on extending Greece additional rescue funds and (2) Fed data that showed Q2 U.S. household wealth fell -1% y/y to $58.5 trillion, the first decrease in a year, which may constrain consumer spending and lead to weaker economic growth.

Citigroup (C) and Bank of America (BAC) both declined at least 2% in pre-market trading on carry-over weakness from a fall in European bank stocks.

Alcoa (AA) slid 2.2% in European trading after the price of copper tumbled to a 9-1/2 month low in overnight trading.

The Markets

December 10-year T-notes this morning are up +16 ticks. T-note prices last Friday pushed higher on increased safe-haven demand on concern the European debt crisis may liger after European finance ministers ruled out further stimulus measures and pushed back a decision on further aid for Greece: TYZ11 +2.5, FVZ11 +2.5, EDH12 -0.5. Bullish factors included (1) increased safe-haven demand for Treasuries on concern the European sovereign-debt crisis will linger after European finance ministers meeting in Poland rejected offers to provide additional stimulus and decided to put off until Oct a decision on extending Greece additional rescue funds and (2) continued strong demand for U.S government debt from Asia after China, the biggest holder of U.S. debt, increased its Treasury holdings by $8 billion in July and Japan, the second-biggest holder, increased its U.S. debt holdings by $3.8 billion in Jul. Bearish factors included (1) the larger-than-expected increase in Sep U.S. University of Michigan consumer confidence (+2.1 to 57.8 versus expectations of +1.2 to 56.9) and (2) decreased safe-haven demand for Treasuries as equity markets rallied.

The dollar index this morning is stronger with the dollar/yen -0.11 yen and the euro/dollar -1.32 cents. The dollar index last Friday moved higher as the euro weakened after Euro-Zone finance ministers put off until Oct a decision on whether to grant Greece additional bailout funds: Dollar Index +0.302, USDJPY +0.083, EURUSD -0.00764. Bullish factors included (1) weakness in the euro after Euro-Zone finance ministers decided to put off until Oct a decision on extending Greece additional rescue funds and (2) continued strong dollar demand from European banks after the 3-month dollar Libor rate rose to 0.35133%, a 13-month high, while the dollar Libor-OIS spread, a gauge of banks’ reluctance to lend, widened to 28.33 bp, the most in 13-1/2 months. Bearish factors included (1) the weaker-than-expected Jul net long-term TIC flows, which indicate reduced foreign demand for U.S. dollar assets and (2) reduced safe-haven demand for the dollar as the equity market strengthened.

Oct crude oil prices this morning are down -77 cents a barrel and Oct gasoline is -0.81 of a cent per gallon. Crude oil and gasoline prices last Friday settled mixed as crude fell on concern a lack of a resolution to the European debt crisis will slow global growth and fuel demand while gasoline rose on speculation European gasoline exports will decline because processing rates have fallen to unprofitable levels: CLV11 -$1.44, RBV11 +0.13. Bearish factors included (1) the stronger dollar, which discourages investment demand in commodities, (2) the lack of any concrete steps by European leaders at a meeting in Poland to resolve the region’s debt crisis, which may slow economic growth and fuel demand the longer the debt crisis lingers. Bullish factors included (1) strength in gasoline due to the fall in European crude processing rates to unprofitable levels, which may curb European gasoline production and limit supplies for export and (2) the larger-than-expected increase in the Sep U.S. University of Michigan consumer confidence, which may benefit economic growth and fuel demand.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): LEN-Lennar Corp (BEST earnings consensus $0.11), TLVT-Telvent GIT SA (0.48), ARAY-Accuray (0.06).

Financial Calendar

1000 ET Sep NAHB housing market index expected unchanged at 15, Aug unchanged at 15.

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

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