Market Happenings for Friday, October 07, 20011

Pre-market, futures are up as stocks rally on a government report that indicated the economy produced twice as many jobs as expected in September. Gainers this morning include ETFC, TSO, JOYG, WYNN and MWW. Losers include LIFE,WPI, PKI, A and TMO. Light crude is up +1.63% at 83.94 and gold is up +0.56% at 1,662.40.

U.S. Stock News

December S&Ps this morning are trading down -4.00 points ahead of the Sep payrolls report. The US stock market yesterday settled higher for a third day after Europe took steps to alleviate the region’s financial crisis: Dow Jones +1.68%, S&P 500 +1.83%, Nasdaq Composite +1.88%. Bullish factors included (1) gains in financial stocks after the action by the BOE to increase its asset purchase program by 75 billion pounds and for the ECB to resume its covered-bond purchases and reintroduce 1-year loans to banks, which may help stimulate economic growth and stem the turmoil from the European debt crisis, (2) strength in bank stocks after European Commission President Barroso said the Commission is “proposing to have a coordinated action to recapitalize banks and to get rid of toxic assets they may have,” (3) the smaller-than-expected increase in weekly initial U.S. unemployment claims (+6,000 to 401,000 versus expectations of +19,000 to 410,000), and (4) a rally in retailers after the ICSC reported Sep chain store sales excluding Wal-Mart rose +5.5% y/y, the most in 3 months.

Bearish factors included (1) concern the European sovereign-debt crisis may worsen after ECB President Trichet said the Euro-Zone economy faces “intensified downside risks,” (2) comments from BOE Governor King who said this could be the most serious financial crisis “ever,” (3) the warning from Fitch Ratings that U.S. state revenue may fall short of forecasts in 2012, which may lead to “widespread” budget cuts, and (r) long liquidation and apprehension ahead of Friday’s Sep non-farm payrolls report.

The Markets

December 10-year T-notes this morning are down -2 ticks. T-note prices yesterday fell for a third day on reduced safe-haven demand as global stocks rallied on signs European leaders are taking concrete measures to resolve the region’s debt crisis: TYZ11 -19, FVZ11 -7, EDH12 +0.5. Bearish factors included (1) reduced safe-haven demand for Treasuries after global stock markets rallied when the ECB said it will resume its covered-bond purchases and reintroduce 1-year loans to banks, which may help ease the European debt crisis, (2) the smaller-than-expected increase in weekly initial unemployment claims (+6,000 to 401,000 versus expectations of +19,000 to 410,000), and (3) comments from European Commission President Barroso who said the Commission is “proposing to have a coordinated action to recapitalize banks and to get rid of toxic assets they may have,” which also boosted stocks and reduced the safe-haven demand for Treasuries. Bullish factors included (1) increased safe-haven demand for Treasuries after ECB President Trichet said the Euro-Zone economy faces “intensified downside risks,” and (2) comments from BOE Governor King who after raising the BOE’s asset purchase target for the first time in 2 years to 275 billion pounds from 200 billion, said that this could be the most serious financial crisis “ever.”

The dollar index this morning is slightly lower with the dollar/yen -0.06 yen and the euro/dollar +0.01 cents. The dollar index yesterday erased an early rally and settled lower as stock markets rallied on speculation that additional stimulus measures enacted by the ECB will help stabilize financial markets: Dollar Index -0.285, USDJPY -0.072, EURUSD +0.00893. Bearish factors included (1) reduced safe-haven demand for the dollar after stocks rallied when the ECB said it will resume its covered-bond purchases and reintroduce 1-year loans to banks, which may help ease the European debt crisis, and (2) comments from European Commission President Barroso who said the Commission is “proposing to have a coordinated action to recapitalize banks and to get rid of toxic assets they may have,” which reduces the safe-haven demand for the dollar on optimism Europe is stepping up measures to support banks. Bullish factors included (1) the unexpected decline in Aug German factory orders, which is euro negative, (2) the plunge in the British pound to a 14-1/2 month low against the dollar after the BOE unexpectedly increased its asset-purchase program to 275 billion pounds from 200 billion, and (3) euro negative comments from ECB President Trichet who said the Euro-Zone economy faces “intensified downside risks.”

Nov crude oil prices this morning are down -50 cents a barrel and Nov gasoline is -2.49 cents per gallon. Crude oil and gasoline prices yesterday settled higher after the BOE and ECB expanded stimulus measures, which may boost the economy and energy demand: CLX11 +$2.91, RBX11 +11.68. Bullish factors included (1) the weaker dollar, which boosts investment demand in commodities, (2) the action by the BOE to increase its asset purchase program by 75 billion pounds and for the ECB to resume its covered-bond purchases and reintroduce 1-year loans to banks, which may help stimulate economic growth and energy demand, and (3) a rally in global stock markets, which improves confidence in the economic outlook and energy demand. Bearish factors included (1) comments from ECB President Trichet who said the Euro-Zone economy faces “intensified downside risks,” which may keep economic growth and fuel demand constrained, and (2) the statement from Iraq’s Oil Ministry that Iraq’s crude production rose to 2.932 million barrels a day, the highest level in 20 years.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): TLVT-Telvent GIT SA (BEST earnings consensus $0.47), LRN-K12 Inc. (-0.01), LEDS-SemiLEDs Corp. (-0.22).

Financial Calendar

0830 ET Sep non-farm payrolls expected +58,000, Aug unchanged. Sep private payrolls (ex-government) expected +90,000, Aug +17,000. Sep unemployment rate expected unchanged at 9.1%, Aug unchanged at 9.1%. Sep manufacturing payrolls expected -1,000, Aug -3,000. Sep avg hourly earnings all employees expected +0.2% m/m and +1.9% y/y, Aug -0.1% m/m and +1.9% y/y. Sep avg weekly hours all employees expected unchanged at 34.2 hours, Aug -0.1 to 34.2 hours.

0930 ET Dallas Fed President Richard Fisher speaks on the U.S. economy to the Texas A&M Retailing Summit.

1000 ET Aug wholesale inventories expected +0.6%, Jul +0.8%.

1045 ET Atlanta Fed President Dennis Lockhart speaks on the ?U.S. economy and financial capability? at the Goizueta Business School of Emory University.

1500 ET Aug consumer credit expected +$8.000 billion, Jul +$11.965 billion.

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