Market Happenings for Friday, November 25, 2011

Pre-market, futures point to a lower open Friday as eurozone fears continued to weigh on investors. Gainers this morning include BSX, DE, YHOO, AMZN and WYN. Losers include GCI, S, ANR, NFX and ABC.

U.S. Stock News

December S&Ps this morning are trading down -8.00 points at a 1-1/2 month low. The US stock market on Wednesday slumped on signs that global economic growth was slowing and that the European debt crisis worsened: Dow Jones -2.05%, S&P 500 -2.21%, Nasdaq Composite -2.43%. The S&P 500, the Dow and the Nasdaq all posted 1-1/2 month lows. Bearish factors included (1) carry-over weakness from a fall in European stocks on fears the European debt crisis is worsening after credit default swaps to insure European government debt rose to a record and after Germany failed to get bids for 35% of a 10-year bund auction, which raises concern that Europe’s debt crisis is driving investors away from the region, (2) concern the global economy is slowing after the Nov China HSBC flash manufacturing PMI fell to its lowest level since Mar 2009 (-3.0 to 48.0) and Sep Euro-Zone industrial new orders fell by the most in 2-1/2 years (-6.4% m/m), (3) weaker-than-expected Oct personal spending (+0.1% versus expectations of +0.3%), (4) the unexpected decline in the Nov U.S. University of Michigan consumer confidence (-0.1 to 64.1 versus expectations of +0.3 to 64.5), and (5) a slump in raw material and energy producers after JPMorgan Chase downgraded commodities to “underweight.”

Bullish factors included (1) the smaller-than-expected decline in Oct durable goods orders (-0.7% and +0.7% ex transportation versus expectations of -1.2% and unchanged ex transportation) and (2) the larger-than-expected increase in Oct personal income (+0.4 % versus expectations of +0.3%).

The Markets

December 10-year T-notes this morning are down -6 ticks. T-note prices on Wednesday rallied to a 1-1/2 month high on signs the global economy is slowing and the European debt crisis is deepening: TYZ11 +13.5, FVZ11 +4.0, EDH12 -2.5. Bullish factors included (1) increased safe-haven demand for Treasuries as stocks slumped on concern the European debt crisis is worsening after credit default swaps to insure European government debt rose to a record and after Germany failed to get bids for 35% of a 10-year bund auction, (2) concern the global economy is slowing after the Nov China HSBC flash manufacturing PMI fell to its lowest level since Mar 2009 and Sep Euro-Zone industrial new orders fell by the most in 2-1/2 years, (3) weaker-than-expected Oct personal spending (+0.1% versus expectations of +0.3%), (4) the unexpected decline in the Nov U.S. University of Michigan consumer confidence (-0.1 to 64.1 versus expectations of +0.3 to 64.5), and (5) strong demand for the Treasury’s $29 billion auction of 7-year T-notes that had a bid-to-cover ratio of 3.20, well above the 12-auction average of 2.79. Bearish factors included (1) the smaller-than-expected decline in Oct durable goods orders (-0.7% and +0.7% ex transportation versus expectations of -1.2% and unchanged ex transportation) and (2) the larger-than-expected increase in Oct personal income (+0.4 % versus expectations of +0.3%).

The dollar index this morning is stronger and at a 1-1/2 month high with the dollar/yen +0.32 yen and the euro/dollar -0.99 cents. The dollar index on Wednesday rallied sharply to a 1-1/2 month high on signs the European sovereign-debt crisis has worsened: Dollar Index +0.875, USDJPY +0.334, EURUSD -0.01632. Bullish factors for the dollar included, (1) the slump in the euro to a 1-1/2 month low against the dollar on concern Europe’s debt crisis is driving investors away from the region when the 10-year German bund yield shot up to a 3-week high after Germany failed to get bids for 35% of a 10-year bund auction, (2) the increase in credit default swaps to insure European government debt to a record, (3) comments from EU Economic and Monetary Affairs Commissioner Rehn who said the debt crisis is “ravaging Europe,” and (4) weakness in the British pound which fell to a 1-1/2 month low against the dollar after the minutes of the Nov 9-10 BOE policy meeting showed some officials said an increase in stimulus may be needed. Bearish factors included (1) the unexpected increase in the Nov Euro-Zone PMI composite, which is euro supportive and (2) the smaller-than-expected increase in Oct U.S. personal spending.

Jan crude oil prices this morning are down -68 cents a barrel and Jan gasoline is -1.05 cents per gallon. Crude oil and gasoline prices on Wednesday settled lower as the dollar index rallied to a 1-1/2 month high and as global stocks fell on concern the European debt crisis may worsen: CLF12 -$1.84, RBF12 -4.45. Bearish factors included (1) the rally in the dollar index to a 1-1/2 month high, which reduces investment demand in commodities, (2) a slump in global stocks on concern the European debt crisis will worsen after credit default swaps to insure European government debt rose to a record and after Germany failed to receive bids on 35% of a 10-year bund auction, (3) the fall in the Nov China HSBC flash manufacturing PMI to its lowest level since Mar 2009, which signals economic weakness in the world’s second-biggest crude oil consumer, and (4) the larger-than-expected increase in weekly DOE gasoline inventories (+4.47 million bbl versus expectations of +1.1 million bbl). Bullish factors included (1) the unexpected decline in weekly DOE crude inventories to their lowest level in 1-3/4 years (-6.22 million bbl versus expectations of a +950,000 bbl increase), and (2) the smaller-than-expected drop in Oct U.S. durable goods orders.

Earnings Reports

None scheduled this shortened post holiday session.

Financial Calendar

No economic reports or Fed speeches scheduled.

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