Market Happenings for Friday, December 16, 2011

Pre-market, futures are up ahead of the latest inflation data, but trading could be choppy Friday as investors also close out options and futures contracts that expire. Gainers this morning include CCE, ADBE, CA, MUR and ANF while losers include CVC, NYX, GILD, DRI and ACN. Light crude is up +0.59% at 94.42 and gold is up +1.30% at 1,597.70.

U.S. Stock News

March S&Ps this morning are trading up +6.30 points. The US stock market yesterday settled higher as stronger-than-expected U.S. economic data overshadowed ongoing European debt crisis concerns: Dow Jones +0.38%, S&P 500 +0.32%, Nasdaq Composite +0.07%. Bullish factors included (1) carry-over strength from a rally in European stocks after the Dec Euro-Zone PMI composite index unexpectedly increased (+0.9 to 47.9) and Spain sold 6 billion euros of government debt, nearly double its 3.5 billion-euro maximum target, which eased European debt concerns, (2) labor market improvement after the unexpected drop in weekly U.S. initial unemployment claims which fell to their lowest level in 3-1/2 years (-19,000 to 366,000 versus expectations of +9,000 to 390,000), (3) the larger-than-expected increase in the Nov Empire manufacturing index which expanded at its fastest pace in 7 months (+8.9 to 9.5 versus expectations of +2.4 to 3.0), and (4) the stronger-than-expected Nov Philadelphia Fed manufacturing index which expanded at its strongest pace in 8 months (+6.7 to 10.3 versus expectations of +1.4 to 5.0).

Bearish factors included (1) the unexpected drop in Nov U.S. industrial production which posted its first decline in 7 months (-0.2% versus expectations of +0.1%), (2) global economic growth concerns after the Q4 Japan Tankan large manufacturers survey fell more than expected to -4 and ECB President Draghi said a short-term contraction in the Euro-Zone is “unavoidable”, and (3) concern the European debt crisis may worsen after IMF Managing Director Lagarde said the “the crisis is not only unfolding, but escalating” and cannot be resolved by one group of countries.
Research in Motion (RIMM) fell 7.6% in pre-market trading after postponing the introduction of its newest generation of BlackBerrys until the “latter part” of 2012. The company also forecast profit of 80 cents to 95 cents a share for fiscal Q4, below analysts’ projections of $1.08 a share.

The Markets

March 10-year T-notes this morning are up +1 ticks. T-note prices yesterday fell back from a 2-1/2 month high and settled lower as stronger-than-expected U.S. economic data offset ongoing European debt crisis concerns: TYH2 -3, FVH2 -0.2, EDM2 +1.5. Bearish factors included (1) the unexpected fall in weekly U.S. initial unemployment claims which dropped to their lowest level in 3-1/2 years (-19,000 to 366,000 versus expectations of +9,000 to 390,000), (2) the larger-than-expected increase in the Nov Empire manufacturing index which expanded at its fastest pace in 7 months (+8.9 to 9.5 versus expectations of +2.4 to 3.0), and (3) the stronger-than-expected Nov Philadelphia Fed manufacturing index which expanded at its strongest pace in 8 months (+6.7 to 10.3 versus expectations of +1.4 to 5.0). Bullish factors included (1) the unexpected drop in Nov U.S. industrial production which posted its first decline in 7 months (-0.2% versus expectations of +0.1%) and (2) in creased safe-haven demand for Treasuries on concern the European debt crisis may worsen after IMF Managing Director Lagarde said the “the crisis is not only unfolding, but escalating” and cannot be resolved by one group of countries.

The dollar index this morning is lower with the dollar/yen +0.02 yen and the euro/dollar +0.18 cents. The dollar index yesterday settled lower as stronger-than-expected European economic data and a strong Spanish debt auction reduced the safe-haven demand for the greenback: Dollar Index -0.268, USDJPY -0.221, EURUSD +0.00328. Bearish factors for the dollar included (1) strong demand for Spanish government debt after Spain sold 6 billion euros of bonds due in 2016, 2020, and 2021 today, exceeding a 3.5 billion-euro target, which is euro supportive, (2) the unexpected increase in the Dec Euro-Zone PMI composite index, which is euro positive, and (3) the smaller-than-expected increase in the Oct net long-term TIC flows which rose +$4.8 billion, weaker than expectations of +$62.5 billion and a sign of weakened foreign demand for U.S. dollar assets. Bullish factors included (1) increased safe-haven demand for the dollar on concern the European debt crisis may worsen after IMF Managing Director Lagarde said the “the crisis is not only unfolding, but escalating” and cannot be resolved by one group of countries and (2) stronger-than-expected U.S. economic data on weekly jobless claims and the Nov Empire and Nov Philadelphia Fed manufacturing indexes, which shows economic strength and is dollar supportive.

Jan crude oil prices this morning are up +40 cents a barrel and Jan gasoline is +2.93 cents per gallon. Crude oil and gasoline prices fluctuated between gains and losses yesterday and finally settled lower as an unexpected decline in U.S. industrial production offset a drop in weekly U.S. jobless claims and a jump in manufacturing activity on the East Coast: CLF12 -$1.08, RBF12 -1.60. Jan crude fell to a 5-week low and Jan gasoline slipped to a 2-week low. Bearish factors included (1) the unexpected drop in Nov U.S. industrial production, (2) concern the European debt crisis may worsen after IMF Managing Director Lagarde said the “the crisis is not only unfolding, but escalating” and cannot be resolved by one group of countries, (3) comments from ECB President Draghi who said a short-term contraction in the Euro-Zone is “unavoidable” due to governments’ austerity measures, and (4) concern energy demand may fall in Japan, the world’s third-biggest c rude consumer, after the Q4 Japan Tankan large manufacturers survey fell more than expected to -4. Bullish factors included (1) the weaker dollar, (2) the fall in weekly U.S. jobless claims to 3-1/2 year low, which may lead to an increase in economic activity and energy demand, and (3) stronger-than-expected manufacturing activity on the U.S. East Coast after the Nov Empire manufacturing index expanded at its best level in 7 months and the Nov Philadelphia Fed manufacturing index expanded at its best level in 8 months.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): DRI-Darden Restaurants (BEST earnings consensus $0.44), UBA-Urstadt Biddle Properties (0.19).

Financial Calendar

0830 ET Nov CPI expected +0.1% m/m and +3.5% y/y, Oct -0.1% m/m and +3.5% y/y. Nov CPI ex food & energy expected +0.1% m/m and +2,1% y/y, Oct +0.1% m/m and +2.1% y/y.

1115 ET Chicago Fed President Charles Evans speaks on a panel on “Econometric Tools for Policy Making after the Crisis” at an European Commission conference in Fiesole, Italy.

1255 ET Dallas Fed President Richard Fisher speaks at an event in Austin, TX on “A Report on the Economy: Where Have We Been; Where Are We Going?”

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