Market Happenings for Wednesday, December 21, 2011

Pre-market, futures are down a bit after an initial pop on the ECB’s injection, but investors remain cautious ahead of housing data. Gainers this morning include GNW, CCE, NKE, HSY and SYMC while losers include STT, ORCL, EXPE, WAG and JBL. Light crude is down -0.04% at 97.20 and gold is down -0.16% at 1,615.00.

U.S. Stock News

March S&Ps this morning are trading up +2.80 points. The US stock market yesterday rallied right from the opening and settled sharply higher as European debt concerns eased and recession fears abated after strong Nov U.S. housing starts bolstered speculation the U.S. economy may weather the European debt crisis: Dow Jones +2.87%, S&P 500 +2.98%, Nasdaq Composite +3.19%. Bullish factors included (1) carry-over strength from a rally in European equity markets as the region’s debt concerns eased after strong demand was seen at an auction of Spanish government debt and after Dec German Ifo business sentiment unexpectedly improved, (2) a rally in home builders after Nov U.S. housing starts rose to a 19-month high (+9.3% to 685,000) and Nov U.S. building permits unexpected surged to a 20-month high (+5.7% to 681,000 versus expectations of -1.4% to 635,000), (3) data from the U.S. Labor Department that showed payrolls increased in 29 states in Nov and the jobless rate declined in 43 states, a sign the labor market is recovering across much of the U.S., and (4) comments from Minneapolis Fed President Kocherlakota who said recent government data have made him “more upbeat” on the outlook for the U.S. economy.
Bearish factors included (1) comments from European Commission President Barroso who said the sovereign-debt crisis is “worsening” conditions in the European labor market and (2) concern the European debt crisis may worsen after Fitch Ratings said the risk of downgrading the EFSF bail-out fund had increased and that the fund’s AAA rating depends on France remaining AAA.

Research in Motion (RIMM) surged 13% in pre-market trading after the WSJ reported that Microsoft and Nokia have “flirted” with the idea of making a joint bid for the company.

Oracle (ORCL) fell 7.5% in pre-market trading after the company reported late yesterday that its fiscal Q2 profit than ended Nov 30 was 54 cents a share on revenue excluding certain items of $8.81 billion, weaker than analysts’ estimates of profit of 57 cents a share on sales of $9.23 billion.

The Markets

March 10-year T-notes this morning are up +1 tick. T-note prices yesterday retreated on reduced safe-haven demand as equity markets rallied sharply after German business confidence unexpectedly improved and as Nov U.S. housing starts surged to a 19-month high: TYH2 -22.5, FVH2 -8.0, EDM2 +0.5. Bearish factors included (1) carry-over weakness from a slide in German bund prices after European debt concerns eased when the Dec German Ifo business climate unexpectedly improved and after strong demand was seen at a Spanish auction of government debt, (2) the larger-than-expected increase in Nov U.S. housing starts which rose to a 19-month high (+9.3% to 685,000 versus expectations of +1.1% to 635,000), (3) the unexpected surge in Nov U.S. building permits to their best level in 20 months (+5.7% to 681,000 versus expectations of -1.4% to 635,000), (4) comments from Minneapolis Fed President Kocherlakota who said recent government data have made him “more upbeat” on the outlook for the U.S. economy, and (5) supply pressures ahead of the Treasury’s $29 billion auction of 7-year T-notes on Wed. Bullish factors included (1) strong demand for the Treasury’s $35 billion auction of 5-year T-notes that had a bid-to-cover ratio of 2.86, slightly above the 12-auction average of 2.84 and strong foreign demand after indirect bidders took 50.6% of the auction, above the 12-auction average of 41.8%, and (2) the statement from Fitch Ratings that said the risk of downgrading the EFSF bail-out fund had increased and that the fund’s AAA rating depends on France remaining AAA.

The dollar index this morning is lower with the dollar/yen -0.07 yen and the euro/dollar +0.05 cents. The dollar index yesterday settled lower as the euro rallied when German business sentiment unexpectedly improved and strong demand was seen at a sale of Spanish government debt: Dollar Index -0.405, USDJPY -0.156, EURUSD +0.00835. Bearish factors included (1) the unexpected increase in the Dec German Ifo business climate, which is euro supportive, (2) the action by Spain to sell 5.64 billion euros of 3-month and 6-month Treasury bills, more than the maximum target of 4.5 billion euros and a sign of strong demand, and (3) strength in the British pound which rose to a 1-week high against the dollar after Nov U.K. nationwide consumer confidence unexpectedly rose and Dec U.K. CBI reported that sales unexpectedly surged to a 7-month high. Bullish factors for the dollar included (1) ongoing European debt crisis concerns which boosts the safe-haven demand for the dollar after European Commission President Barroso said the sovereign-debt crisis is “worsening” conditions in the European labor market and (2) dollar supportive comments from Minneapolis Fed President Kocherlakota who said recent government data have made him “more upbeat” on the outlook for the U.S. economy.

Feb crude oil prices this morning are up +34 cents a barrel and Feb gasoline is +0.01 of a cent per gallon. Crude oil and gasoline prices yesterday closed higher for a second day as the dollar weakened, European debt concerns eased and after Nov U.S. housing starts surged: CLG12 +$3.19, RBG12 +8.68. Bullish factors included (1) the weaker dollar, which encourages investment demand in commodities, (2) the surge in Nov U.S. housing starts to their best level in 19 months, which lifts confidence in the economy and energy demand, and (3) reduced European debt concerns after the Dec German Ifo business climate unexpectedly gained. Bearish factors included (1) comments from European Commission President Barroso who said the sovereign-debt crisis is “worsening” conditions in the European labor market, which may slow economic growth and fuel demand and (2) concern that U.S. legislators will fail to extend the expiring U.S. payroll tax cut, which may reduce economic growth and fuel demand. Expectations for Wednesday’s weekly inventory report from the DOE are for crude oil stockpiles to fall -2.12 million bbl, gasoline supplies to increase +1.5 million bbl, distillate inventories to fall -750,000 bbl and the refinery capacity rate to rise +0.4 to 85.5%.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): WAG-Walgreen (BEST earnings consensus $0.67), BBBY-Bed Bath & Beyond (0.88), KMX-CarMax (0.38), MU-Micron Technology (-0.10), TIBX-TIBCO Software (0.35), SHAW-Shaw Group (0.44), ATU-Actuant (0.43), FINL-Finish Line (0.11), SCS-Steelcase (0.19), INXN-InterXion Holding NV (0.11), LNN-Lindsay (0.43), KBH-KB Home (0.04), PKE-Park Electrochemical (0.33).

Financial Calendar

0700 ET Weekly MBA mortgage applications, previous +4.1% with purchase mortgage sub-index -8.2% and refinancing sub-index +9.3%.

1000 ET Nov existing home sales expected +2.0% to 5.07 million.

1300 ET Treasury auctions $29 billion 7-year T-notes.

Both comments and pings are currently closed.

Comments are closed.