Market Happenings for Thursday, December 22, 2011

Pre-market, futures are up as investors await jobs data and final reading on economic growth. Gainers this morning include JNPR, CELG, FSLR, ALTR and YHOO while losers include BBBY, JCP, CCL, ETFC and MO. Light crude is up +0.56% at 99.22 and gold is down -0.09% at 1,612.20.

U.S. Stock News

March S&Ps this morning are trading up +6.50 points. The US stock market yesterday settled mixed as a rally in energy stocks led the broader market higher but technology stocks settled lower when Oracle reported weaker-than-expected earnings results: Dow Jones +0.03%, S&P 500 +0.19%, Nasdaq Composite -0.99%. Bullish factors included (1) the action by the ECB to loan European banks a record 489 billion euros in 3-year loans, which temporarily reduced European debt concerns and boosted stocks, (2) the +4.0% m/m increase in Nov U.S. existing home sales to a 10-month high of 4.42 million, stronger than expectations of +2.2% m/m, and (3) strength in energy producers after crude oil rallied sharply when the DOE reported that weekly crude inventories fell more than expected to near a 3-year low.
Bearish factors included (1) carry-over weakness from a slide in European equities after Italian and Spanish bond yields rose and Dec Euro-Zone consumer confidence fell more than expected to a 2-1/3 year low on speculation that ECB measures to support the European banking system will be insufficient to stem the region’s debt crisis, (2) a slide in technology stocks after Oracle plunged and dragged the entire sector lower when it reported weaker than expected Q2 earnings, and (3) the action by the National Association of Realtors to revise down the number of U.S. existing homes sold in 2010 by -15% to 4.19 million from the originally reported 4.91 million, which signals the U.S. housing crisis was worse than estimated.

Tibco Software (TIBX) rose 3.4% in European trading after the company reported Q4 adjusted earnings of 42 cents a share, stronger than analysts’ estimates of 35 cents.

The Markets

March 10-year T-notes this morning are up +3.5 ticks. T-note prices yesterday fluctuated on either side of unchanged and settled lower as slack demand for the Treasuries 7-year T-note auction offset an increase in safe-haven demand after stock prices declined: TYH2 -6.5, FVH2 -4.7, EDM2 unchanged. Bearish factors included (1) the action by the ECB to loan European banks a record 489 billion euros in 3-year loans, which temporarily eased European debt concerns and reduced safe-haven demand for Treasuries, (2) the +4.0% m/m increase in Nov U.S. existing home sales to a 10-month high of 4.42 million, stronger than expectations of +2.2% m/m, (3) slack demand for the Treasury’s $29 billion auction of 7-year T-notes that had a bid-to-cover ratio of 2.68, below the 12-auction average of 2.84, and (4) overall supply pressures after the Treasury auctioned $177 billion in government debt over the past 2 weeks, the most ever for that time frame. Bullish factors included (1) the action by the National Association of Realtors to revise down the number of U.S. existing homes sold in 2010 by -15% to 4.19 million from the originally reported 4.91 million, which signals the U.S. housing crisis was worse than estimated and (2) increased safe-haven demand for Treasuries as the stock market declined.

The dollar index this morning is lower with the dollar/yen +0.03 yen and the euro/dollar +0.22 cents. The dollar index yesterday recovered from a 1-week low and settled higher on speculation that ECB measures to support European banks won’t be enough to stem the region’s sovereign-debt crisis: Dollar Index +0.140, USDJPY +0.168, EURUSD -0.00355. Bullish factors included (1) weakness in the euro which retreated from a 1-week high against the dollar and settled lower after European government bond yields rose and (2) increased safe-haven demand for the dollar as European and U.S. equity markets tumbled on speculation that ECB measures to support European banks won’t be enough to stem the region’s sovereign-debt crisis. Bearish factors for the dollar included (1) early strength in the euro after the ECB awarded 489 billion euros in 1,134 day loans, the most ever in a single operation and more than estimates of 293 billion euros to a total of 523 Euro-Zone lenders, which may help avoid a liquidity squeeze and reduce the safe-haven demand for the dollar and (2) the action by the National Association of Realtors to revise down the number of U.S. existing homes sold in 2010 by -15% to 4.19 million from the originally reported 4.91 million, which signals the U.S. housing crisis was worse than estimated.

Feb crude oil prices this morning are up +38 cents a barrel at a 1-week high and Feb gasoline is -0.19 of a cent per gallon. Crude oil and gasoline prices yesterday rallied for a third day after weekly DOE crude supplies fell more than expected to a nearly 3-year low and total U.S. petroleum demand increased: CLG12 +$1.43, RBG12 +3.75. Bullish factors included (1) the plunge in weekly DOE crude inventories to a nearly 3-year low (-10.57 million bbl to 323.6 million bbl versus expectations of -2.12 million bbl, (2) the unexpected decline in weekly DOE gasoline supplies (-412,000 bbl versus expectations of a +1.5 million bbl build), (3) increased demand after total U.S. petroleum demand for the week ended Dec 16 rose +5% w/w to 19.3 million barrels a day, and (4) reduced European debt concerns after the ECB lent European banks a record amount for 3 years, which may help avoid a liquidity squeeze and help stem the region’s debt crisis. Bearish factors included (1) a rebound in the dollar after the dollar index recovered from a 1-week low and settled higher, (2) weakness in the equity market, which curbs confidence in the economic outlook and energy demand, and (3) the greater-than-expected decline in Nov Japan exports along with the BOJ’s assessment of the Japanese economy to “remain more or less flat for the time being,” which signals reduced energy demand in the world’s third-biggest crude oil consumer.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): NEOG-Neogen (BEST earnings consensus $0.27), AM-American Geetings (0.81), DMND-Diamond Foods (0.72), CAMP-CalAmp (0.07), LUB-Luby’s (-0.05).

Financial Calendar

0830 ET Weekly initial unemployment claims expected +14,000 to 380,000, previous -19,000 to 366,000. Weekly continuing claims expected -3,000 to 3.600 million, previous +4,000 to 3.603 million.

0830 ET Revised Q3 GDP, previous +2.0% annualized. Qs personal consumption, previous +2.3%. Q3 GDP price index, previous +2.5%. Q3 core PCE, previous +2.0% q/q.

0955 ET Final Dec U.S. University of Michigan consumer confidence expected +0.3 to 68.0, previous +3.6 to 67.7.

1000 ET Nov leading indicators expected +0.3%, Oct +0.9%.

1000 ET Oct FHFA house price index purchase only expected +0.2% m/m, Sep +0.9% m/m.

1630 ET Weekly money supply report and Fed balance sheet.

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