Market Happenings for Friday, December 23, 2011

Expect quiet trade today with many investors packed up ahead of the holiday weekend. Gainers this morning include NTAP, FSLR, MU, GCI and SNDK while losers include MJN, XLNX, AKAM, NYX and BBY. Currently light crude is up a bit and gold is down a bit.

Hope everyone has a Merry Christmas!

U.S. Stock News

March S&Ps this morning are trading up +6.60 points at a 2-week high. The US stock market yesterday settled higher as an unexpected drop in weekly jobless claims and improved consumer confidence bolstered optimism in the U.S. economy: Dow Jones +0.51%, S&P 500 +0.83%, Nasdaq Composite +0.83%. The S&P 500 posted a 1-1/2 week high and the Dow rose to a 1-week high. Bullish factors included (1) the unexpected decline in weekly initial U.S. unemployment claims to their lowest level in 3-1/2 years (-4,000 to 364,000 versus expectations of +14,000 to 380,000), (2) the larger-than-expected increase in Dec U.S. University of Michigan consumer confidence to its best level in 6 months (+2.2 to 69.9 versus expectations of +0.3 to 68.0), (3) the bigger-than-expected increase in Nov leading indicators (+0.5% versus expectations of +0.3%), and (4) reduced European debt concerns after Italy’s Senate approved Prime Minister Monti’s 30 billion-euro emergency budget plan.

Bearish factors included (1) the unexpected downward revision to Q3 U.S. GDP (+1.8% annualized versus expectations of no change at 2.0% as Q3 personal consumption was revised downward to +1.7% from the originally reported +2.3%), (2) the unexpected drop in the Oct FHFA house price purchase only index (-0.2% m/m versus expectations of a +0.2% m/m increase), and (3) comments from BOE Governor and ESRB vice chairman King who said the Euro-Zone debt crisis is starting to affect the real economy as growth prospects “have deteriorated.”

The Markets

March 10-year T-notes this morning are down -3 ticks. T-note prices yesterday settled higher after Q3 U.S. GDP was unexpectedly revised lower along with dealer short covering after the Treasury sold $177 billion of government debt over the past 2 weeks: TYH2 +1.0, FVH2 -0.7, EDM2 -1.0. Bullish factors included (1) the unexpected downward revision to Q3 U.S. GDP (+1.8% annualized versus expectations of no change at 2.0% as Q3 personal consumption was revised downward to +1.7% from the originally reported +2.3%), (2) the unexpected drop in the Oct FHFA house price purchase only index (-0.2% m/m versus expectations of a +0.2% m/m increase), (3) comments from BOE Governor and ESRB vice chairman King who said the Euro-Zone debt crisis is starting to affect the real economy as growth prospects “have deteriorated,” and (4) dealer short covering after the Treasury auctioned $177 billion in government debt over the past 2 weeks, the most ever for that time frame. Bearish factors included (1) the unexpected decline in weekly initial U.S. unemployment claims to their lowest level in 3-1/2 years (-4,000 to 364,000 versus expectations of +14,000 to 380,000), (2) the larger-than-expected increase in Dec U.S. University of Michigan consumer confidence to its best level in 6 months (+2.2 to 69.9 versus expectations of +0.3 to 68.0), (3) the unexpected upward revision to the Q3 GDP price index to its highest level in 3 years (+2.7% versus expectations of +2.5%), and (4) the bigger-than-expected increase in Nov leading indicators (+0.5% versus expectations of +0.3%).

The dollar index this morning is weaker with the dollar/yen -0.15 yen and the euro/dollar +0.25 cents. The dollar index yesterday settled slightly lower after an unexpected downward revision to Q3 U.S. GDP and reduced European debt concerns pressured the dollar: Dollar Index -0.058, USDJPY +0.112, EURUSD +0.00034. Bearish factors included (1) the unexpected downward revision to Q3 U.S. GDP to 1.8% annualized form 2.0% annualized, and (2) reduced European debt concerns after Italy’s Senate approved Prime Minister Monti’s 30 billion-euro emergency budget plan. Bullish factors for the dollar included (1) the unexpected decline in weekly U.S. jobless claims to their lowest level in 3-1/2 years, which is dollar supportive and (2) increased safe-haven demand for the dollar after BOE Governor and ESRB vice chairman King said the Euro-Zone debt crisis is starting to affect the real economy as growth prospects “have deteriorated.”

Feb crude oil prices this morning are up +33 cents a barrel at a 1-week high and Feb gasoline is -0.88 of a cent per gallon. Crude oil and gasoline prices yesterday settled higher for a fourth day after weekly U.S jobless claims fell to a 3-1/2 year low and Dec U.S. University of Michigan consumer confidence rose to a 6-month high: CLG12 +$0.86, RBG12 +1.53. Bullish factors included (1) the unexpected decline in weekly initial U.S. unemployment claims to their lowest level in 3-1/2 years, which shows improvement in the labor market that may boost economic growth and energy demand, (2) the larger than expected increase in the Dec U.S. University of Michigan consumer confidence to a 6-month high, which may lead to an increase in consumer spending and energy demand, and (3) the larger than expected increase in Nov leading indicators, which boosts confidence in the economic outlook and energy demand. Bearish factors included (1) the unexpected downward revision to Q3 U.S> GDP, which indicates reduced energy demand and (2) comments from BOE Governor and ESRB vice chairman King who said the Euro-Zone debt crisis is starting to affect the real economy as growth prospects “have deteriorated.”

Earnings Reports

Nothing happening here this morning.

Financial Calendar

0830 ET Nov durable goods orders expected +2.2% and +0.4% ex transportation, Oct -0.5% and +1.1% ex transportation.

0830 ET Nov personal spending expected +0.3%, Oct +0.1%. Nov personal income expected +0.2%, Oct +0.4%. Nov PCE deflator expected +2.7% y/y, Oct +2.7% y/y. Nov PCE core expected +0.1% m/m and +1.7% y/y, Oct +0.1% m/m and +1.7% y/y.

1000 ET Nov new home sales expected +2.6% to 315,000, Oct +1.3% to 307,000.

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