Market Happenings for Tuesday, December 27, 2011

Pre-market, futures are flat as investors continued to look for positive economic news. Gainers this morning include MJN, EQR, MET, PRGO and ROST while losers include SHLD, GNW, CBG, JNPR and FDX. Light crude is up +0.15% at 99.83 and gold is down -0.67% at 1,595.20.

U.S. Stock News

March S&Ps this morning are trading slightly lower by 0.30 points in light post-holiday trading. The market is awaiting today’s U.S. economic reports. The US stock market last Friday settled higher as stronger than expected Nov durable goods orders and strong Nov new home sales offset weaker-than-expected Nov personal income and spending: Dow Jones +1.02%, S&P 500 +0.90%, Nasdaq Composite +0.74%. The S&P 500 posted a 2-week high and the Dow posted a 5-month high. Bullish factors included (1) the stronger-than-expected Nov durable goods orders and the upward revision to Oct (Nov +3.8% and +0.3% ex transportation versus expectations of +2.2% and +0.4% ex transportation and Oct revised up to unchanged and +1.5% ex transportation from the originally reported -0.5% and +1.1% ex transportation), (2) the increase in Nov U.S. new home sales to their best level in 7 months (+1.6% to 315,000, right on expectations), and (3) the action by Congress to finally pass an extension of the U.S. payroll tax cut before it expired at the end of the year.

Bearish factors included (1) the weaker than expected Nov personal spending (+0.1% versus expectations of +0.3%) and Nov personal income (+0.1% versus expectations of +0.2%), which raises concern about the sustainability of the economic recovery, (2) ongoing concern about the European debt crisis and Europe’s banking system after the dollar Libor-OIS spread, a gauge of banks’ reluctance to lend, widened to 48.62 bp, the most in 2-1/2 years and (3) concern about a slowdown in global growth after Fitch Ratings cut its 2012 China GDP forecast to 8.2% from a previous estimate of 8.5% and to cut its GDP estimate for India for the year ending March 2013 to 7.5% from an earlier estimate of 8.2%.

The Markets

March 10-year T-notes this morning are trading slightly lower by 1.5 ticks with little fresh trading incentive. T-note prices last Friday fell to 2-week low and settled lower after stronger-than-expected U.S. economic data boosted stocks and optimism in the economic outlook and reduced the safe-haven demand for Treasuries: TYH2 -19.0, FVH2 -11.5, EDM2 -2.0. Bearish factors included (1) the stronger-than-expected Nov durable goods orders and the upward revision to Oct (Nov +3.8% and +0.3% ex transportation versus expectations of +2.2% and +0.4% ex transportation and Oct revised up to unchanged and +1.5% ex transportation from the originally reported -0.5% and +1.1% ex transportation), (2) the increase in Nov U.S. new home sales to their best level in 7 months (+1.6% to 315,000, right on expectations), and (3) the rally in the S&P 500 to a 2-week high, which reduced the safe-haven demand for Treasuries. Bullish factors included (1) the weaker than expected Nov personal spending (+0.1% versus expectations of +0.3%) and Nov personal income (+0.1% versus expectations of +0.2%) and (2) reduced inflation concerns after the Nov PCE deflator rose +2.5% y/y, weaker than expectations of +2.7% y/y.

The dollar index this morning is trading slightly lower by 0.121 points with the dollar/yen down 0.12 yen and the euro/dollar up 0.06 cents. Forex trading is light with the post-holiday trade and with London closed for an extended Christmas holiday. The dollar index last Friday settled slightly higher after stronger-than-expected U.S. economic data on durable goods orders and new home sales signaled strength in the U.S economy: Dollar Index +0.035, USDJPY -0.089, EURUSD -0.00047. Bullish factors included (1) the increase in Nov durable goods orders by the most in 4 months and the jump in Nov U.S. new home sales to their best level in 7 months, which signals economic strength and is dollar supportive, (2) euro=negative comments from ECB Executive Board member Bini Smaghi who said the ECB shouldn’t shirk from using quantitative easing if it’s needed to avoid deflation, (3) Q3 French GDP being revised lower to +0.3% q/q and +1.5% y/y from the originally reported +0.4% q/q and +1.6% y/y, and (4) ongoing European debt concerns that boost the safe-haven demand for the dollar after the dollar Libor-OIS spread, a gauge of banks’ reluctance to lend, widened to 48.62 bp, the most in 2-1/2 years. Bearish factors for the dollar included (1) concern about the sustainability of U.S. growth after Nov personal spending and income rose less than expected and (2) data from the U.S. Treasury Department that showed the U.S. government’s net financial position worsened to a -$14.8 trillion deficit in fiscal 2011 from -$13.5 trillion in 2010.

Feb crude oil prices this morning are up 24 cents a barrel and Feb gasoline is up 0.03 cents per gallon on some continued underlying strength from the recent positive U.S. economic data. Crude oil and gasoline prices last Friday posted 1-week highs and settled higher for the fifth consecutive session on optimism the U.S. economy will continue to expand after Nov durable goods rose by the most in 4 months and Nov U.S. new home sales rose to their best level in 7 months: CLG12 +$0.15, RBG12 +4.13. Bullish factors included (1) strong U.S. economic data that may boost economic growth and energy demand after Nov durable goods orders rose by the most in 4 months and Nov U.S. new home sales rose to their best level in 7 months and (2) geopolitical concerns after Iran’s Navy said it will hold 10 days of maneuvers starting Dec 24 east of the Strait of Hormuz, where one sixth of global crude supplies flow through each day. Bearish factors included (1) the smaller-than-expected increase in Nov U.S. personal spending, which indicates subdued consumer spending that may lead to slower economic growth and fuel demand, (2) the downward revision to Q3 French GDP, which signals reduced energy consumption, and (3) the action by Fitch Ratings to cut its 2012 China GDP forecast to 8.2% from a previous estimate of 8.5% and to cut its GDP estimate for India for the year ending March 2013 to 7.5% from an earlier estimate of 8.2%, which indicates reduced energy demand.

Earnings Reports

Earnings reports : CALM-Cal-Maine Foods (BEST earnings consensus $0.89).

Financial Calendar

0900 ET Oct S&P/CaseShiller composite-20 home price index expected -0.2% m/m and -3.2% y/y, Sep -0.6% m/m and 3.6% y/y.

1000 ET Dec U.S. consumer confidence expected +2.5 to 58.5, Nov +15.1 to 56.0.

1000 ET Dec Richmond Fed manufacturing index expected +5 to 5, Nov +6 to 0.

1130 ET Weekly 3-mo and 6-mo T-bill auctions.

Both comments and pings are currently closed.

Comments are closed.