Market Happenings for Monday, October 03, 2011

Pre-market, futures are down a bit as investors remain unnerved about Greece and a slowing global economy. Gainers this morning include YHOO, FHN, NEM, FLR and TLAB. Losers include OI, WYNN, BTU, ANR and VIAB. Light crude is down -1.43% at 78.07 and gold is up +2.29% at 1,659.40.

U.S. Stock News

December S&Ps this morning are trading down -3.70 points. The US stock market last Friday tumbled after economic reports from Europe and Asia heightened concern that the global economy is slowing: Dow Jones -2.16%, S&P 500 -2.50%, Nasdaq Composite -2.63%. Bearish factors included (1) carry-over weakness from a fall in European and Asian stock markets on concern the global economy may slip into recession after Aug German retail sales fell by the most in 4 years, China’s HSBC Sep purchasing mangers index contracted for a third month, and Aug Japan industrial production rose less than forecast, (2) concern that U.S. consumer spending may slow after the unexpected decline in Aug U.S. personal income (-0.1% versus expectations of +0.1% and its first decline in 22 months), and (3) weakness in technology stocks after Micron Technology, the largest maker of computer-memory chips, plunged when it reported an unexpected loss on weak demand for personal computers.

Bullish factors included (1) the unexpected increase in the final Sep U.S. University of Michigan consumer confidence (+1.6 to 59.4 versus expectations of unchanged at 57.8), (2) the unexpected increase in the Sep Chicago purchasing managers index (+4.1 to 60.4 versus expectations of -1.5 to 55.0), (3) the smaller-than-expected increase in the Aug core PCE deflator (+0.1% m/m and +1.6% y/y versus expectations of +0.2% m/m and +1.7% y/y), and (4) comments from St, Louis Fed President Bullard who said the Fed is prepared to ease policy should the U.S. economy weaken and that “the Fed has potent tools at its disposal and is not now, or ever, out of ammunition.”

The Markets

December 10-year T-notes this morning are up +7.5 ticks. T-note prices last Friday traded higher for most of the session and settled slightly higher on increased safe-haven demand as equities declined and on concern the global economy is slowing: TYZ11 +3.5, FVZ11 -0.7, EDH12 -1.5. Bullish factors included (1) carry-over support from a rally in German bunds after Aug German retail sales plunged by the most in 4 years (-2.9% m/m), (2) the unexpected decline in Aug U.S. personal income (-0.1% versus expectations of +0.1% and its first decline in 22 months), (3) the smaller-than-expected increase in the Aug core PCE deflator (+0.1% m/m and +1.6% y/y versus expectations of +0.2% m/m and +1.7% y/y), (4) comments from St. Louis Fed President Bullard who said the Fed is prepared to ease policy should the U.S. economy weaken and that “the Fed has potent tools at its disposal and is not now, or ever, out of ammunition,” and (5) increased safe-haven demand for Treasuries after stocks fell. Bearish factors included (1) the unexpected increase in the final Sep U.S. University of Michigan consumer confidence (+1.6 to 59.4 versus expectations of unchanged at 57.8) and (2) the unexpected increase in the Sep Chicago purchasing managers index (+4.1 to 60.4 versus expectations of -1.5 to 55.0).

The dollar index this morning is stronger and posted an 8-1/4 month high with the dollar/yen -0.20 yen and the euro/dollar -0.24 cents. The dollar index last Friday moved higher on increased safe-haven demand as the stock market tumbled and as weak European economic data undercut the euro: Dollar Index +0.525, USDJPY +0.196, EURUSD -0.02114. Bullish factors included (1) increased safe-haven demand for the dollar as global equity markets fell on concern of a global economic slowdown, (2) the plunge in Aug German retail sales by the most in 4 years (-2.9% m/m), which is euro negative, and (3) the unexpected increase in the Sep Chicago purchasing managers index and Sep U.S. University of Michigan consumer confidence, which indicates economic strength and is dollar supportive. Bearish factors included (1) the unexpected increase in the Sep Euro-Zone CPI estimate to a 3-year high of +3.0% y/y, which may keep the ECB from cutting rates or implementing any further stimulus measures and (2) the unexpected decline in Aug U.S. personal income, which may prompt the Fed into additional dollar negative stimulus measures to spur the economy.

Nov crude oil prices this morning are down -73 cents a barrel and Nov gasoline is +0.05 of a cent per gallon. Crude oil and gasoline prices last Friday closed lower due to dollar strength and weak global economic data: CLX11 -$2.94, RBX11 -2.05. Bearish factors included (1) the stronger dollar, which discourages investment demand in commodities, (2) the plunge in Aug German retail sales by the most in 4 years and the decline in China’s Sep purchasing mangers index for a third month, which hints at global economic weakness that may reduce energy demand, and (3) the unexpected contraction in Aug U.S. personal income, which may curtail consumer spending and fuel demand. Bearish factors included (1) the unexpected increase in the Sep Chicago purchasing mangers index, which is positive for energy consumption and (2) the unexpected increase in the Sep U.S. University of Michigan consumer confidence, which may help keep consumer spending and fuel demand for falling.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): WWW-Wolverine World Wide (BEST earnings consensus $0.75), TISI-Team Inc. (0.25).

Financial Calendar

0700 ET Dallas Fed President Richard Fisher is interviewed by CNBC.

1000 ET Aug construction spending expected -0.2%, Jul -1.3%.

1000 ET Sep ISM manufacturing index expected -0.2 to 50.4, Aug -0.3 to 50.6. Sep ISM prices paid expected -2.0 to 53.5, Aug -3.5 to 55.5.

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

1700 ET Sep total vehicle sales expected 12.50 million, Aug 12.10 million. Sep domestic vehicle sales expected 9.60 million, Aug 9.52 million.

1800 ET Richmond Fed President Jeffrey Lacker speaks on ?Economics After the Crisis? at the University of Wisconsin Madison .

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