Market Happenings for Thursday, October 13, 2011

Pre-market, futures are down a bit as investors monitored the latest developments in Europe’s debt crisis, digested JPMorgan Chase’s earnings and latest job market data. Gainers this morning include AKAM, AVP, BRCM, HPQ and AAPL. Losers include ETFC, GT, KR, JPM and ANR. Light crude is down -1.50% at 84.29 and gold is down -0.86% at 1,668.10.

U.S. Stock News

December S&Ps this morning are trading down -6.10 points. The US stock market yesterday moved higher on reduced European sovereign debt concerns after the European Union released a plan to recapitalize banks and stem the region’s debt crisis: Dow Jones +0.90%, S&P 500 +0.98%, Nasdaq Composite +0.84%. The S&P 50 and the Nasdaq posted 3-week highs and the Dow climbed to a 1-1/4 month high. Bullish factors included (1) reduced European debt concerns after European Economic and Monetary Affairs Commissioner Rehn said the Euro-Zone is moving toward a consensus on resolving the “calamity” of the sovereign debt crisis as European Commission President Barroso called for a “coordinated approach” to deliver a “significantly higher capital ratio of highest quality capital” for banks, (2) the action by Slovakia, the only Euro-Zone nation yet to approve a retooled European bailout fund, to reach an agreement on another vote to ratify the plan, and (3) the action by UBS AG to raise its 2011 earnings forecast for companies in the S&P 500 to $96.64 a share from $95, saying earnings in the second half of the year will reflect higher economic growth expectations after U.S. manufacturing, auto sales, construction and payrolls beat forecasts.

Bearish factors included (1) concern that the global economic recovery may be undercut by rising unemployment after the U.K. unemployment rate rose to a 15-year high of 8.1% and the number of unemployed in the U.K. climbed to 2.57 million, the most since 1994, and (2) comments from Cleveland Fed President Pianalto who said the U.S. economy is “struggling to recover.”

JPMorgan Chase (JPM) fell 1.4% in pre-market trading even after the company reported Q3 EPS of $1.02, higher than estimates of 92 cents and said profit fell 4%, smaller than analysts’ estimated as the company benefited from accounting changes in the value of its liabilities.

The Markets

December 10-year T-notes this morning are up +11.5 ticks. T-note prices yesterday traded lower on reduced safe-haven demand after global stock markets gained on optimism European leaders will contain the region’s debt crisis along with weak demand for the Treasury’s $21 billion 10-year T-note auction: TYZ11 -10, FVZ11 -3, EDH12 +3.0. Bearish factors included (1) reduced safe-haven demand for Treasuries after the S&P 500 rallied to a 3-week high when European Commission President Barroso called for a “coordinated approach” to recapitalize European banks, (2) slack demand for the Treasury’s $21 billion 10-year T-note auction that had a bid-to-cover ratio of 2.86, below the 12-auction average of 3.11, and (3) supply pressures ahead of Thursday’s $13 billion auction of 30-year T-bonds. A bullish factor was the minutes of the Sep 20-21 FOMC meeting in which Fed members wanted to keep further asset purchases as an option to boost the economy as some policy makers saw “considerable uncertainty” that U.S growth will pick up.

The dollar index this morning is stronger with the dollar/yen -0.35 yen and the euro/dollar -0.61 cents. The dollar index yesterday slumped to a 3-week low and settled lower when European Commission President Barroso reduced European debt concerns when he called for a “coordinated approach” to recapitalize European banks: Dollar Index -0.591, USDJPY +0.609, EURUSD +0.01524. Bearish factors included (1) the rally in the euro to a 3-week high against the dollar on reduced sovereign debt concerns after European Commission President Barroso called for a “coordinated approach” to deliver a “significantly higher capital ratio of highest quality capital” for banks, (2) the unexpected increase in Aug Euro-Zone industrial production, which is euro supportive, and (3) the euro positive action by Slovakia, the only Euro-Zone nation yet to approve a retooled European bailout fund, to reach an agreement on another vote to ratify the plan. Bullish factors included (1) the slide in the yen to a 1-month low against the dollar and (2) strong demand for dollars after the 3-month dollar Libor rate increased for the 24th consecutive day to 0.40083%, the highest in 14 months,

Nov crude oil prices this morning are down -$1.59 a barrel and Nov gasoline is -2.77 cents per gallon. Crude oil and gasoline prices gyrated between gains and losses yesterday and finally settled mixed after the IEA cut its 2012 global oil demand forecast for a second month: CLX11 -$0.24, RBX11 +0.11. Nov gasoline posted a 3-week high. Bearish factors included (1) the action by the IEA to cut its 2012 global oil demand forecast by 210,000 barrels a day to 90.5 million a day, citing a loss of momentum in the economic recovery, (2) IEA’s action to raise its Libyan oil output estimate by year-end to 600,000 barrels a day from a previous forecast of 350,000 to 400,000 barrels a day, and (3) the action by the U.S. Energy Department to cut its 2011 WTI crude price estimate to average $92.36 a barrel, down from a Sep estimate of $94.40. Bullish factors included (1) the slide in the dollar index to a 3-week low, which encourages investment demand in commodities, and (2) the rally in the S&P 500 to a 3-week high, which boosts confidence in the economic outlook and energy demand. Expectations for Thursday’s weekly inventory report from the DOE (pushed back a day due to Monday’s Columbus Day holiday) are for crude supplies to rise +800,000 bbl, gasoline stockpiles to fall -50,000 bbl, distillate inventories to drop -650,000 bbl and the refinery utilization rate to fall -0.8 to 86.9%.

Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): GOOG-Google (BEST earnings consensus $8.77), JPM-JPMorgan Chase (0.92), FAST-Fastenal (0.33), SWY-Safeway (0.35), CBSH-Commerce Bancshares (0.77), VMI-Valmont Industries (1.53), FCS-Fairchild Semiconductor (0.32), LNN-Lindsay (0.61).

Financial Calendar

0830 ET Weekly initial unemployment claims expected +4,000 to 405,000, previous +6,000 to 401,000. Weekly continuing claims expected +10,000 to 3.710 million, previous -52,000 to 3.700 million.

0830 ET Aug trade balance expected -$45.8 billion, Jul -$44.8 billion.

1100 ET Treasury announces amount of 30-year TIPS to be auctioned Oct 20.

1300 ET Treasury auctions $13 billion 30-year T-bonds.

1430 ET Minneapolis Fed President Narayana Kocherlakota speaks to business leaders at an event in Sidney, Montana.

1630 ET Weekly money supply report and Fed balance sheet.

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