8:30am Sept Personal Income (last 0.2%), Sept Personal Spending (last 1.3%), Sept PCE Deflator y/y (last -0.5%), Sept PCE Core (last m/m 0.1%, y/y 1.3%)
9:45am Oct Chicago Purchasing Manager Index (last 46.1)
10:00am Oct University of Michigan Confidence (last 69.4), Oct NAPM-Milwaukee (last 58)
Todays Headlines
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9:30:26 AM
(US) Treasury Sec Geithner: Discusses resolution authority; FDIC would take control of failing firms, which would be sold or liquidated
- FDIC approach would allow the government to cut risk that failures would panic creditors and shareholders.
- In all but the rarest cases, bankruptcy would remain the main way of resolving failing financial firms.
- No "open bank" assistance would be allowed, all firms would be either sold or liquidated.
10:30 AM
*EIA NATURAL GAS INVENTORIES:
+25 BCF VS. +28 TO +33 BCF ESTIMATE RANGE
11:02:06 AM
NY Fed: Completes program; Purchased $1.93B in $300B outright coupons purchase; dealers submitted $10.98B for consideration (bid to cover 5.67)
- Heaviest purchase was $564M in the 04/30/14 maturity
- Note: Avg bid to cover for prior four auctions is 5.7
- Note: This was the final Treasury coupon purchase under the $300B program
11:46:03 AM
ECB source notes ECB against a $1.50 exchange rate over medium term; will urge China to allow Yuan appreciation - unconfirmed report
- ECB concerned about a rapidly appreciating Euro; concerned about an FX intervention without Chinese and US support
- Reminder: EU's Verhuegen today commented that China has a competitive advantage due to FX and the G20 should discuss 'artificially' low currencies
1:01:40 PM
*TREASURY'S $31B 7-YEAR NOTE AUCTION DRAWS 3.141%; BID-TO-COVER RATIO: 2.65 V 2.79 PRIOR AND 2.51 OVER THE LAST 8
- indirect bidders take 59.3% of competitive bids
- 46.8% alotted at the high
- median 3.02%, low 2.85%
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
8:30am Advance Q3 GDP q/q (last -0.7%), Q3 GDP Price Index (last 0.0%), Q3 Personal Consumption (last -0.9%), Q3 Core PCE q/q (last 2.0%), Initial Jobless Claims (last 531K), Continuing Claims (last 5.923M)
10:30am Natural Gas Inventories
1:00pm Treasury 7-yr note auction
Todays Headlines
8:30:02 AM
*SEPT DURABLE GOODS ORDERS: 1.0% V 1.0%E; DURABLES EX-TRANSPORTATION: 0.9% V 0.7%E
- No revisions to Prior Durables at -2.6%
- Prior Durables Ex Transportation revised from -0.3% to -0.4% (second revision)
9:00:08 AM
*(NO) NORGES RAISES DEPOSIT RATES BY 25BPS TO 1.50%; AS EXPECTED, TO INCREASE RATES GRADUALLY IN THE TIME TO COME
- If NOK strengthens more than expected rate hikes many be scaled back or delayed
- Inflation has been slightly higher than expected
- Sees deposit rate at 2.25% in 2010 v 1.50% prior, 3.50% in 2011 v 2.75% prior
- Sees 2009 Mainland GDP -1.25%, 2010 Mainland GDP +2.75%, 2011 GDP +3.25%
- Sees 2010 Underlying CPI at 1.75% (unchanged), 2011 CPI 2.25% (unchanged)
10:00:02 AM
*SEPT NEW HOME SALES: 402K V 440KE (-3.6% M/M)
- Prior revised from 429K to 417K
- Median price $204.8K v $199.9K +2.5% m/m
- Months supply: 7.5 v 7.5 month in Aug
10:30:04 AM
*DOE CRUDE: +775K V +1.4ME; GASOLINE: +1.6M V -1.0ME; DISTILLATE: -2.1M V -700KE; CAPACITY UTILIZATION: 81.8% V 81.6%E
- Distillate demand +150K to 3.64M bpd
- Gasoline demand -90K to 8.86M bpd
- Strategic Petroleum Reserve unchanged at 725.1M bbl
11:01:22 AM
(PD) Polish Central Bank shifts monetary policy bias to neutral from easing; medium-term inflation risks seen as balanced
- Forecasts 2010, 2011 GDP forecast between 2.2% to 4.2%
- Forecasts 2010 CPI between 0.8% to 2.2% v 2.5% target; 2011 in range of 1.1% to 32.%
Update at 11:25pm: Polish Central Banker Filar sees 3Q GDP Growth at 1.4-1.5%
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
8:30am Sept Durable Goods Orders (last -2.4%, ex-transport 0.0%)
10:00am Sept New Home Sales (last 429K, m/m 0.7%)
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
1:00pm Treasury's 5-yr note auction
4:00pmReserve Bank of New Zealand interest rate decision
Todays Headlines
8:42:00 AM
*(BR) BRAZIL SEPT TOTAL OUTSTANDING LOANS M/M: BRL1.3B V BRL1.3B PRIOR
- PRIVATE BANK LENDING M/M: BRL797M v BRL787M PRIOR - CENTRAL BANK
- Company default rate at 4.0%; Consumer default rate at 8.2%
9:00:03 AM
*AUG S&P/CASE SHILLER HOME PRICE INDEX: 146.0 V 144.2 PRIOR; COMPOSITE-20 (Y/Y): -11.32% V-11.9%E
- Prior Home Price Index revised from 144.2 to 144.3
- Prior Composite-20 revised from -13.3% to -13.26%
1:01:43 PM
TREASURY'S $44B 2-YEAR NOTE auction draws 1.020%
- BID-TO-COVER RATIO 3.63 V 3.23 PRIOR AND 2.77 AVE OVER LAST 10 AUCTIONS
- indirect bidders take 44.5% of competitive bids with 3.21% alotted at the high
- median bid 0.980%, low bid 0.800%
- note: bid-to-cover ratio highest since Aug 2007
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
9:00am Aug S&P/CS Home Price Index (last 144.23), Aug S&P/CS Composite-20 (last -13.30%)
10:00am Oct Consumer Confidence (last 53.1), Oct Richmond Fed Manufacturing (last 14)
1:00pm Treasury's 2-yr note auction
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
9:53:44 AM
(SA) South Africa's Central Banker Mboweni: No preferred exchange rate for the Rand currency; MPC seeks a 'competitive' FX rate
***Reminder: Earleir in the European issue the ZAR weakness was attributed to chatter regarding proposal to freeze South Africa's currency at a predetermined exchange rate in a Fin24 press article noted that the Ministry of Economic Development was preparing to propose "radical" economic policy adjustments. The Gov't denied the press speculation.
9:07:05 AM
(CH) PBoC's Yi: Reserve diversification is a long term process; Reserve diversification should not lead to short-term FX volatility
- China's inflation will turn positive this quarter
- Near-term focus on preventing deflation.
- To maintain relatively stable Yuan exchange rate
9:29:28 AM
Follow up: German listed solars trading slightly higher following pre-release of coalition contract regarding feed in tariffs
- New Govt position paper states intentions to avoid large adjustments
- Paper states that new Govt will remain committed to soalr energy and solar technology within country
10:35:47 AM
(US) CNBC states that under proposed Rep Frank legislation, FDIC resolving fund to be paid for by banks
- New legislation on authority seen coming forward this Thursday
- Under the currently discussed program, current equity holders would be 'wiped out'
- Follow Up 11:00amET: CNBC's Liesman citing sources updates on status of legislation; sees legislation coming as soon as today or tommorow; with legislation impacting creditors and debtors; leaving FDIC as resolving agent of banks; with other agencies remaining involved in oversight
11:47:13 AM
Equity and commodity market weakness attributed to a variety of vague rumors circulating
- some desks noting the strength in the USD(moves back below 1.5000 level), citing the Brazilian central bank buying dollars in the spot market, though we would note that the Brazilian central bank does this frequently, including four times last week.
2:30:24 PM
(UK) BoE's Posen: QE would be more effective if it were extended to more securities than GILTS
- Insists that QE will not cause "unacceptably high" inflation.
- Does not have precise knowledge about the impact of QE at this point.
- Need to fix the banks before withdrawing stimulus funding.
- Indications are that the recession is coming to an end.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
"Fear less, hope more; eat less, chew more; whine less, breathe more; talk less, say more; love more and all good things will be yours.”
Market Week Wrap-up
- Earnings season hit its stride this week, although the effect on markets has been hardly salutary.
Trading in US equities was highly volatile, with the leading indices whipsawing back and forth in the absence of any overall negative or positive theme.
The DJIA spent most of the week above 10,000, but closed out on Friday below this key psychological level. Economic data played a minor role, with most attention paid to another brace of mixed housing numbers.
September housing starts and building permits fell below August levels, while the September existing home sales data over 9% sequentially. With the holiday season imminent, a National Retail Federation poll showed that US consumers plan to spend 3.2% less on a y/y basis on holiday shopping in 2009, stating that "Americans are not ready to declare an end to the recession."
Meanwhile, third quarter GDP reports from China and the UK impacted FX and bond trading. China's GDP growth was stronger than the prior two quarters at +8.9% (though slightly below consensus), while a dismal UK GDP data reading of -0.4% shocked investors and took the wind out of sterling.
The Fed confirmed this week that it has been testing reverse repo operations for several months, calling it a critical part of its eventual exit strategy, although it declared that the tests do not signal any imminent policy shift. Note it was just last weekend that Barron's implored Fed Chairman Bernanke to raise the Fed Funds Rate to 2%, and later in the week the FT speculated that Fed governors may soften their commitment to the zero rate policy via wording in the FOMC statement. For the week, the DJIA fell 0.2%, the S&P 500 declined 0.8% and the NASDAQ Comp slipped 0.1%.
- Tougher government regulation of telecommunications and the financial industry occupied Washington this week. It was hard to avoid news of moves by the Treasury's "pay czar" Feinberg to slash executive compensation at TARP recipients and examine even wider restrictions on pay at banks. The Fed began its own review of pay in the financial sector, noting that up to 28 large banks would face special "horizontal" compensation reviews. On the Hill, the House Financial Services Committee voted in favor to speed up implementation of elements of the Consumer Financial Protection Agency. The FCC moved closer to adopting "net neutrality" as official policy, with exceptions for "reasonable" network management needs.
- On Wednesday Morgan Stanley was the final big banking firm to report earnings. Morgan blew out estimates and returned to profitability after three quarters of losses. Morgan Stanley's CFO insisted that putting losses behind the bank is not a relief but an affirmation of its strategy. Leading regional banking name Wells Fargo also crushed expectations, although many commentators have expressed concern that the bank continues to rack up more non-performing assets and higher provisions for credit losses. Dick Bove spooked markets on Wednesday afternoon with a big reversal on Wells Fargo following the bank's report. Bove, who had initially called Wells Fargo a big winner just after the earnings came out, seemed to change his mind by afternoon and downgraded the name to a sell upon closer examination of loan loss figures. The regional banks appear to be splitting into groups of winners and loosers, with solid results from Bank of New York and US Bancorp, and more losses from Fifth Third, KeyCorp and SunTrust.
- Many quarterly earnings reports are apparently repeating the pattern established in the prior earnings season: EPS meets or exceeds consensus expectations while revenue results lack the surge in sales that would indicate a firm economic recovery. A look at the DJIA components which reported results this week illustrates the point. Thanks to a big tax benefit Caterpillar's earnings were nearly an order of magnitude better than the consensus view, while revenue fell short of expectations. DuPont's earnings outperformed while revenue fell somewhat short. Other leading names are in the same boat: Honeywell's EPS was slightly better than expected, while revenue missed the consensus view somewhat. The firm's CFO said top-line performance will remain challenging. Railroad Burlington Northern also had solid earnings but underwhelming revenues, while its forecast for next quarter was weaker than expected. Oil services name Schlumberger was in line with earnings expectations and revenue was a hair below expectations. Boeing's loss was a bit steeper than anticipated and revenue missed expectations. The aerospace giant also took a hammer to its 2009 guidance, citing the continuing problems in its 787 Dreamliner and 747-8 projects.
- Tech earnings continued to be an exception to the rule. Apple yet again surprised to the upside, beating top- and bottom-line expectations handily, and even exceeded "whisper" numbers. On the conference call, Apple executives said iPhone supply was short "virtually everywhere," and bragged that the iPhone has been deployed in more than 50%+ of Fortune100. SanDisk and Yahoo blew out consensus estimates across the board. Amazon beat on EPS by a large margin and met revenue expectations. Texas Instruments modestly exceeded expectations. Broadcom and STMicro were tech losers, with both semi manufacturers missing bottom-line goals by wide margins (ironically, both beat on the top line). Microsoft capped off the week in tech, rising over 5% on Friday on the strength of its earnings and revenue results.
- The military-industrial complex had a solidly profitable third quarter. Dow component United Technology, Northrop Grumman and Lockheed Martin all beat earnings expectations, although LMT's revenue was a bit behind the Street. Big pharma had a good Q3, as evidenced in reports from Merck, Novartis, Schering-Plough and Bristol-Myers. Earnings at all three firms were more or less in line with expectations, although Bristol-Myers and Novartis were a bit behind on the top line.
- With corporate earnings in the spotlight, Treasury yields have quietly moved higher this week as the liquidity driven rally across a broad spectrum of asset classes appears to be taking a breather. Next week the Treasury returns after a two week hiatus with a record $44B in 2-year, $41B in 5-year and $31B 7-year notes up for grabs, alongside $7B in 5-year TIPS. Although higher, yields have broadly speaking remained range-bound. The 2-year yield managed to test the 1% mark for the first time in October after the FT reported that FOMC members were considering altering their commitment to keeping rates at the zero bound for "an extended period" in an effort to manage inflationary expectations. The 10-year Note is only a few basis points away from the 3.50% level (not tested since late September) while the 30-year Bond finished the week above the 4.25% mark.
- The UK surprised many by failing to join Germany and France in technically escaping recession on Friday, posting its 6th successive quarter of negative growth. The considerably worse than expected reading meant the deepest downturn for the UK since records began in the mid 1950's and has heightened expectations for an expansion of quantitative easing from the Bank of England next month. US GDP data is due Thursday, and whilst the market is expecting a firmly positive reading (and by extension, an end to the US recession) the potential for both upside and downside surprises will number provide further event risk for bond traders next week.
- Strong corporate earnings in the US and rising commodity prices around the world helped drive the euro to fresh highs against the greenback and the Swiss Franc this week. There was also a fair amount of talk regarding shifting away from the USD as a reserve currency following last week's heated debate. Former US Secretary of State Kissinger commented that China's goal was to dislodge the dollar's position at the heart of the global monetary system, noting that any moves to alter the dollar's reserve status would be made over a long period. PBoC Governor Ma noted that dollar weakness would trigger domestic inflation in China, leading to vague reports that China was looking to help curb USD weakness. The EU EcoFin conclave sent a letter to the chairman of the G20 stating that economic recovery was increasingly apparent and fears of a prolonged recession were fading. The unexpected GDP contraction in the UK took the wind out of sterling and sharpened the debate over a potential expansion of the BoE's £175B QE program. By Friday, dealers couldn't help but notice that the interest yield differentials between US and Germany have been trending in favor of the euro, as the benchmark 2-year yield spread moved towards the 50bps, its highest spread since early June.
- EUR/USD tested and then broke above the 1.50 level mid week on continued chatter that Eastern European names were buying euros and that Russia was seeking to reduce the USD weighting in its currency basket to 33% from 55%, although Russian Central Banker Ulyukayev said he sees the weak dollar as a correction rather than devaluation. EUR/USD hit a high water mark around 1.55, a level last seen in early August 2008 before consolidating around 1.50. The German Export Assoc (BGA) believes the euro could rise toward $1.60 over the next few months before settling down to a 1.45-1.55 range. French Presidential Advisor Guaino commented that a sustained bout of EUR/USD above 1.50 would be a disaster for European industry. GBP/USD maintained a constructive tone throughout the week into the UK Q3 GDP data, climbing past a 14-month downtrend line of 1.65 before giving up its gains because of the weak GDP figures.
- USD/JPY progressively over the course of the week despite BoJ's Hayakwa comments that Japanese companies were not asking the government to do something to weaken the yen. The BoJ released its quarterly regional report, noting that the economy remains severe in some regions but is improving overall. The currency's weakness late in the week was attributed to press reports that the BoJ expects continued deflation in Japan through 2011, when the Core Consumer Price index is projected to decline for the third consecutive year. The carry-trade sentiment rose a bit for the yen as dealers noted that the report was another indication that the central bank would keep interest rates near zero for the time being.
- The trading week in Asia centered on economic data out of China mid week, where the Q3 GDP reading was released concurrently with the monthly industrial production, retail sales and inflation metrics. Despite the multi-month highs across these figures, markets expressed mild disappointment, with the Shanghai Composite extending its losses in the wake of the data. The 8.9% GDP reading was a one-year high, but came in just short of expectations of 9.0%. Industrial production hit a 14-month high at 13.9% and topped estimates of 13.2%, but fell short of the earlier press whisper number of 14.1%. Inflation is declining more slowly and retail sales met expectations.
- The rhetoric from the Chinese government was barely optimistic: officials stated the economy still faces insufficient external demand and warned that building up domestic demand remains challenging. Moreover, NDRC researcher Wang said the fundamentals of China's economic recovery are still not sufficient, and top central bank advisor Fan Gang urged policy makers to maintain fiscal stimulus through 2010.
- On the monetary front, the minutes of the latest Reserve Bank of Australia policy meeting shed some light on the central bank's decision to become the first G20 nation to raise interest rates. The RBA's focus revealed growing concerns over inflation bottoming at much higher level than previously expected and possibly rising again in 2011. In addition, the RBA forecasted economic growth will return to trend in 2010, and could rise to above-trend levels by 2011. Policymakers also did not appear to be fazed by the rally in AUD, suggesting the Aussie dollar rise reflects improving market sentiment and may actually help to contain inflation.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
10:00am SeptExisting Home Sales (last 5.1M, m/m -2.7%)
Todays Headlines
9:53:44 AM
(SA) South Africa's Central Banker Mboweni: No preferred exchange rate for the Rand currency; MPC seeks a 'competitive' FX rate
***Reminder: Earleir in the European issue the ZAR weakness was attributed to chatter regarding proposal to freeze South Africa's currency at a predetermined exchange rate in a Fin24 press article noted that the Ministry of Economic Development was preparing to propose "radical" economic policy adjustments. The Gov't denied the press speculation.
10:00:02 AM
*(US) SEPT LEADING INDICATORS: 1.0% V 0.8%E
- Prior revised from 0.6% to 0.4%
- Conf Board statment: data shows that a "recovery is developing," with the largest negatives in manufacturing hours and building permits.
10:30:16 AM
(CA) Bank of Canada (BOC) Monetary Policy Report: Inflation risk remain skewed slightly downward; Expect financial conditions to continue to improve
- Expects annual growth in Q3 at 2%, in Q4 at 3.3%; See reaching full capacity by Q3 2011
- Q4 2009 core inflation reiterated at 1.4%
- 2010 and 2011 growth outlooks are revised downward
- Reiterates expectation to keep rates at 0.25% through June 2010
11:01:07 AM
(US) US Treasury's Barr: interconnected firms should face higher capital, liquidity requirements
- Vital to end perception that any firm is "too big to fail"
- Interventions to support firms make problem worse
- Through tougher regulation, aim to give biggest firms incentive to shrink
- Must have ability to "break apart or unwind" firms that pose systemic threat
11:11:08 AM
(GR) Fitch lowers Greece currency issuer default rating to A- from A; outlook negative
- Fitch cites Greece's 2009 fiscal deficit likely to be near 12.5% of GDP, far higher than Fitch's previous 6% expectation.
- Fitch now expects general govt debt to reach around 115% of GDP by end of 2009, higher than the levels seen in the mid 1990's. With the deficit now expected to fall below 9% in 2010, debt is likely to reach around 120% of GDP by the end of 2010, the highest in the "A" category.
1:38:41 PM
(US) Fed's Dudley: Fed may avoid losses on its emergency lending programs.
- says Fed emergency lending programs expiring naturally; exit from liquidity programs have gone "pretty well" so far.
3:14:52 PM
US Sen Snowe (R): Congress may not finish the health care bill before year end; prefers trigger for option if the cost competition fails - interview
- notes that the public option places the industry at a disadvantage
- Note: Sen Snowe was the only republican to vote for the Senate Finance commitee version of the health care bill; claims vote was to advance the bill out of commitee
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
8:30am Initial Jobless Claims (last 514K), Continuing Claims (last 5.992M)
10:00am Sept Leading Indicators (last 0.6%), Aug House Price Index m/m (last 0.3%)
10:30am Natural Gas Inventories
11:00am Treasury note announcement
Todays Headlines
10:30:04 AM
*DOE CRUDE: +1.3M V +1.5ME; GASOLINE: -2.2M V -1.2ME; DISTILLATE: -785K V -1.2ME; CAPACITY UTILIZATION: 81.1% V 81.3%E
- Distillate demand -70K bpd to 3.48M bpd
- Gasoline demand -300K bpd to 8.95M bpd
- Strategic Petroleum Reserve unchanged 725.1M prior week
10:42:45 AM
White House: Aiming to propose additional aid to small businesses
- may increase the size of small business administration loans; could include increasing size of micro loans to $50K from $35K; increase max size of 7(a) loans to $5M from $2M; 504 loans to increase to $5.5M
- Treasury will work to provide more capital to participating community banks and small businesses
11:02:11 AM
NY Fed: Purchased $1.05B in $300B outright coupons purchase; dealers submitted $6.96B for consideration (bid to cover 6.63)
- Heaviest purchase was $555M in the 08/15/39 maturity (longest dated)
- Note: Avg bid to cover for prior four auctions is 5.01
11:48 AM
-Front month Copper futures breeches $3.00/contract for the first time since late Sept 2008
- Reminder China Q3 GDP expected at 9.1%, to be released during Asian trading hours
2:00:29 PM
*FED'S BEIGE BOOK: 12 DISTRICTS SHOWED STABILIZATION OR MODEST IMPROVEMENTS IN MANY SECTORS; LABOR MARKETS SHOW POCKETS OF SOME IMPROVEMENT
- commercial real estate shown as weakest sector
- residential and manufacturing showed patterns of improvement
- Reports of gains in economic activity generally outnumber declines, but virtually every reference to improvement was qualified as either small or scattered.
- Districts generally reported little or no increase to either price or wage pressures, but references to downward pressures were occasionally noted.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
4:30am BoE minutes
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
2:00pm Fed Beige Book
22:00pm China Q3 GDP
Todays Headlines
8:00 AM
*(PD) POLISH SEPT PRODUCER PRICES M/M: -0.2% V 0.1%E, Y/Y: 1.6% V 2.2%E
- Prior MoM revised from -0.2% to-0.4%
- Prior YoY revised from 2.5% to 2.2%
8:30 AM
*(CA) CANADA AUG WHOLESALE SALES M/M:
-1.4% V -0.4%E
- Prior revised from 2.8% to 2.6%
8:30 AM
*(US) SEPT PRODUCER PRICE INDEX M/M:
-0.6% V 0.0%E
-PPI EX FOOD&ENERGY M/M: -0.1% V 0.1%E- PPI
YoY: -4.8% v -4.3%e
- PPI Ex Food & Energy
YoY: +1.8% v +2.0%e - No revisions
8:30:03 AM
*(US) SEPT HOUSING STARTS: 590K V 610KE; BUILDING PERMITS: 573K V 595KE
- Prior Housing Starts revised Lower from 598K to 587K
- Prior Building Permits revised from 579K to 580K
9:00:12 AM
*(CA) BANK OF CANADA (BOC) LEAVES INTEREST RATES UNCHANGED AT 0.25%; AS EXPECTED; CAD CURRENCY STRENGTH "MORE THAN FULLY OFFSET" FAVORABLE DEVELOPMENTS SINCE JULY
- Forecasts 2009 GDP growth -2.4% v -2.3% prior
- Forecasts 2010 GDP +3.0% (unchanged) , 2011 GDP +3.3% v 3.5% prior
9:52:58 AM
US FDIC Staff recommends end of Govt debt guarantee on Oct 31
- Recommends full TLGP to expire Oct 31
- Recommends further 6-month extension of debt guarantee operations
- Seeking limiting US backing in emergencies
**Note as recently as Sep 29th Citigroup was seen selling FDIC back debt
3:15:23 PM
(UK) BoE's King: UK Inflation will pick up and may be volatile; drop in money growth will pull down inflation
- reforms still necessary in banking institution; capital rules do not rule out need for Govt intervention and assistance
- Banks should avoid additional risks designed to wean themselves from Govt aid
- UK economic recovery will not be smooth and painless; but will likely return to positive growth in 2H09
- sees a significant fiscal tightening to come over next coming years
- UK will pay for the crisis impact 'for a generation'
3:50:20 PM
(US) Fed's Yellen: Tightening will happen "when the time comes," Fed has plenty of tools for tightening but does not expect them to be used in the next several months
- Fed has not decided on the sequence of tightening steps to be taken, wary of using tightening tool that would hurt the mortgage market.
- Paying interest on reserves could be an adequate tightening tool, examining this approach.
- Fed will likely look at spreads in mortgage markets when deciding which tools to use in tightening.
- Fed feels completely comfortable that it will be able to exit from loose policy when the time comes.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
8:30am Sept PPI (last m/m 1.7%, y/y -4.3%, ex food & energy last m/m 0.2%, y/y 2.3%),
9:00am BoC rate decision
10:00am TAF results
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
8:00 AM
*(PD) POLISH SEPT PRODUCER PRICES M/M: -0.2% V 0.1%E, Y/Y: 1.6% V 2.2%E
- Prior MoM revised from -0.2% to-0.4%
- Prior YoY revised from 2.5% to 2.2%
8:30 AM
*(CA) CANADA AUG INTL SECURITIES TRANACTIONS: C$5.08B V C$2.5BE
- Prior revised from C$351M to C$370M
9:09:34 AM
(GE) IFO's Sinn: German credit crunch has already begun and will intensify next year
**Note: earlier today Sinn said a "Strong Euro" poses risk for Germany's recovery and that they must not withdraw stimulus measures before end 2010.
10:00:24 AM
(US) NY Fed: Confirms testing of reverse repos operations; "no inference should be drawn" regarding policy action
- Working with counterparties on reverse repo; calls testing of repos "prudent advance planning."
- Considering expanding counterparties for repos, but no decision yet.
- calls focus of recent work with repos and reverse repos was to expand existing capability to conduct reverse repos with Primary dealers for a tri party settlement
- also considering expansion of set of counterparties Fed might employ for conducting reverse repos beyond primary dealers
11:30:18 AM
Fed's Bernanke: Exit strategy is important for confidence in the US economy and currency
-More urgency exists among G20 members to address imbalances - Q&A
- asset price bubbles are a concern; Asian countries are evaluating the issue; sees exchange rate flexibility assisting in handling the asset price bubble concerns
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- The first hour of trading was choppy as investors mulled over a mixed bag of corporate earnings absent of any US economic data. But following news that the Fed was testing reverse repo operations (as rumored in the press the last few weeks), investors bid up stocks and bonds, pushing up the leading indices. Equity markets were also helped by encouraging preliminary results from Daimler in Europe. The reverse repo operations will allow the Fed to drain cash from the financial system once it decides to exit its loose monetary policy. The Fed has conducted at least three tests of reverse repos since March. Front-month crude pushed out to yet another one-year high above $79 earlier before trading off a bit. Treasury prices remain near the unchanged mark holding onto a flatter curve. Short term yields were higher heading into this morning's floor open in Chicago and a Barron's cover story called on the Fed to raise rates. In electronic trade crude made another new high on the year just below $80, before backing off as traders shift their focus to the December contract.
- Shares of troubled lender CIT spiked as high as 20% this morning after Carl Icahn offered to underwrite a $6B loan for the company. Icahn criticized the company's current reorganization plan and slammed the current board for ineptitude. On Saturday CIT sweetened its offer for bondholders after too little debt was offered in its prior attempt at reorganization. CIT is down to +10% in mid morning trading.
- In earnings, BB&T offered lackluster results, missing bottom line estimates and reporting a big jump in provisions for credit losses. BBT is down 5% in early trading, and many of the other regional banks are in negative territory as well. Power distribution infrastructure manufacturer Eaton beat the earnings consensus but trimmed its full-year guidance. Shares of ETN are up 6% in the early going, while competitor ITT is up 4% in sympathy. Toy giant Hasbro is down 4% after missing revenue estimates, as investors ignore its bottom-line outperformance. Executives took pains to emphasize that revenue for the year will grow.
- The price action in currencies was subdued during the New York session as the dollar managed to claw off earlier lows thanks to vague chatter of a dovish think tank report on the ECB. Market participants are now focusing on the EcoFin Euro Zone ministers' meeting for potential market-moving comments. In Germany, the IFO's Sinn commented that a strong euro poses a risk for economic recovery and warned that the government should not withdraw stimulus measures before the end of 2010. The IFO noted that Germany is facing a credit crunch, and that the crunch would intensify next year.
- Dealers are noting that the verbal intervention seems to have come up a notch in recent weeks as EUR/USD approaches the critical 1.50 level. However, the overall view is that official concern and headlines are only one factor in the globalization of markets while the intentions of sovereign wealth funds continues a present process of reserves diversification is another force to content with. EUR/USD is holding above the 1.49 level ahead of the Euro-Zone EcoFin meeting that begins later today.
More Headlines
8:00 AM
*(PD) POLISH SEPT PRODUCER PRICES M/M: -0.2% V 0.1%E, Y/Y: 1.6% V 2.2%E
- Prior MoM revised from -0.2% to-0.4%
- Prior YoY revised from 2.5% to 2.2%
8:30 AM
*(CA) CANADA AUG INTL SECURITIES TRANACTIONS: C$5.08B V C$2.5BE
- Prior revised from C$351M to C$370M
9:09:34 AM
(GE) IFO's Sinn: German credit crunch has already begun and will intensify next year
**Note: earlier today Sinn said a "Strong Euro" poses risk for Germany's recovery and that they must not withdraw stimulus measures before end 2010.
10:00:24 AM
(US) NY Fed: Confirms testing of reverse repos operations; "no inference should be drawn" regarding policy action
- Working with counterparties on reverse repo; calls testing of repos "prudent advance planning."
- Considering expanding counterparties for repos, but no decision yet.
- calls focus of recent work with repos and reverse repos was to expand existing capability to conduct reverse repos with Primary dealers for a tri party settlement
- also considering expansion of set of counterparties Fed might employ for conducting reverse repos beyond primary dealers
11:30:18 AM
Fed's Bernanke: Exit strategy is important for confidence in the US economy and currency
-More urgency exists among G20 members to address imbalances - Q&A
- asset price bubbles are a concern; Asian countries are evaluating the issue; sees exchange rate flexibility assisting in handling the asset price bubble concerns
"You cannot perform in a manner inconsistent with the way you see yourself."
Market Week Wrap-up
- With the DJIA closing above 10,000 for two consecutive sessions this week, traders have a lot to be enthusiastic about.
The October Empire manufacturing survey crushed expectations, rising to its highest level in five years. Weekly initial jobless claims fell to their lowest level since early January and continuing claims dipped below 6M, prompting none other than Former Fed Chairman Greenspan to say that US firms may have cut too many workers. A smaller-than-expected decline in September retail sales indicated more incremental improvements in consumer sentiment. Signs of normality were seen in bond markets, as an ongoing rally in both stocks and government bonds may be giving way to the historical inverse relationship between the two asset classes. The dollar suffered as investors took on risk, spot gold marched even higher, hitting record levels above $1,070 mid-week and NYMEX crude pushed out to fresh one-year highs above $78 level in the wake of a surprising gasoline draw in the week DoE inventory report. But troubling signs were not hard to find. Terrible earnings reports from Bank of America and Citigroup reminded everyone that the banks are far from normal. Shares of Goldman are down over 2% on the week despite the bank crushing consensus expectations in its quarterly report. And it's best to keep in mind that the exit strategy is growing nigh. For the week, the DJIA increased 1.4%, the S&P 500 rose 1.5% and the NASDAQ Comp gained 0.8%.
- Last Sunday Fed Governor Bullard expanded on his analysis of US employment trends, after he seemed to break ranks with other Fed members and speculate where the unemployment rate might top out. The previous Friday, Bullard had said he "hopes" unemployment can "remain below 10%," and that job growth might resume in 2009 and 2010. On Sunday, Bullard said unemployment may go into double digits and that high levels of unemployment are a "measure of stress" in the US economy. This contrasts statements from other Fed governors, who have avoided commenting on where peak unemployment may be and instead focusing what level unemployment might fall to next year.
- Meredith Whitney foreshadowed the bad week for the banks on Tuesday when she cut Goldman Sachs to a Neutral from Buy; many investors took the call as a vote against the entire sector. Goldman's results actually beat consensus estimates, although earnings fell short of a widely reported whisper number, heightening a sense of disappointment. Goldman's CFO noted that his firm was getting "a bigger share of a smaller pie." JP Morgan also beat top and bottom line estimates, citing broad-based strength across its businesses. But JP Morgan's Jamie Dimon didn't shy away from mentioning the challenges faced by the industry, warning that corporate lending is still around all time lows and credit lines continue to be drawn at very light levels. Ward of the state Citigroup racked up its eighth consecutive quarterly loss, although the loss was a bit smaller than expected and executives took pains to point out that the bank added the smallest amount to its loan-loss reserves in two years. The biggest surprise came from Bank of America, which lost $2.4B, shocking investors with a per share loss more than four times the expected amount, not to mention revenue that was more than $1B lower than the consensus view. Executives blamed the loss on more asset writedowns at Merrill Lynch and Countrywide, and net charge-offs, net losses and nonperforming assets were all higher on a sequential basis. On the conference call, outgoing CEO Ken Lewis said total credit losses may have peaked this quarter but warned that net loss levels would remain high in 2010.
- Major DJIA components General Electric, Johnson & Johnson and IBM also disappointed investors this week. GE's revenue missed consensus estimates, although executives took pains to highlight the fact that GE's $174B backlog is at all-time highs and cancellations are very low. The losses continue at GE Capital, however. JNJ also missed top line expectations. On the conference call, the CEO said JNJ continues to cut costs and warned that the consumer business continues to feel the impact of the crisis. IBM may have beaten estimates, but revenue hardly grew on a sequential basis and remains well below year-ago levels. Dow component Intel outperformed the consensus view, although executives warned that overall enterprise spending remains weak.
- In other earnings news, Google's quarterly report was relatively strong, garnering the sultan of search multiple price target upgrades on Wall Street. Cell phone giant Nokia surprised investors with a quarterly loss and a modest miss on the top line, thanks to a writedown at its networks unit and sequential declines in smartphone sales. Medical device maker Baxter missed top and bottom line estimates, blaming lower margins and FX impact. Southwest Airlines beat earnings estimates on an adjusted basis, although it still racked up a small quarterly loss when taking into account one-time charges for its fuel hedging portfolio and employee buyouts.
- Merger news was dominated by deals falling to pieces this week. Friday was the "put up or shut up" deadline set by the UK takeover panel for a consortium to make a binding offer for UK transportation name National Express. No offer was forthcoming. UK miner Xstrata walked away from bidding for competitor Anglo American this week as well, also after the UK takeover panel told the company to make an offer or give up on the acquisition. Back in the US, Live Nation and Ticketmaster are negotiating with regulators to come up with concessions that would allow a merger, although numerous US officials, principally Senator Schumer, have said the transaction will not happen. Actual deals did manage to come together, with Cisco announcing it would acquire the mobile telecommunications operator Starent for $35/share, in a deal valued at $2.9B. In addition, Pfizer closed its acquisition of Wyeth.
- In fixed income trading, long-dated treasuries have borne the brunt of equity market strength. Despite a slight pullback on Friday, the yield on the 10-year Note is well on its way back above 3.40% and the 30-year Bond tested 4.30%, a noticeable increase of almost 40bps in just over two weeks. The short end remains the exception, where yields are lower. One overlooked byproduct of recent USD weakness has been the effect on short-dated treasury yields. The market continues to be abuzz with reports of Southeast Asian central bank buying in the short end as monetary authorities deposit dollars bought to maintain currency pegs in treasuries. The result is a much steeper yield curve, with 2s10s probing 250bps for the first time in almost a month.
- Much attention was paid to the contribution fixed income trading made to the bottom line at JPMorgan and Goldman Sachs. Citigroup didn't fare as well, with some analysts noting the much larger percentage of assets concentrated in very short-term debt as well as concerns going forward about the discontinuation of the government guarantee for paper. It was another week where high quality companies raised money in a variety of different currencies. Goldman Sachs announced a 10-year bond offering in Euros while Bank of America raised 2¥ in Uridashi bonds. Anheuser-Bush/Inbev raised $5.5B in a multi-part offering while Deere did a smaller two-part sale.
- The dollar extended its losses this week thanks to more reserve diversification and selected corporate earnings. Highlighting the reserve diversification issue, a Barclays analyst report said that nations which report currency breakdowns placed 63% of their new cash into euro and yen pairs this summer (the report also noted that 1999 reserve levels showed USD at 63% of holdings). Emerging market central banks have been notably more aggressive in shifting out of the dollar into other G10 currencies. However, ECB Chief Trichet warned that the euro was never designed to be a global reserve currency, while the ECB's Noyer cautioned that SDRs were not the right replacement for the dollar and the Chinese Yuan would only make for a workable reserve after it becomes fully convertible. Top Japanese Currency Advisor Gyohten weighed in, saying that cooperation between Japan, China and US was needed to stabilize the dollar. German Economic Minister Guttenberg commented that the weak dollar was not a concern for Germany since it would help the Euro Zone keep oil prices lower. Looking ahead, the Euro Zone finance ministers meeting (EcoFin) next Monday could be the key focus going into the weekend.
- EUR/USD approached the key psychological resistance level of 1.50 and sovereign names seemed to put in a floor under the 1.4680 level for the time being. Dealers still believe the 1.50 level is a target, although plenty of option barriers are lurking ahead of that key level. Note that 1.50 has been cited by German companies as a "threshold of pain" for exports. The greenback hit 14 month lows against the Swiss, Canadian and Australian pairs, as well as the euro. UK inflation data kept the door open to the possibility of additional BoE quantitative easing, helping sterling maintain a broadly weaker tone against the majors at the start the week. A Centre for Economics and Business Research (CEBR) report noted that UK interest rates would stay at 0.5% through 2011, and would not rise to 2% before 2014. GBP/USD fell below 1.5770 to test its lowest level since May and sharply reversed back to 1.64 before the end of the week. Some dealers noted the downtrend line from Aug 2008 is currently around the 1.65 area and seem to take advantage of sterling strength in rallies.
- JPY-related crosses weakened over the course of the week and Japan's Fin Min Fujii tried to clarify his recent remarks on the currency front. Fujii noted that he never committed to either a "strong yen" or "weaker yen" as a positive for the Japanese economy. MOF Chief Currency Advisor Gyohten commented that cooperation between Japan, China and the US helped the USD/JPY move above the 91 as the week ended.
- The week in Asia echoed much of the cautious optimism seen in US markets. The Bank of Japan left overnight call rates unchanged at 0.10% as expected and also raised its economic assessment for the second consecutive month. In a unanimous decision, BoJ saw financial conditions showing signs of improvement on rising exports and production. Conspicuously absent from the decision was any alteration of the timeline for corporate bond or commercial paper buying, which is set to expire at the end of December. However, later testimony from BoJ Governor Shirakawa's left little reason to doubt the sun is setting on quantitative easing, as he insisted the need for corporate debt purchases is receding. Shirakawa also said that ending this program does not necessarily signal the beginning of the exit strategy.
- Over in Australia, the central bank retained its hawkish bias in the wake of last week's rate hike. RBA Governor Stevens signaled an end to the period of economic weakness, noting that overall the downturn was fairly mild and the feared economic risks failed to materialize. Going forward, Stevens said policymakers cannot delay withdrawing stimulus, steering the target of RBA policy to a sustainable expansion. Following these comments, Aussie bond markets have begun pricing in about a 35% chance of a 50bps rate hike at the next RBA rate meeting.
- Ahead of the pivotal Q3 GDP report next week in China, fresh signs of economic recovery emerged from the September trade report. While the overall trade balance came in below estimates at $12.9B, both export and import components saw relative rates of decline fall to multi-month lows. Imports were particularly striking, with contractions falling to 12-month lows, portending a more sustainable internally-driven bounce.
Week of 10/19/2009 thru 10/23/2009
Monday, October 19, 2009
10:00am TAF auction
11:00am Fed Chairman Bernanke speaks on Asia and the financial crisis
1:00pm Oct NAHB Housing Market Index (last 19)
Tuesday, October 20, 2009
8:30am Sept PPI (last m/m 1.7%, y/y -4.3%,
ex food & energy last m/m 0.2%, y/y 2.3%),
Sept Housing Starts (last 598K),
Sept Building Permits (last 579K)
9:00am BoC rate decision
10:00am TAF results
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
9:00am Aug Net Long-Term TIC Flows (last $15.3B), Aug Total Net TIC Flows (last -$97.5B)
9:15am Sept Industrial Production (last 0.8%), Sept Capacity Utilization (last 69.6%)
9:55am Oct prelim Univ of Michigan confidence (last 73.5)
Todays Headlines
8:28:22 AM
*(US) OCT EMPIRE MANUFACTURING: 34.6 V 17.25E (highest level in 5 years)
- No revisions
Components
- Prices Paid: 19.5 v 20.24 prior
- New Orders: 35.1 v 19.84 prior
- Employment: 10.4 v -8.33 prior
9:15:35 AM
(GE) ECB's Weber: Sustained economic recovery in Germany from mid-2010; Crisis effects to be felt well into next decade
- Worst part of economic crisis is over in Germany as markets have improved
- Warns against excessive optimism in germany
- No credit crunch at present, but risks still remain in Germany
- Must begin planning of exit strategies of special measures
10:00:03 AM
*OCT PHILADELPHIA FED INDEX: 11.5 V 12.0E
**Sub-Indices:
- Prices Paid: 21.3 v 14.9 prior
- New Orders: 6.2 v 3.3 prior
- Employment: -6.8 v -14.3 prior
- Inventories: -31.8 v -18.1 prior
11:00:05 AM
*DOE CRUDE: +334K V +1ME; GASOLINE: -5.2M V+1ME; DISTILLATE: -1.08M V 0.0E; CAPACITY UTILIZATION: 80.9% V 85%E
- Distillate demand +30K bpd to 3.56M bpd
- Gasoline demand -13K bpd to 9.26M bpd
- Strategic Petroleum Reserve at 725.1M; unchanged
12:14:46 PM
(TU) Turkey Central Bank cuts Base rate by 50bps to 6.75%; As Expected
- Central bank notes it may consider slowing the pace of rate cuts
- May continue to lower rates and banks' Lira reserve requirements
- Inflation likely to remain low
4:30:21 PM
(US) M2 -$23.3B v $47.5B prior, M1 $16.9B v $13.8B prior; Fed balance sheet data has been delayed
- M2 52 week change 7.4% v 7.5% prior, M1 16.6% v 16.8% prior
- The decline in M2 was driven by a $19.7B decline in savings deposits, $12.3B drop in small denominated deposits and a $8.1B decline in retail money fund assets.
- The M1 increase was driven by a $12.1B rise in demand deposits.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
8:30am Sept CPI (last m/m 0.4%, y/y -1.5%; ex food & energy last m/m 0.1%, y/y 1.4%), Sept CPI Core Index SA (last 219.692), Oct Empire Manufacturing (last 18.88), Initial Jobless Claims (last 521K), Continuing Claims (last 6.04M)
10:00am Oct Philadelphia Fed (last 14.1)
10:30am Natural Gas Inventories
11:00am DoE Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
8:30:03 AM
*SEPT ADVANCE RETAIL SALES: -1.5% V -2.1%E; EX AUTOS: 0.5% V 0.2%E
- Retail Sales Ex Auto&Gas: 0.4% v 0.2%e
- Prior Advance Retail Sales revised from 2.7% to 2.2%
- Prior Ex autos revised from 1.1% to 1.0%
9:40:48 AM
(UK) BOE's Fisher: Central Bank's debate on extension of Quantitative Easing measures continues; declines to comment on the appropriate level for the GBP - press interview
- Confident of the success of quantitative easing program
***Reminder: Back on Sept 24th BoE Gov King commented that a weaker GBP currency was "helpful" for the rebalancing of the economy.
9:42:19 AM
(EU) ECB's Bini Smaghi: There is no case for pre-emptive interest rate hikes due to higher asset prices
- Primary goal to maintain pricing stability, but a monetary policy that supports price stability might not ensure financial stability
- Focusing too narrowly on inflation forecast is hazardous
- Looking at output gap estimates is not enough.
10:32:10 AM
ECB's Bini Smaghi: Coordinated currency action depends on the situation
- Have performed several coordinations with Fed in the past
- Recent EBC policies are correct; speed of recovery still uncertain
- Inflation expectations well anchored
- Will unwind conventional tools when crisis is over
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
8:30am Sept Import Price Index (last m/m 2%, y/y -15%), Sept Advance retail sales (last 2.7%, ex autos last 1.1%)
10:00am AugBusiness Inventories (last -1.0%)
2:00pm FOMC minutes
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
8:30:02 AM
*INITIAL JOBLESS CLAIMS: 521K V 540KE; CONTINUING CLAIMS: 6.040M V 6.106ME
- Prior Jobless Claims revised from 551K to 554K
- Prior Continuing Claims revised from 6.090M to 6.112M
- initial jobless claims lowest since January
9:00:34 AM
(UK) BOE Bean: Economic activity in UK likely has bottomed out; quantitative easing having desired effects
- Worst of downside economic risks unlikely to materialize
- Will be some time before determining exactly how effective QE has been
10:32:37 AM
(CH) Codelco CEO: Expects demand for copper to be weaker
**Note earlier today Rio Tinto's Exec said he expects Chinese copper imports to slow to 150-200k tons/month in the near future.
11:02:46 AM
NY Fed: Purchased $2.95B in $300B outright coupons purchase; dealers submitted $13.48B for consideration (bid to cover 4.57)
- Heaviest purchase was $2.72 in the 05/15/16 maturity (earliest dated)
- Note: Avg bid to cover for prior four auctions is 6.15
12:56:41 PM
(US) US Senator Snowe (R): Will vote for Baucus healthcare plan in committee; says her vote is "with reservations" but is meant to move the bill out of committee.
- She is the first Republican to voice support the health overhaul.
- Note: Democrats hold a 13-10 majority on the Senate Finance Committee, due to vote today.
2:52:34 PM
(US) Senate Finance Committee passes healthcare reform bill (as expected); Vote was 14-9
- Senator Snowe(R) voted in favor; as she stated she would earlier today.
- note: the Senate will now move to combine this bill with the bill passed out of the healthcare committtee on the Senate floor; a final Senate bill would then have to be reconciled with the House bill.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
10:00pm Oct IBD/TIPP Economic Optimism (last 52.5)
Todays Headlines
8:30:02 AM
*INITIAL JOBLESS CLAIMS: 521K V 540KE; CONTINUING CLAIMS: 6.040M V 6.106ME
- Prior Jobless Claims revised from 551K to 554K
- Prior Continuing Claims revised from 6.090M to 6.112M
- initial jobless claims lowest since January
6:00 AM
(US) US Presidential Economic Advisor Larry Summers:
- Conditions in financial markets have stabilized, seeing signs of stabilization in housing- Risk of financial collapse receded
8:00 AM
*(IC) ICELANDIC SEPT UNEMPLOYMENT RATE:
7.2% V 7.7% PRIOR
- Prior revised from 7.7% to %
Today 10:02 AM
(TU) Turkey Current Account:
$0.1B v -$0.1Be; second straight monthly surplus
- Prior revised from $0.3B to $
11:11:03 AM
*House and Ways Means Committee Spokesperson:
-Financial transactions tax not being considered by committee
-Note: On 10/09 WSJ reported that House Democrats were still considering tax of financial transactions which could range from 0.1-0.25% on value of certain trades in such instruments such as stocks; but would not add taxes to credit card transactions.
The tax claims were projected to raise $100-150B to help pay for aid to states and cost of new initiatives.
12:26:30 PM
(US) White House's Summers: Financial markets have made substantial progress, most credit spreads show financial markets are 80% back to normal; current economic picture is better than expected 6 to 9 months ago
- Observers expect above-potential growth in 2H; notes major slack remains in the US economy.
- Sees no higher priority than maximizing economic growth and job creation.
4:02:07 PM
(RU) Russian Fin Min Kudrin: Expects diversification of global reserves to continue over the long term; Does not see sharp changes in short to medium term
- Says: "In the short and medium term we can hardly expect sharp changes in the structure of currency reserves, because a sale of dollar assets would lead to a significant fall in their value. This is also true for Russian reserves."
- "The Chinese yuan is now not a convertible currency. But in 10 years it could become convertible and reserve. The Russian rouble, if it has not yet fully become a regional reserve currency, has the signs of being such."
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Markets opened higher this morning and rallied steady as the DJIA approaches 10,000 and reached its highest levels of 2009 above 9918.
Trading conditions are slightly thin due to the Columbus Day holiday, while the S&P500 is not printing due to technical difficulties. Front-month NYMEX crude is heading straight up this morning, gaining $2 as the contract heads toward the $74 handle.
- On Sunday Fed Governor Bullard expanded on his analysis of US employment trends, after he seemed to break rank among Fed members and speculate where the unemployment rate might top out.
On Friday, Bullard said he "hopes" unemployment can "remain below 10%," and that job growth might resume in 2009 and 2010. On Sunday, Bullard said unemployment may go into double digits and that high levels of unemployment are a "measure of stress" in the US economy. This contrasts statements from other Fed governors, who have avoided commenting on where peak unemployment may be and instead focusing what level unemployment might fall to next year.
- Today's WSJ "Heard on the Street" section is previewing the upcoming Q3 earnings for US banks, ahead of scheduled reports from Citi, Goldman Sachs, JP Morgan and Bank of America this week.
The column notes that normality, "if it comes, will be nasty for most banks." One problem remains the over-stretched US consumer, while commercial real estate is expected to remain a drag for several years. Meanwhile, new data from Zillow.com suggests that foreclosures are rising in more expensive housing markets. According to data from the real estate website, approximately 30% of foreclosures in June involved homes in the top third of local housing values v 16% three years ago. Shares of Blackstone are up 8% and gaining in early trade after the FT reported the company is planning public listings for up to eight companies it owns.
- In other equity news, Black & Decker cranked up its Q3 earnings forecast, crushing lowball estimates, citing better-than-expected sales and improved margins.
Shares of BDK are up nearly 10% in early trading. Arcelor Mittal's CEO said the pace of steel restocking in the US is picking up, and commented that he does not see current level of Chinese growth as sustainable. In addition, the World Steel Association reported that 2009 global apparent steel use would be -8.6% y/y, while China's 2009 steel use was expected to rise by 18.8% y/y and another 5% in 2010. Steel industry ETF SLX is up nearly 2% in early trading.
- The greenback is on the defensive in thin New York session trading, as US banks are closed for the Columbus Day holiday.
Commodity-related pairs rallied sharply, with USD/CAD moving towards the 1.0300 level and AUD/USD probing the 0.91 area. The dollar was also influenced by higher equity markets in both Europe and the US thanks to strength in commodities. Dealer concerns about reserve diversification by sovereign names put in a floor in EUR/USD under 1.4680 and prompted a short covering rally above the 1.48 area.
More Headlines
6:00 AM
(US) US Presidential Economic Advisor Larry Summers:
- Conditions in financial markets have stabilized, seeing signs of stabilization in housing- Risk of financial collapse receded
8:00 AM
*(IC) ICELANDIC SEPT UNEMPLOYMENT RATE:
7.2% V 7.7% PRIOR
- Prior revised from 7.7% to %
Today 10:02 AM
(TU) Turkey Current Account:
$0.1B v -$0.1Be; second straight monthly surplus
- Prior revised from $0.3B to $
11:11:03 AM
*House and Ways Means Committee Spokesperson:
-Financial transactions tax not being considered by committee
-Note: On 10/09 WSJ reported that House Democrats were still considering tax of financial transactions which could range from 0.1-0.25% on value of certain trades in such instruments such as stocks; but would not add taxes to credit card transactions.
The tax claims were projected to raise $100-150B to help pay for aid to states and cost of new initiatives.
"The measure of who we are is what we do with what we have!!"
Market Week Wrap-up
- Investors cranked up the risk appetite again this week, helping US equity indices recover all the losses sustained in last two weeks.
With little data to get in the way and the dollar on the defensive, a choir of analysts and commentators preached that consensus estimates are too conservative and corporate earnings would surprise to the upside as earnings season begins.
That was certainly the case with Alcoa, which did much better than expected on Wednesday. Incremental improvements were seen in the September ISM non-manufacturing index, weekly jobless claims and the August Trade data.
Same-store sales evidenced the beginnings of recovery for retailers, with some names finally returning to positive year/year comps and many others beating expectations.
Distant signs of trouble were seen at the GSEs, as the FHFA warned that delinquency rates for mortgages held by Freddie and Fannie are still rising and said the two firms "appear destined for a taxpayer bailout in the next 24-36 months."
With some editorialists contemplating "the demise of the dollar," commodities pushed higher all week, and gold futures broke out to new all time highs, ending the week around $1,050. For the week, the DJIA increased 4%, the S&P 500 rose 4.5% and the NASDAQ Comp grew 4%.
Week of 10/12/2009 thru 10/16/2009
Monday, October 12, 2009
LIVE Trade Room Opens @ 730am EST
Columbus Day Holiday, US
Electronic Trading OPEN Only
Tuesday, October 13, 2009
None.
Wednesday, October 14, 2009
8:30am Sept Import Price Index (last m/m 2%, y/y -15%),
Sept Advance retail sales (last 2.7%, ex autos last 1.1%)
10:00am Aug Business Inventories (last -1.0%)
2:00pm FOMC minutes
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Thursday, October 15, 2009
8:30am
Initial Jobless Claims (last 521K),
Continuing Claims (last 6.04M)
Sept CPI (last m/m 0.4%, y/y -1.5%;
ex food & energy last m/m 0.1%, y/y 1.4%),
Sept CPI Core Index SA (last 219.692),
Oct Empire Manufacturing (last 18.88),
10:00am Oct Philadelphia Fed (last 14.1)
10:30am Natural Gas Inventories
11:00am DoE Crude Oil/Gasoline/Distillate Inventories
Friday, October 16, 2009
9:00am Aug Net Long-Term TIC Flows (last $15.3B),
Aug Total Net TIC Flows (last -$97.5B)
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
*INITIAL JOBLESS CLAIMS: 521K V 540KE; CONTINUING CLAIMS: 6.040M V 6.106ME
- Prior Jobless Claims revised from 551K to 554K
- Prior Continuing Claims revised from 6.090M to 6.112M
- initial jobless claims lowest since January
8:33:53 AM
(EU) ECB's Trichet: Reiterates that interest rates are "appropriate"; labor market may deteriorate less than expected
- Return of moderate positive inflation rates in coming months; reiterates inflation will remain subdued; current negative inflation rate is in line with expectations.
- sees a pressing need for fiscal consolidation
- calls for design of exit program in line with Maastricht pact; when economy improves
- Increasing signs of economic stabilization.
8:49:11 AM
(EU) ECB's Trichet: Reiterates signs of economic stabilization are emerging; Euro Zone is no longer in "economic free fall" - Q&A session
- Economic uncertainties remain "exceptionally high," cannot say difficulties of the past are over.
- Today's "judgement very close" to September's judgement
- Anchoring inflation expectations is extremely important; "very solid anchoring" helped avoid deflation risk and key for recovery
- Will always do what is needed to delivery price stability in line with charter
10:30 AM
*EIA NATURAL GAS INVENTORIES:
+69 BCF V +60 TO +65 BCF ESTIMATE RANGE
1:01:54 PM
TREASURY'S $12B 30-YEAR BOND REOPENING draws 4.009%; BID-TO-COVER RATIO 2.37 V 2.92 PRIOR AND 2.52 AVE OVER THE LAST 6 REOPENINGS
- indirect bidders take 34.5% of competitive bids with 27.53% alotted at the high
- median 3.930%, low 3.825%
2:18:36 PM
(US) Fed's Lacker: Outlook has not changed since the last FOMC meeting; now is not the time to raise rates
- Skeptical of Sen Dodd's proposal for a consolidated financial regulator
- Sees rationale for credit standard tightening
- Reiterates forecast for growth in 2H and 2010
- Seeing increase in losses in commercial real estate; construction will be a drag on growth for a few quarters
- Comments that chances for a double dip recession have not been eliminated; yet chances have diminished
4:30:22 PM
(US) Fed balance sheet assets $2.12T v $2.14T prior; M2: $47.5B v -$8B prior, M1 $13.8B v -$31.1B prior
- M2 52 week change 7.5% v 7.8% prior, M1 16.8% v 17.5% prior
- The rise in M2 was driven by a $53B rise in saving deposits
- The rise in M1 was driven by a $7.4B rise in total checkable and demand deposits.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Better-than-expected earnings from Alcoa, encouraging Sep same-store sales figures and improving weekly jobs data are all helping equity indices rally. With earnings season now under way, commentators are waiting to see whether corporate America can follow up last quarter's earnings gains with revenue growth. Weekly initial jobless claims came in lower than expected, sinking to their smallest figure since January, while continuing claims fell very close to the 5M handle. Commentators continue to warn that the continuing jobs figures are being impacted by workers exhausting unemployment payments. Front-month crude is up nearly $2, to trade around $71.50. Treasury prices remain stubbornly firm with the long end outperforming heading into this afternoon's 30-year reopening which has sent the yield below 4%.
- Alcoa managed to rack up a profit (ex items) in its Q3, crushing analysts' expectations for another loss. Executives were upbeat about the quarter, noting that they are seeing signs that Alcoa's markets are stabilizing and consumption is set to grow in the second half of the year. Nevertheless, revenue was merely in line and better earnings beat expectations due to cost and expense reductions. PepsiCo was in line with the Street in its Q3 report, and reaffirmed its 2009 guidance. Ominously, PepsiCo's CEO warned that he expects an "age of thrift" has descended on markets and will last through 2010, echoing similar comments from Wal-Mart's chairman last week. Marriott came in slightly ahead of estimates, thanks to improvements in revenue per available room (REVPAR), which the company said should improve further next quarter.
- Sales data out this morning is showing a big turnaround for retailers in Septermber, fueling hopes for the holiday season. Comps from apparel names The Limited (+1% v -3%e), American Eagle (flat v -4%e) and TJX (+7% v +4%e) were much higher than expected. Teen mall chain Aeropostale held up its excellent comps for yet another month, while higher end competitor Abercrombie saw another month of dismal negative comps. Shares of AEO and ANF are up 6% or so, while LTD and TJX are around even. Costco pulled its same-store sales numbers out of negative territory for the first time since last fall, while Target and BJs saw incremental progress towards positive comps, but are still in the red. COST and TGT are around even, while BJ is down 4%. Department stores did universally better than expected, with Nordstrom and Dillards trouncing estimates. Despite this, y/y sales comps at nearly all the leading department stores remain in the red. Kohls is the big exception, with the name beating estimates by a wide margin (5.5% v 0.1%e).
- In currencies, the greenback composed itself in New York trading after rising risk appetite in the Asian session and early European morning put it on the defensive. Both the BoE and ECB maintained their interest rates at current levels, in line with expectations. EUR/USD initially maintained a steady tone around the 1.4770 area after Trichet reiterated yet again his steady line that interest rates are appropriate, adding that the Euro Zone labor market might deteriorate less than originally expected. Dealers were especially keen to see whether Trichet would fine-tune his currency views from before the G7 summit last week. The market seemed disappointed with his tepid remarks, including boilerplate comments that excessive FX volatility is not wanted. Trichet also welcomed the recent strong dollar statements from US officials, calling them "extremely important," and warned that he would never comment on FX intervention, pledging to act rather than talk on the topic.
- EUD/USD briefly tested 1.48 before technical exhaustion seemed to envelop the upward momentum in commodities and currencies. EUR/USD tested the 1.4730 level as the NY morning wore on but holding onto small gains established from the Asian open. Commodities retreated from their earlier highs in sympathy with the dollar's slight improvement. The 88 level in USD/JPY continues to be on dealers' radar with earlier chatter circulating that the Japanese Post Office was bidding for dollars ahead of the figure. There could be some significant USD sell stops if that level is breeched and there is no sign of Kampo.
More Headlines
8:30:02 AM
*INITIAL JOBLESS CLAIMS: 521K V 540KE; CONTINUING CLAIMS: 6.040M V 6.106ME
- Prior Jobless Claims revised from 551K to 554K
- Prior Continuing Claims revised from 6.090M to 6.112M
- initial jobless claims lowest since January
8:33:53 AM
(EU) ECB's Trichet: Reiterates that interest rates are "appropriate"; labor market may deteriorate less than expected
- Return of moderate positive inflation rates in coming months; reiterates inflation will remain subdued; current negative inflation rate is in line with expectations.
- sees a pressing need for fiscal consolidation
- calls for design of exit program in line with Maastricht pact; when economy improves
- Increasing signs of economic stabilization.
8:49:11 AM
(EU) ECB's Trichet: Reiterates signs of economic stabilization are emerging; Euro Zone is no longer in "economic free fall" - Q&A session
- Economic uncertainties remain "exceptionally high," cannot say difficulties of the past are over.
- Today's "judgement very close" to September's judgement
- Anchoring inflation expectations is extremely important; "very solid anchoring" helped avoid deflation risk and key for recovery
- Will always do what is needed to delivery price stability in line with charter
10:30 AM
*EIA NATURAL GAS INVENTORIES:
+69 BCF V +60 TO +65 BCF ESTIMATE RANGE
(IN) Indian Fin Min Mukherjee: Economic growth may be 7% in 2011; WPI inflation might be 5% to 6% by March
- India is walking a tight rope-walk between growth and inflation
- Policy makers are watching INR currency appreciation
- Cannot suddenly withdraw excess liquidity
- Success of state-owned company IPOS a good sign
10:30:54 AM
*DOE CRUDE: -975K V +2ME; GASOLINE: +2.9M V +1.2ME; DISTILLATE: +680K V 0.0E; CAPACITY UTILIZATION: 85% V 84.3%E
- Distillate demand +120K bpd to 3.52M bpd
- Gasoline demand +140K bpd to 9.27M bpd
11:02:08 AM
NY Fed: Purchased $1.3B in $300B outright coupons purchase; dealers submitted $7.9B for consideration (bid to cover 6.07)
- Heaviest purchase was $645M in the 11/15/21 maturity.
- Note: Avg bid to cover for prior four auctions is 5.48.
1:01:42 PM
*TREASURY'S $20B 10-YEAR NOTE REOPENING DRAWS 3.21%; BID-TO-COVER RATIO: 3.01 V 2.77 PRIOR AND 2.66 OVER THE LAST 5
- Indirect bidders take 47.7% of competitive bids, with 12.77% alloted at high
- Median 3.167%, Low 3.090%
3:00:02 PM
*AUG CONSUMER CREDIT: -$12B V -$10BE; 7th straight month of contraction
- Prior revised from -$21.6B to -$19B
- Annual growth rate -5.8% v -9.1% m/m (revised from -10.37% prior)
- Revolving credit -$9.9B (-13.1% rate)
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Investors took a breather this morning after a two-day up streak that saw the DJIA rise around 230 points. Indices opened lower and stayed in negative territory for the first hour of trading, until a particularly strong New York Fed coupon purchase goosed equities higher around 11amET. Much attention is being paid to comments from the Fed's Hoenig, who said the FOMC could raise rates for some time before policy gets tight and said the Fed should raise rates "sooner rather than later." Note that Discover released its US Spending Monitor index this morning, stating that consumer spending intentions remained flat in September, worrying retailers who are hoping consumers will increase their spending as we approach the holidays. Front-month crude is off its overnight highs despite the unexpected draw down in crude inventories seen in the weekly DoE data. Bond prices are firmer again, with pushing the 10-year yield back from 3.25% ahead of this afternoon's reopening.
- Discount retailers Costco and Family Dollar are both up 3% or so in early trading after reporting their Q4 results. Costco beat consensus earnings and revenue targets and reported its first positive monthly comp sales data since last September. Family Dollar was in line with expectations, and also in line with expectations for the coming quarter and 2010. Family Dollar executives said they are still seeing trading down in the middle income sector, which continues to cut back on credit-driven spending. Fast food name Yum! Brands exceeded earnings expectations considerably in its Q3 but was a bit behind revenue projections, and on the conference call warned that its Q4 would be a low point for sales in the year. Shares of YUM are in the red. Small personal care products name Helen of Troy is up 10% after very strong earnings.
- Beaten down retailers are surging this morning ahead of same-store sales today after the close and tomorrow morning. Talbots, which has not turned a profit since May 2008 and has reported double-digit comp sales declines for most of this year, is up 18% in early trading after Piper Jaffray raised the name to neutral. Fellow upscale retailer Liz Claiborne, which has not performed much better than Talbots, rose 12% on the news before dropping back to +4% or so. Many other retail names are up in the low single digits ahead of the September comps data as well. Note that troubled retailer Abercrombie was raised to Equal Weight at Morgan Stanley.
- In currency trading, the greenback recovered from overnight lows in the New York session on suspected short covering activity by Middle Eastern names. USD/JPY appeared to fortify sentiment after a furious attempt to gun for USD sell-stops that were said to be lurking below the 88.00 level. USD/JPY climbed over a big figure as New York traders took the helm, to test above 89.30. EUR/USD has been unable to move above Tuesday's high of 1.4760 despite gold's record breaking ascent. Note that the euro is being weighed down by continued contagion risks from Latvia after the failure of a bond auction. Dealer chatter about a "bearish'' think-tank advisory report on euro made the rounds. The report indicated that European policymakers were losing trust in the Obama administration's commitment to a "strong dollar" policy and are considering policy responses. EUR/USD tested the 1.4660 level before consolidating just below the 1.47 handle. Dealers are fixated on sell-stops orders in various pairs with 88.00 and 89.60 cited in USD/JPY and 1.4650 building fir euro sell-stops.
More Headlines
8:56:38 AM
(IN) Indian Fin Min Mukherjee: Economic growth may be 7% in 2011; WPI inflation might be 5% to 6% by March
- India is walking a tight rope-walk between growth and inflation
- Policy makers are watching INR currency appreciation
- Cannot suddenly withdraw excess liquidity
- Success of state-owned company IPOS a good sign
10:30:54 AM
*DOE CRUDE: -975K V +2ME; GASOLINE: +2.9M V +1.2ME; DISTILLATE: +680K V 0.0E; CAPACITY UTILIZATION: 85% V 84.3%E
- Distillate demand +120K bpd to 3.52M bpd
- Gasoline demand +140K bpd to 9.27M bpd
11:02:08 AM
NY Fed: Purchased $1.3B in $300B outright coupons purchase; dealers submitted $7.9B for consideration (bid to cover 6.07)
- Heaviest purchase was $645M in the 11/15/21 maturity.
- Note: Avg bid to cover for prior four auctions is 5.48.
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
1:00pm Treasury's 10-yr note auction
3:00pm Aug Consumer Credit (last -$21.6B
Todays Headlines
8:30 AM
*(CA) CANADA AUG BUILDING PERMITS M/M: 7.2% V 5.0%E
- Prior MoM revised from -11.4% to -10.0%
8:30:44 AM
EIA Short Term Outlook: WTI crude to average $69 in 2009, to average $72.42 in 2010 (unchanged from prior)
- Expects the price of WTI crude oil to average about $70/bbl this winter (October-March), +$19 increase over last winter.
-The forecast for average WTI prices rises gradually to about $75/bbl by December 2010 as U.S. and world economic conditions improve.
9:01 AM
*SPOT GOLD MOVES TO ALL-TIME HIGHS ABOVE $1,032.40/OZ
- Tested above the $1,032.40 level seen back in March 2008
10:00 AM
*(UK) UK SEPT NIESR GDP ESTIMATE: 0.0% V 0.1% PRIOR
- Prior revised from 0.2% to 0.1%
10:00 AM
*(CA) CANADA SEPT IVEY PURCHASING MANAGERS INDEX:
-61.7 V 56.2E; highest since July 2008
- No revision
1:01:45 PM
*TREASURY'S $39B 3-YEAR NOTES DRAW 1.445%, BID-TO-COVER RATIO 2.76 V 3.02 PRIOR AND 2.57 AVG OVER THE LAST 10 AUCTIONS
- indirect bidders take 49.1% of competitive bids
- 61.96% allotted at high
- Median 1.387%; Low 1.32%
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- US equity indices opened higher for a second consecutive morning today and gained steadily in early trading. Dollar weakness is feeding into the picture, as the greenback continues to absorb fallout from the UK Independent's sensational (and now mostly discredited) claims about major industrial and crude producing nations dumping the dollar for oil trading. Spot gold shot above its all-time highs of $1,032.40 before the open, to trade around $1,041 in mid-morning action. Australia became the first major nation to raise interest rates, as the RBA said it was time to begin withdrawing monetary stimulus ahead of the global economic recovery. Front-month crude is strong on all the optimism, with the contract trading just shy of $72 this morning. Treasury prices are a bit softer ahead of this afternoon's $39B 3-year note offering. The 10-year yield has returned to 3.25% while the long bond has climbed back above 4%.
- The regional banks are making steady gains hand in hand with everybody else, with the notable exception of Marshall Ilseley, which warned investors that its Q3 loss would be nearly twice the expected amount. MI's CEO said that while the firm is seeing some improvement in credit quality, it still assumes the recession will be a big factor for several more months. Shares of MI were up 6% on improving credit quality metrics included with the guidance call, but have fallen to around even in early trade.
- UBS has resumed coverage of the US life insurers sector, including coverage of AIG at Neutral. AIG, the day trader's delight, is up 4% on the news. HIG is up 6%, while other life insurers like MFC, AFL and PFG are up 4-5%. Note that overnight the Taiwan press wrote that AIG had chosen a $2.2B bid for its Taiwan unit, Nan Shan Life. In other financial sector news, overnight the WSJ reported that Goldman Sachs is continuing talks with CIT Group about revising the terms of its loan, including a smaller payment to Goldman if CIT filed for bankruptcy.
- Earnings at fertilizer name Mosaic fell short of expectations in its Q1 report, while revenue was more in line with the Street. The company's gross margin has improved markedly over last quarter's lows, although it remains well below last year's levels. Mosaic's potash production was -59% y/y in the quarter, as customers remain very cautious due to volatile agricultural prices for select products. On the conference call, executives said they believe potash demand is "on the brink of a recovery," while phosphate demand is already recovering. Shares of MOS are up 5% on the report, with other potash names up 2-3% as well. St. Jude Medical trimmed its Q3 outlook ahead of earnings season, citing a slowdown in hospitals stocking medical devices. STJ is down 10%, but off its worst levels, while MDT is down 2%. American Repographics, which provides construction firms with document management services, slashed its 2009 forecast, saying sales will be weaker in the back half of the year due to the "severely restrained" construction business. ARP is down nearly 20%.
- The greenback limped into the New York session, still suffering damage from the UK Independent's big front-page article on the demise of the dollar despite subsequent denials by numerous officials. Dealers noted the whole drama showed the continuing vulnerability of the dollar and its inability to sustain strength in this environment unless there was a fresh bout of risk aversion. The Australian overnight rate of 3.25% is above the US ten-year yield, highlighting the carry-trade implications of the dollar among the commodity-related and emerging market currencies. USD/CAD tested fresh one-year lows below 1.0570 following Canada's Sept Ivey Purchasing report and higher energy and metal prices. EUR/USD is maintaining a construction tone over 1.4700. Indian Central Banker Subbarao noted that no consensus on timing of policy exit but inflationary concerns suggested an earlier exit might be needed. Sterling became a casualty of market chatter that the Q3 UK GDP reading could be negatively impacted by almost 0.3% on the back of today's industrial production numbers. Its Sept GBP NIESR estimate came in flat with the back month revised lower. GBP/USD was around 1.5925 in mid morning US trade, 25 pips below its opening level in Asia.
More Headlines
8:30 AM
*(CA) CANADA AUG BUILDING PERMITS M/M: 7.2% V 5.0%E
- Prior MoM revised from -11.4% to -10.0%
8:30:44 AM
EIA Short Term Outlook: WTI crude to average $69 in 2009, to average $72.42 in 2010 (unchanged from prior)
- Expects the price of WTI crude oil to average about $70/bbl this winter (October-March), +$19 increase over last winter.
-The forecast for average WTI prices rises gradually to about $75/bbl by December 2010 as U.S. and world economic conditions improve.
9:01 AM
*SPOT GOLD MOVES TO ALL-TIME HIGHS ABOVE $1,032.40/OZ
- Tested above the $1,032.40 level seen back in March 2008
10:00 AM
*(UK) UK SEPT NIESR GDP ESTIMATE: 0.0% V 0.1% PRIOR
- Prior revised from 0.2% to 0.1%
10:00 AM
*(CA) CANADA SEPT IVEY PURCHASING MANAGERS INDEX:
-61.7 V 56.2E; highest since July 2008
- No revision
9:45pm Fed's Hoenig to speak in Kansas City. William Blair Emerging Growth Stock Conference. I
Todays Headlines
8:30:01 AM
*INITIAL JOBLESS CLAIMS: 551K V 535KE; CONTINUING CLAIMS: 6.09M V 6.170ME
- Prior Jobless Claims revised from 530K to 534K
- Prior Continuing Claims revised from 6.138M to 6.16M
7:34:23 AM
(GE) German Bundesbank Sarrazin: German 2009 GDP contraction seen between 4.5% to 4.0%
- U.S.Current account deficit not sustainable; U.S. dollar has reacted to that fact
***Reminder: IMF last week revised its 2009 German GDP view to -5.3% v -6.2% prior (July)
8:20 AM
(CZ) Czech Central Banker Tuma: If Crown continues to appreciate, would consider FX intervention as currency rate is one of biggest risk for the economy
- Notes that the central bank is not a "fan" of intervention
8:20 AM
(US) TARP Oversight Official Barofsky: Highly unlikely to see dollar-for-dollar return on TARP program – CNBC
- Notes that "I don't think the point was to obtain dollar-for-dollar returns."
10:00:03 AM
*SEPT ISM NON-MANUFACTURING COMPOSITE: 50.9 V 50.0E (highest reading since May 2008, first time above 50 since Aug 2008)
**sub-indices:
- Non-Mfg Prices Paid Index: 48.8 v 63.1 prior
- Employment: 44.3 v 43.5 prior (44.3 is highest reading since Aug 2008)
- New Orders Index: 54.2 v 49.9 prior (54.2 is highest reading since Oct 2007)
10:15:24 AM
ECB's Tumpel-Gugerell: Credit constraints are demand driven; Monetary policy is appropriate; emergency measures are still needed now, but can be withdrawn at any time
- Sees recent data as 'encouraging', medium and long term inflation expectations are anchored; and will fight price risks in a timely fashion
1:01:39 PM
*US TREASURY'S $7B 10-YEAR TIPS BID-TO-COVER RATIO: 3.12 V 2.25 PRIOR AND 2.10 AVG OVER THE LAST 5 REOPENINGS
- indirect bidders take 44% of competitive bids
- notes draw 1.510% with 14.26% alotted at the high
- Median 1.43%, Low 1.35%
1:01:39 PM
*US TREASURY'S $7B 10-YEAR TIPS BID-TO-COVER RATIO: 3.12 V 2.25 PRIOR AND 2.10 AVG OVER THE LAST 5 REOPENINGS
- indirect bidders take 44% of competitive bids
- notes draw 1.510% with 14.26% alotted at the high
- Median 1.43%, Low 1.35%
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Equity trading has been bumpy this morning as investors hesitantly try to bid up stocks after two weeks of declines.
Reaction to the Sept ISM non-manufacturing index at 10amET was initially negative, despite a marginally higher than expected number, as investors concentrated on the big decline in the prices paid component. But as traders take to heart that today's data is the highest reading in the index since May 2008, with the highest level in the new orders component as well, confidence is returning. Front-month NYMEX crude is well off its overnight highs, down $1.50 to $68.50 or less. Bond prices remain bid into this week's coupon auctions. The 10-year note yield remains at multi-month lows of 3.18% ahead of this afternoon's TIPS reopening.
- Some contrasting high-level commentary was out from BoA/Merrill Lynch and Credit Suisse overnight, indicating just how opaque the picture is for markets as they head into Q3 earnings season.
Analysts at BoA/Merril believe a correction in S&P500 "appears underway" and that all signs point to a steeper declines, citing technical development and weaking tech, among other factors. Analysts at Credit Suisse updated their global equity strategy, noting that they continue to believe that now is not time to sell equities. Credit Suisse believes that further near-term correction is possible, but sees the S&P500 at 1,100 at end of 2009. HSBC's CEO was also out with his own troubling read on the macro situation, noting that HSBC would delay expansion of the bank because of fears over another downturn in the economy.
- Early this morning the US Treasury said three more funds have met financing requirements for participation in its PPIP asset purchase program.
AllianceBernstein, BlackRock and Wellington Capital Management to be named on Monday as having raised $500M, the minimum amount to participate in the program. Their combined commitment equals $7.7B, including matching funds and debt financing from the government. Recall that last week, Invesco and TCW were approved to participate. The PPIP now has commitments of about $12.25B, out of a $40B targeted by the Treasury (scaled back from original aims of up to $1T). In other finance sector news, the FT wrote that Goldman Sachs stands to make $1B if CIT Group files for Chapter 11 Bankruptcy, given the terms of a rescue package from back in June, 2008. Note also that Wells Fargo is up more than 5% after an upgrade from Goldman Sachs.
- In equity news, RPM International outperformed expectations in its Q1, beating both earnings and revenue targets.
Shares of RPM were up 5% on the news, but have sunk into negative territory in mid morning trading. MKS Instruments said it would be profitable next quarter, blowing away analysts' expectations for a substantial loss. As with plenty of other increased guidance in the tech sector, MKS cited big improvement in semiconductor names. MKSI rose 6% on the news, but is down to +3%. Seattle Genetics discontinued a Phase IIb trial in diffuse large B-Cell Lymphoma based on a determination that the trial would be unlikely to meet its primary endpoint and a recommendation by the Independent Data Monitoring Committee (IDMC) following a pre-specified interim analysis. SGEN is down 15% on the news.
- In currencies, the greenback recovered from the softer tone that was established during a lackluster European morning against the European and commodity-related currencies.
The US non-manufacturing ISM release mirrored the European data and also failed to inspire any robust directional moves. Sterling remained pressured during the NY morning as it approached the 1.5900 at one point. Focus now set on the Australian central bank to see whether they are the first G20 member to raise interest rates at its policy meeting ahead of the Asian
More Headlines
8:30:01 AM
*INITIAL JOBLESS CLAIMS: 551K V 535KE; CONTINUING CLAIMS: 6.09M V 6.170ME
- Prior Jobless Claims revised from 530K to 534K
- Prior Continuing Claims revised from 6.138M to 6.16M
7:34:23 AM
(GE) German Bundesbank Sarrazin: German 2009 GDP contraction seen between 4.5% to 4.0%
- U.S.Current account deficit not sustainable; U.S. dollar has reacted to that fact
***Reminder: IMF last week revised its 2009 German GDP view to -5.3% v -6.2% prior (July)
8:20 AM
(CZ) Czech Central Banker Tuma: If Crown continues to appreciate, would consider FX intervention as currency rate is one of biggest risk for the economy
- Notes that the central bank is not a "fan" of intervention
8:20 AM
(US) TARP Oversight Official Barofsky: Highly unlikely to see dollar-for-dollar return on TARP program – CNBC
- Notes that "I don't think the point was to obtain dollar-for-dollar returns."
10:00:03 AM
*SEPT ISM NON-MANUFACTURING COMPOSITE: 50.9 V 50.0E (highest reading since May 2008, first time above 50 since Aug 2008)
**sub-indices:
- Non-Mfg Prices Paid Index: 48.8 v 63.1 prior
- Employment: 44.3 v 43.5 prior (44.3 is highest reading since Aug 2008)
- New Orders Index: 54.2 v 49.9 prior (54.2 is highest reading since Oct 2007)
10:15:24 AM
ECB's Tumpel-Gugerell: Credit constraints are demand driven; Monetary policy is appropriate; emergency measures are still needed now, but can be withdrawn at any time
- Sees recent data as 'encouraging', medium and long term inflation expectations are anchored; and will fight price risks in a timely fashion
1:01:39 PM
*US TREASURY'S $7B 10-YEAR TIPS BID-TO-COVER RATIO: 3.12 V 2.25 PRIOR AND 2.10 AVG OVER THE LAST 5 REOPENINGS
- indirect bidders take 44% of competitive bids
- notes draw 1.510% with 14.26% alotted at the high
- Median 1.43%, Low 1.35%
"Good manners will open doors that the best education connot."
Market Week Wrap-up
- Weak economic data hit markets hard this week, prompting traders to take profits as one of the best quarters for equities seen in decades came to a close on Wednesday. More than one commentator noted that the big slide that many had predicted for September has apparently arrived a month late, given the 200-point slide in the DJIA seen in the first two days of October. In any case, four consecutive sets of economic data rattled investors: Tuesday's Sept consumer confidence missed expectations and slipped below August's level, Wednesday's Sept ADP employment survey was surprisingly high and the Sept Chicago PMI reading was much lower than projected, and Friday's payrolls data was much worse than expected. Bearish comments from Fed governors only added weight to markets, with Rosengren stating employment would likely remain high for the next two years and Lockhart saying the Fed's exit strategy may have to wait as near term economic strength may not last. Pianalto added an optimistic note, saying that she sees signs the economy is emerging from steep decline, such as a sense of optimism that was not present a few months ago. Front-month crude tested back above $71 briefly, before closing out the week around $70, while gold made a run up to $1,010 mid week before closing the week just above $1,000. For the week, the DJIA fell 1.8%, the S&P 500 dropped 1.8% and the NASDAQ Comp declined 2.1%.
- The September US employment data was especially worrying this week, prompting many commentators to express strong concerns over the state of the recovery. Late in the week, Noriel Roubini took the opportunity to reiterate his fears of a "double-dip" recession in the US. On Wednesday, the September ADP employment reading indicated a much bigger increase in job losses than expected, setting the table for negative September payrolls data on Friday, which declined nearly 100K more than the consensus view (-263K v -175Ke). Analysts were quick to point out that a hefty portion of the unanticipated declines came in government jobs (associated with the start of the school year), but that even if these losses were only a one-month anomaly, the overall trend in employment remains worrying. PIMCO's Bill Gross said that the Fed does not move to tighten unless unemployment is down for 12 months in a row, "so we've got plenty of jobs to create before the Fed raises rates." The September hourly earnings data was more or less flat, as was the September annualized unemployment rate. The decrease seen in weekly hours may suggest that lower wages are not prompting employers to bet on green shoots and boost the hours worked by existing staff. Analysts believe this shows there is plenty of caution about the durability of the downturn.
- Financials helped drive overall gains early in the week. On Monday Goldman Sachs said it may hire as many as 200 asset managers. "We are moving back on the offensive," said one Goldman executive. The FT wrote that the recent rally in markets for "toxic securities" could help boost the banks' Q3 earnings, if they choose to book gains on mortgage-backed securities. Note that the IMF warned that up to $1.5T in bank writedowns are still expected through 2010 on a global basis, but also reduced its estimates for overall writedowns faced by the industry by $600B. News that the FDIC would require banks to pre-pay deposit insurance fees three years in advance hardly impacted share prices. But the dire data hit the banks hard later in the week, with JP Morgan and Morgan Stanley particularly weak. Citi was a notable exception, as the name was up around 3% on the week. Bank of America had a big week: the firm announced CEO Ken Lewis would step down at the end of the year (without naming a successor), and sold asset management unit Columbia Management to Ameriprise for $1B in cash.
- A burst of M&A action also helped boost markets on Monday, and an uptick in deals was seen all week long, providing some of the only optimism in a grim week. On Monday, Xerox said it would acquire Affiliated Computer Services in a $6.4B in cash and stock deal, Abbott said it would buy Solvay's prescription drug unit and vaccines business for €4.5B in cash, GenTek agreed to be acquired by private equity firm American Securities for $673M and Aspect Medical said it was being acquired by Covidien for $210M. Later in the week Cisco bought Norweigian video conference technology firm Tandberg for almost $3B, continuing Cisco's big move into online video applications, and ViaSat acquired private satellite internet provider WildBlue Communications for $568M in stock and cash. In two other ongoing merger soap operas, Facet Biotech once again rejected Biogen's $14.50/shr offer as inadequate, while across the pond the UK Takeover Panel said Xstrata has until October 20th to make a concrete offer for Anglo American or drop its bid (for six months).
- Treasury markets surged on Thursday as equities slumped and bond traders rolled the dice in anticipation of an ugly reading in Friday's pivotal September employment report. Yields subsequently took out some key technical levels, with the 30-year Bond moving below 4% for the first time since late April and the 10-year Note below 3.25% for the first time since mid May. European government bond rates followed suit early on Friday. The moves came in the context of a choir of Fed, ECB, and other various government officials, whose chorus remains it is still too early to begin withdrawing stimulus; but they are ready to act decisively when the recovery finds self sustained traction. Ultimately, the skeptics on the recovery story were vindicated with worse than expected readings on virtually every available labor metric. The cognitive dissonance that has been building between bond markets and equities diminished when stocks plunged and bond prices surged following the data.
- The knee jerk reaction quickly abated though, with buyers stepping into the equity markets while bond traders took profits. The 10-year yield appears to have found a floor around its 200-day moving average at 3.15% and as clawed back above 3.2%. The long bond pushed back towards 4% in late Friday trade. Whether or not yields can hold these key levels will face a stern test next week. The Treasury will introduce a fresh round of supply ($12B in 30 year bonds, $20B in 10 year notes, $7B in 10 year TIPS, $39B in 3 year notes), while Aloca's earnings report on Wednesday signals the commencement of Q3 earnings season for stocks.
- In currency trading, sharp price movements were prompted by government rhetoric and undercurrents from the G7 summit, which is set to commence in Turkey this weekend. In particular, rhetoric from government officials bolstered the JPY and GBP crosses. World Bank President Zoellick commented several times, insisting that the US should not take for granted the dollar's status as the world's main reserve currency. Zoellick said the yuan would have more influence in the future and the euro would likely continue to appreciate, setting the stage for volatility. IMF Chief Economist Blanchard noted that while global recovery has commenced, the strength of the recovery would depend on rebalancing growth. This was a major theme at the G20 summit, with the conclusion that countries with surpluses would do well to focus on domestic growth, while countries with deficits should focus on savings and fiscal consolidation.
- The tug-of-war between risk aversion and risk appetite remains firmly entrenched. Appetite for risk was whetted by news that the IMF raised its 2010 global GDP outlook to 3.1% from 2.5% and strong results from the second ECB 12-month tender operation, with the latter prompting optimism that balance sheet stresses in the Euro Zone and emerging market countries had fallen significantly. Some commodity-related news suggested that the restocking process by China seemed to have diminished. The Chinese Steel Group CISA forecast a glut in global iron ore supply in 2010 and the dollar seemed to take note of this projected demand slump, especially when various central bankers in both Europe and the Far East issued cautious statements on the sustainability of the recent recovery. Risk aversion struck back as the September US jobs report raised fresh skepticism about the sustainability of the economic recovery, with weaker-than-expected US consumer confidence as a precursor mid week.
- In Europe, German Chancellor Merkel's pro-business coalition survived the election, but with a weakened mandate. Following the results she noted that there would not be any new tax cuts before 2011. For most of the week the EUR/USD and stock indices exhibited strong correlation, with the stock price decline leading the currency pair to dip below the 1.4500 level in the aftermath of the payroll data on Friday. However, dealers noted that some reserve managers were taking advantage of the post-payroll report to sell into USD strength. Spot gold level continued to hold the key support level of $970; which continues to provide a catalyst for any USD retracement from recent its downtrend path. EUR/CHF continued to test its 200-day moving average, as has been the case since mid-August. Dealers were watching for any Swiss bank intervention and CHF demand from Swiss institutions taking advantage of the inexpensive euros available from the ECB 12-month tender.
- The UK press began the week by defending the BoE's recent stance on the pound, with the general tone that BoE Gov King was not trying to depreciate the value of the pound but was presenting a more macro view. A closed-door meeting between BoE Gov Bean and various London economists sparked speculation that the BOE might still pursue a deposit rate cut in the manner of Sweden. However, the GBP recovered following talk that no such measure would occur. The CBI distributed trade data which registered a positive reading, while the UK manufacturing PMI dipped back below the 50 level.
- Traders made every attempt to understand the new Japanese government's position on the yen, which firmed up against major pairs after Japanese Finance Minister Fujii noted that he was unlikely to bring up the recent JPY appreciation issue at the G7 weekend meeting. Throughout the week, Fujii seemed to adjust his prior position, noting that he would not rule out action in the FX market, especially when currency moves seemed "abnormal," reiterating that a global competition to devalue each country's currency would be wrong. MoF Special Currency Advisor Gyohten commented that he doesn't see JPY rise as "sharp" and does not see a great deal of turbulence in FX price action.
- Russian Central Bank's First Deputy Chairman once again shared his opinion on the reserve currency issue, reiterating Russia's desire to diversify away from the dollar in favor the CAD and AUD pairs. The comments helped CAD and AUD pairs maintain their firm tone following the upward revision in the IMF's global GDP forecast for 2010. AUD crosses inched higher also with the increase in spot gold prices which tested the $1008 level before consolidating lower.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Equities opened lower for a second morning in a row as investors battened down the hatches following the September payrolls data. With Wednesday's ADP numbers much worse than expected, participants prepared themselves for a reversal of August's improvements in job losses. They were not disappointed, with the Sept nonfarm declines nearly 100K greater than the consensus view (-263K v -175Ke). Analysts were quick to point out that a hefty portion of the unanticipated declines came in government jobs (associated with the start of the school year), but that even if this is only a one-shot drag, the overall trend in employment remains worrying. PIMCO's Bill Gross said that the Fed does not move to tighten unless unemployment is down for 12 months in a row, "so we've got plenty of jobs to create before the Fed raises rates." The hourly earnings data was more or less flat along with the unemployment rate. The decrease in weekly hours may suggest that lower wages are not prompting employers to bet on green shoots and increase hours worked with their current staffs, showing caution about the sustainability of the recovery remains. After testing $71 yesterday afternoon, front-month crude is once again below $70. Treasury prices rallied sharply on the data, with the 10-year note up more than half a point initially. Prices seemed to hit some resistance when the benchmark yield approached the 200-year moving average at 3.15% and have been losing ground ever since. Futures have generally given back all their gains on the day while the long bond yield has worked back towards 4%. Subsequently stock indices have recovered nearly all their losses as well, briefly trading green across the board.
- CIT's ongoing poker game with bond holders has come to a head over the last 24 hours. Yesterday evening there were press reports that the company's latest restructuring plan called for a debt exchange or a pre-packaged bankruptcy, which the company later confirmed. Later the company said bondholders would be offered "$700-$900 plus preference shares for each $1,000 held." Bondholders to recieve between 0.41- 3.26 pref shares. CIT warned that it doesn't get enough cooperation on its exchange offer it will declare Chapter 11, which would "minimally disrupt" its business. Shares of CIT have gained 15% in early trading, after much volatility over the last several days. Also note that last night the Senate Finance committee voted in favor of compensation caps for insurance executives last night. This morning, the CEO of FINRA said that performance measures for financial executive compensation need adjustment, with a stress on long-term performance.
- In other equity news, shares of Accenture are around flat after the consulting giant met analysts' expectations in its Q4 report, raised its dividend by 50% and announced a bit $4B stock buyback. Overnight GM's CEO confirmed reports from yesterday afternoon that the company is discussing a potential sale (or an IPO) of its NBC Universal unit. Press speculation has centered on Comcast as a potential partner, although CEO Immelt did not say who GE is negotiating with. In any case, the WSJ poured cold water on the deal, saying it isn't clear what strategic value there is in linking Comcast's cable operations with NBC. Also note that two more IPOs opened for trading on the NASDAQ, online freight management name Echo Global (ECHO) and online college name Education Management Corp (EDMC).
- Bank of America lent its support to the railroad sector overnight, on speculation that legislative gridlock will keep the Senate from "re-regulating" railroads through next year (but not indefinitely). The firm raised price targets on multiple names, although trading in rail stocks has been in line with overall markets. JP Morgan discussed its updated equity strategy, cutting cyclicals stocks to Neutral from Overweight. JP Morgan sees leading fundamental indicators now pointing towards a loss of momentum in the performance of cyclical compared to defensives, but sees the action as tactical move rather than strategic and is retaining fundamental positions on equity drivers. In tech, the Semiconductor Industry Association (SIA) forecasted growing global chip sales (to $19.1B in August v $18.2B m/m) for the sixth month in a row.
- Currency action continues to strongly correlate with equity prices. Risk aversion sentiment roiled the equity markets as the September jobs report called the sustainability of the economic recovery into question. USD and JPY saw some strength following US payrolls and the sharp downward benchmark revisions. EUR/USD tested below 1.4500 following the data. However, dealers noted that some reserve managers were taking advantage of post payroll report of to sell into USD strength. Spot gold continued to hold key support around $970, which continues to proved a catalyst for any USD retracement from recent its downtrend. PIMCO's Bill Gross reiterated his view that US policymakers are targeting a weaker dollar. Equity markets climbed from their lows as the USD saw its initial strength sapped.
More Headlines
8:30:01 AM
*INITIAL JOBLESS CLAIMS: 551K V 535KE; CONTINUING CLAIMS: 6.09M V 6.170ME
- Prior Jobless Claims revised from 530K to 534K
- Prior Continuing Claims revised from 6.138M to 6.16M
8:15:19 AM
(US) Fed's Rosengren: Sees low inflation over the next several years, economy remains fragile, could fall short of expectations, requires further support
- Primary short-term concern is disinflation, not inflation. Must insure inflation rate does not fall too low.
- Must return inflation to a "better long-term trajectory."
- Expects to see positive GDP in Q3 and Q4. However, positive growth will not be enough to reduce unemployment.
8:30:02 AM
*SEPT CHANGE IN NONFARM PAYROLLS: -263K V -175KE; CHANGE IN MANUFACTURING PAYROLLS: -51K V -52KE
- Prior nonfarm payrolls revised from -216K to -201K
- July nonfarm Payrolls revised from -247 to -304K
- Prior Manufacturing Payrolls revised from -63K to -66K
8:30:04 AM
*SEPT AVERAGE HOURLY EARNINGS M/M: 0.1% V 0.2%E; AVERAGE WEEKLY HOURS: 33.0 V 33.1E
- Average Hourly Earnings Y/Y: 2.5% v 2.6%e
- Prior Average Hourly Earnings M/M revised from 0.3% to 0.4%
9:19:08 AM
Insight: Average weekly hours painting disturbing trend on workforce
- Since the post 1945 period the decline in US average weekly hours was due to the increased role of productivity via the introduction of technology
-The recent recession has continue this trend and the data series is at al all-time low since its inception with a 33.0 reading in the Sept jobs report
- Data suggesting that lower wages is not prompting employers to take note of the recent economic optimism (green shoots) to increase the hours worked with the current amount employed at their faculties and remain caution of the sustainability of the current phase of the recovery
12:31:18 PM
(US) White House's Summers: Agrees with Fed Chairman Bernanke's position that the USD could come under pressure if the US does not get deficits under control
- Reminder: Back on 10/1, the Fed's Bernanke said the US must put "Macro house" in order to avoid long term risk to the USD
*INITIAL JOBLESS CLAIMS: 551K V 535KE; CONTINUING CLAIMS: 6.09M V 6.170ME
- Prior Jobless Claims revised from 530K to 534K
- Prior Continuing Claims revised from 6.138M to 6.16M
8:30:02 AM
*AUG PERSONAL INCOME: 0.2% V 0.1%E; PERSONAL SPENDING: 1.3% V 1.1%E (largest increase in Personal spending in 8 years)
- Prior Personal Income revised from 0.0% to 0.2%
- Prior Personal Spending revised from 0.2% to 0.3%
9:46:00 AM
(US) Fed's Bernake: Large firms must be alllowed to fail in safe manner that does not bring down the whole system -Q/A
- Not all firms can be reduced to size that would prevent systemic risk (economies of scale issues); better to raise costs applicable to firms that have risen to size that makes them systemic.
- In the near future, will need a plan in place to address FRE and FNM.
9:46:00 AM
(US) Fed's Bernake: Large firms must be alllowed to fail in safe manner that does not bring down the whole system -Q/A
- Not all firms can be reduced to size that would prevent systemic risk (economies of scale issues); better to raise costs applicable to firms that have risen to size that makes them systemic.
- In the near future, will need a plan in place to address FRE and FNM.
9:48:05 AM
(SZ) Swiss SNB's Roth: Have had no discussion with UBS regarding exit from toxic asset program
- Swiss economy remains dependent on global economy; uncertainties in global economy remain
- Monetary conditions will normalize when the broader economy does
- Expects economy to post positive growth figures in 2010, figures will be moderate
10:53:12 AM
Fed's Bernanke: There is no immediate risk to the USD; must put "Macro house" in order to avoid long term risk to the USD
- Confident that Fed can support economy without bringing large levels of inflation.
- Remains committed to low inflation levels; have tools to maintain price stability.
- Best method of raising savings rate in the US is to cut the deficit levels.
1:31:21 PM
(US) Fed's Lacker: wants rate increase once recovery is established; risk of double dip recession has dimished 'quite considerably'
- Timing of rate increase dependent on consumer spending outlook.
- GDP may have expanded to 2.5% -3% in 3Q.
- Growth outlook more fundamental than job market.
- notes there is something to the view of the Fed's Warsh that a more agressive exit strategy may be needed.
2:46:02 PM
Railroad Carloads Data for week ending 9/25 - UPDATE
- BNI 213.5K, -7% from Q308 average
- CP 84.9K, -1.4% from Q308 average
- CSX 214.8K, -5.2% from Q308 average
- KSU 43.7K, -6.9% from Q308 average
- NSC 197.1K, -1.5% from Q308 average
- UNP 282.2K, -6.1% from Q308 average
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Equity indices are racking up substantial losses in early trading thanks to negative data for a second consecutive morning. This time around a miss in the ISM manufacturing data (52.6 v 54e) is raising risk aversion, aiding Treasury prices along with the Greenback. ISM Official Ore offered a dim view, noting that ISM ,embers have yet to be convinced that the economy has turned and are still "somewhat negative" overall Note that yesterday's worse than expected Chicago PMI reading also spooked investors, although the leading indices managed to regain losses in midday trading. Today the strong August housing numbers are being ignored. Construction spending returned to growth in August, while the NAR's pending home sales showed their seventh consecutive month of growth, up sharply from July figures. The NAR's Chief Economist warned that not all contracts are turning into closed sales within an expected timeframe, although the rise in pending home sales certainly shows buyers are returning to the market. Fed Chairman Bernanke testified before the House Financial Service Committee, noting that the Fed should not be the only regulator of systemic risk. Also not that the IMF officially raised its 2010 world GDP view to 3.1% from 2.5% prior (in line with earlier speculation). Front month NYMEX crude popped above $70 this morning, but has come off prior highs in mid-morning trading. Government bond yields are testing some key levels to the downside on both sides of the Atlantic. !0-year Gilt yields are now below 3.5% while its US counterpart has seen the benchmark fall below 3.25%. The US long bond rate is now below 4% for the first time since this spring.
- Financials are leading the charge downwards this morning in the wake of news that Ken Lewis will step down as CEO of Bank of America at the end of the year. Speculation has been rife regarding which of the five potential replacements is in the lead. The WSJ's "Heard on the Street" column was cautious on JP Morgan's prospects amid the firm's ongoing management changes, but still predicted that earnings would likely beat expectations. In the longer run, declining volatility will cut JP Morgan's opportunities for outsized gains, according to the WSJ. The tier one banks are all down 1% or 2%, while Citi is down 3%.
- Constellation Brands managed to gain 5% in pre-market trading thanks to strong Q2 results and a reaffirmation of its 2009 forecast. Broader market declines have brought shares of STZ down to +2%. Testing equipment manufacturer Teradyne offered very strong guidance for its Q3 thanks to cost cutting and improving demand. Shares of TER are off their best levels, at +3%. In other equity news, Cisco bought Norweigian video conference technology firm Tandberg for almost $3B, continuing Cisco's big move into online video applications. Cisco Chief Chambers said he will continue to be a "very aggressive" in acquisition. And finally, in another piece of economic crisis fallout, Penske abandoned its quest to run Saturn Motors just as a final deal with GM was expected, as uncertainty deepened over Penske's ability to obtain long-term supplies of vehicles. Bank of America analysts were positive on the news, calling the cancellation a "headache avoided."
- In currencies, the greenback maintained its firm tone against the EUR and CHF pairs following initial comments from EU's Almunia before the European session. As the New York morning commenced, ECB Chief Trichet confirmed that FX was discussed today's EuroFin meeting while other European finance ministers complained about the effect on exports of a stronger euro. Dealers noted hourly support at 1.4530, a level that represented lows made earlier in the week, and chatter of a Far Eastern name previously bidding for euros. A move below 1.4530 opens the door for test of 1.4330, which represents the uptrend line support from the March low.
More Headlines
8:30:01 AM
*INITIAL JOBLESS CLAIMS: 551K V 535KE; CONTINUING CLAIMS: 6.09M V 6.170ME
- Prior Jobless Claims revised from 530K to 534K
- Prior Continuing Claims revised from 6.138M to 6.16M
8:30:02 AM
*AUG PERSONAL INCOME: 0.2% V 0.1%E; PERSONAL SPENDING: 1.3% V 1.1%E (largest increase in Personal spending in 8 years)
- Prior Personal Income revised from 0.0% to 0.2%
- Prior Personal Spending revised from 0.2% to 0.3%
9:46:00 AM
(US) Fed's Bernake: Large firms must be alllowed to fail in safe manner that does not bring down the whole system -Q/A
- Not all firms can be reduced to size that would prevent systemic risk (economies of scale issues); better to raise costs applicable to firms that have risen to size that makes them systemic.
- In the near future, will need a plan in place to address FRE and FNM.
9:46:00 AM
(US) Fed's Bernake: Large firms must be alllowed to fail in safe manner that does not bring down the whole system -Q/A
- Not all firms can be reduced to size that would prevent systemic risk (economies of scale issues); better to raise costs applicable to firms that have risen to size that makes them systemic.
- In the near future, will need a plan in place to address FRE and FNM.
9:48:05 AM
(SZ) Swiss SNB's Roth: Have had no discussion with UBS regarding exit from toxic asset program
- Swiss economy remains dependent on global economy; uncertainties in global economy remain
- Monetary conditions will normalize when the broader economy does
- Expects economy to post positive growth figures in 2010, figures will be moderate
10:53:12 AM
Fed's Bernanke: There is no immediate risk to the USD; must put "Macro house" in order to avoid long term risk to the USD
- Confident that Fed can support economy without bringing large levels of inflation.
- Remains committed to low inflation levels; have tools to maintain price stability.
- Best method of raising savings rate in the US is to cut the deficit levels.
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