7:01:08 AM
Citigroup Inc *TREASURY RELEASES STATEMENT, CITI TO RECEIVE $80B AT CONVERSION RATE OF $3.25/SHR, GOVT STAKE TO INCREASE TO 36%
- Series G) will each convert into separate trust preferred securities with a coupon of 8%
- Citi to alter board to include a majority of independent directors
- US Govt to match exchange up to a maximum of $25B face value of its preferred stock at same conversion price.
- Confirms that Prince Alaweed and Singapore Govt to participate
- Dividends on outstanding preferred shares to be suspended
- The company will continue to pay the distribution on its Trust Preferred Securities and Enhanced Trust Preferred Securities at the current rates.
- Sees Q4 goodwill impairment charge of $9.6B, charge does not result in a cash outflow or negatively affect the Tier 1 or Total Regulatory Capital ratios, Tangible Common Equity or Citis liquidity position as of December 31, 2008.
- FY08 EPS revised to -$5.59 v $1.62e
- Tier 1 ratio 11.9%
- CEO: "This securities exchange has one goal: to increase our tangible common equity. While we believe Tier 1 capital remains the most important measure of the financial strength of banks, we recognize that the markets also view Tangible Common Equity as an important measure. This transaction which requires no additional investment from U.S. taxpayers does not change Citi's strategy."
8:30 AM
*Q4 PRELIMINARY GDP ANUALIZED: -6.2% V -5.4%E; PERSONAL CONSUMPTION: -4.3% V -3.7%E
*Q4 PRELIMINARY GDP PRICE INDEX: 0.5% V -0.1%E; CORE PCE Q/Q: 0.8% V 0.6%E
8:39:16 AM
Citigroup Inc CFO Crittenden:
Internal stress tests appear to be somewhat more conservative than US Treasury stress test; tests showed we would maintain among the highest Tier 1 capital ratio in industry - Conf call
- Intent of latest aid package was to eliminate Citi's need for more capital, but that it doesn't guarantee that this will be the case
- Expects $12.5B worth of privately-placed preferred stock to convert shares
- Expects zero to $14.9B worth of privately-placed preferred stock to convert shares
- Including US Treasury's stake, expects $25-52.4B worth of preferred stock to convert shares
9:35 AM
Citigroup Inc Goldman analyst: avoid Citi shares; Citi may need to seek further funding
(timing uncertain)
9:45:09 AM
*FEB CHICAGO PURCHASING MANAGERS INDEX: 34.2 V 33.0E **sub-indices:
- Prices Paid: 37.8 v 39.8 last
- New Orders: 30.6 v 30.7 last
- Employment: 26.2 v 34.8 last
- Inventories: 33.0 v 38.0 last
- Supplier Deliveries: 51.0 v 51.9 last
- Production: 34.7 v 29.7 last
- Order Backlogs: 29.3 v 26.5 last
9:55:05 AM
*FEB FINAL UNIVERSITY OF MICHIGAN CONFIDENCE: 56.3 V 56.0E - 1 yr median inflation expectations at 1.9% v 2.2% Jan final
- 5 yr median inflation expectations at 3.1% v 2.9% Jan final
10:00:48 AM
FDIC raising regular fee for banks to 12-16 basis points starting in April (previously 12-14 basis points); considering 20bps special assessment - Special assessment would be paid in Q3, could raise $15B from special assessment.
- FDIC estimates that bank failures could cost up to $65B through 2013, raising prior estimates.
- reminder: there have been reports that FDIC was considering raising fees for several weeks.
- Reminder: Back on 2/03 an FDIC Official stated that the FDIC needs the authority to impose special risk assessments on certain banks, forecasting bank failures from 2008-2013 would be in excess of $40B.
- follow up 10:35amET: FDIC board member Reich says he is against the special assessment.
11:00:45 AM
(GE) Germany's Steinbrueck: Seeking to develop European wide stock tax scheme - Derivatives should not be traded in OTC markets, but on regulated exchanges
- Short selling activity that is damaging should be banned
- G20 Plan for 'college of supervisors' should be implemented as soon as possible
- Need new laws to stop business capital flows into tax heavens
***Reminder: back on Feb 16th: 2/16 10:34 EUR/USD:
Germany's Social Democrats (SPD) were considering including a tax on stock market transactions in their election manifesto -The levy was being considered with a view to directing investments more towards the real economy rather than towards quick, speculative transactions on the financial markets,
1:22 PM
US Official: There are no current plans to assist mortgage financing companies through capital injections; some insurers may receive aid
More Headlines
- Discomfort over the government's latest attempt to rescue Citigroup from itself and an ugly -6.2% preliminary annualized GDP reading forced US equity futures sharply lower in the pre-market.
The DJIA skidded to within 40 points or so of breaking the key 7,000 level after the open, before a nervous rally sent equity indices back toward positive territory by mid morning.
Technology stocks are showing relative strength while energy and bank companies are weighing on the indices. To say markets remain skittish would be an understatement as traders anxiously await this afternoon's week, and month end closing levels.
Technicians are paying close attention to the Nov 741 low on the S&P and the Dow 2002 low just below 7200 among others. Treasury spreads are widening out once again as the 10-year has reclaimed 3% for the first time since early in the month.
- Citibank is dominating headlines and markets this morning.
Late last night the media widely reported that the Treasury and Citi had finished hammering out a deal for converting the government's preferred stock into common shares, warning that the government would only move forward with the conversion if Citi was able to persuade private investors to do so as well. The Treasury released the final details of the deal this morning: Citi will offer to convert nearly $27.5B in preferred stock sold to private investors and the public and up to $25B in government-held preferred stock into common shares, at a conversion rate of $3.25 a share, raising the government's stake to 36%.
Citi will pay the Treasury an 8% annual dividend, while dividends on outstanding preferred shares have been suspended. Singapore, whose sovereign wealth fund owns 11% of Citi, confirmed that it supports the conversion deal; Prince Alaweed is also on board with the arrangement. Citi CEO Pandit said that the move was not an easy choice, but believes that confidence is key and that the deal takes the confidence issue "off the table."
Citi CFO Crittenden stated that the intent of the aid package was to eliminate any need for more capital, but warned that it doesn't guarantee that this will be the case. Shares of Citi broke below $2 in pre-market trading and opened down more than 30% around $1.70. Bank of America lost more than 15% before the bell on the news, while other major banks fell significantly. Citi and the other financials are off their worst levels in mid morning trading.
- In other corporate news, Dell offered a mixed quarterly report yesterday, beating earnings estimates but missing revenue targets.
Dell's CFO noted that the company is seeing continued weakness in demand in the current quarter and believes there could be a protracted slowdown. Note that yesterday afternoon, HP's CFO remarked that IT budgets are under pressure and that HP saw enterprise demand fall in January.
Shares of Dell were trading up 3% mid morning, while HP was down 2.5% or so. Two more retailers, Gap and Kohl's, managed to beat earnings targets for Q4. Gap did miss revenue estimates by a bit, while Kohl's guided below par for the coming quarter and the full year. Waste management name Republic Services missed earnings targets and guided well under expectations for 2009, prompting investors to dump shares, with RSG down 12% in the early going.
- In currencies, the greenback maintained a firmer tone during the New York morning thanks to risk aversion and safe haven flows, in spite of US GDP registering its weakest reading since 1980 (note that the weak US reading was complemented by weak GDP and trade data from key emerging market regions).
EUR/USD headed toward the 1.26 level, softer by over 80 pips from its Asian opening level, GBP/USD tested 1.4115 before consolidating while USD/CHF held above the 1.17 area.
The yen retraced from its lowest levels against the majors aided by risk aversion stemming from lower equity markets and profit-taking from shorter-term traders on month-end positioning. The USD/CAD pair tested the 1.27 level for one-month highs as commodity related currencies were hurt by lower oil prices. The Mexican Peso (MXN) hit all-time lows against the USD above 15.00. Note that the bigger government stake in Citi is expected to have implications for some of its foreign units, including Mexico's second-largest bank Banamex, fueling rumors of a possible sale.
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DAX Summary
Previous
Current
25-Feb-2009
26-Feb-2009
OPEN
3929.0
3870.5
HIGH
3980.0
3992.5
LOW
3790.5
3851.0
CLOSE
3848.5
3939.0
RANGE
189.5
141.5
VOLUME
195,032
189,523
ES Summary
Previous
Current
25-Feb-2009
26-Feb-2009
OPEN
769.00
761.00
HIGH
779.50
779.00
LOW
751.25
750.25
CLOSE
761.50
752.00
RANGE
28.25
28.75
VOLUME
2,750,323
3,198,201
RED ZONE AREAS for Tomorrow
More info on the RED ZONE located here:
FDAX (DAX): 3913.50 / 3851.00
ES (E-MINI S&P): 768.50 / 750.00
YM (E-MINI DOW): 7290 / 7158
6E (EURO): 1.2810 / 1.2761
ZS (SOYBEANS): 877.00 / 858.00
GC (GOLD): 946.30 / 965.70
Economic News to Watch Tomorrow
8:30am Preliminary Q4 Annualized GDP q/q (last -3.8%),
- Q4 GDP Price Index (last -0.1%),
- Q4 Personal Consumption (last -3.5%),
- Q4 Core PCE q/q (last 0.6%)
9:45am Feb Chicago Purchasing Manager Index (last 33.3)
9:55am Feb Final U. of Michigan Confidence (last 56.2), Feb NAPM-Milwaukee (last 33)
Todays Headlines
6:00:40 AM
(US) Obama administration officials release details of 2010 budget, includes $250B in additional funding for financial rescue, predicts a $1.75T deficit
- Budget has "placeholder" of $250B in additional funds for financial resuce, could seek up to $750B for banks.
- Sees deficit reaching $533B by 2013, stabilizing at 3% of GDP.
- Includes health care reforms and a tax increase on top earners, as expected.
- Budget to include plan for cap and trade scheme for C02 emissions.
- Would atempt to reform payments to farmers, curbing payments to crop producers making more than $500K a year.
****Reminder that official release is expected at 11:00 EST
7:04:19 AM General Motors Corp Reports Q4 -$9.65 (adj) v -$7.40e, R $30.8B v $35.1Be
- Including special items, reported a Q4 net loss of $9.6B, or $15.71 per diluted share
- Q4 special items results totaling $3.7B, including $1.1B impairment charge for Hummer and Saab brands, a $1.0B charge for adjustments to deferred tax assets outside of the US, $900M of restructuring and capacity-related costs, $660M increase to the Delphi pension reserve, $610M of gross goodwill impairments in Europe and North America, $533M net gain relating to GMAC bond exchange gain, net of an impairment taken on GMs holdings in GMAC.
- In 2008, including special items, GM reported a loss of $30.9B, or $53.32 per diluted share, compared to a reported loss of $43.3B, or $76.52 per diluted share in 2007.
- GM anticipates receiving a going concern opinion from its auditors in the 2008 10-K. GM and its auditors must determine whether there is substantial doubt about GMs ability to continue as a going concern.
- Q4 Global market share 12.0% v 13.1% y/y
- Q4 North America market share 21% v 22.7% y/y
- Q4 Europe market share 9.1% v 9.2% y/y
- Q4 Latin America market share 16.2% v 17.3% y/y
- GMAC Financial Services reported Q4 net income of $7.5B, driven largely by the company's December bond exchange, compared to a net loss of $724M in Q4 of 2007. Ex the $11.4B gain on its bond exchange, GMAC's Q4 results reflected a net loss of $4.0B, driven primarily by losses in North America automotive finance and continued losses at ResCap.
- GM realized an adjusted loss of $1.9B for Q4. This excludes a Q4 net gain of $533M related to GMs portion of GMACs bond exchange gain that was largely offset by an impairment of GMs investment in GMAC.
- Year end cash equivalents $14B v $27.3B y/y
- Notes pension plan underfunded by around $12.4B
- Needed funding in 2009 from US Treasury to continue operations
8:21:41 AM (EU) ECB's Trichet: Wage restraint would help a lot, unemployment is a concern in many parts of Europe
- Calls on Ireland to return to compliance with EU stability pact and find immediate savings, cutting Irish budget deficit is "essential."
- Optimistic about Ireland's prospects despite the severe challenges it faces.
- Notes that since the launch of the EUR, Euro Zone states have seen significant differences in cost competitiveness.
- Sees high costs to delaying EU reforms.
8:30:02 AM *INITIAL JOBLESS CLAIMS: 667K V 625KE; CONTINUING CLAIMS: 5.112M V 5.025ME
- Prior jobless claims revised from 627K to 631K
- Prior Continuing Claims revised from 4.987M to 4.998M
***Highest initial claims since Oct 1982
***Highest Continuing claims on record
8:30:04 AM *JAN DURABLE GOODS ORDERS: -5.2% V -2.5%E; DURABLES EX-TRANSPORTATION: -2.5% V -2.2%E
- Prior Durables revised from -3.0% to -4.6% (2nd revision)
- Prior Durables Ex Transportation revised from -3.9% to -5.5% (2nd revision)
***Note: Sixth straight monthly decline in Durables
10:00:02 AM * JAN NEW HOME SALES: 309K V 324KE (-10.2% M/M), another record low
- Median sales price: $201,100 v $223,200 m/m (-10%), $224,500 y/y (-10.5% y/y)
- New Home months of supply: 13.3 v 12.2 months m/m (13.3 months is a record high)
- Prior New Home Sales revised from 331K to 344K
10:30 AM
*EIA NATURAL GAS INVENTORIES: -101 BCF VS. -100 TO -110 BCF ESTIMATE RANGE
10:31:30 AM Obama Budget Plan: Return on TARP purchases seen at $0.66/dollar; ends subsidies to private student loan providers
- Forecasts unemployment at 8.1% in 2009, 7.9% in 2010, 7.1% in 2011
- Budget estimates return on purchased assets by Federal Govt at 2/3 of original investment, lower than the 74% expected by the Congressional Budget Office.
- Budget removes several tax breaks for oil and gas companies; excise tax on Gulf of Mexico ops expected to raise $5.3B in 2011-2019.
- More cost cutting actions to be announced in final budget report in April.
- Budget aims to end student loan payments to private lenders.
2:30:11 PM FDIC: Troubled bank list grew to 252 in Q4 from 171 in Q3; outlook for banking failures has increased - Deposit insurance fund lost $15.7B in Q4, net charge off rate for US banks is at highest ever, reserve ratio for deposit insurance fund at lowest since 1993
- Problem Bank assets at $159.4B v $115.6B q/q
- Q4 Banks losses at $26.2B (first quarterly loss since Q41990)
- FDIC's Bair: Troubled loans in near term will continue to rise, asset quality show no indication that they are improving; even the healthiest of banks should review dividend policies
4:21:27 PM Microsoft Corp CFO: Sees an "incredibly tough" economy everywhere, not unreasonable to expect global GDP contraction - technology conf comments
- Sees economic difficulties lasting for one or two years.
- expect to keep costs flat for the foreseeable future.
- PC sales could rebound next year
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6:00:40 AM
(US) Obama administration officials release details of 2010 budget, includes $250B in additional funding for financial rescue, predicts a $1.75T deficit
- Budget has "placeholder" of $250B in additional funds for financial resuce, could seek up to $750B for banks.
- Sees deficit reaching $533B by 2013, stabilizing at 3% of GDP.
- Includes health care reforms and a tax increase on top earners, as expected.
- Budget to include plan for cap and trade scheme for C02 emissions.
- Would atempt to reform payments to farmers, curbing payments to crop producers making more than $500K a year.
****Reminder that official release is expected at 11:00 EST
7:04:19 AM General Motors Corp Reports Q4 -$9.65 (adj) v -$7.40e, R $30.8B v $35.1Be
- Including special items, reported a Q4 net loss of $9.6B, or $15.71 per diluted share
- Q4 special items results totaling $3.7B, including $1.1B impairment charge for Hummer and Saab brands, a $1.0B charge for adjustments to deferred tax assets outside of the US, $900M of restructuring and capacity-related costs, $660M increase to the Delphi pension reserve, $610M of gross goodwill impairments in Europe and North America, $533M net gain relating to GMAC bond exchange gain, net of an impairment taken on GM’s holdings in GMAC.
- In 2008, including special items, GM reported a loss of $30.9B, or $53.32 per diluted share, compared to a reported loss of $43.3B, or $76.52 per diluted share in 2007.
- GM anticipates receiving a "going concern" opinion from its auditors in the 2008 10-K. GM and its auditors must determine whether there is substantial doubt about GM’s ability to continue as a going concern.
- Q4 Global market share 12.0% v 13.1% y/y
- Q4 North America market share 21% v 22.7% y/y
- Q4 Europe market share 9.1% v 9.2% y/y
- Q4 Latin America market share 16.2% v 17.3% y/y
- GMAC Financial Services reported Q4 net income of $7.5B, driven largely by the company's December bond exchange, compared to a net loss of $724M in Q4 of 2007. Ex the $11.4B gain on its bond exchange, GMAC's Q4 results reflected a net loss of $4.0B, driven primarily by losses in North America automotive finance and continued losses at ResCap.
- GM realized an adjusted loss of $1.9B for Q4. This excludes a Q4 net gain of $533M related to GM's portion of GMAC's bond exchange gain that was largely offset by an impairment of GM's investment in GMAC.
- Year end cash equivalents $14B v $27.3B y/y
- Notes pension plan underfunded by around $12.4B
- Needed funding in 2009 from US Treasury to continue operations
8:21:41 AM (EU) ECB's Trichet: Wage restraint would help a lot, unemployment is a concern in many parts of Europe
- Calls on Ireland to return to compliance with EU stability pact and find immediate savings, cutting Irish budget deficit is "essential."
- Optimistic about Ireland's prospects despite the severe challenges it faces.
- Notes that since the launch of the EUR, Euro Zone states have seen significant differences in cost competitiveness.
- Sees high costs to delaying EU reforms.
8:30:02 AM *INITIAL JOBLESS CLAIMS: 667K V 625KE; CONTINUING CLAIMS: 5.112M V 5.025ME
- Prior jobless claims revised from 627K to 631K
- Prior Continuing Claims revised from 4.987M to 4.998M
***Highest initial claims since Oct 1982
***Highest Continuing claims on record
8:30:04 AM *JAN DURABLE GOODS ORDERS: -5.2% V -2.5%E; DURABLES EX-TRANSPORTATION: -2.5% V -2.2%E
- Prior Durables revised from -3.0% to -4.6% (2nd revision)
- Prior Durables Ex Transportation revised from -3.9% to -5.5% (2nd revision)
***Note: Sixth straight monthly decline in Durables
10:00:02 AM * JAN NEW HOME SALES: 309K V 324KE (-10.2% M/M), another record low
- Median sales price: $201,100 v $223,200 m/m (-10%), $224,500 y/y (-10.5% y/y)
- New Home months of supply: 13.3 v 12.2 months m/m (13.3 months is a record high)
- Prior New Home Sales revised from 331K to 344K
10:30 AM
*EIA NATURAL GAS INVENTORIES: -101 BCF VS. -100 TO -110 BCF ESTIMATE RANGE
10:31:30 AM Obama Budget Plan: Return on TARP purchases seen at $0.66/dollar; ends subsidies to private student loan providers
- Forecasts unemployment at 8.1% in 2009, 7.9% in 2010, 7.1% in 2011
- Budget estimates return on purchased assets by Federal Govt at 2/3 of original investment, lower than the 74% expected by the Congressional Budget Office.
- Budget removes several tax breaks for oil and gas companies; excise tax on Gulf of Mexico ops expected to raise $5.3B in 2011-2019.
- More cost cutting actions to be announced in final budget report in April.
- Budget aims to end student loan payments to private lenders.
More Headlines
- US equity indices are sustaining solid gains this morning, taken higher by rallying financial stocks.
With a better picture of the Treasury's stress testing in hand and the initial details of Obama's budget leaking out, both seem to be providing confidence in the banks and helping investors ignore the dismal economic data. The Commerce Department reported the sixth straight monthly decline in durables goods orders, continuing jobless claims broke above the 5M level for all-time high reading and January new home sales sagged to fresh record lows, with the median sale price slumping 10% m/m. Details of the Obama administration's 2010 budget leaked out earlier this morning, indicating that the White House sees a budget deficit of up to $1.75T, or 12.3% of GDP.
- Gold markets are losing ground with the return of risk appetite by investors around the globe. April gold traded off as much as $30 approaching $930 once again.
Treasury prices are lower as well as the market tries to digest the magnitude the Obama Administration's budget proposal and looks past the disturbing durable goods and housing figures. The 10-year yield has climbed back to 3% while the benchmark spread has widened back to 190 basis points. The energy complex is rallying for the second straight session led by RBOB + 7.5%. WTI crude is testing $45 for the first time in nearly a month.
- Financial stocks are making solid gains this morning after the Treasury finally laid out concrete details regarding bank stress testing yesterday afternoon.
Yesterday after the close, Treasury Secretary Geithner told NPR that more government backstops would be helpful for banks even as they look to raise private capital, as required under the Treasury's emerging financial stability plans. Geithner also echoed the host of administration and Congressional officials who have asserted that nationalization of banks is unnecessary. In a research note published overnight, Citigroup indicated that it believes the stress testing plan will be positive for US banks, although it cautioned that the final targets for bank capital levels remain unclear. In separate news, Citi is getting closer to a deal with the Feds, with a final announcement expected as soon as today.
- Managed care names CVH, AET, UNH, CI and HUM are getting hit as details about the Obama administration's budget leak out.
Current budget proposals indicate significant changes in the government's role in health care, including cuts to private Medicare Advantage plans.
- General Motors reported a giant $9.6B quarterly loss this morning, amounting to -$9.65 per share, well above analysts' expectations for -$7.40.
Revenue was $30.8B, nearly $5B less than expected. For the full year, GM said it lost $30.9B, which admittedly is less than last year's $43.3B loss. The wounded automaker anticipates receiving a "going concern" opinion from its auditors in its 2008 10-K. At the very end of its earnings press release, GM briefly noted that it requires funding from the US Treasury to continue operations.
- In other earnings news, Fluor is up nearly 10% after blowing out EPS and revenue estimates. Cablevision fell to -5% after the open before bouncing up +5% along with markets.
CVC missed on earnings in a big way, while revenue was in line with expectations. Sears holding is sustaining an 8% gain in early trading after earnings, while Limited Brands is well off early losses but still down 3% or so. Supermarket chain Safeway missed earnings and revenue slightly, while reaffirmed its 2009 forecast. Investors are not reassured, however, and are dumping the stock, which is down more than 10%. Utility Integrys Energy has fallen off a big cliff after missing the consensus view by a mile thanks to big losses on derivatives, with shares down more than 20%.
- In currencies, the greenback was mixed in the New York session but off its worst levels against the European pairs.
EUR/USD once again tried to break the 1.28 level before succumbing to selling pressures. Sterling was firmer, with dealers attributing gains on month-end activity but added that weak economic fundamentals coupled with the protracted resolution of the banking sector's problems continue to weigh on prices. The yen maintained its soft tone on both technical and fundamental factors. USD/JPY was approaching the mid 98 handle as the New York morning progressed.
Bernankes buddy Paulson may have been a little too optimistic in September 08
Treasury releases more details of the Stress Tests
Geithner wants banks to raise their own funds, and sees us in better position than previous recessions
Quote of the Day
"The real power behind whatever success I have now was something I found within myself - something that's in all of us, I think, a little piece of something just waiting to be discovered."
RED ZONE AREAS for Tomorrow
More info on the RED ZONE located here:
FDAX (DAX): 3977.00 / 4116.00
ES (E-MINI S&P): 768.75 / 779.50
YM (E-MINI DOW): 7307 / 7391
6E (EURO): 1.2785 / 1.2875
ZS (SOYBEANS): 881.50 / 890.75
GC (GOLD): 969.40 / 997.00
Economic News to Watch Tomorrow
8:30am Jan Durable Goods Orders (last -2.6%, ex-transport -3.6%), 8:30am Initial Jobless Claims (last 627K),
8:30am Continuing Claims (last 4.99M)
10:00am Jan New Home Sales (last 331K, m/m -14.7%)
10:30am Natural Gas Inventories
1:00pm Treasury's $22B 7-year note auction
Todays Headlines
Tuesday, February 24, 2009 7:25:46 PM
(US) Pres Obama: Administration identified $2T in budget savings over next decade; budget requires sacrifice of some "worthy priorities" from both parties
- Plans to eliminate no-bid contracts that wasted billions of dollars in Iraq and end spending on faulty "cold war" weapons systems
- Will end direct payments to large agribusiness that do not need subsidy
- To seek end to companies receiving tax breaks from shipping jobs offshore
- US must confront dependence on oil and health care costs, pledged to root out waste, fraud and abuse in Medicare
- Health care reform to begin next week with gathering or interested parties
- Bank rescue will probably require additional funds; To make sure banks have sufficient lending funds even in difficult times; Banks to be held fully accountable for aid
- Working with G20 to avoid possibility of escalating protectionism
- Housing plan to result in lower interest rates
- Administration is creating lending fund for auto and school loans
- Calls for market-based cap on carbon pollution
- Committed to retooled auto industry
4:30:03 AM
*(UK) UK Q4 PRELIMINARY GDP Q/Q: -1.5% V -1.6%E; Y/Y: -1.9% V -1.9%E; largest annual decline since 1980
- Exports: -5.5% v -4.9%e
- Imports: -5.9 % v -3.7%e
- Private Consumption: -0.7% v -0.6%e
- Government Spending : 1.5% v 0.6%e
- Gross Fixed Capital Formation : -2.3% v -4.4%e
*** Note: Largest drop in inventories since Q4 1990; largest drop in Household Spending since Q2 1994
- Prior Exports revised from 0.3% to 0.5%
- Prior Imports revised from 1.0% to 0.3%
- Prior Government Spending from 0.6% to 0.5%
- Prior Gross Fixed Capital Formation revised from -2.8% to -3.6%
6:49:30 AM
(EU) EU's Almunia: EU would not accept a market failure of a firm on the scale of Lehman, EU is seriously concerned over bond spreads
- Says support measures have prevented a collapse in lending
- Global economy is 'seriously' impacted by credit crisis
- Too soon to see the results of stimulus in EU
- US and China stimulus is ahead of EU package
- EU nations concerned regarding bond spreads
- Expects more EU nations outside EuroZone to ask for assistance
- Notes conditions for joining EuroZone should stay the same
- Warns against low interest rates and does not see insolvency in EU
7:00 AM
*MBA MORTGAGE APPLICATIONS W/E FEB 20TH: -15.1% V 45.7% PRIOR
- Refis : -19.1% v 64.3% prior
- Avg rate on 30y Mortgage: 5.07% v 4.99% prior
9:43:51 AM
(UK) BOE's Kate Barker: Concern that economy might be weaker than forecasts; growth may not retrun before year-end
- Low UK interest rates will help growth over two years; rates nearing floor
- Sterling decline will prompt shift away from imports; exports prospects to recover once global economy rebounds
- Sees severe constraint on supply of credit
- Increasing money supply may be an inappropriate next step for BoE
- Reminder on 12/10: BOE's Barker: Sees bleak outlook for UK economy over the short term, recovery likely in late 2009
11:39:15 AM
Fed's Bernanke: Banks will be told how much capital they need following stress tests, banks will have up to six months to raise private capital - House testimony Q&A
- Believes existing tools can be utilized to address bank problems, most small banks are 'very well capitalized'
11:41:46 AM
Citigroup Inc Fed's Bernanke: Not planning "anything like nationalization" for Citi
- Bernanke notes there could be more substantial minority share of Citi and others owned by the US govt.
- Defines nationalization as "zeroing out shareholders."
2:00:40 PM
(US) Treasury releases details of stress testing and capital assistance plans; notes US banks needing new funds must raise private capital within six months
- Stress tests are based on a baseline of adverse GDP and employment forecasts, including unemployment of 10.4% by 2010. Stress tests will consider loan, trading and securities losses.
- Banks with assets under $100B will also be able to receive government funding under new plan.
- Banks that need capital will issue convertible preferred shares carrying a 9% dividend yield.
- Treasury will convert banks securities to common stock as needed. Banks already receiving TARP funds can convert existing stakes into new shares.
- Program seeks to provide banks with incentives to replace government capital with private funds.
- Plan includes limits to dividends and acquisitions.
- Note: Fed's Bernanke alluded to the the 6 month time frame and encouragement for banks to cut dividends in hisTestimony to Congress; conversion of securities to common stock and incentives to replace Govt capital had been casually mentioned by the Treasury and other sources over the last couple weeks
3:11:43 PM (US) Treasury Official: Results of stress test results will not be made public
- Notes that there will be no 'explicit cap' upon capital the Govt may provide to Banks that go through stress tests; Capital assistance program will be open for 'significant' period of time
4:55:43 PM (US) Treasury Sec Geithner: Wants banks to raise private funds, but govt backstop would be helpful; Banks have very substantial capital compared to levels seen going into prior recessions - NPR Interview
- Says nationalizing banks would be wrong strategy and is unnecessary
- Wall St. is reacting to a deepening recession
- Major banks have sufficient capital, but require a cushion - nationalizing banks would be wrong strategy
- Says financial stability plan would absolutely work
- note: his comments echo those expressed by Press Secretary Gibbs and Fed's Bernanke in the last few days.
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.
Tuesday, February 24, 2009 7:25:46 PM
(US) Pres Obama: Administration identified $2T in budget savings over next decade; budget requires sacrifice of some "worthy priorities" from both parties
- Plans to eliminate no-bid contracts that wasted billions of dollars in Iraq and end spending on faulty "cold war" weapons systems
- Will end direct payments to large agribusiness that do not need subsidy
- To seek end to companies receiving tax breaks from shipping jobs offshore
- US must confront dependence on oil and health care costs, pledged to root out waste, fraud and abuse in Medicare
- Health care reform to begin next week with gathering or interested parties
- Bank rescue will probably require additional funds; To make sure banks have sufficient lending funds even in difficult times; Banks to be held fully accountable for aid
- Working with G20 to avoid possibility of escalating protectionism
- Housing plan to result in lower interest rates
- Administration is creating lending fund for auto and school loans
- Calls for market-based cap on carbon pollution
- Committed to retooled auto industry
4:30:03 AM
*(UK) UK Q4 PRELIMINARY GDP Q/Q: -1.5% V -1.6%E; Y/Y: -1.9% V -1.9%E; largest annual decline since 1980
- Exports: -5.5% v -4.9%e
- Imports: -5.9 % v -3.7%e
- Private Consumption: -0.7% v -0.6%e
- Government Spending : 1.5% v 0.6%e
- Gross Fixed Capital Formation : -2.3% v -4.4%e
*** Note: Largest drop in inventories since Q4 1990; largest drop in Household Spending since Q2 1994
- Prior Exports revised from 0.3% to 0.5%
- Prior Imports revised from 1.0% to 0.3%
- Prior Government Spending from 0.6% to 0.5%
- Prior Gross Fixed Capital Formation revised from -2.8% to -3.6%
6:49:30 AM
(EU) EU's Almunia: EU would not accept a market failure of a firm on the scale of Lehman, EU is seriously concerned over bond spreads
- Says support measures have prevented a collapse in lending
- Global economy is 'seriously' impacted by credit crisis
- Too soon to see the results of stimulus in EU
- US and China stimulus is ahead of EU package
- EU nations concerned regarding bond spreads
- Expects more EU nations outside EuroZone to ask for assistance
- Notes conditions for joining EuroZone should stay the same
- Warns against low interest rates and does not see insolvency in EU
7:00 AM
*MBA MORTGAGE APPLICATIONS W/E FEB 20TH: -15.1% V 45.7% PRIOR
- Refis : -19.1% v 64.3% prior
- Avg rate on 30y Mortgage: 5.07% v 4.99% prior
9:43:51 AM
(UK) BOE's Kate Barker: Concern that economy might be weaker than forecasts; growth may not retrun before year-end
- Low UK interest rates will help growth over two years; rates nearing floor
- Sterling decline will prompt shift away from imports; exports prospects to recover once global economy rebounds
- Sees severe constraint on supply of credit
- Increasing money supply may be an inappropriate next step for BoE
- Reminder on 12/10: BOE's Barker: Sees bleak outlook for UK economy over the short term, recovery likely in late 2009
11:39:15 AM
Fed's Bernanke: Banks will be told how much capital they need following stress tests, banks will have up to six months to raise private capital - House testimony Q&A
- Believes existing tools can be utilized to address bank problems, most small banks are 'very well capitalized'
11:41:46 AM
Citigroup Inc Fed's Bernanke: Not planning "anything like nationalization" for Citi
- Bernanke notes there could be more substantial minority share of Citi and others owned by the US govt.
- Defines nationalization as "zeroing out shareholders."
More Headlines
- The market schizophrenia continues this morning as US equity indices give up many of yesterday's gains in early trading.
Existing home sales hit lows not seen since 1997, while investors dump bank stocks on nervousness over government stress testing, which begins today.
Front-month gold is up a bit, trading around $___ in early trading, while WTI crude is sustaining the $40 level in early trading.
- Financial names are under pressure from the broader index declines in early trading, despite the emerging consensus that outright nationalization is off the table for now.
Note that yesterday the Fed's Fisher said he was uncomfortable with bank nationalization and House Speaker Pelosi said the US may need to buy transitional stakes in some banks that would not wipe out shareholders. Earlier this morning PIMCO's McCulley insisted that Citi would get support from Washington if stress tests showed it needs it because the firm is too big to fail. The Wall Street Journal wrote that Wells Fargo may need to cut its dividend to save costs, noting that bank's ratios "look anything but bulletproof" in the face of rising credit losses and the uncertain outlook.
- Monoline insurer Ambak followed up competitor Radian Group's big quarterly loss with an even bigger loss of its own thanks to changes in fair value accounting of assets.
ABK reported earnings of -$8.14 per share; analysts had expected -$0.18. On the conference call, ABK's CEO said there is little or no assurance that TARP funds will be forthcoming for the monolines, but also noted ABK does not need public funding. S&P published a report discussing the impact of loan modifications on mortgage insurers, noting that current plans could reduce mortgage insurers' loss costs. According to the report, one mortgage insurer estimated that loan modifications in Q3 last year resulted in savings of 14% of its incurred losses. ABK is giving up yesterday's gains, down 5%, while RDN is down a whopping 18%.
- In earnings, TJX Companies followed up on yesterday's mostly solid Q4 retail earnings reports, beating the consensus earnings view and coming in even on revenues.
Tween Brands missed in a big way, reporting a sizable loss in contrast to analysts' estimates for a $0.44 gain. TWB also missed revenue targets and reported a 23% decline in same-store sales. Shares of TWB are down more than 40%, while TJX is up about 3% in early trading. Food names Del Monte and J.M. Smucker both beat earnings estimates and missed revenue targets in third-quarter reports but offered diverging forecasts for 2009. DLM raised its view for the year, while SJM cut guidance. Shares of DLM are up 13% in early trading, while SJM is down about 7%. In other equity news, Agrium launched a hostile takeover bid for CF Industries at $72/shr in cash and stock, valuing the company at $3.6B. Agrium expects the transaction to be accretive to earnings and cash flow in 2010 and significantly accretive on both measures in subsequent years. CF is up 15% on the news, while AGU is down 7% or so.
- In currencies, risk aversion returned during the New York session after S&P downgraded Ukraine's currency rating below junk status and the US existing home sales reading hit levels last seen more than a decade ago.
In addition, Moody's published a report highlighting the potential for rising delinquencies and defaults among consumer loan ABS in the final quarter of 2008 in the EMEA region (Europe, Middle East and Africa).
- EUR/USD was probing session lows around the 1.2730 level after testing 1.2900 earlier in the European session.
GBP/USD is around 1.4290 after testing 1.46 earlier today. GBP/USD was softer by 250 pips from its opening Asian levels thanks to downside momentum sparked by softer GDP data that came out ahead of the New York morning. Sterling also being weighed down by the pending announcement on the details of the UK Asset Protection Scheme. Dealers are noting that the potential liability of British taxpayers has reached 1.3 trillion since the start of the credit crunch, which one trader noted is equivalent to almost the entire annual output of the British economy. Needless to say, this sort of arithmetic is causing concern among investors.
Consumer Confidence in US drops to lowest reading on record
Bernanke starts a buzz over his seemingly optimistic body language
'Now is the time to act boldly, wisely' President Obama
Quote of the Day
"Dreams come true. Without that possibility, nature would not incite us to have them."
RED ZONE AREAS for Tomorrow
More info on the RED ZONE located here:
FDAX (DAX): 3925.00 / 4054.00
ES (E-MINI S&P): 759.75 / 786.50
YM (E-MINI DOW): 7279 / 7497
6E (EURO): 1.2788 / 1.2989
ZS (SOYBEANS): 877.00 / 894.50
GC (GOLD): 982.70 / 960.20
Economic News to Watch Tomorrow
10:00am Jan Existing Home Sales (last 4.74M, m/m 6.5%)
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
1:00pm Treasury's $32B 5-year note auction
2:00pm TSLF auction
Events 10:00am Fed Chairman Bernanke testifies before US House.
Todays Headlines
9:00:02 AM
*DEC CASE SHILLER HOME PRICE INDEX: 150.66 V 154.59 PRIOR; COMPOSITE 20 INDEX: -18.55% V -18.3%E
- Prior home price revised from 154.59 to 154.55
- Prior Composite 20 Index revised from -18.18% to -18.20%
- For the fourth consecutive month all 20 regions experienced price declines
9:59 AM
*FEB RICHMOND FED MANUFACTURING INDEX: -51 V -49E-
10:00 AM
*FEB CONSUMER CONFIDENCE: 25 V 35.0E; lowest reading on record
10:00:26 AM
Fed's Bernanke: Full recovery will take more than two or three years, Sees recovery beginning in 2010 only if banks are stabilized
- US Senate Testimony
- Urges strong action to stabilize markets and banks.
- Sees sharp contraction in first quarter.
- Reiterates there may be need for "exceptionally low rates" for some time.
- Most securitization markets remain closed.
10:05:49 AM
*DEC HOUSE PRICE INDEX: 0.1% V -1.7%E; Q4 HOUSE PRICE PURCHASE INDEX Q/Q: -3.4% V -2.0%E
- No revision to prior MoM at -1.8%
- Prior Q/Q House Price purchase index revised from -1.8% to -2.0%
- 2008 Home Price: -8.2%
10:43:59 AM
Fed's Bernanke: Major banks are meeting capital requirements, Seeing very heavy risk aversion, broad based weakness in economy
- Q&A with Senate panel
- says auto and housing industries will eventually be part of the recovery.
- says some banks are too big to fail.
11:06:11 AM
Fed's Bernanke: Big risks lay with the big firms, stress tests will determine how much and what type of capital banks should hold
- Q&A
- Notes that smaller banks can cause systemic risk if all affected by the same problem.
- Notes more info will be released shortly regarding stress test but broadly it will look at the balance sheets and capital needs of the 19 largest banks over 2-year time horizon under two different scenarios one of which being much more dire than currently forecast
11:41:44 AM
Fed's Bernanke: TALF program is "about to open"
- Q&A before Senate panel
- in response to a question of when extraordinary programs will be removed, Bernanke says Fed is focused on being ready to normalize monetary conditions when appropriate.
- Expects inflation to be lower than normal over next several years.
- says cannot run a $1T deficit indefinitely; otherwise foreign investors may lose confidence in US investments.
11:42:50 AM
ECB's Weber: Germany has "exhausted" its fiscal abilities to maneuver
; reiterates that there is room to cut rates, but ECB must increase rates quickly when financial crisis is over - Newspaper interview
- Notes cannot allow current economic developments to be at expense of future inflation, sees recession lasting 'for a while;' everyone must adjust their long term growth assumptions.
12:39:42 PM
Fed's Bernanke: Fed is still prepared to buy longer-dated treasuries, would like to keep the option open - Q&A before Senate panel
- Not trying to affect the cost of govt finance, merely trying to help private credit markets.
- Govt does not need majority ownership in order to work with them, get them to lend. Fed is just trying to ensure banks return to health. Nationalization would quickly erode the franchise value of the banks' brand names.
**in questions to Bernanke, Senator Dodd notes he regrets comments from last week that bank nationalization "could happen."
12:56:33 PM
S&P reports capital adequacy ratios among US insurers remains strong, but sees downward trend
- "Capitalization is especially important for mortgage insurers because their exposure to the mortgage and housing markets makes their operating results more volatile than most lines of business," said Standard & Poor''s credit analyst James Brender. "For this reason, our criteria caps the rating on a mortgage insurer at the rating its capital adequacy ratio (CAR) implies."
- According to S&P, this is unique to mortgage insurers, and a mortgage insurer can be rated below the rating its CAR implies.
4:30 PM
*API PETROLEUM INVENTORIES: *
API CRUDE: +341K V +1ME;
GASOLINE: -898K V 0.0E;
DISTILLATE: +1.76M V -1ME;
CAPACITY UTILIZATION: 81.9% V 82.2%E
7:25:46 PM
(US) Pres Obama: Administration identified $2T in budget savings over next decade; budget requires sacrifice of some "worthy priorities" from both parties
- Plans to eliminate no-bid contracts that wasted billions of dollars in Iraq
- Will end direct payments to large agribusiness that do not need subsidy
- To seek end to companies receiving tax breaks from shipping jobs offshore
- To end spending on faulty "cold war" weapons systems
- US must confront dependence on oil and health care costs, pledged to root out waste, fraud and abuse in Medicare
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.
February 24, 2009
MARKET UPDATE 11:15AM EST
Thanks to everyone who came out to see us at the NYC Expo over the weekend! It was great to meet all of our wonderful members and see you all doing so well!
9:00:02 AM
*DEC CASE SHILLER HOME PRICE INDEX: 150.66 V 154.59 PRIOR; COMPOSITE 20 INDEX: -18.55% V -18.3%E
- Prior home price revised from 154.59 to 154.55
- Prior Composite 20 Index revised from -18.18% to -18.20%
- For the fourth consecutive month all 20 regions experienced price declines
9:59 AM
*FEB RICHMOND FED MANUFACTURING INDEX: -51 V -49E-
10:00 AM
*FEB CONSUMER CONFIDENCE: 25 V 35.0E; lowest reading on record
10:00:26 AM
Fed's Bernanke: Full recovery will take more than two or three years, Sees recovery beginning in 2010 only if banks are stabilized
- US Senate Testimony
- Urges strong action to stabilize markets and banks.
- Sees sharp contraction in first quarter.
- Reiterates there may be need for "exceptionally low rates" for some time.
- Most securitization markets remain closed.
10:05:49 AM
*DEC HOUSE PRICE INDEX: 0.1% V -1.7%E; Q4 HOUSE PRICE PURCHASE INDEX Q/Q: -3.4% V -2.0%E
- No revision to prior MoM at -1.8%
- Prior Q/Q House Price purchase index revised from -1.8% to -2.0%
- 2008 Home Price: -8.2%
10:43:59 AM
Fed's Bernanke: Major banks are meeting capital requirements, Seeing very heavy risk aversion, broad based weakness in economy
- Q&A with Senate panel
- says auto and housing industries will eventually be part of the recovery.
- says some banks are too big to fail.
11:06:11 AM
Fed's Bernanke: Big risks lay with the big firms, stress tests will determine how much and what type of capital banks should hold
- Q&A
- Notes that smaller banks can cause systemic risk if all affected by the same problem.
- Notes more info will be released shortly regarding stress test but broadly it will look at the balance sheets and capital needs of the 19 largest banks over 2-year time horizon under two different scenarios one of which being much more dire than currently forecast
11:41:44 AM
Fed's Bernanke: TALF program is "about to open"
- Q&A before Senate panel
- in response to a question of when extraordinary programs will be removed, Bernanke says Fed is focused on being ready to normalize monetary conditions when appropriate.
- Expects inflation to be lower than normal over next several years.
- says cannot run a $1T deficit indefinitely; otherwise foreign investors may lose confidence in US investments.
11:42:50 AM
ECB's Weber: Germany has "exhausted" its fiscal abilities to maneuver
; reiterates that there is room to cut rates, but ECB must increase rates quickly when financial crisis is over - Newspaper interview
- Notes cannot allow current economic developments to be at expense of future inflation, sees recession lasting 'for a while;' everyone must adjust their long term growth assumptions.
More Headlines
- Investors seem to have lost their appetite for panic selling, at least temporarily this morning, after watching the DJIA fall to levels last seen in 1997 yesterday.
All three leading US equity indices are sustaining modest gains in volatile early trading, despite the lowest February Consumer Confidence reading on record and data reminding everyone home prices continue to decline at the fastest pace ever.
Testifying before the Senate, Fed Chairman Bernanke warned that recovery will only begin next year if the banks are stabilized,
and will take two or three years to work out at that. Treasury prices have seen some bids throughout the session helped by the continued dismal economic data. The curve has seen some steepening across the curve with the long bond yield sliding drifting towards 3.4%. The 2-year remains near unchanged ahead of this afternoon's $40B auction results. Gold is seen some profit takers step in with the firmer equity market, trading off more than $25 to the mid $960's.
- Financial stocks rallied in the pre-market and after the bell on news that the government close to taking a bigger stake in Citigroup and may restructure and expand its loans to AIG.
Even JP Morgan ticked up a bit after cutting its dividend by 87%.
But for Citi and JP Morgan, the rally was not built to last, with shares of the two stock back around even mid morning. Morgan Stanley, Goldman and Wells Fargo remain up 6-7%. Overnight the WSJ said that the government and AIG have been discussing the loan changes since December and plan to announce them by Monday, when the company is expected to report earnings. With Citi, various online news outlets rehashed reported that a key executive was seen visiting the White House yesterday. In any case, the government is expected to announce shortly that it will convert its preferred stake to common stock in Citi. The WSJ noted that the outlook for Citi depends on how the government converts its preferred stake, noting that if it wants to put Citi's TCE concerns to rest once and for all it will be forced to own more than half of Citi or pay a hefty premium for the shares. Credit insurer Radian Group offered disastrous fourth quarter results, including more than twice the expected loss and puny revenues.
- Multiple retailers reported results yesterday and this morning.
The only apparent common theme among the retailers is that fourth quarter results are less bad than they could be given the state of the consumer.
Macy's came in a bit ahead of the Street while Target was a bit behind estimates, while both reported mid single digit same-store sales declines in the quarter. Macy's reaffirmed its 2009 earnings forecast. Target only stated that earning in the next two quarters would be well below last year's levels. Upscale retailer Nordstrom managed to do well in Q4, reporting results just a hair ahead of estimates and guiding 2009 in line. The company's same-store sales fell by more than 15% in the quarter, and it expects them to fall much further in 2009. Home Depot reported a bit ahead of the consensus earnings view, but guided 2009 below expectations.
Office Depot and Radio Shack stand out from the group. HD surprising investors with an unexpectedly large loss and a big miss on revenues, while RSH missed EPS estimates by a wide margin.
- In currencies, non-USD related flows were the primary drivers of price action in a session riddled by soft economic data and sovereign debt rating concerns.
The greenback was mixed among the major pairs but rebounded off its worst levels following the US consumer confidence data. S&P was busy with Eastern Europe this morning, cutting Latvia's sovereign credit rating and putting Lithuania and Estonia's ratings on negative watch. S&P noted that the resilience of Eastern European economies seem to be crumbling under the weight of high foreign currency debt and the looming reprioritization of lending among foreign banks. French President Sarkozy fanned the flames when he said the Eastern European banking situation would most likely get worse.
The Swedish Kroner was broadly weaker in the New York session, hit by fallout from the Baltic states. The yen maintained a soft tone, testing its 100-day moving average in the EUR/JPY pair for the first time since August 2007. Trading desks and analysts are now dreaming up lots of reasons for a weaker JPY, ranging from fundaments and valuation, to technical factors.
February 23, 2009
News Image:
**Great Seeing all of you at the EXPO this weekend!**
"A fool sees an enemy. A wise man sees a lesson to be learned."
RED ZONE AREAS for Tomorrow
More info on the RED ZONE located here:
FDAX (DAX): 3860.00 - 3973.00
ES (E-MINI S&P): 739.75 - 752.50
YM (E-MINI DOW): 7086 - 7228
6E (EURO): 1.2658 - 1.2775
ZS (SOYBEANS): 878.50 - 889.25
GC (GOLD): 928.80 - 976.20
Economic News to Watch Tomorrow
9:00am Dec S&P/CS Home Price Index (last 154.59),
- Dec S&P/CS Composite-20 y/y (last -18.18%),
- Q4 S&P/CS Housing Price Index (last , y/y %)
10:00am Feb Consumer Confidence (last 37.7),
- Dec House Price Index m/m (last -1.8%),
- Q4 House Price Purchase Index q/q (last -1.8%),
- Feb Richmond Fed Manufacturing Index (last -49)
1:00pm Treasury's $40B 2-year note auction
3:00pm TSLF announcement
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
Sunday, 4:02:32 PM
(US) US President Obama vows to cut Deficit 50% by 2013; To reclass private equity income as ordinary income
-President Obama in a speech this weekend vowed to reduce the budget deficit by half in the coming years. In his speech he presented a number of ways to increase tax receipts and reduce spending most of which have been discussed in the past.
-One item, however is quite negative for Financials and private equity firms. The proposal to tax investment income of hedge funds and private equity partnerships at ordinary income tax rates (~39%), rather than the current dividend capital tax rate of 15%. Note: Hedge funds and investment partnerships of all kinds - not just financial investment funds - have been getting around taxation as ordinary income rates for years since the Bush tax cuts lowered the capital gains tax rate.
Today 1:04 PM
Citigroup Inc CNBC's Gasparino: Sources indicate a deal with the US Govt may come as early as today or tommorow; amount to close to $40B
2:17:40 PM
White House Press Secretary reiterates that the administration believes a privately held banking system regulated by the govt is the best way forward
- asked about the report that the govt may take a 40% stake in Citigroup, says will not comment on individual banks.
2:32:46 PM
American International Group, Inc In discussions with Govt for additional funds; hope to hammer out an agreement with the govt this weekend; AIG to report $60B loss next Monday -
CNBC's Faber
- Faber reports that sources say AIG has hired a law firm specializing in bankruptcy, though bankruptcy is still an unlikely scenario.
- Talks would center around trading debt for equity, but Faber notes one problem is that govt ownership in AIG can not exceed 79.9%
2:46 PM
Treasury will begin stress tests on Feb 25 with "an aggressive time table"
- CNBC's Liesman citing Treasury sources
- Note: This morning the Treasury issued a statement that the stress testing would begin Feb 25
4:19 PM
AIG American International Group, Inc Says that it will provide a complete update when it reports its financial results in the near future
, continues to work with the US govt to evaluate potential new alternatives for dealing with financial challenges
5:04:17 PM
JPMorgan Chase and Co Guides Q1 investment bank credit costs/marks about $2B, private equity write-downs about $400M - presentation slides
- Q1 retail finance services business sees modest deterioration in home lending.
- Says WaMu's earnings expectations "still on track."
- says Q4 Tangible Common Equity (TCE) stands at $81B.
- Will remain profitable in 2009.
6:00:36 PM
Fed's Fisher: Case can be made for Fed to Treasuries; Buying longer term bonds could help economy
- Biggest problem in the economy is lack of confidence
- Fed must not monetize exploding deficit
- Fed should not peg long term interest rates that would destort market function
- Balance sheet could expand if conditions warrant
- Fed will be proactive, use all tools at its disposal
- Unemployment rate could exceed 9%
- Govt must weigh short and long term spending priorities
- Fed will need to watch velocity of money.
- Banks that are too big to fail are simply too big, any govt bank regulation should be temporary
- Personally does not believe in govt banking involvement, calls for an exit strategy realizable in short term
- Headquarters of AIG was run like a large hedge fund.
** Note: comments in line with prior sentiment; On Feb 9th, Fisher said the Fed should be free of political influence in pursuit of financial sector recovery, stable prices and maximum growth; Saw unemployment potentially rising above 9% and GDP falling 2.5% in 2009
6:57:45 PM
Citigroup Inc According to Politico, future Chairman Parsons was seen at the northwest gate to the White House
- Note: Earlier today CNBC's Gaspario said sources indicate a deal with the US Govt may come as early as today or tommorow; amount to close to $40B.
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.
February 23, 2009
MARKET UPDATE 11:15AM EST
Thanks to everyone who came out to see us at the NYC Expo over the weekend! It was great to meet all of our wonderful members and see you all doing so well!
- The US banks, namely Citi and Bank of America, remain under the microscope this morning as equity indices continue heading lower despite a strong open, and investors wonder whether nationalization can really be avoided.
The VIX volatility index popped over 50 this morning, reflecting the heightened sense of unease. Front-month crude is hovering around $40, while spot gold is just below the $990 handle. Government bond markets have recouped a good portion of declines as stocks softened after the New York open. The Bund yield remains just above 3% with the US benchmark yield is holding near 2.8% but prices are well off their worst levels.
- Shares of Citi rose more than 18% before the open and dropped as far as +8% in volatile early trading, spurred by press reports that the US Treasury was holding preliminary talks with Citigroup for up to a 40% US stake in the bank to improve the bank's tangible equity base.
According to the WSJ, under the plan being considered a large portion of the $45B in preferred shares held by the US government would convert into common stock, with other private investors holding preferred shares encouraged to follow the government's lead in converting some of their stakes into common stock. The WSJ noted that given these reports, it appears any government stress tests will dwell on tangible common equity as a gauge of bank health.
Meanwhile the NY Times reported that stress tests would begin this week. The Treasury's initial response to the stories was to make no comment while also noting it is open to converting preferred shares to common stock, if needed. Then early this morning the Treasury and Fed issued a joint statement stating they stand firmly behind the banking system and confirmed that stress testing would begin on Feb 25. Shares of BAC are sustaining a +13% gain in early trading. Wells Fargo spiked as much as +18% after the open before trading off to +5%. Investors are continuing to dump GE-5% following big declines last Thursday and Friday. WSJ's Heard on the Street reported that GE's shares are down on concerns over GE Capital, which has substantial exposures to commercial real estate and overseas residential mortgages.
- Shares of GM were up 5% in early trading on reports the Treasury has started lining up the biggest bankruptcy loan in history for the auto makers, but that officials are trying to find a way to restructure GM and Chrysler without resorting to bankruptcy.
Shares of Ford are up 15% after the company reached a preliminary deal with the UAW over health insurance obligations.
- In currencies the USD has managed to climb back from earlier losses against the euro to test the 1.2730 level during the New York session.
The Eastern European currency situation has been on the front burner this morning, with various central players making public statements. The ECB's Nowotny commented that Eastern European bank problems were manageable but their business models must change.
Czech Central Banker Tuma stated that central bankers in the region would maintain a united front and was echoed by Hungarian and Polish central banks. The region's central banks all commented that the excessive depreciation of their currencies recently has not been in line with the economic reality on the ground. The Polish Central Bank reiterates that it could undertake actions to prevent negative impact of FX rate on the economy.
- There was dealer chatter circulating that the Bank of International Settlements were buying EUR/USD around the 1.2770, but that level eventually gave away.
The JPY moved off its European lows as the equity markets saw their pre-New York gains evaporate and move into negative territory.
USD/JPY was unable to break above the 95 level and was at 94.30. EUR/JPY tested 121.90 during the European equity open moved back towards the 1.2020 as the New York morning ended.
USD/CAD tested around the 1.2530 level after weaker December retail data came in below expectations for the largest decline since 1991.
February 19, 2009
**No video tonight, see everyone at the NYC Traders EXPO**
"The secret of success in life is for a man to be ready for his opportunity when it comes."
Economic News to Watch Tomorrow
8:30am Jan CPI (last m/m -0.7%, y/y 0.1%; ex food & energy last m/m 0.0%, y/y 1.8%)
Todays Headlines
8:30 AM
*JAN PRODUCER PRICE INDEX M/M: 0.8% V 0.3%E; PPI EX FOOD&ENERGY: 0.4% V 0.1%E- PPI YoY: -1.0% v -2.4%e - PPI Ex Food & Energy YoY: 4.2% v 3.8%e - No Revisions
10:00:12 AM *FEB PHILADELPHIA FED INDEX: -41.3 V -25E, lowest since 1990
**sub-index readings:
- Prices Paid: -13.7 v -27 prior
- New Orders: -30.3 v -22.3 v prior
- Employment: -45.8 v -39 prior (2nd straight month of record low in this component since survey began in 1968)
- Inventories: -24.3 v -23.6 prior
- Six-month business conditions outlook: 15.9 v 7.4 prior
11:00 AM
*DOE CRUDE: -138K V +3ME; GASOLINE: +1.1M V -500KE; DISTILLATES: -813K V -1.5ME; UTILIZATION:
82.3% V 81.3%E- Distillate demand +244K bpd to 4.36M bpd - Gasoline demand -98K bpd to 8.9M bpd
3:41 PM
Dow Jones Industrial Avg breaks below Nov 21st intraday low of 7,449.38
8:58:04 PM
(US) According to people close to the situation, some banks were in talks with regulators over plans that would provide them with more capital, but stopped short of an outright nationalization - FT
- One plan being talked about, in the case of Citigroup, would be for the government to convert some or all of its $45B worth of preferred shares, along with $35B in preferred shares held by sovereign wealth funds and other investors into common stock.
- The plan could be combined with an offering at a discount to the current share price.
- FT says it is not clear if the US government will approve such an arrangement.
- The Treasury wants to complete its new stress tests before determining the best options for specific banks.
9:49:36 PM
Bank of America Corp CEO told sr company executives that US government officials assured him that nationalization option is Not on the table - WSJ
- The comments from the CEO Lewis came at a meeting on Thursday.
- Note: In a CNBC Interview on 2/6, the company's CEO said that everyone who he had spoken to in the government indicated that nationalization is Not the way forward
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 made modest gains before and after the NYSE bell as traders were a bit encouraged that an increase in the Jan PPI reading could alleviate some of the recent deflationary concerns.
Traders quickly attributed much of the price increases to energy and seasonal factors and turned their focus to the subsequent weekly jobless claims and February Philly Fed data. The weekly continuing jobless claims came in just shy of 5 million, for yet another all-time record high reading, while the employment component of the Philly Fed Index registered its second consecutive record low. This discouraging data comes after yesterday's FOMC minutes revised the Fed's projected 2009 unemployment rate down to 8.5-8.8% from the prior 7.1-7.6% range. An increase in general risk appetite spurred the early gains in stocks despite continued weakness in some of the largest US Banks, but the indices drifted back into the red after the Philly Fed data. European banks set a positive early tone as several of the largest institutions rallied after their earnings reports failed to spook the markets.
- Treasury prices have declined modestly on continued supply concerns and unwinds of flight to safety trades.
The benchmark yield is back above 2.8% and the long bond has regained 3.6%. The US Treasury announced $94B in fresh 2, 5, and 7-year note supply. Energy markets have reversed early losses post weekly inventory data with April WTI inching back towards $40 a barrel. March copper is up better than 3% just below $1.50.
- Dow component Hewlett-Packard's Q1 earnings were in line with the Street, although its revenues lagged estimates by nearly 10%.
The computer and IT services giant's forecast for next quarter was also below expectations, while the CFO warned that the company expects more inventory reductions to deal with ever slowing demand. Shares of HPQ are down 8%, off their worst levels. The Wall Street Journal highlighted the continuing slowdown in tech and the overall economy today, reporting that Apple retail unit sales fell by 6% in January. Sprint Nextel reported a slightly smaller loss than expected but missed revenue targets. The company sounded upbeat in the press release on its conference call, noting that it expects total subscriber losses to ease in 2009, although the CEO warned Sprint hasn't turned the corner yet. Investors are snapping up shares of Sprint, sending it up more than 25% in early trading before retrenching a bit.
- CVS beat the Street by a hair, reporting strong segment sales data for the quarter.
On the conference call, CVS's CEO was blunt, noting that the company is immune to the recession. Markets seem to agree, with shares of CVS up nearly 8% before the bell. Speaking of recession-proof, Spam manufacturer Hormel beat earnings estimates and reiterated its 2009 forecast. Shares of HRL are rising, up more than 8% mid morning.
- Mid-cap steel companies Reliance Steel and Gerdau Ameristeel offered varying earnings reports this morning.
RS blew out consensus earnings and revenue targets, noting that it has not seen any meaningful change in business activity levels so far in 2009. It also noted that pricing for most of its products appears to be at or near the bottom. GNA surprised investors with a substantial loss versus expectations of a positive earnings gain. The company noted that during the first nine months of the year it delivered EBITDA of $1.5B, while in the last quarter of the year, EBITDA decreased to $19.4M. GNA has bounced in and then out of positive territory, while RS is rocketing up 20% mid morning.
- In currencies, demand for dollars and gold has abated in the session as some pressures recently seen in Eastern European have eased a bit.
There is speculation that the EU will devise a plan to help Eastern European countries to stave off the fallout from the global economic crisis. EUR/USD took out buy stops above the 1.2730 level in the aftermath of the weak US data. The EUR/USD pair moved back below the 1.27 level ahead of the European equity close as chatter that German Chancellor Merkel and EU's Barroso were working out an Eastern European bailout strategy. Dealers noted that a lot hope and emphasis was being place into the result of this meeting, potentially setting things up for a big disappointment. USD/JPY hit one-month highs above the 94.40 level as the economic situation in Japan continues to disappoint. EUR/GBP has moved off session lows of 0.8770 to test 0.8870 on chatter of a large FX fix on the London cut.
8:30am Jan PPI (last m/m -1.9%, y/y -0.9%, ex food & energy last m/m 0.2%, y/y 4.3%),
10:00am Feb Philadelphia Fed (last -24.3), Jan Leading Indicators (last 0.3%)
10:30am Natural Gas Inventories
11:00am DoE Crude Oil/Gasoline/Distillate Inventories, Treasury note announcement
2:00pm TSLF auction
Todays Headlines
8:30:12 AM
*JAN HOUSING STARTS: 466K V 529KE; BUILDING PERMITS: 521K V 525KE (another record low for both Starts and Permits)
- Prior Housing Starts revised from 550K to 560K
- both Housing Starts and Building Permits hitting fresh record lows for the third month in a row (this data series has been tracked since 1959).
9:00:37 AM
Treasury will increase GSE loan refinancing by up to $400B, believes strengthening GSEs will make mortgages more affordable; announces details of housing initiative
- GSE mortgage portfolios will be boosted by $50B each to a total of $900B.
- Purchase agreements amended to $200B from $100B.
**Launches $75B stability initiative, for owner-occupied homes, seeking to reduce costs for homeowners and avoid foreclosures:
- Plan seeks to help 7M-9M homeowners avoid foreclosure; Allows for 4M-5M home refis and targets another 3M-4M "at risk" homeowners.
- Treasury will match lender reductions in interest payments that decrease mortgage payments to 31% of their monthly income.
- Housing initiative includes $20B-$25B from the GSE's form modifying mortgages.
- $10B fund to insure lenders against additional decline in home value.
1:00:22 PM
Fed's Bernanke: Suggesting a long term inflation forecast similiar to that of a target; encouraged by market response to actions thus far, expects inflation to be low for some time
- Long term forecasts to be released with FOMC minutes later today
- Fed will extend economic forecast horizons to a period of 5-6 years
- Sees recovering Bear Stears and AIG loans
- Note: Bernanke comments do not mention possibility of buying long term Treasuries as has been discussed in the FOMC meetings
1:25:36 PM
Fed's Evans: Economy is contracting at 'distubring pace', inflation may be below 2% range, GDP will pick up in 2H09
- TALF can program can affect interest rates further out on the yield curve
- Economy could reach growth near its potential in 2010, a target for inflation may help anchor expectations
- Sees a risk that inflation could be below 2%, and the Fed will increase its exisiting liquidity programs as sees fit and as it necessary
- Fed still considering the purchase of long term treasuries
1:41:02 PM
Fed's Bernanke: TALF program will begin "any day now", demand for treasuries at the moment is 'strong', US requires a realistic plan to create fiscal balance in medium term- Q&A
- Says TALF will help lower credit card rates.
- Obama is strongly committed to keeping banks private or quickly returning them to private hands.
2:00:30 PM
*MINUTES OF THE JAN 28 FOMC MEETING: SAW RISKS OF PROTRACTED TOO LOW INFLATION, SET 2% AS LONG TERM US INFLATION GOAL,
- Increase in spending could be short lived in consumer spending due to stimulus, no signs housing stabilizing
- Sees business spending contracting rapidly
**economic forecast:
- 2009 GDP growth forecast revised to -0.5% to -1.3% from -0.2% to 1.1% range prior.
- 2009 jobless rate forecast revised to 8.5-8.8% from 7.1-7.6% range prior.
- 2009 PCE inflation forecast at 0.9-1.1%
- 2010 GDP growth forecast revised to +2.5-3.3% from 2.3-3.2% prior forecast.
- 2010 jobless rate forecast revised to 8-8.3% from 6.5-7.3% prior forecast.
- 2010 PCE inflation forecast 0.8-1.5%
- Introduces 2011 GDP forecast of +3.8-5%, and jobless rate forecast of 6.7-7.5%
- 2011 PCE inflation forecast 0.7-1.5%
- Forecasts long term GDP growth of 2.5%-2.7% and jobless rate at 4.8-5.0% (long term defined as 5 or 6 years by Bernanke).
2:37:05 PM
JPMorgan Chase and Co CEO: Concerned may lose talent due to Obama compensation rules, sees housing program announced earlier as 'successful, well design, comprehensive'
- CNBC interview
- Remarks that that those borrowers who are currently 'underwater' on mortgages should continue to pay the mortgages, they have 'an obligation'
3:50:33 PM
General Motors Corp Moody's comments on restructuring proposals for GM and Chrysler; Ca Ratings unchanged
- Sees 70% probability that one automaker will file for bankruptcy
- Worried about UAW and creditor opposition to further compromise
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.
February 18, 2009
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- Trading is volatile this morning as investors wrestle plenty of cross currents and major news stories.
The Dow did move within 40 points of its Nov intra-day low before snapping back, but in general stock markets have moved lower from the NY open. US housing starts made another all-time low as the credit drought continues. President Obama fleshed out details of his housing relief plan to cut mortgage payments for millions of homeowners and arrest foreclosures. Commentators continued to dissect GM and Chrysler's viability plans, which essentially show no improvement at the automakers, who only boosted their request for billions more in Federal assistance. Front-month natural gas made making lows not seen since 2002, briefly approaching $4 before rebounding sharply. Traders are also eagerly awaiting the minutes of the latest FOMC meeting due out this afternoon, and comments from Chairman Bernanke are expected in Washington beforehand.
- The US yield curve has seen some noticeable compression with the benchmark spread narrowing towards 175 basis points.
Buyers have pushed the long bond yield away from the 3.5% level. Initially the gains in gold seem to be taking a breather but as we move towards the noon hour in NY the April contract is making fresh highs above $975.
- The Obama administration released details of its housing relief plan just before the open.
It aims to help 4 to 5 million "responsible homeowners" refinance mortgages and another 3 to 4 million homeowners by lowering the risk of imminent default with a $75 billion 'stability initiative.' The plan also increase the loan portfolios of Freddie Mac and Fannie Mae by $50B a piece, and inject $100B into the two GSEs via preferred stock purchases. And in another troubled corner of the financial industry, bond insurer MBIA said it would split itself in two, separating the muni bond business from its riskier derivates operations. Shares of MBI rose nearly 40% before the open and then gave up all its gains by 10amET. Shares of leading banks got a bit of a bounce out of the announcements before sinking into the red. Note that USB analysts said overnight that 2009 US bank pre-provision earnings will likely fall 12% over 2008 levels, while Nouriel Roubini wrote in the WSJ that Geithner's plan will simply confirm the insolvency of US banks, paving the way for nationalization.
- Deere and Goodyear offered very weak earnings before the open this morning. Both missed consensus earnings estimates, and Goodyear said it would cut 5,000 jobs, or 7% of its workforce.
The CEO of Deere said the outlook for upcoming year remains unusually uncertain.
The firm expects double-digit y/y declines in commercial and construction sales. Shares of GT and DE are both won about 4% in early trading. OfficeMax missed both earnings and revenue targets, and reported a quarterly same-store sales decline of 10.8%. Shares of OMX fell as much as 15% immediately after the bell, before they bounced to +10% shortly before 10amET; OMX is around even mid morning. Constellation Energy barely made a profit in its fourth quarter, well below analysts estimates, guided below par for 2009 and cut its dividend. Despite a solid earnings report, not even cable giant Comcast seems to be able to escape the selling this morning, with shares of CMCSA down 5% despite beating the Street, offering positive metrics and raising its dividend.
- In currencies, the greenback has firmed up a bit against the major pairs and managed to shrug off the dismal economic data and yet another helping of Federal spending.
Across the pond concerns about crisis in Eastern Europe and widening EU spreads remained on the front burner, making traders wonder whether Germany and France could be forced to bailout entire nations rather than just individual banks. These concerns died down a little after Eastern European CE4 currencies strengthened a bit later in the New York session, providing some covering in related risk-aversion trades (gold, fixed income and equities). Poland sold a helping of EU grants due to the 'attractive' EUR/PLN exchange rate, which held around the 4.80 area, below the Polish prime minister's 'line-in-the-sand ' level of 5.0.
Germany said it will host the leaders of Britain, France, Italy, Spain, Netherlands, Czech Republic and Luxembourg over the weekend to prepare a common European stance ahead of the G20 summit. JPY was broadly softer against the major pairs, with USD/JPY approaching 94 and EUR/JPY around 117.60. Dealers again mentioning option flows with 94 initial strike swaying sentiment and providing momentum.
Historic Legislation signed into Law today as Manufacturing Numbers are lowest on Record
The Party left early as markets trade sideways early on
NY Traders EXPO Coming this weekend, are you going to be there?
Quote of the Day
"If everyone is thinking alike, then somebody isn't thinking."
Economic News to Watch Tomorrow
4:30am BoE minutes
8:30am Jan Import Price Index (last m/m -4.2%, y/y -9.3%),
- Jan Housing Starts (last 550K),
- Jan Building Permits (last 547K)
9:15am Jan Industrial Production (last -2.0%), Jan Capacity Utilization (last 73.6%)
2:00pm FOMC minutes of Jan 28 meeting,
TSLF auction
3:00pm TSLF announcement
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
830pm
*FEB EMPIRE MANUFACTURING: -34.65 V -23.75E; LOWEST READING ON RECORD
- No Revisions
Components:
- Prices Paid: -13.79 v -18.18 prior
- New Orders:-30.51 v -22.81 prior - all time low
- Employment:-39.08 v -26.14 prior
900am
*DEC NET LONG TERM TIC FLOWS: $34.8B V $20.0BE; TOTAL NET TIC FLOWS: $74B V $61.3B PRIOR
- Prior Net TIC revised from -$21.7B to -$25.6B
- Prior Total TIC revised from $56.8B to $61.3B
- China remains largest holder of UST's, holdings increase by $14.3B v $29.0B in Nov
- Total Chinese holdings stand at $696.2B v $681.9B in Nov
- Total Japanese holdings stand at $578.3B v $577.5B in Nov
100pm
*FEB NAHB HOUSING MARKET INDEX: 9 V 8E
- No revisions to prior
- NAHB: 'hopeful stimulus will have positive impact on housing market, builders concerned over foreclosures and short sales'
105pm
Fed's Bullard: Sees risks of 'sustained' deflation, sees a possible 'deflationary' trap, prices could stagnate or fall; seeing a long period of low interest rates
- Remarks that mortgage purchases could counteract deflation.
- Sees jobs falling over 1H09, core inflation 'essentially zero.'
- Fed buying Treasuries remains an option, will revisit Fed program later this year.
- Not going to be easy to pin down how quickly to expand money supply.
323pm
President Obama formally signs Economic Recovery Bill as expected
430pm
Chrysler viability report: Requests another $2B in addition to the original $7B loan request; have cut 32K jobs through 2008, plan additional 3K job cuts
- to cut 100K units of capacity; discontinue three vehicle models
- Says bankruptcy and liquidation are not "our recommendation, not our preference"
- Says it would need $20B-$25B in Chapter 11 funding.
- CEO says the company needs $5B by March 31.
601pm
(US) WSJ reports that President Obama to unveil multi-faceted program on Wed to help troubled homeowners
- The plan would include efforts to lower monthly mortgage payments, allow more borrowers to refinance loans.
- The plan would also give bankruptcy judges more power to modify mortgages.
- The administration is expected to allot $50B from the bailout fund for the program (in the past it was reported that the administration could announce
between $50B-$100B for foreclosure prevention).
- Note: Today's WSJ article follows a CNBC report from 2/12, which noted that the Obama plan could seek to subsidize homeowner payments after a home value has been established and the homeowner has been means tested and the plan would aim to target homeowners before they are fall behind in payments, in contrast to current plan.
801pm
(US) Former Fed Chairman Greenspan: Current recession worst since 1930's, global stocks are cheap by historical standards but market volatility is expected to be high
- Difficult to determine when economy will recover
- Economic downturn cannot "persist indefinitely"
- TARP program partially successful but additional funds would help
- Recovery requires stable home prices, which will not stabilize for "many months" until liquidation of excess inventory can take place; sees another decline of 10% from current levels
- Fiscal stimulus will be helpful
- Self regulation for markets still preferred
- Follow Up:
Greenspan was quoted by the FT as noting that it might be necessary to temporarily nationalize some US banks to deal with the financial system, says this would allow the government to transfer toxic assets to a "bad bank" without the problem of how to price them."; Says the government would have to be careful about imposing any loss on sr creditors of nationalized banks, because it could hurt the sr debt of all other banks.
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.
- It remains grim out there this morning, with US equity indices making fresh multi-month lows. The Dow slipped to nearly just 100 points above the Nov intra-day low.
Traders are dumping stocks and headed for safe havens in the face of the imminent arrival of part two of the US auto industry bailout, fresh currency fears swirling in Eastern Europe and a highly negative February Empire Manufacturing number that only serves to remind everyone how far the real economy has deteriorated. The imminent signing of a stimulus bill and the failure of the G7 say anything meaningful over the weekend are failing to serve as any much needed catalysts. March crude is off nearly $2.50 around $34.70 and EUR/USD is hitting two-month lows, while spot gold keeps climbing towards $1000. The US benchmark yield is come off more than 20 basis points from Friday while the long bond is testing 3.5% once again.
- GM and Chrysler are in the hot seat this morning thanks to today's deadline for the firms to submit their restructuring plans to the federal government.
Negotiations between the UAW and both companies, as well as Ford (which has said it will not take government funds), have been hot and heavy. Press reports from yesterday indicated that the talks were focusing on cutting retiree health care costs. Interestingly the Detroit Free Press reported that a potential Ford deal with the UAW may be used as a framework for any eventual Chrysler or GM deals. The New York Times quoted an administration official as saying that President Obama was reserving for himself any decision on the viability of GM and Chrysler and that the administration had not ruled out government-backed bankruptcy plans. In other auto industry news, Daimler is the latest automaker to miss analyst estimates in its quarterly results, reporting an unexpected loss of 1.53B euro and cutting its 2008 dividend. GM has plunged 16%, while Daimler's ADR shares and Ford are both down 7% in early trading.
- Dow component Wal-Mart reported solid fourth-quarter earnings this morning, coming in a bit ahead of the consensus EPS view.
The company's forecasted earnings ranges for the coming quarter and full year were tilted a bit below par, however. On the conference call, WMT's CEO said the company's financial position remains strong, to the point where it will continue making strategic acquisitions. Generic drugs giant Teva beat earnings estimates as well, although revenues were slightly below the consensus view. Teva also raised its dividend and offered a strong earnings forecast for 2009. Shares of WMT are up nearly 3% mid morning, while shares of TEVA are up more than 4%. Medical device firm Medtronic missed top- and bottom-line estimates and narrowed its 2009 outlook; investors are shrugging off the lackluster quarterly results and sending shares of MDT up nearly 8%. Oil services firm Transocean's Q4 results were a hair under consensus estimates; share of RIG are down 4% but off their worst levels.
- In currencies, safe haven flows continue to be the main driver this morning as concern over the exposure of European bank to their Eastern compatriots.
The failure of G7 over the weekend to flesh out its rhetoric with concrete details has compounded the risk aversion mood. USD, CHF and gold have re-establishing their safe-haven status over the last 48 hours. EUR/USD is printing new two-month lows beneath the 1.2580 level. The pair is also under some technical pressure if 1.2730 cannot be regained and held, with 1.2300 the first measured move target. In Eastern Europe, Polish PM Tusk commented that Poland would very likely to intervene and sell euros when PLN reaches 5 to EUR. However, currency dealers are noting that history teaches specifying a 'line in the sand' level is like waving a red flag in front of a charging bull. EUR/PLN was at 4.92 at the time of writing. Other Eastern European currencies, including the Czech Krona (CZK) and Hungarian Forint (HUF), are under threat as well. As is well known at this point, Russia and Ukraine remain under stress and could add to any potential domino effect. The carry-related trend has been a factor in this region as Switzerland had become the world's second biggest source of carry-trade credit after Japan with more than 80% of all new mortgages in Hungary are in Swiss Francs (CHF), with a similar pattern emerging in Poland, Croatia and Romania.
- In other currency news, USD/JPY was holding above the 92 level.
Dealers noted good interest in USD calls featuring short expiration dates with 2-week strike prices up to 94 interest building for 100 strike within a three-month time period. USD/CAD is holding above the 1.2550 resistance level and testing the 1.2670 area. Weaker energy prices are offsetting firmer metals for sentiment in CAD-related pairs.
February 15, 2009
EXIT STRATEGIES
Are you using the Correct Exit Strategy for your trading?
Market Week Wrap-up: February 9-February 13, 2009
-Hopes that the Obama administration would launch the final solution to the toxic asset question were dashed this week as Treasury Secretary Geithner disappointed nearly everyone with a plan that has been dismissed as misguided, too vague and short on details.
The DJIA fell more than 300 points on Tuesday after Geithner's speech left investors wondering why private capital would jump into bed with the government in buying up toxic securities and what the Treasury will do when stress tests show that leading US banks are technically insolvent.
Gold finally broke through the critical $930 resistance level on fresh risk aversion after Geithner's speech; April gold briefly tested $950 before consolidating around $940.
The G7 is meeting in Rome, but few surprises are expected. The final stimulus package emerged from conference committee and passed the House on Friday.
The Senate is expected to pass the measure later tonight, and President Obama plans to sign it on Monday. The ham handed efforts of the Administration to outline the financial sector rescue package did nothing to inspire equity markets, and they retested recent lows this week.
For the week, the DJIA lost 5.3%, the Nasdaq Composite dropped 3.6%, and the S&P500 fell 4.8%.
February 13, 2009
MARKET UPDATE 11:15AM EST
Crude +42.65
SP Futures +831.5
DAX -122.53
FTSE -32.02
NIKKEI +0
HANG SENG -310.91
EURO +1.2856
YEN +90.835
11:11 AM US Market Update
Dow +3 S&P +0.5 NASDAQ +5
- US equity markets hiccupped briefly this morning, dipping in and out of negative territory but are well off their worst levels and look to extend yesterday's late rally spurred by reports that the administration will shortly announce a plan to subsidize payments for troubled mortgages.
Investors are waiting on the final House vote on the stimulus package, which is expected later this morning or early this afternoon, as well as an official communique out of the G7 meeting in Rome. The morning's economic data has not been especially positive, with the preliminary University of Michigan confidence reading returning to the lows seen in November and the Philadelphia Fed survey indicating that US GDP could fall to -5.2% in the first quarter.
- March crude has popped as much as 6% to trade back towards $36 after OPEC said in their monthly report the saw oil demand falling by 580K bpd v the 180K bpd forecast prior, making for their the sixth straight revision lower.
Traders are focusing on the March contract taking back some dramatic increases in spreads recently seen across the curve. Front-month gasolline is lower by more than 2% paring some of the substantial widening that has been seen in crack spreads.
- Leading US financial stocks are struggling to participate in upside, with Morgan Stanley, JP Morgan, Bank of America and Wells Fargo all down 2-4% in early action.
Goldman and Citi are exceptions, with shares of both banks in the black mid morning. Investors should note that across the pond UK banking giant Lloyds warned that its HBOS unit would reports a substantial loss of 10B euro for 2008 and that its impairments for HBOS would be larger than initially estimated. Lloyds still expects to be profitable in 2008, however. Overnight the Wall Street Journal commented on the Treasury's plan to conduct stress tests of banks, noting that the new effort could force banks recognize credit losses faster, which would lead to dillutive capital raises and the need for further increases in reserves.
- In other equity news, Pepsico reported in line with analyst estimates and offered a positive forecast for 2009, although big y/y declines were reported in its US and European units.
The CEO warned that the first half of 2009 would be a big challenge. Shares of Abercrombie & Fitch are up 10% after the apparel retailer managed to beat the Street, although it refrained from offering any guidance for 2009 due to the crisis. China Security is off 9% after filing a big mixed securities shelf, while YRCW+10% after working out a financing deal with lenders.
- In currencies the Lloyds trading update pulled the upside momentum out from under European equity markets and Sterling saw earlier gains erode against major pairs.
GBP/USD was over 200+ pips off its session highs of 1.4605 before the New York open, moving below 1.44 as US equities commenced trading. JPY was broadly weaker as dealers noted some evidence of position squaring ahead of the G7 summit. USD/JPY is probing the 92 handle, while the EUR/JPY tested the mid-118 area.
Retail Sales Surprise us all!
Obama loses another cabinet member to withdrawal
Business Inventories Tumble as Jobless Claims Climb
Quote of the Day
"Don't be too timid and squeamish about your actions. All life is an experiment."
Economic News to Watch Tomorrow
Friday the 13th Be careful out there tomorrow
9:55am Feb prelim Univ of Michigan confidence (last 61.2)
Todays Headlines
*INITIAL JOBLESS CLAIMS: 623K V 610KE;
- CONTINUING CLAIMS: 4.810M V 4.800ME
- Prior jobless claims revised from 626K to 631K, the highest since the week ending Oct. 30, 1982
*JAN ADVANCE RETAIL SALES: 1.0% V -0.8%E; LESS AUTOS: 0.9*% V -0.4%E
- Prior Advance Retail Sales revised from -2.7% to -3.0%
- Prior Less Autos revised from -3.1% to -3.2%
*DEC BUSINESS INVENTORIES: -1.3% V -0.9%E, largest drop since Oct 2001-
prior revised from -0.7% to -1.1%
ECB's Trichet: Euro area faces weakness in next few quarters, seeing exceptional uncertainty, stability pact must be implemented strictly
- ECB has taken into account easing inflation pressures, policy responses have been resolute
- Draws attention to long end of bond curve indicates a trust of the ECB, does not recommend a 'premature entry' into the EMU
US Senate Judd Gregg (R) withdraws as nominee as Commerce Secretary, citing 'irresolvable conflicts' on policy issues
- mentions the stimulus and the 2010 census (which helps apportion new Congressional districts) as issues that could not be reconciled.
(CH) Chinese Banking Regulatory Commission's Luo Ping said that holding US gov't bonds is not the only option for investing reserves
- China News Service
- Luo was quoted as saying that US debt is one optiion in addition to gold and other government debt.
- Also, Luo noted that if the US government issues too much debt in its efforts to revive the economy, all Treasury holders will suffer losses.
- Luo is the head of the training center at the banking regulator.
- Note: On 2/11, an unnamed Chinese regulator noted that US Treasuries remain a safe-haven investment and that he believed there is "no real
alternative" to US Treasuries
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.
February 11, 2009
Go Green & Save $$$ with our Trade System Recycling Program!
Nightly Newsletter, February 11, 2009
Stimulus Package is complete, Some issues still pending
Trading ranges remain tight as indecision paralyzes the markets
Quote of the Day
"If you do what you've always done, youll get what youve always received."
Economic News to Watch Tomorrow
8:30am Jan Advance retail sales (last -2.7%, ex autos last -3.1%)
- Initial Jobless Claims (last 626K)
- Continuing Claims (last 4.788M)
10:00am Dec Business Inventories (last -0.7%
10:30am Natural Gas Inventories
1:00pm 30 year bond auction
Todays Headlines
10:30am EST
*DOE CRUDE: +4.7M V +2.6ME; GASOLINE: -2.6M V +500KE; DISTILLATES: -1M V -1.7ME; UTILIZATION: 81.6% V 83.4%E
- Distillate demand -100K bpd to 4.11M bpd
- Gasoline demand -9K bpd to 9MM bpd
- EIA: US Oil Inventories Highest Since July 2007
1:00pm EST
(US) Fed's Evans: Fed is still considering buying longer-term Treasuries; see a need for more policy accommodation
- says there is a notable risk that inflation will remain below 2%, but deflation is not an immediate threat.
- Believes the US is in a "serious recession," not a depression.
- Expects to see further slowing of Core CPI through 2010.
- Believes an inflation target would help tether expectations.
- Unemployment will likely continue rising into 2010.
- New TALF liquidity program will start shortly, within a few weeks, existing liquidity tools can be expanded.
- Economic outlook could change as stimulus takes effect.
- US GDP will likely fall considerably in the first half of 2009, may begin rising in second half of the year.
- Reminder: There was discussion after Bernanke's testimony yesterday about the fact he didnt mention again the Fed could buy long term Treasuries
after doing so in the past
1:01pm EST
Senate Majority Leader Reid: Negotiators have reached a deal on a $789B stimulus bill, report to come to floor in next few days, maybe as early as tomorrow
- The final floor votes in House and Senate on the reconciled version of the bill are expected on Friday or Saturday.
8:13pm EST
*(KS) SOUTH KOREA CUTS KEY RATE 50 BPS TO 2.00% FROM 2.50% (AS EXPECTED);
Rates are at Record Low
- Cuts rate on special loans for smaller funds by 25bps
- Economy is contracting rapidly, with additional downside risks to growth increasing
- Consumer inflation expected to moderate substantially
- BOK sees a Current Account surplus in 2009
- Will target monetary policy to improving liquidity; also to focus on preventing a severe slowdown
- Sees companies struggling to borrow funds
- Gov Lee sees inflation slowing rapidly, no clear signs of economic recovery, credit risk concerns persist in financial market, uncertain when economy will bottom out, policy will target liquidity and growth.
- Lee notes that he needs to see how rate cuts impact market conditions and open to more easing.
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.
February 11, 2009
US Market Up-Date; 11:15am EST
Dow +60 S&P +6.5 NASDAQ +8
- Investors seem to be struggling between the certain buying opportunities presented by yesterday's stock declines and pessimism over the Obama administration's thus far lack of details regarding the financial rescue plan.
Equity indices were up sharply early on, briefly dipped into the red thanks to weakness among tech names, and then popped back into positive territory making fresh highs.
The CEOs of the eight largest US banks are testifying before Congress this morning about how they have spent the first round of TARP funding; shares of the major banks are sustaining solid gains in early trading. Gold broke out of a multi-month trading range pushing through the $930 level which had been providing substantial resistance going back to last fall.
Treasury yields continue to fall, helped by comments from a Chinese regulator who noted he does not really see any real alternatives to USTs. Long yields are declining faster with the long bond now below 3.45% and the 2-10year spread narrowing to 186 basis points. Front-month crude is sustaining yesterday's weakness, hovering below the $37 handle as weekly DoE inventory data showed yet another big jump in inventories.
- Tech stocks have been battered by bad news in corporate earnings reports and cautious guidance from the likes of smartphone leader Research in Motion.
Before the open RIMM tweaked its earnings forecast, noting that Q4 EPS would come in at the low end of its prior guidance range of $0.83-0.91. Yesterday NVIDIA and Applied Materials both offered unexpectedly large quarterly losses, with AMAT reporting -$0.10 versus break-even expectations while NVIDIA's loss was twice the expected amount.
The latter struck a hopeful tone on its conference call, insisting that this will be the last quarter of revenue declines in a while. RIMM-16% and NVDA-14% are down significantly, while AMAT is around even.
Telecom Level 3 Communications surprised investors with positive earnings instead of an expected loss, and said free cash flows would turn positive in 2009. LVLT was up as much as +15% in early trading, but is now back down to +5%.
- Currency trading has taken its cues from turmoil in the financial sector this morning.
The words 'deep resession' have reverberated among government officials far and wide as trade data from China, the US and Canada heightened concerns over contracting domestic and foreign demand.
EUR/USD probed toward the 1.30 level on chatter the Bank of France and BIS had an appetite for euros at the start of the European morning, although the USD managed to move back below 1.29 as the New York morning progressed.
Note that the surge in spot gold seems to be decoupling somewhat from its typical relationship with the dollar, given fairly steady tone in USD.
Sterling limped through the New York session following earlier comments from the BoE's King, who observed that the sharp drop in the pound would act as a stimulus for demand.
GBP/USD was near session lows at 1.4320, off over 220 pips from its opening levels in Asia.
The Loonie weakened after Canada posted its first trade deficit since early 1976, with December data falling by C$0.5M. USD/CAD was holding near the 1.25 level throughout the New York morning.
Canadian Finance Minister Flaherty commented that the current weakness in CAD would boost Canadian trade in the future, noting that prior currency strength helped create trade deficit in the first place.
February 10, 2009
Nightly Newsletter, February 10, 2009
Geithner disappoints traders as Financial Stability Plan announcement lacks vital details
Smart money continues to stand on the sidelines, waiting for fundamentals to give them direction
Quote of the Day
"Whatever you can do or dream, begin it."
Economic News to Watch Tomorrow
8:30am Dec Trade Balance (last-$40.4B)
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
1:00pm 10 year note auction
2:00pm Jan Monthly Budget Statement, TSLF auction
Todays Headlines
11:00am EST (US) US Treasury's Geithner: Fed may expand TALF to as much $1T, toxic assets relief fund to start at $500B, could reach $1T; still exploring options for public-private asset value program.
- Notes that the TALF expansion will be assisted by funds from TARP by US Treasury; Fed TALF expansion would be in consultation with the Treasury.
TALF collateral could include AAA commercial mortgage backed securities, mortgage backed securities and other asset backed securities.
- will launch comprehensive housing program; banks participating in the relief program must be involved in mortgage foreclosure mitigation program.
- Banks with assets above $100B must be undergo stress tests in supervisory review
12:08pm EST
(US) US Treasury's Geithner: Want to preserve financial system 'in private hands', Will not put out details on toxic asset program until we can "get the structure right" - CNBC interview
- Lessons of the past are that governments tend to underestimate the cost of financial crises, bailout will be less expensive by being forceful now.
1:41pm EST
Fed's Bernanke: 95% of the Fed's balance sheet is extremely safe, not attempting to 'prop' up home prices, Geithner plan will encourage price discovery - Q&A
- 5% has risk related to exposure to risk at big financial institutions.
- says very unhappy with the 'too big to fail' notion, situation needs to be remedied in the future.
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.
February 09, 2009
Nightly Newsletter, February 9, 2009
Obama: This isnt your "Run-of-the-mill Recession"
GOP trio helps stimulus bill clear key hurdle
Quote of the Day
"Basing our happiness on our ability to control everything is futile."
Economic News to Watch Tomorrow
10:00am Dec Wholesale Inventories (last -0.6%), TAF results
11:00am 1 month and year bill auction
1:00pm 3 year note auction
3:00pm TSLF announcement, Treasury inventory class auction data
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
4:05 pm EST
(US) UPDATE: WSJ notes that the US is mulling a private-bank plan bailout
- The Obama Administration is mulling a plan to help banks get rid of their bad assets by partnering with the private sector to buy troubled assets.
- The aggregator bank would be seeded with some money from the $700B financial-sector bailout fund, but most of the financing would come from the private sector.
- Private firms would buy mortgage-backed securities and other troubled assets.
- The idea is not yet certain to be included in the final plan.
- The administration has discussed having the government buy assets directly from banks, but the costs and complexities involved with such a plan largely scuttled that effort.
- Some within the administration believe that a private sector effort is preferable because it would allow asset prices to be set by the market instead of the government.
- The bailout plan from the Treasury Sec has for main components: fresh equity injections into banks; new programs to help homeowners; an expansion of the Fed's program aimed at stimulating consumer lending and a mechanism that allows banks to sell their bad assets.
- The FDIC could also guarantee a wider range of debt that banks issue to fund loans and the government could move to guarantee debt with maturieis of up to 10 yrs (vs. 3-yrs currently).
- For homeowners, the administration is expected to announce a plan that could include the creation of national standards for loan modifications to be adopted by Fannie Mae and Freddie Mac.
- This plan could include a way to determine the value of homes facing foreclosure, which could speed negotiations.
- A related move would see the government give mortgage companies an incentive to modify loans.
- Treasury Sec Geither is expected to express support for legislation that would allow judges to modify the terms of mortgages in bankruptcy court.
- A related CNBC report added that officials are likely to indicate that the government has approved capital injections to insurance companies with thrift-structured lending units that have applied for government aid under the TARP.
- With respect to the bad bank, CNBC added that the government would buy toxic assets below the banks' "carrying value", but not at fire-sale levels
5:07 pm EST
US Senate expected to hold procedural vote on stimulus bill tonight, sometime between 5:30pmET and 10pmET
- According to our Senate sources this procedural vote is most likely to come after 7pmET. Today's vote is to "limit debate" on the bill, i.e. a cloture vote to overcome an attempted filibuster by Republicans. The Democrats will need all of their members plus at least two Republicans to get the 61 votes necessary to move the bill forward. Currently, it is believed that Republican Senators Collins, Snowe and Specter will vote in favor of the bill.
- If this procedural vote is cleared as expected, the Senate will move on to vote tomorrow on a few amendments and then likely a final vote for passage tomorrow afternoon.
5:51 pm EST
US SENATE VOTES TO LIMIT DEBATE ON $827B STIMULUS BILL; A PROCEDURAL VOTE THAT ALLOWS THE BILL TO MOVE ON TO A VOTE ON AMENDMENTS AND A FINAL VOTE ON TUESDAY- vote was 61-36, overcoming a filibuster
7:04 pm EST
CNBC: Bad debt bank dropped from US bailout package
- The Obama administration plan no longer includes creating a "bad bank" but will still contain measures to buy up toxic assets from financial companies.
- Also, funding for the bank-rescue plan is unlikely to exceed the $350B currently available under the TARP.
- The report adds that private capital will be used to deal with toxic assets.
- The report cites a source familiar with the plan.
8:03 pm EST
(US) Pres Obama: Calls for a recovery plan as soon as possible, with govt as the only entity to "jolt" economy back to life; sees creation of 4M jobs (90% in private sector) as a result of the plan
- Says tax cuts by themselves cannot resolve the economic problems
- Stimulus plan contains the necessary transparency and accountability
- Crisis most extreme since the Depression; can turn into a catastrophe
- Calls for Congress to act promptly
- Private capital still "lifeblood of the economy"
- US stands to lose $1T in 2009 and $1T in 2010.
- US must correct some mistakes with TARP, will make sure that 2nd tranche is used more wisely
- Primary measure of success for economic recovery is job creation
8:31 pm EST
(US) Fed's Fisher: Fed should be free of political influence in pursuit of financial sector recovery, stable prices and maximum growth; opposes all protectionist trade policies; Fed will use all practicable means to support credit market functioning and aid growth
- Expects economic contraction in US to last for most of 2009
- Unemployment may rise above 9%
- Fed is prepared to expand its balance sheet if needed; purchasing of longer term Treasury's is still an option
- Credit conditions remain difficult
- May increase mortgage security purchases
- Says Fed must resist perception that it is "monetizing" fiscal deficit
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.
February 05, 2009
Nightly Newsletter, February 5, 2009
(US) Senate work on stimulus plan to be resumed at 10am tomorrow
Jobless Claims continue to tumble
Quote of the Day
"This is the best day the world has ever seen. Tomorrow will be a better one."
Economic News to Watch Tomorrow
8:30am Jan Nonfarm Payrolls (last -524K),
-Jan Unemployment (last 7.2%),
-Jan Manufacturing Payrolls (last -149K),
-Jan Average Hourly Earnings (last m/m 0.3%, y/y 3.7%),
-Jan Average Weekly Hours (last 33.3)
3:00pm Dec Consumer Credit (last -$7.9B)
Todays Headlines
*(UK) BOE CUTS INTEREST RATES BY 50BPS TO 1.00%; AS EXPECTED
- Lowest interest rates since BOE's inception back in 1694
- Bank of England notes growth in emerging market economies has slowed
- Says consumer spending looks increasingly weak
*INITIAL JOBLESS CLAIMS: 626K V 580KE; CONTINUING CLAIMS: 4.788M V 4.795ME
- Prior jobless claims revised from 588K to K
- Prior continuing claims revised from 4.776M to M
- No Revisions
Hearing equity market strength being attributed to rumors of possible easing or suspension of mark to market accounting rules
(US) Senate work on stimulus plan to be resumed at 10am tomorrow - Majority Leader Reid
- Hopes that a vote can take place on Friday, but if there is no progress, could take place on Sunday
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.
February 05, 2009
Morning Report
News Image:
US Market Update
Dow +11 S&P +3.5 NASDAQ +13.5
- Equity markets opened are under some pressure as the usual culprits fed an increasingly risk averse environment.
Weekly jobless claims spiked above 600K to the highest level in more than a quarter of a century.
The relentless selling in the large cap US banks continues sending BofA down another 15% below $4 briefly to levels not seen since the mid 1980s. Wells Fargo traded off more than 10% as well. Early stock losses for the second straight session resulted in Treasury market bids. The 10-year note has traded up roughly half a point for much of the morning sending the yield back below 2.90%. March crude traded below $40 once again early in the session before recouping most of its losses with a rebound in equity markets. Equity markets in both the US and Europe snapped back sharply in late NY morning trade as speculation picked up that the US government was considering suspending mark to market rules when they unveil their latest measures. It should be noted that multiple politicians on both sides of the isle have made statements in the past indicating they were not in favor of altering the current mark to market landscape.
- Jan same store sales results were as expected dismal, but most of the stocks are experiencing a relief rally as the results were not worse than anticipated.
WMT +4% TGT +3% ANF +9% AEO +4%
- Shares of Dell are lower after a pre-market downgrade at JP Morgan.
JPM also slashed their outlook for PC shipments for the current year weighing on shares of IBM and HPQ.
- Credit card behemoths MA and V are charged up after their earnings results suggested they are weathering the economic storm thus far.
MA noted that the gross dollar volume was up better than 3% y/y in the latest quarter.
- The European interest rate decisions came in as expected with the BOE cutting by 50bps to 1.00% while the ECB paused at the 2.0% level also expected.
- At the ECB press conference; Trichet initial comments were perceived as 'dovish' as he stated that the market turmoil has intensified and reduced economy activity.
The EUR/USD languished below the 1.28 area for most of the NY morning as Trichet backpedaled on potential rate moves at the March ECB policy meeting. Trichet commented that the market expectations of 50bps cut could be accurate in March and that the current 2% level did not mark the floor in the easing cycle. He did reiterate the drawbacks of zero interest rates and complemented the point that the risk that one could be overly pessimistic regarding economic recovery. Protectionism was also cited as a very important threat. EUR/GBP cross was trading at 0.8730 as GBP also benefited from the HBOS housing Index uptick from earlier in the session.
- Some risk aversion sentiment remained in the NY morning session (particularly in financial sector). The IMF's Strauss Kahn noted that he saw the possibility for a global recovery in 2010, but cautioned that such a scenario was not certain. IMF cited that lending not improved at the desired speed and that the implementations of stimulus packages have been 'too much delayed.' The JPY is softer from its opening levels against the major pairs and the selling was only exacerbated by the late morning rebound in stocks.
- The Russian Ruble tested its recently imposed ceiling of 41 against the basket but it did not encounter any significant break of the level. The Russian Central previously commented that it would use all tools available to maintain the ceiling including raising interest rates and currency intervention.
- The Mexican Peso was 1% firmer as unconfirmed reports circulated that its Central bank was again undertaken currency intervention to support MXN.
- The German yield curve maintained its steepening shape with the spread between the 2-year and 10-year at 194bps, the widest level since late 1997.
February 04, 2009
Are you aware of these VITAL trading tools?
Nightly Newsletter, February 4, 2009
Whats a TRILLION Dollars between Friends?
ADP Unemployment not as bad as first expected
Quote of the Day
"Let me tell you the secret that has led me to my goal. My strength lies solely in my tenacity."
10:00am Dec Factory Orders (last -4.6%)
10:30am Natural Gas Inventories
Todays Headlines
*JAN ADP EMPLOYMENT CHANGE: -522K V -535KE
- Prior month revised from -693K to -659K
- Total employment: -522k
- Small businesses: -175k
- Medium businesses: -255k
- Large businesses: -92k
- Goods-producing sector: -243k
- Service-providing sector: -279k
- Manufacturing industry: -160k
*US TREASURY QUARTERLY REFUNDING: TOTAL $67B, Record high refunding
- Sees a 7-year notes refunding on Thursday, Feb 26
- 3-year notes: $32B
-10-year notes: $21B
- 30-year bonds: $14B
- Sees auction of reopening of 30 year bond on March 12
- Treasury will approach debt ceiling in 1H09
- CBO projects 2009 debt at $1.19 trillion v primary dealer estimate at $1.63 trillion
*JAN ISM NON-MANUFACTURING COMPOSITE: 42.9 V 39.0E
**sub-indices:
- Non-Mfg Prices Paid Index: 42.5 v 36.1 prior
- Employment: 34.4 v 34.5 prior
- New Orders Index: 41.6 v 38.9 prior
*DOE CRUDE: +7.17M V +3ME; GASOLINE: +362K V +1ME; DISTILLATES: -1.36M V -1.3ME; UTILIZATION: 83.5% V 82.0%E-
Distillate demand -38K bpd to 4.22M bpd - Gasoline demand +360K bpd to 9.015M bpd
President Obama: Tax cuts alone cannot solve economic problems; confirms US Treasury Sec Geither to release new financial rescue strategy next week
- Urges Congress to pass stimulus package due to falling confidence, failure to act could lead to catastrophe
White House Economic Council Director Summers: Deflation is a 'real risk' to the economy, cannot wait on stimulus package, confident stimulus to be signed as Obama has expected
- Forecasting stimulus package in $900B range, sees a $2T gap between the actual and potential GDP
- Note: Obama expected the stimulus to be approved by 2H of Feb 2009
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.
February 04, 2009
MARKET UPDATE 11:15AM EST
US Market Update
Dow +60 S&P +11 NASDAQ 30
- US equity indices are making solid gains this morning after the ADP employment and ISM non-manufacturing data came in less bad than expected and the Baltic index jumped 15%.
Investors were further heartened by the downward revision to last month's ADP data, although the Challenger index of planned job cuts data painted a darker picture, jumping 45% m/m to its highest level since 2002. Note that the big rise in the Baltic was its 12th consecutive gain and its largest daily rise in nearly 24 years, sending shipping stocks up by double digits, with EGLE spiking 27%.
- The US Treasury's quarterly refunding announcement came in at an all-time high of $67B this morning.
A Treasury official tried to market fears regarding the implications of the US hitting its debt ceiling again in the first half of 2009, noting that the US debt to GDP ratio would still be relatively low compared to other G7 countries if this happened. Keep in mind that back on Sept 23, the Treasury Secretary Paulson had been planning to ask Congress to raise the US debt ceiling to $11.3T, leading dealers to note that the 2009 deficit could rise above $1T. Elsewhere in fixed income, an S&P report noted that 936 issuers of global bonds were poised for potential downgrades, compared to 687 issuers a year ago. S&P said this metric was at its highest level in 41 months and that potential downgrades have more than doubled compared to the number of companies poised for upgrades. On a separate note, S&P also cut their rating for the state of California's lease revenue bond SPUR to A-. Treasury yields ticked higher heading into the funding announcement, but initially the news appears to be price in as prices are now paring losses. The 10-year note future is still down more than half a point and the cash yield is testing 2.9%, holding at the highest level in more than 2 months.
- Leading US bank stocks are making gains in early trading thanks to all the optimism this morning, with Citigroup notably rising 5%.
Bank of America is not participating, however, with shares of BAC down 4% as reports continue to circulate that the merger process with Merrill Lynch is not progressing smoothly. Last night media reported that the US plans to impose salary limits on companies who take TARP funds, with salaries limited at $500K and any compensation above this amount limited to restricted stock that vests only after taxpayers are paid back. In addition, companies that already received Treasury funds must agree to stricter oversight going forward. Metlife is off its best levels after trading up more than 6% just after the bell. The insurance giant beat the street, noting that business remains strong. Fellow insurance name Aflac missed estimates but has managed to stay in the black in trading today.
- Dow components Disney and Kraft Foods fell off a cliff before the open, dropping 6% and 8.5%, respectively, with little sign of recovery in mid morning trading.
Both companies missed consensus estimates, and KFT also guided 2009 earnings below par, noting on its conference call that dollar strength was presenting a major obstacle. Shares of Eastman Kodak dropped into the red in early trading before recovering mid morning after the company released dim revenue guidance for 2009, noting that it sees big declines in digital revenues. Engineering group ITT beat top and bottom line estimates and reaffirmed 2009 earnings earlier. It reserved the bad news for the conference call, when the company said it would miss targets in the first quarter. Time Warner missed analyst estimates, taking shares of TWX down 4% early on, although the name has retraced back toward positive territory mid day. Time Warner Cable beat on earnings (ex items) and indicated it was considering a reverse stock split, sending TWC from - 4% to +6% before 10amET, before trading off somewhat.
- The greenback retraced its early morning gains against the European pairs following the Russian sovereign downgrade by Fitch. EUR/USD tested the 1. 2813 level, and was broadly softer against the British Pound and Japanese Yen.
Canadian Finance Minister Flaherty commented that the upcoming G7 communique would likely reflect concerns regarding inflexibility of Asian currencies. A G7 source complemented that view, adding that the Rome meeting would seek to reassure markets that G7 governments stand ready to continue acting against the global economic crisis and would avoid any trade protectionism. GBP is seeing some relative strength late in the NY morning on chatter a large UK Bank needs to buy 4B Pound ahead of the London close.
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US equity trade is volatile with a definite upward bias as investors wrestle with yet another dismal dose of corporate earnings announcements which was followed by better-than expected pending home sales data.
Senate members continue their heated exchanges regarding stimulus with reports now putting the package close to $900B, while political wrangling remains over how best to utilize the second tranche of TARP funding.
Quote of the Day
"It's not enough that we do our best; sometimes we have to do what's required."
Economic News to Watch Tomorrow
7:30am Jan Challenger Job Cuts y/y (last -274.5%)
8:15am Jan ADP Employment Change (last -693K)
9:00am Treasury's quarterly refunding announcement
10:00am Jan ISM Non-Manufacturing (last 40.1)
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
* DEC PENDING HOME SALES M/M: 6.3% V 0.0%E-Prior revised from -4.0% to -3.7%
General Motors Corp Reports Jan vehicle sales -48.8% v -35%e (unadjusted)
- Total vehicles sales 129K v 222K m/m
- Forecasting Q1 production at 380K v 420K prior forecast on 12/2/08 (-10% reduction)
- Inventories at 801K (-103K y/y)
*API PETROLEUM INVENTORIES: CRUDE: +8.1M V +3ME; GASOLINE: +2.15M V +1ME; DISTILLATE: -184K
V -1.3ME; CAPACITY UTILIZATION: 83.9% v 82%e
(US) President Obama: Economic rescue effort must include repairing the "broken" banking system
- Says US should avoid "protectionist" stance in stimulus, will re-examine "buy American" clause and work on its language
- Will remove any clause in stimulus bill that could trigger a trade war
- Plans to make announcement on Exec compensation plan
- Sees economic recovery as the focal point in his administration
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.
February 02, 2009
Manufacturing Slump Eases, While Construction Falls & Obama prepares to release Crisis Remedy next week
News Image:
Nightly Newsletter, February 2, 2009
Equity indices opened under a cloud this morning after consumer spending made its sixth straight monthly decline and total 2008 consumer spending was seen rising a mere 3.6%, the smallest annual gain since 1961.
Quote of the Day
"If you're going to panic, panic early."
Economic News to Watch Tomorrow
10:00am Dec Pending Home Sales m/m (last -4.0%)
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
*DEC PERSONAL INCOME: -0.2% V -0.4%E; PERSONAL SPENDING: -1.0% V -0.9%E
- Prior Personal Income revised from -0.2% to -0.4%
- Prior Personal Spending revised from -0.6% to -0.8%
***Personal Spending drop of 1.0% matches lowers level since the drop of 1.2% in Dec 2001 and 6th straight monthly decline.
Consumer spending rose 3.6% for all of 2008, the smallest annual gain since 1961
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.
SchoolOfTrade.com and United Business Servicing, Inc. are not registered investment or trading advisers. The services and content provided by SchoolOfTrade.com and United Business Servicing, Inc. are for educational purposes only, and should not be considered investment advice in any way. U.S. Government Required Disclaimer - Commodity Futures Trading Commission. Futures and Options trading have 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 futures and options markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to Buy/Sell futures or options. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this web site. The past performance of any trading system or methodology is not necessarily indicative of future results. cftc rule 4.41. These results are based on simulated or hypothetical performance results that have certain inherent limitations. Unlike the results shown in an actual performance record, these results do not represent actual trading. Also, because these trades have not actually been executed, these results may have under-or-over-compensated for the impact, if any, of certain market factors, such as liquidity. Simulated or hypothetical 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 profits or losses similar to these being shown. Testimonials may not be representative of the experience of other clients. Testimonials are not a guarantee of future performance or success. No compensation is ever paid in exchange for any testimonials. Testimonials have not been independently verified.
