EUREX MARKETS CLOSED FOR MAY DAY HOLIDAY, WILL RE-OPEN ON MONDAY
10:00am AprilFinal U. of Michigan Confidence (last 61.9),
• April ISM manufacturing (last 36.3),
• April ISM Prices Paid (last 31),
• March Factory Orders (last 1.8%)
Todays Headlines
8:30:03 AM
*INITIAL JOBLESS CLAIMS: 631K V 640KE; CONTINUING CLAIMS: 6.271M V 6.200ME
- Prior jobless claims revised from 640K to 645K
- Prior Continuing Claims revised from 6.137M to 6.138M
***Highest continuing claims on record
8:37 AM
(US) White House: Chrysler will proceed with Chapter 11 filing
9:45:06 AM
*APRIL CHICAGO PURCHASING MANAGERS INDEX: 40.1 V 35.0E
**sub-indices:
- Prices Paid: 28.4 v 34.1 last
- New Orders: 42.1 v 30.9 last
- Employment: 31.8 v 28.1 last
- Inventories: 30.6 v 34.9 last
- Supplier Deliveries: 45.4 v 48.4 last
- Production: 38.1 v 32.7 last
- Order Backlogs: 36.9 v 21.3 last
12:00:21 PM
(US) Obama Administration: Chrysler to file for bankruptcy in New York, Fiat to take 20% stake in reorganized company
- GMAC to provide the financing for new Chrysler car loans.
- US Treasury to have 8% equity stake in new Chrysler; Govt of Canada and Ontario to have 2% stake. VEBA to own 55% stake. Fiat can take an added 15% in 3 increments of 5% if it meets certain criteria.
- White House confirms sees a 'surgical' bankruptcy to last approx 30-60 days.
- Chrysler network of US dealers to be reduced as part of bankruptcy.
- US govt will help select the new board.
- US to provide $3-3.5B in bankruptcy support, provide another $4B after restructuring and bankruptcy is complete.
2:21 PM
(US) White House Press Sec Gibbs:
There are no plans at the moment for another economic stimulus package
2:35 PM
Senate budget committee chairman:
Geithner tells Senate that no added bailout funds will be requested any time in the near future
3:04 PM
US Senate rejects cram down amendment to home mortgage legislation;
amendment would have allowed judges to cut mortgage payments- 40 votes were opposed; vote ongoing
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Equities are advancing in part thanks to positive data and a flood of earnings reports to decipher.
The Labor Department said initial jobless claims fell to 631K last week, down from the prior week's 645K, providing more evidence that declines are at least pausing. Note that continuing claims surged to their highest level since 1982. The Chicago purchasing data was also much higher than expected, with big gains in both the new orders and employment components.
- While the any official announcement on Chrysler is is not yet out, President Obama is expected to speak on the auto sector at noonET, with hardly anyone doubting that Chrysler will enter bankruptcy today.
Chrysler executives struggled to extract an agreement with its lenders until the very last minute, trying late yesterday to get its lenders to accept around 30 cents on the dollar for their collective $6.9B in debt, but apparently the bondholders see better chances in court. White House aides have indicated that the bankruptcy would be a brief affair, lasting only one or two months. There were also reports circulating yesterday that Fiat would sign its alliance deal with Chrysler today, with an Italian newspaper reporting earlier this morning that the deal had already been signed. Fiat has denied these reports, however. Negotiations with the UAW and bondholders continue over at GM. This morning the bondholders countered GM's latest offer (involving a debt for equity swap and the UAW owning 39% of the company), calling for an allocation of new GM equity equally across the board to union VEBA and GM bondholders, pro rata to the level of financial obligation owed to each by GM, with no cash component and no government equity stake.
- Shares of the leading financials made modest gains but have been losing ground early on.
Bank of America's Ken Lewis has managed to keep his position of CEO, although shareholders stripped him of his title of chairman. Note also that the FBI is probing possible accounting violations at Freddie Mac, examining whether the firm delayed the recognition of billions of dollars of losses. Visa is up 5% after coming in ahead of analyst estimates and reaffirming its 2009 forecast.
- Major health insurance name Cigna missed on earnings and revenue this morning, sending its shares down 4% in early trading.
General insurer Travelers' revenue came in below par, and the firm's full-year forecast was disappointing, sending its shares down 5%. Cardinal Health is trading around even after reporting in line with expectations.
- Dow Chemical is up nearly 20% after surprising investors with a quarterly profit of $0.20/shr (ex items), against analysts’ projections for a $0.21 loss, although revenue was well below estimates.
The CEO noted that there are some signs that the pace of global economic decline is moderating, but still expects the global economy to remain in recession all year. Energy titan Exxon is down a few percentage points after reporting a 58% y/y decline in net income and missing earnings estimates, thanks to the global slowdown and sharply lower commodity prices.
- A handful of major consumer-facing names reported yesterday and this morning, including Kellogg, Colgate-Palmolive, Procter & Gamble, Safeway and Starbucks.
Dow component PG is under pressure this morning despite a more-or-less in line earnings report, including a much improved revenue outlook for the year. On the conference call, executives said destocking has been a factor and should continue to be for another quarter. Competitor Colgate is also down slightly after an unremarkable quarterly report. Kellogg and Starbucks are both up around 10% after outperforming the Street by slight margins. Shares of supermarket giant Safeway are down nearly 10% after the company missed estimates and cut its guidance. Also note that Revlon was up as much as 25% before the open before it fell to around +10%, thanks to an unexpectedly large quarterly profit (versus a projected loss).
- In currencies, dealers noted a change in sentiment as the New York session commenced, with the euro turning softer in the wake of the April Euro-Zone unemployment data, which hit its highest level in 2-1/2 years, at 8.9%.
EUR/USD retested the 1.3200 level after probing near 1.34 earlier today. Employment should remain the Achilles heel of the euro, given that it is considered a lagging indicator. Some of the Euro retracement was also attributed to rumors of discord inside the ECB ahead of its May 7th policy meeting. Dealers were discussing word of bickering over which non-standard measures should be implemented. Trichet has reportedly imposed a vow of silence on Governing Council members ahead of the meeting. Around the globe the rhetoric from both government and central bank officials has been more upbeat, with plenty of assertions that the worst of the global recession is over and that green shoots are appearing. The GBP/USD fell short of retesting the 1.50 handle, where some considerable GBP selling emerged earlier this month. The USD/CAD bounced off support seen around its 200-day moving average of 1.1847 (last violated back in early Jun of 2008). Currently the pair is seen consolidating with resistance pegged at 1.1970/90 level. Weaker energy and metal price action did little to derail the recent positive momentum for the commodity-related currencies.
More Headlines
8:30:03 AM
*INITIAL JOBLESS CLAIMS: 631K V 640KE; CONTINUING CLAIMS: 6.271M V 6.200ME
- Prior jobless claims revised from 640K to 645K
- Prior Continuing Claims revised from 6.137M to 6.138M
***Highest continuing claims on record
8:37 AM
(US) White House: Chrysler will proceed with Chapter 11 filing
9:45:06 AM
*APRIL CHICAGO PURCHASING MANAGERS INDEX: 40.1 V 35.0E
**sub-indices:
- Prices Paid: 28.4 v 34.1 last
- New Orders: 42.1 v 30.9 last
- Employment: 31.8 v 28.1 last
- Inventories: 30.6 v 34.9 last
- Supplier Deliveries: 45.4 v 48.4 last
- Production: 38.1 v 32.7 last
- Order Backlogs: 36.9 v 21.3 last
12:00:21 PM
(US) Obama Administration: Chrysler to file for bankruptcy in New York, Fiat to take 20% stake in reorganized company
- GMAC to provide the financing for new Chrysler car loans.
- US Treasury to have 8% equity stake in new Chrysler; Govt of Canada and Ontario to have 2% stake. VEBA to own 55% stake. Fiat can take an added 15% in 3 increments of 5% if it meets certain criteria.
- White House confirms sees a 'surgical' bankruptcy to last approx 30-60 days.
- Chrysler network of US dealers to be reduced as part of bankruptcy.
- US govt will help select the new board.
- US to provide $3-3.5B in bankruptcy support, provide another $4B after restructuring and bankruptcy is complete.
8:30am March Personal Income (last -0.2%),
March Personal Spending (last 0.2%),
•
March PCE Deflator y/y (last 1.0%),
•
March PCE Core (last m/m 0.2%, y/y 1.8%),
•
Initial Jobless Claims (last 640K), Continuing Claims (last 6.137M)
•
9:45am April Chicago Purchasing Manager Index (last 31.4)
10:00am April NAPM-Milwaukee (last 30)
10:30am Natural Gas Inventories
Todays Headlines
8:30 AM
*Q1 ADVANCED GDP PRICE INDEX
: 2.9% V 1.8%E; CORE PCE Q/Q: 1.5% V 1.0%E- Ex food and energy headline figure +1.5%
9:57:58 AM
(US) White House's Romer: Believes Q1 GDP may have a "silver lining" in higher consumer spending and lower inventories
- TV interview
- Reiterates that it is expected for economy to bottom out in Q2 of 2009 with recovery possible in H2
- Reiterates that there are limited signs that financial markets are loosening up somewhat.
10:00:34 AM
ECB's Weber: Reiterates Q1 GDP likely to be worse than -1.5% reading seen in Q4
- Bank will not recover without removing toxic assets
- Pace of economic deterioration likely to slow
10:11:48 AM
Bank of America Corp Lewis: Reiterates would like to repay TARP as soon as is possible;
Notes that every major bank "under pressure"; have lost some talent to competitors - annual meeting
- Abandoning the deal for Merrill Lynch would have casued great harm for both firms and the banking sector
- Reiterates that both acquisitions were not mistakes, they are not regretted; no need for further acquisitions in the near future
10:30 AM
*DOE CRUDE: +4.1M V +2ME; GASOLINE:
-4.7M V -100KE; DISTILLATE: +1.8M V +500KE; CAPACITY UTILIZATION: 82.7% V 83.5%E.- Distillate demand -11K bpd to 3.44M bpd - Gasoline demand +15K bpd to 9.15M bpd
11:14:45 AM
WHO: Moving towards a Phase 5 pandemic alert; no signs swine flu is slowing its spread; currently flu close to that of seasonal Flu
- Currently at Phase 4; raised to Phase 4 from Phase 3 on 4/27
- Warns that the virus is still new, too early to understand mutations.
1:01 PM
*TREASURY'S $26B 7-YEAR NOTE AUCTION
BID-TO-COVER RATIO: 2.28 V 2.52 PRIOR AND 2.31 OVER THE LAST TWO- indirect bidders take 33% of competitive bids - notes draw 2.63% with 18.93% alotted at the high
2:16:44 PM
*FOMC LEAVES RATE UNCHANGED AT 0.25%;
Sees gradual resumption of economic growth; seeing signs of stabilization in spending
- Leaving GSE and Treasury purchases unchanged
- Vote was 10-0
- Sees some risk for inflation to be below desired levels
- Will continue evaluation of timing and amounts of purchases of Treasuries and GSEs
- Economic outlook likely to remain weak; outlook has improved slightly since March
2:48:20 PM
FOX news reports WHO expected to raise alert to Phase 5 pandemic level in next few hours
- "Phase 5" is characterized by human-to-human spread of the virus into at least two countries in one WHO region.
While most countries will not be affected at this stage, the declaration of Phase 5 is a strong signal that a pandemic is imminent and that the time to finalize the organization, communication, and implementation of the planned mitigation measures is short
3:12:26 PM
Fiat S.p.A Will be signing partnership agreement with Chrysler tomorrow;
does not rule out pre-packaged bankruptcy - CNBC's LeBeau
- Follow up: Separate unconfirmed report notes Alliance to be formed in a pre--packaged bankruptcy; parties still hopeful to avoid bankruptcy
7:52:31 PM
WHO confirms Phase 5 pandemic level
- WHO Director-General Chan:
"I am impressed by the work being done by affected countries as they deal with the current outbreaks....
WHO will be tracking the pandemic at the epidemiological, clinical, and virological levels.... All countries should immediately activate their pandemic preparedness plans. Countries should remain on high alert for unusual outbreaks of influenza-like illness and severe pneumonia."
- "At this stage, effective and essential measures include heightened surveillance, early detection and treatment of cases, and infection control in all health facilities. This change to a higher phase of alert is a signal to governments, to ministries of health and other ministries, to the pharmaceutical industry and the business community that certain actions should now be undertaken with increased urgency, and at an accelerated pace. "
- "I have reached out to donor countries, to UNITAID, to the GAVI Alliance, the World Bank and others to mobilize resources. I have reached out to companies manufacturing antiviral drugs to assess capacity and all options for ramping up production. I have also reached out to influenza vaccine manufacturers that can contribute to the production of a pandemic vaccine. "
- "Need to continue to monitor the evolution of the situation to get the specific information and data we need to answer this question. From past experience, we also know that influenza may cause mild disease in affluent countries, but more severe disease, with higher mortality, in developing countries."
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.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
9:00am Feb S&P/CS Home Price Index (last 146.4) Composite-20 y/y (last -18.97%)
10:00am April Consumer Confidence (last 26), April Richmond Fed Manufacturing Index (last -20)
1:00pm Treasury's 5-yr note auction
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
7:05:33 AM
(GE) Bundesbank's Reckers: German GDP to fall 6% in 2009, GDP could fall significantly in 2010
- Against ECB interest rate cut below the 1% level
- There are some positive sign in the midst of economic crisis
- Central banks must reduce liquidity once economic crisis has peaked
9:03 AM
(EU) ECB's Hurley: Global price pressures have moderated significantly,
negative Euro Zone CPI will last for a number of months; cannot exclude further measured rate cuts- ECB to decide on new non standard polict measures in May - Global indicators are improving
11:03:54 AM
WHO: Swine flu has spread geographically, emergency panel meeting is ongoing - conf call
- Human to human transmission still unclear (Phase level still under consideration, considering moving to phase 4 or 5 from current phase 3 pandemic level).
- Currently 40 confirmed cases in the US, 26 in Mexico, 6 in Canada, and 1 in Spain.
- Note: Currently in Phase 3; see our 9:42amET headline for information on different Phase levels or WHO website at http://www.who.int/csr/disease/avian_influenza/phase/en/index.html
12:28:56 PM
FDIC's Bair: We have moved beyond the liquidity crisis seen last year, now in the clean up phase; government needs to "do repair work and get out"
- Bankruptcy does not work for resolving the problems of big, systemically important companies.
- Reiterates call for a special "resolution regime" for dealing with big, failed firms.
12:56:28 PM
(US) OCC's Dugan: Worry at this point are credit losses in the banking system rather than financial markets or confidence.
- The size of bank losses related to credit cards and commercial real estate remains unknown.
- More attention is being paid to common equity versus other types of capital.
- No plans for second bank stress test if economy worsens due to Swine Flu
1:00 PM
ECB's Nowotny: Ready to use non conventional measures; rates to stay low as long as necessary- Remarks that there is a need for additional discretionary stimulus
1:01:43 PM
*TREASURY'S $40B 2-YEAR NOTE AUCTION BID-TO-COVER RATIO: 2.72 V 2.71 PRIOR AND 2.42 AVE OVER LAST 10 AUCTIONS
- Indirect bidders take 28.7% of competitive bids
- Notes draw 0.949% with 11.83% allotted at the high
6:13:37 PM
(GE) German Fin Min Steinbrueck: Euro-region would respond to currency risk - German TV
- Says that the euro region "must and would" act in concert to maintain the stability of the single currency if it were at risk in the financial crisis.
6:31:51 PM
(US) Swine flu has been confirmed in 1 Dallas-area student - WSJ
- 2 more Dallas-area swine flu cases are suspected.
- Follow Up as of 6:56 PM EST: According to Dallas County Officials, 3 swine flu cases have been confirmed and 3 are "probable"
- Follow Up as of 7:55 PM EST: Dallas confirms 3 more cases bringing the total to 6.
7:50:12 PM
*(JP) JAPAN MAR RETAIL TRADE YOY: -3.9% V -4.7%E; MOM: -1.1% V -0.4%E
- Prior Y/Y revised to -5.7% from -5.8%
- Prior M/M revised to -0.2% from -0.3%
- Large Retailers' Sales: -8.1% v -7.8%e (prior revised to -8.1% from -8.2%)
- METI cuts assessment on retail sales and says that sales are "decreasing"
7:59:09 PM
(US) UAW is seen having a 55% equity stake in a restructured Chrysler - WSJ
- UAW and Chrysler have agree to new limits on overtime pay and workers will be paid overtime only after they have worked at least 40 hours in a week.
- Chrysler plans to pay a $4.59B note to the UAW's VEBA.
- Chrysler will pay $300M in cash into the VEBA in 2010 and 2011 and increasing amounts up to $823M from 2019 to 2023.
- The UAW and Chrysler have agreed to suspend the cost-of-living adjustments.
- Fiat is expected to eventually own 35% of Chrysler.
- Chrysler estimates that Fiat's investment is worth $8B and it may create 4,000 new UAW jobs in the US.
- Fiat agreed to produce at least one small car at a Chrysler plant in the US.
- The US government and Chrysler’s secured lenders together will hold a 10% stake in the restructured company.
- Today's report follows yesterday's agreement between the UAW and Chrysler.
- Note: According to prior reports, Chrysler’s creditors were offered a 5% stake on 4/22, if they agreed to accept 22% of the total debt they are owed. Chrysler creditors are owed $7B in debt.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Equities began the morning with a touch of Swine Flu, as nervousness over a potential global pandemic spread from trading in Asia and Europe to the United States.
The major US indices opened lower on the flu news but quickly managed to move back into positive territory as investors focused on the morning's decent corporate earnings. The World Health Organization (WHO) moved forward an emergency meeting about the flu to today from Tuesday. Note that travel and tourism stocks have been hit especially hard in early trading, with the major US airline stocks down around 15%, hotel names Marriot and Starwood down 6% and 10%, respectively, and Royal Caribbean is down 16%. Front-month NYMEX crude has erased Friday's gains to trade around $49. Treasury prices opened firmer on the equity weakness and concerns surrounding the Flu breakout, but yields have been trending higher following the open of pit trade. The benchmark is moving back towards 3% post the latest reverse auction results from the NY Fed and ahead of this afternoon's $40B 2-year note auction.
- GM announced yet another round of restructuring plans this morning, including more plant closures and a renewed offer for the company's bondholders.
This is apparently the last stop for bondholders, with GM offering 225 shares for every $1,000 in notes and warning that if 90% of bonds are not tendered by June 1, it will file for bankruptcy. Note that at GM's current share price of $1.80, the offering would make for a haircut of approximately $0.60 on the dollar for bondholders. The plan includes closing at least six plants; reduce U.S. hourly employment to 40,000 in 2010 and Canadian hourly workers to 4,400 by 2014. But even then, GM would still need another $9B in Federal funding after June 1.
- Earnings from Verizon, Humana and Corning have been better than expected. Verizon came in a bit ahead of analyst estimates, and reported strong gains in wireless and FiOS subscriber additions on a q/q basis.
On the conference call, Verizion's CFO expressed strong optimism regarding future performance. There had been reports overnight that Apple was talking with Verizon about launching iPhone service as soon as 2010, but executives refused to confirm or deny the reports. Humana also beat earnings and revenue targets slightly, and also raised its 2009 forecast. Corning reported very strong earnings, and said volumes would increase with strength next quarter. Qualcomm reported a loss due to litigation and various other charges. But the tech firm's guidance for the coming quarter and the full year was very strong, helping the name rise 7% in early trading.
- In currency trading, the USD and JPY consolidated earlier gains during the NY morning in an environment of risk aversion thanks to the Swine Flu.
Dealers took noting of some EUR/JPY charting opportunities and saw a potential H&S top formation developing. Dealers are eyeing the key support and neckline at the 126.00 level with measured move objective of some 800 pips. CAD is firmer in the session despite lower energy and commodity prices, making it way back toward the lower end of the 1.20 handle.
More Headlines
7:05:33 AM
(GE) Bundesbank's Reckers: German GDP to fall 6% in 2009, GDP could fall significantly in 2010
- Against ECB interest rate cut below the 1% level
- There are some positive sign in the midst of economic crisis
- Central banks must reduce liquidity once economic crisis has peaked
9:03 AM
(EU) ECB's Hurley: Global price pressures have moderated significantly, negative Euro Zone CPI will last for a number of months; cannot exclude further measured rate cuts- ECB to decide on new non standard polict measures in May - Global indicators are improving
11:03:54 AM
WHO: Swine flu has spread geographically, emergency panel meeting is ongoing - conf call
- Human to human transmission still unclear (Phase level still under consideration, considering moving to phase 4 or 5 from current phase 3 pandemic level).
- Currently 40 confirmed cases in the US, 26 in Mexico, 6 in Canada, and 1 in Spain.
- Note: Currently in Phase 3; see our 9:42amET headline for information on different Phase levels or WHO website at http://www.who.int/csr/disease/avian_influenza/phase/en/index.html
12:28:56 PM
FDIC's Bair: We have moved beyond the liquidity crisis seen last year, now in the clean up phase; government needs to "do repair work and get out"
- Bankruptcy does not work for resolving the problems of big, systemically important companies.
- Reiterates call for a special "resolution regime" for dealing with big, failed firms.
12:56:28 PM
(US) OCC's Dugan: Worry at this point are credit losses in the banking system rather than financial markets or confidence.
- The size of bank losses related to credit cards and commercial real estate remains unknown.
- More attention is being paid to common equity versus other types of capital.
- No plans for second bank stress test if economy worsens due to Swine Flu
1:00 PM
ECB's Nowotny: Ready to use non conventional measures; rates to stay low as long as necessary- Remarks that there is a need for additional discretionary stimulus
1:01:43 PM
*TREASURY'S $40B 2-YEAR NOTE AUCTION BID-TO-COVER RATIO: 2.72 V 2.71 PRIOR AND 2.42 AVE OVER LAST 10 AUCTIONS
- Indirect bidders take 28.7% of competitive bids
- Notes draw 0.949% with 11.83% allotted at the high
"Miracles can be yours. Faith and preparation make them possible."
- With earnings season closing out its second week, US equity indices continue to trade in ranges that have been maintained since early April.
The DJIA seems to have found a floor just below 7800 and a ceiling a little below 8200. Trading was volatile, with mixed corporate earnings, mixed housing data, stress test anxiety and auto industry woes keeping things unsettled all week long. Investors ignored Bank of America's impressive earnings on Monday morning, instead focusing on the 46% increase in nonperforming loans the bank reported, and sending equities on a gut-churning slide; the VIX volatility index shot right back up to the 40 handle the following morning after last week's big declines in the volatility bellwether. On the "homes" front, Thursday's NAR Existing Home Sales index came in below expectations, falling 3% below last month's levels, while Friday's March New Home Sales impressed with better-than-expected results and declining months of inventories. Big earnings disappointments alternated with strong showings, compounding the general aimlessness. By Friday, the Fed's bank "stress test" assumptions created only minor ripples, as investors looked forward to more earnings uncertainty next week. Equities moved sideways for the week, consolidating gains after six weeks of rallying: the S&P 500 slipped 0.4%, the DJIA dropped 0.7%, while the Nasdaq Composite was managed another gain, up 1.2%.
- The rest of the top US banks reported their first-quarter results, following the market-moving reports from Citi, Goldman and JP Morgan late last week.
Bank of America's EPS results were an order of magnitude better than expected and revenue was nearly $9B above target. But other aspects of the bank's performance, such as its hefty $13.4B provision for credit losses, rising net charge offs and a big gain in non-performing assets, indicated that not all is well as of yet. Wells Fargo beat earnings and revenue estimates by narrower amounts than other big banks and said the integration of Wachovia is going well and should not lead to further losses. The black sheep in the group was Morgan Stanley, which reported a big loss and much lower revenues than expected. CEO Mack said the firm would have been profitable if not for the dramatic improvement in credit spreads, which negatively impacted the firm's revenues.
- Second-tier financial firms have followed in the footsteps of the leading banks, with share values gaining strongly and credit quality becoming less bad.
But the first-quarter reports from these firms have been far more mixed than those from their larger colleagues, with many firms unable to scrape their way out of quarterly losses or keep from falling short of analysts' targets. Regions Financial and US Bancorp reported above-average results, with ROE and ROA up strongly on a y/y basis, in line with the tier-1 firms. Asset managers State Street and BlackRock also reported solid first quarter results, although assets under management at both firms fell on a q/q basis. Quarterly losses at SunTrust, Fifth Third and Zions Bancorp were smaller than expected, but ROA and ROE were still in bad shape and non-performing loans were still seen rising. KeyCorp's loss was considerably larger than anticipated, and MTB and Bank of New York missed earnings and revenue expectations entirely, while CIT's quarterly loss was three times the expected amount. The latter two firms cut their dividends steeply.
- The US auto industry lurched towards clarity this week, with Chrysler apparently headed for bankruptcy or even liquidation, GM facing government-sponsored restructuring in bankruptcy and Ford likely to restructure and normalize outside of Chapter 11.
On Friday Ford surprised markets with higher than expected revenues and a much smaller loss than projected; noting that it nearly cut its cash burn in half in the quarter. The company reiterated that it won't need US government aid to get through the year and said it is on track with its plan to break even in 2011. Late in the week there were reports from politicians and the press that Chrysler could file for bankruptcy as early as next week, though Chrysler later denied any such plans. And as GM's negotiations with bondholders and labor drag on, there have been press reports that a new debt-for-equity offer (composed almost entirely of equity) could come on Monday, along with an announcement that GM will discontinue its Pontiac brand.
- Among the major Dow components reporting this week, AT&T and McDonalds offered the most positive results, including strong earnings and moderate growth in sales metrics, with executives from both firms emphasizing that they are working to prepare for strong growth upon the arrival of economic recovery.
Caterpillar blew out estimates but issue extremely cautious guidance for the year, reducing its outlook and noting that the US "missed an opportunity" with its "disappointing" stimulus plan. Boeing missed estimates slightly and lowered its EPS forecast for 2009, with its order backlog and operating margin both falling further on a q/q basis.
- Tech earnings have been fairly strong, although executives at leading names in the sector are reiterating the caution heard almost everywhere else.
Texas Instruments earned more than expected in Q1 and issued bullish guidance for the next quarter, thanks to an expected increase in market share. IBM also beat earnings expectations and forecast global technology services returning to revenue growth in the second half of 2009. Microsoft reported lackluster quarterly results; the CFO said that the economy is the most challenging in the company's 30-year history and stated he sees a difficult next quarter. Yahoo's profits were twice the estimated figure, but the company's CFO warned that "dark clouds" remain on the horizon. Apple and Amazon had strong quarterly results, with Apple offering its typically conservative guidance for next quarter. Apple noted that CEO Steve Jobs would return to full time work at the end of June.
- Three high-profile acquisitions were announced on Monday. Oracle surprised observers (and likely blindsided IBM) by offering $9.50/shr in cash for Sun Microsystems in a deal valued at $7.4B.
GlaxoSmithKline bought privately-held Stiefel Labs for $3.6B in cash, debt and other payouts. Stiefel, which is partially owned by the Blackstone Group, had been reportedly pursued by several other major drug companies such as Johnson & Johnson and Novartis. PepsiCo offered to buy up its bottling partners Pepsi Bottling Group and PepsiAmericas, for $29.50/shr and $23.27/shr, respectively. The two deals, which would give PepsiCo control of 80% of its North American distribution volume, are worth a total of around $9B.
- With the focus on corporate earnings, Treasury markets have quietly seen prices erode and yields drift to the highest levels in more than a month.
The US benchmark is approaching 3% for the first time since the Fed's March QE announcement. Equity resilience, seen in investors' ability to shrug off Monday's sharp sell-off, and another $101B in fresh 2-, 5- and 7-year supply coming to market next week, has provided support for bond bears. Mid-week traders also took note of a well bid 5-year TIPS auction reminding everyone there is real demand for inflation protection looking ahead.
- European and in particular UK debt markets focused on Wednesday's UK budget announcement from Exchequer Darling.
Of particular relevance to debt markets was the Debt Management Office's financing remit, which outlined a record £220B in Gilt issuance this year, easily surpassing analyst estimates. The increased supply has weighed heavily on Gilts since Wednesday, pushing the yield on the benchmark 10-year to month highs above 3.50%, and well on the way back to its pre-quantitative easing levels. And with most of the upcoming issuance set to be long dated, curve steepening has ensued, with 2-10y yield spreads moving to three-month highs above 220bps. Gilt prices did recover some on Friday following a weaker than expected UK advanced Q1 GDP reading and speculation of a downgrade of the AAA sovereign rating.
- Other fixed income markets continue to point to some loosening of credit conditions, helped by several major banking CEOs who noted various signs of improvement through the prism of their Q1 results.
Interbank lending rates continue to improve toward levels not seen since the beginning of the crisis. The US 3-month Libor fixing has come down towards 1.07%. The munis market attracted some attention when California came to market with nearly $7B in taxable bonds and the spreads paid were narrower than initial expectations. The NJ Turnpike and NY MTA also successfully borrowed more than $2B through taxable bonds, indicating that the high-quality munis market is functioning effectively. Finally, extending a trend seen last week, several lesser quality companies came to market with high yielding corporate debt. Home builder Lennar and paper company Georgia Pacific raised in excess of $1B in total.
- Commodity markets generally continue to take their cue from stocks.
Monday's bout of risk aversion and plummeting stock prices sent gold higher and oil lower. Gold prices harnessed the momentum from Monday to work up through the $900 level for the first time in nearly a month. Talk of continued reserve diversification by the Chinese and in particular into gold buoyed prices above $910 by the end of the week. Front-month copper encountered some resistance at the 200-day EMA, as prices have declined by more than $0.10 for the week. June WTI crude has also moved up steadily from Monday's lows to trade comfortably above $50 despite another week of inventory builds across all products. On the other hand, front month natural gas cannot find a floor, with prices hitting new seven-year lows below $3.30 late on Friday.
- Early in the week EUR/USD hovered around the 1.2950 level as reports of "sizeable" options barriers at this level limited volatility.
But the greenback softened against the European pairs, with a better-than-expected ZEW survey helping the EUR/USD to move back toward the 1.30 area later in the weak, with lackluster Irish bond auction results on Tuesday (a 2018 auction had a bid-to-cover of only 1.1x) tempering the euro's upside. Overall risk aversion has trailed US corporate earnings, which have included plenty of fretting over the stiff headwinds that will complicate economic recovery. The USD ended the week on a soft note after a Chinese State Administration of Foreign Exchange (SAFE) said China's gold reserves were 1,054 metric tons, up by 454 tons since 2003.
- Sterling continued to retrace after testing the 1.50 handle last week.
British Trade Minister Davies reiterated his view that a weaker pound offered huge potential for exporters and said the UK had an opportunity to export its way out of the crisis. The GBP tested its weekly low of 1.4400 following the release of an outline of the UK budget and the announcement of a new tax bracket for those who make over £150K. Finally Chancellor Darling noted that the cost of the government's bank bailouts could reach £60B and acknowledged that the UK was unlikely to ever fully recover the funds it put into the sector.
- The yen strengthened over the course of the week.
The pace of deterioration in Japan's trade balance seemed to have stabilized, with the March trade balance hitting its second consecutive positive total surplus after five months of deficits. JPY strength was also attributed to press speculation that Japan's FSA was looking to impose curbs on FX trading, with chatter circulating that margin trades would be kept to 20-30x leverage compared to some entities that allow leverage of up to 100-600x. In CHF, Swiss national Bank Chief Hildebrand reiterated that the SNB would continue to fight CHF appreciation in the face of persisting deflation risks. CAD strengthened after the Bank of Canada failed to make any specific commitments on quantitative easing in their monetary policy report, although it did establish a framework implementing QE. The BOC unexpectedly cut its key rate by 25bps to 0.25% earlier in the week. Steady oil gold prices also contributed to a firmer CAD in the latter part of the week.
- The week in Asia began with Australian officials conceding the economy is in recession and ended with a South Korean surprise, in the form of a 0.1% preliminary Q1 GDP report.
While eking out a positive GDP figure certainly has symbolic value, the report's components painted a tamer picture, with a trade surplus made up of weak exports versus weaker imports and investment in industrial sector remaining bleak. In Australia, official concession of recession from monetary and government authorities could have longer-term repercussions for the AUD ahead of the May 5th RBA decision.
Week of 4/27/2009 thru 5/01/2009
Monday, April 27, 2009
1:00pm Treasury's 2-yr note auction
Tuesday, April 28, 2009
9:00am Feb S&P/CS Home Price Index (last 146.4) Composite-20 y/y (last -18.97%)
10:00am April Consumer Confidence (last 26), April Richmond Fed Manufacturing Index (last -20)
1:00pm Treasury's 5-yr note auction
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Wednesday, April 29, 2009
ALERT: FOMC DAY!
8:30am Advance Q1 Annualized GDP q/q (last -6.3%),
Q1 GDP Price Index (last 0.5%), Q1 Personal Consumption (last -4.3%), Q1 Core PCE q/q (last 0.9%)
8:30am March Personal Income (last -0.2%),
March Personal Spending (last 0.2%),
March PCE Deflator y/y (last 1.0%),
March PCE Core (last m/m 0.2%, y/y 1.8%),
Initial Jobless Claims (last 640K),
Continuing Claims (last 6.137M)
9:45am April Chicago Purchasing Manager Index (last 31.4)
10:00am April NAPM-Milwaukee (last 30)
10:30am Natural Gas Inventories
Friday, May 01, 2009
10:00am April Final U. of Michigan Confidence (last 61.9),
April ISM manufacturing (last 36.3),
April ISM Prices Paid (last 31), March Factory Orders (last 1.8%)
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Investors seem to be shrugging off the indecision seen through most of the week and bidding up equity markets with strength this morning.
With more clarity on the bank stress tests due later this afternoon and higher-than-expected March New Home Sales, there are some reasons for optimism. And while home sales returned to a sequential downtrend after February's uptick, investors are focusing on the data showing falling inventory levels in the report. Crude moved through the $51 barrier for the first time all week earlier in the session. Note that overnight OPEC Secretary General El-Badri said he is not expecting new production cuts in May, stating that OPEC needs full compliance with past cuts before new ones are instituted. In addition, the Kuwaiti Oil Minister affirmed his preference for oil in the $50-$70/bbl range.
- Ford surprised everybody this morning, reporting higher than expected revenues and a much smaller loss than projected, and nearly cut its cash burn in half in the quarter.
Shares of Ford jumped 20% before the bell, trading off to around +15% by mid morning. The company reiterated that it won't need US government aid to get through the year, and said it is on track with its plan to break even in 2011. Ford also optimistically insisted that it does not expect to be hurt by potential GM or Chrysler bankruptcy, but also warned that the health of the supply base is critical. Bankruptcy is looking increasingly unavoidable for Chrysler, whether the company manages a deal with Fiat or not. Overnight the WSJ reported that Chrysler could file for bankruptcy as early as next week, while this morning the Canadian finance minister said liquidation is a possibility. And as GM's negotiations with bondholders and labor drag on, there have been press reports that a new debt-for-equity offer (composed almost entirely of equity) could come on Monday.
- The Treasury is due to disclose its assumptions for stress testing to the 19 banks undergoing testing this afternoon at 2pmEST.
FDIC Chairwoman Bair said that some banks will need to encourage preferred shareholders to switch to common shares/equity, and reiterated that the administration won't likely have to ask for more TARP funding. Most of the leading US banks opened marginally higher this morning. AmEx offered stellar first-quarter results although revenues were light. The company cautioned that while it did see some recent improvement in early delinquency rates, overall credit indicators reflected rising unemployment levels and the broad-scale weakness in the economy with card members across most units reducing spending y/y.
- Mid-cap industrials Honeywell, 3M and Xerox reported at or a bit below expectations and cut full-year forecasts, offering quarterly performance that trailed large-cap competitors.
Honeywell noted on the conference call that it is not counting on any big macro improvements in 2009 although it does see the rate of economic decline stabilizing. 3M was a bit light on the top and bottom lines, noting that it expects two more quarters of economic decline and warned it would not return to 2007 levels of business until 2011.
Oil services giant Schlumberger exceeded estimates by a hair, noting that the company does not see any significant recovery in North American gas drilling before 2010
- Shares of Microsoft are up 8% after lackluster quarterly results yesterday evening.
Note that on the conference call, Microsoft's CFO said that the economy is the most challenging in the company's 30-year history, saying there were no signs of a bottom in the quarter and that next quarter would remain difficult, with shipments of PCs (ex netbooks) expected to be weak. These comments echo the pessimism heard from the likes of TXN and IBM earlier in the week. Consumer-facing Nasdaq components Amazon and Netflix offered positive quarterly results, beating earnings expectations. Both companies offer cautious forecasts for the next quarter, however. AMZN was up 6% and NFLX was off its worst levels around -4% mid day.
- In currencies, the greenback maintained a soft tone ahead of the G7 finance minister meeting this weekend in Washington DC, with concerns of Chinese FX reserve diversification weighing on the USD sentiment.
ECB's Nowotny commented that the US economic measures were starting to take effect, maybe faster than European efforts. EUR/USD rose toward 1.33 in New York trading, while GBP/USD rebounded after Moody's said the UK's AAA sovereign were stable and not under review. Dealers are noting good continental European names (particularly German banks) buying GBP aggressively from 1.4630 to 1.4680. The pair proceeded to test 1.4750 by mid-NY morning. The CAD continued its firm tone that emerged yesterday, with USD/CAD moved towards the 1.2100 after gaining technical momentum below the 1.2230 level seen in the aftermath of the BoC monetary report on Thursday.
More Headlines
7:16:37 AM
(US) US Treasury to release bank stress test assumptions at 2PM EST (19:00 GMT) to the banks under consideration -
CNBC
- Apparently there will be no public release of the stress test assumptions, although commentators assume leaks of the assumptions will begin immediately.
8:28 AM
(EU) ECB's Nowotny: ECB does not have an exchange rate goal;
US economic measures are starting to take effect, maybe faster than European efforts- Signs that the economy reaching a low point
8:30:02 AM
*MAR DURABLE GOODS ORDERS: -0.8% V -1.5%E; DURABLES EX-TRANSORTATION: -0.6% V -1.2%E
- Prior Durables revised from 3.4% to 2.1%
- Prior Durables Ex Transportation revised from 3.9% to 2.0%
10:00:01 AM
*MAR US NEW HOME SALES: 356K V 337KE (-0.6% M/M)
- Median sales price: $201,400 v $208,700 m/m (-4%); $225,200 y/y (-12% y/y) (lowest level since 2003)
- New Home months of supply: 10.7 months v 11.2 months m/m
- Prior New Home Sales revised from 337K to 358K
10:23:24 AM
FDIC's Bair: Prefers suggestions from multiple regulators rather than one main regulatory entity
- Banks identified that require capital should look to raise capital from existing stakeholders
- Some banks will need to encourage preferred share holders to switch to common shares/equity
- Reiterates that it is not expected to have to ask the US Congress for more funds post stress tests
- Plan to vote on bank emergency assessment fee schemes in late May
11:43 AM
White House Chief of Staff Emanuel: Obama has '100% confidence' in Fed Chairman Bernanke
- note: this is the first explicit statement of support for Bernanke from the Obama Administration
12:29:03 PM
Chrysler tells dealers there is no pending bankruptcy - WSJ
- Note: on 4/23 the New York Times reported that the US Treasury is said to be preparing a bankruptcy filing for Chrysler
12:31 PM
(US) US Treasury announces an additional $569M in TARP repayments from four more financial firms
"Life does not accommodate you, it challenges you. It challenges your desire & commitment to achieve greatness, for nothing good in this life comes without challenge."
8:30am March Durable Goods Orders (last 3.4%, ex-transport 3.9%)
10:00am March New Home Sales (last 337K, m/m 4.7%)
Treasury to disclose bank stress test assumptions. Time TBD
Treasury Secretary Geithner hosts G7 finance ministers in Washington, DC
Todays Headlines
8:30:02 AM
*INITIAL JOBLESS CLAIMS: 640K V 640KE, CONTINUING CLAIMS: 6.137M V 6.120ME
- Prior jobless claims revised from 610K to 613K
- Prior Continuing Claims revised from 6.022M to 6.044M
***Highest Continuing claims on record
9:00:56 AM
(US) Fitch: US house prices to fall another 12.5% before finding a bottom
- U.S. home prices will fall an additional 12.5% from 2008's year end values before exhibiting more stability in late 2010, according to Fitch Ratings.
- This forecast reflects a reversion to early 2002's prices.
- Currently, prices are hovering around levels seen in mid 2003.
- To date, national home prices have declined by 27%
9:07:50 AM
(US) USDA US Export Sales for week ended Apr 16
- Wheat Net Sales 232.2K tons (+91% w/w). Notable buyers: Nigeria 90K tons. Japan. 43.8K tons Canada 26.8K tons. Venezuela 19K tons
- Wheat Net sales for 2009/10 delivery 119.3K tons, Primary destinations: Taiwan 86.4K, South Korea 66.8K, Philippines 19.0K,Singapore 16,5K
- Wheat Exports 387.5K tons (-20% w/w); Primary destinations. Japan 72.7K tons. China 58.6K tons. Philippines 46.0K tons. Yemen 34.2K tons. Cuba 26.8K tons. Canada 26.3K tons
- Corn Net Sales 1.21M tons (+40% w/w). Notable buyers: unknown destinations 425K tons. Japan 317K tons. Mexico 141K tons. South Korea 116.9K tons. Venezuela 91.4K tons
- Corn Net sales for 2009/10 delivery 69.5K tons, Primary destinations Guatemala: (61.0K tons and Honduras 8,5K tons
- Corn Exports 1.03M tons (+20% w/w). Primary destinations: Japan 298K tons. Taiwan 173.5K tons). Egypt 130.7K tons. Mexico 97.4K tons, Taiwan 87.K0 tons, Venezuela 77.1K tons
- Soybeans Net Sales 617.1K tons (-24% w/w), Notable buyers: China 186.3K tons, Mexico 8832K tons, Iran 64.7K tons, Egypt 55,5K tons, Syria 45.6K tons, Taiwan 45.5K tons
- Soybeans Net sales for 2009/10 delivery 824.2Ktons (+23% w/w): Primary destinations .unknown destinations 582.0K tons, China 232.5K tons, and Mexico 9,5K tons.
- Soybeans Exports 660.8K tons (23% w/w), Primary destinations: China 302.0K tons, Mexico 96.3K tons, Japan 75.9K tons, Iran 64.7K tons, Turkey 29.3K tons, Taiwan 20.5K tons, Syria 16.6K tons.
10:00:03 AM
*MARCH EXISTING HOME SALES: 4.57M V 4.65ME (-3% M/M)
- prior revised from 4.72M to 4.71M
- Total Months of supply months 9.8 months v 9.7 months prior
- Median Existing Home Price: $175,200 v $168,200 prior, $200,100 in Mar 2008
- NAR President: First-time buyers are driving the market. "The share of lower priced home sales has trended up, indicating a return of many first-time buyers."
10:30 AM
*EIA NATURAL GAS INVENTORIES: +46 BCF VS. +40 TO +45 BCF ESTIMATE RANGE
5:59:53 PM
(US) Chrysler could be pushed into bankruptcy filing as soon as next week - WSJ
- The filing could occur whether or not Chrysler reaches an agreement with Fiat.
- If the company does file for bankruptcy, the US government would provide the financing.
- Under a bankruptcy scenario, Fiat would be allowed to pick the parts of Chrysler it wants.
- Obama administration and Fiat believe that a bankruptcy is NOT inevitable.
8:10:00 PM
(UK) According to the London Telegraph, the UK may lose its AAA sovereign rating following the government's budget
- The budget disclosed that national debt will hit £1.4T over the next 5 years.
- Moodys and S&P are reviewing the UK's rating.
- According to an analyst at Moodys, the UK Treasury's projections for public-sector net borrowings are "a cause for concern"
- S&P said it was looking at details of the budget and had no comment at the time.
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.
- Corporate earnings and housing data continue to buoy equity volatility in the early going.
The major US indices are bouncing in and out of negative territory as selling pressures seem to be mounting and investors look for a theme to hold on to. The NAR's Existing Home Sales index fell 3% over last month's levels, below expectations. NAR's President indicated that first-time buyers are driving the market. Front-month NYMEX crude made a run for $50 earlier this morning, but is a bit off its highs around $48.50 in mid day trading.
- The US benchmark 10-year yield continues to bump its head just below 3%, trading at the highest level in more than a month.
The US Treasury announced $101B in new 2-, 5-, and 7-year supply to be auctioned of next week, exceeding many analyst forecasts.
- FDIC's Bair hopes to have an initial plan for selling legacy assets in place by June, noting that her agency has the potential to become the "resolution authority" for systemically risky companies.
Wells Fargo is strong this morning +8% despite warnings from "Heard on the Street" that it may need more capital than competitors, given the conspicuous absence of any statement of intent to repay $25B in TARP loans in its Q1 report. The article highlighted the bank's lower-grade loan portfolios eroding its "relatively thin capital base." And there has been a flurry of gossipy commentary over BoA's Ken Lewis, who told the WSJ that Ben Bernanke pressured him to "keep quiet" on loan losses at Merril Lynch, a claim that was predictably denied by the Fed.
- Another batch of tier-2 and regional banks have reported earnings yesterday and today.
Quarterly losses at major regional’s SunTrust Banks and Fifth Third Bancorp were smaller than expected, but neither bank is out of the woods as of yet, with ROE and ROA still weak and non-performing loans still rising. STI was up as much as 6% early on, but has dropped to around even mid morning. Share of FITB are up 10%. PNC Financial did very well, crushing analyst estimates. But like the former two firms, PNC is still facing rising non-performing loans and credit deterioration. PNC is up 8%. The situation at deeply troubled CIT looks to be worsening, with a quarterly loss three times the expected amount. CIT also suspended it dividend, sending shares of CIT down 6%.
- Shares of tech darlings Apple and eBay are up 10% and 4%, respectively, after the firms offered strong quarterly results yesterday evening, with both firms beating Wall Street's targets by healthy margins.
Apple's guidance for next quarter fell notably short of expectations, however, and the CFO warned that investors shouldn't count on the high gross margins seen in the past. iPhone shipments were up 123% y/y, but were only just in line with analyst estimates, disappointing some commentators. AAPL benefited from plenty of price target and analyst ratings hikes overnight, with the exception of Collins Stewart, which cut the name to neutral from a buy.
EMC reported in line with the Street. EMC's CEO said global IT spending is at or near a bottom and expects things to improve in the second half of the year. Chip maker Xilinx came in ahead of estimates and guided strongly for next quarter.
- Shipping giant UPS offered lots of pessimism this morning after missing expectations and guiding lower for next quarter.
Considered a major bellwether, the company believes the recovery in the US might begin late this year, but more likely not until 2010. Other consumer-facing names have had a better Q1, with fast-food king YUM! Brands ahead on the bottom line and in line on the top, with same-store sales remaining just in positive territory. The company forecasts Q2 to be its most challenging quarter and the low point of its year, but still plans to expand in China with over $1B new capital investment over three years.
Hotelier Marriot and cruise line Royal Caribbean did substantially better than expected, and managed to at least not cut guidance.
- Mid-cap steel makers Nucor and Reliance Steel reported weaker-than-expected earnings and revenue in the first quarter.
Reliance's CEO said that business remains difficult across all products, with no geographic region that is significantly better or worse than any other. Nucor's mill utilization rate fell to 45%. Steel Dynamics did better, cutting its expected loss in half. The company expects Q2 results to improve, with a "small profit" possible in Q2.
- In currency trading, EUR/USD has consolidated earlier gains but failed to advance above the 1.3070 pivot point.
Note that the Belgium Business Confidence index fell more than expected this morning; the data is usually seen as an good indicator of German IFO data, which is expected to be released on Friday. The Bank of Canada failed to make any specific commitments on quantitative easing (QE) after cutting its interest rates to 0.25% earlier this week. However, the BoE did set up a framework in which QE could be implemented. The CAD was broadly firmer following the remarks, with USD/CAD at 1.2250, down 150 pips in the aftermath of the BoC comments.
More Headlines
8:30:02 AM
*INITIAL JOBLESS CLAIMS: 640K V 640KE, CONTINUING CLAIMS: 6.137M V 6.120ME
- Prior jobless claims revised from 610K to 613K
- Prior Continuing Claims revised from 6.022M to 6.044M
***Highest Continuing claims on record
9:00:56 AM
(US) Fitch: US house prices to fall another 12.5% before finding a bottom
- U.S. home prices will fall an additional 12.5% from 2008's year end values before exhibiting more stability in late 2010, according to Fitch Ratings.
- This forecast reflects a reversion to early 2002's prices.
- Currently, prices are hovering around levels seen in mid 2003.
- To date, national home prices have declined by 27%
9:07:50 AM
(US) USDA US Export Sales for week ended Apr 16
- Wheat Net Sales 232.2K tons (+91% w/w). Notable buyers: Nigeria 90K tons. Japan. 43.8K tons Canada 26.8K tons. Venezuela 19K tons
- Wheat Net sales for 2009/10 delivery 119.3K tons, Primary destinations: Taiwan 86.4K, South Korea 66.8K, Philippines 19.0K,Singapore 16,5K
- Wheat Exports 387.5K tons (-20% w/w); Primary destinations. Japan 72.7K tons. China 58.6K tons. Philippines 46.0K tons. Yemen 34.2K tons. Cuba 26.8K tons. Canada 26.3K tons
- Corn Net Sales 1.21M tons (+40% w/w). Notable buyers: unknown destinations 425K tons. Japan 317K tons. Mexico 141K tons. South Korea 116.9K tons. Venezuela 91.4K tons
- Corn Net sales for 2009/10 delivery 69.5K tons, Primary destinations Guatemala: (61.0K tons and Honduras 8,5K tons
- Corn Exports 1.03M tons (+20% w/w). Primary destinations: Japan 298K tons. Taiwan 173.5K tons). Egypt 130.7K tons. Mexico 97.4K tons, Taiwan 87.K0 tons, Venezuela 77.1K tons
- Soybeans Net Sales 617.1K tons (-24% w/w), Notable buyers: China 186.3K tons, Mexico 8832K tons, Iran 64.7K tons, Egypt 55,5K tons, Syria 45.6K tons, Taiwan 45.5K tons
- Soybeans Net sales for 2009/10 delivery 824.2Ktons (+23% w/w): Primary destinations .unknown destinations 582.0K tons, China 232.5K tons, and Mexico 9,5K tons.
- Soybeans Exports 660.8K tons (23% w/w), Primary destinations: China 302.0K tons, Mexico 96.3K tons, Japan 75.9K tons, Iran 64.7K tons, Turkey 29.3K tons, Taiwan 20.5K tons, Syria 16.6K tons.
10:00:03 AM
*MARCH EXISTING HOME SALES: 4.57M V 4.65ME (-3% M/M)
- prior revised from 4.72M to 4.71M
- Total Months of supply months 9.8 months v 9.7 months prior
- Median Existing Home Price: $175,200 v $168,200 prior, $200,100 in Mar 2008
- NAR President: First-time buyers are driving the market. "The share of lower priced home sales has trended up, indicating a return of many first-time buyers."
10:30 AM
*EIA NATURAL GAS INVENTORIES: +46 BCF VS. +40 TO +45 BCF ESTIMATE RANGE
ALERT: IMPORTANT NEWS EVENTS TODAY, PLAN ACCORDINGLY
8:30am Initial Jobless Claims (last 610K), Continuing Claims (last 6.02M)
10:00am March Existing Home Sales (last 4.72M, m/m 5.1%)
10:30am Natural Gas Inventories
1:00pm Treasury's 5-year auction
Todays Headlines
10:13:32 AM
*FEB HOUSE PRICE INDEX M/M: 0.7% V -0.7%E
- Prior revised to 1.0% from 1.7%
10:30:04 AM
*DOE CRUDE: +3.86M V +2.5ME; GASOLINE: +800K V -800KE; DISTILLATE: +2.68M V -900KE; CAPACITY UTILIZATION: 83.4% V 80.9%E
- Distillate demand -317K bpd to 3.45M bpd
- Gasoline demand +192K bpd to 9.13M bpd
11:11:07 AM
(GE) German Chancellor Merkel: Against a third stimulus package,
pledges to do everything possible to support jobs
- Note that earlier this morning, an IMF official said Germany has room for additional stimulus.
12:02:54 PM
CNBC reports US regulators want stress test banks to require 3% tangible common equity under worst case scenario
- cites sources
- exact % will depend on each individual bank's risk weighted assets, though details are still not finalized, say sources
12:54:33 PM
(UK) BoE's Blanchflower: Seeing early indications of a turnaround; labor market loosening quickly
3:52:08 PM
(US) US regulators are considering disclosing details
of capital needs for each bank; Asks banks to disclose needs at the same time
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
10:00am Treasury Sec Geithner testifies before Congressional panel on TARP
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
3:00:54 PM
World Bank President Zoellick: Reiterates USD will remain the world's reserve currency- Concerned by capital shortfalls in developing world
4:29 PM
*API PETROLEUM INVENTORIES: CRUDE: -1M V +2.5ME; GASOLINE:+107K V -800KE; DISTILLATE: +458K V -900KE; CAPACITY UTILIZATION: 82.1% V 80.9%E
6:52:07 PM
(EU) ECB's Weber: Global economy still in midst of a sharp downturn, still considers 1% reasonable lower bound for main refi - Press Interview
Growth:
- No clear signs of leveling off of economic slump in Europe.
- Expects deceleration of downward economic pressure.
Inflation:
- Expects negative inflation in summer months due to base effects.
- Negative inflation has nothing to do with deflation.
- No sign risks of deflation are materializing.
- Weaker inflation is a welcome relief for consumers' buying power.
- Medium-term inflation expectations relatively robustly anchored.
Monetary Policy:
- Monetary policy's main concern is still anchoring inflation expectations.
- ECB will continue to use marginal room for maneuver left.
- Leaving rates too low too long can create imbalances later.
Quantitative Easing:
- With respect to non-standard measures, Weber said that should focus attention on bank channel.
- With respect to government bond buying, Weber said exclude anything not in line with treaty, treaty forbids direct buying in primary market of government bonds.
9:29 PM
*(AU) AUSTRALIA Q1 CPI Q/Q: 0.1% V 0.5%E (PRIOR -0.3%); Y/Y: 2.5% V 2.8%E (PRIOR 3.7%)- Core Q/Q: 1.0% v 0.8%e (0.6% prior), Y/Y: 3.9% v 3.8%e (4.2% prior)
9:32:20 PM
(CH) PBOC Dep. Governor Yi Gang: Economy hit bottom in Q4, sees positive signs of recovery in Q1 and continued recovery trend
- Sees 2009 GDP growth close to 8%, Hopes CPI growth will be positive
- Economy facing some deflationary pressures
10:30 PM
(AU) Australia's Treasurer Swan: Inflation moderated significantly, further easing in inflation expected
11:01:35 PM
(JP) Japan Upper House passes corporate recapitalization plan
- The legislation will give the government authority to use public funds to provide assistance to troubled non-financial companies.
- Under the plan, the Development Bank of Japan will be allowed to inject public funds into companies.
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.
April 20, 2009
Nightly Newsletter / One great trade is all it takes!
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
9:14 AM
US Treasury spokesman: We do not have results for the stress tests yet, there is no basis for report stress tests are complete
9:45:24 AM
(EU) ECB's Nowotny: Latest economic forecasts are becoming more pessimistic; reiterates that he does not believe the refi rate should go below 1%
- There is a clear sentiment at the ECB that the deposit rate should remain positive.
- ECB will discuss how low to cut the benchmark rate.
- Money markets are working more or less, capital markets remain a problem.
- The Euro Zone economy is still in a very negative situation.
- The ECB is not currently seeing deflation.
9:59 AM
*MAR LEADING INDICATORS: -0.3% V -0.2%E- Prior revised from -0.4% to -0.2%
10:02 AM
Fed's Bernanke: Global economy continues to experience unusual turbulence
7:30:22 PM
(US) Fed's Kohn: Sees initial signs of recovery; expects a modest recovery, with chance of a strong one
- Says "The cross-currents in the recent data and a bit more favorable financial news of late stand in contrast to the uniformly bleak picture of a few months ago"
- Sees recent trends implying that Q2 GDP will decline at slower rate; GDP to stabilize later this year
- Expects gradual recovery, wide range of uncertainty surrounds outlook
- Credit conditions to ease slowly, to restrain spending for some time
- If path recovery slows, Fed will look for new measures to boost spending
- Fed acutely aware of inflation risks if rebound gains speed, remains committed to price stability
- Financial markets remain disrupted and fragile, improved some since last fall
- Anticipates trends of restocked consumer saving vs spending for some time
- Not clear what is to happen to US auto firms, sudden disorderly problem in auto industry would add to problems in economy.
8:11:02 PM
(US) According to the WSJ, some Obama administration officials may support a bankruptcy of Chrysler - WSJ
- The report cites people familiar with the matter.
- The article notes that some believe that Chrysler's product line is weak and the company has limited international reach.
8:19:37 PM
(US) Fed's Kohn: Does not anticipate that time when Fed needs to raise rates is coming soon
- When Fed decides to raise interest rates, it may face "a lot of criticism"
- Inventories of homes are so high that it is likely that there will be more downward pressure on housing prices.
8:31:13 PM
Asia Development Bank (ADB): Equity markets showing signs of recovery, Expects net private inflows to region to remain positive in 2009
- Depreciation pressure on Asian currencies persist
- Rising bond yields could add to cost of regional stimulus
9:30:13 PM
*(AU) RBA APRIL MINUTES: NEAR TERM OUTLOOK FOR DEMAND AND OUTPUT IS WEAKER THAN PREVIOUSLY EXPECTED
On response and recovery
- Stimulus to foster economic recovery in due course; Easing in rates and fiscal policy response have been substantial
- Evidence of housing demand rising due in part to first-time buyers, but construction activity is likely to fall further
- Consumption holding up well
On Inflation
- Falling capacity utilization, weak employment to continue downward pressure on inflation
On Jobs
-Employment expected to fall further and jobless rates to continue rising
On GDP
- GDP now expected to contract in 2009, return to growth in 2010; Estimates point to GDP falling again in March, and also contracting over Q1
- Internal GDP forecasts were cut since Feb
On China
- Some signs of improvement seen in China
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.
- Observers are wondering whether the financials-driven rally has hit a wall this morning as equity markets sink despite Bank of America's impressive Q1 earnings performance.
Various commentators have offered cautious comments this morning, with Fed Chairman Bernanke noting that the global economy is still facing usual turbulence and the Obama Administration's Larry Summers saying that “substantial risks” remain in the economic recovery process.
In a sign of extreme skittishness, dodgy dealer chatter circulating before the bell saying that an unknown news had obtained published results of the stress tests actually prompted a rebuttal from the Treasury.
A Treasury spokesperson said the results of the testing aren't in yet, even though the integrity of this news source was severely doubtful. Concern over the global outlook weighed on NYMEX crude, with the front-month contract down nearly $4/barrel, around $46.
- Treasury prices are rallying on risk aversion bids pushing the 10-year yield back below 2.85%.
GILT prices surged following the BOE's latest reverse auction results which showed a paltry bid-to-cover ratio of 1.83 times. 2-year swap spreads in the US moved out to their widest level in a month while EuroDollar futures were also under some pressure early as concerns swirled ahead of the stress test details scheduled for release on Friday.
- Bank of America improved on the performances from competitors JP Morgan, Goldman Sachs and Citi last week, reporting Q1 earnings that were an order of magnitude better than expected and blowing out revenue targets by nearly $9B. But analysts are focusing on other aspects of the bank's performance, such as its hefty $13.4B provision for credit losses, rising net charge offs and a big gain in non-performing assets.
And on the conference call CEO Lewis was hardly positive, noting that credit is bad and credit conditions are expected to get worse. Lewis warned the bank's reserves will keep building over next few quarters, an expensive choice in the short term that will pay long term results.
Note that overnight Citi confirmed it is closing bidding for its Nikko Cordial unit today, with bids in from Mitsubishi, Mizuhi and SMFG. Sale of Nikko Cordial includes part of Nikko Citigroup, but Nikko Asset Management is not part of the transaction.
Overnight the WSJ reported that lending from top US banks has continued to decline, with February loan and refinancing activity from the largest TARP recipients down around 23% from October levels. Shares of Citi and BoA are down 14% in early trading.
It's been a big morning for M&A, with a couple of headline deals moving markets.
Oracle surprised observers (and likely blindsided IBM) by offering $9.50/shr in cash for Sun Microsystems in a deal valued at $7.4B. Oracle expects the acquisition to be accretive in the first full year after closing; both boards have unanimously approved the transaction and the deal is anticipated to close this summer.
The pharma tie-up dance continued, with GlaxoSmithKline buying the privately-held Stiefel Labs for $3.6B in cash, debt and other payouts. Siefel, which is partially owned by the Blackstone Group, had been reportedly pursued by several other major drug companies such as Johnson & Johnson and Novartis.
The biggest deal of the day is a family affair, with PepsiCo offering to buy up its bottling partners Pepsi Bottling Group and PepsiAmericas, for $29.50/shr and $23.27/shr, respectively. The two deals, which would give PepsiCo control of 80% of its North American distribution volume, are worth a total of around $9B. Also note that Chesapeake Utilities signed an all-stock deal to pick up Florida Public Utilities for $12.20/shr.
- In other earnings news, PepsiCo beat Q1 earnings estimates and reaffirmed its full-year forecast.
The company noted that carbonated drink sales improved on a sequential basis and expects operating profits to improve in the second half of 2009.
Oil services major Halliburton offer solid Q1 performance, a bit ahead on the bottom line and a bit behind the Street on revenue. Executives warned it remains unclear when the continuing decline in industry activity will bottom out.
Toymaker Hasbro was also in line with EPS estimates and a bit behind on revenue, but noted that it is on track to grow both in the rest of the year.
- In currency trading, risk aversion came on strong in the New York session as the USD and JPY firmed against their respective majors, with the EUR/USD finally breaking through the 1.2950 support level seen earlier today to test below 1.29.
The EUR/JPY cross was off over two big figures at 127.00, while GBP/JPY was off 400 pips at 142.80 by the mid-New York morning. The risk aversion theme was set in motion by a interview with IMF Director Strauss-Kahn published in German newspaper Handelsblatt.
Strauss-Kahn said the global growth forecast due from the IMF later this week would be worse than the 0.5% contraction seen in the prior report. The dealer chatter regarding the spurious bank stress test news posting didn't help either. USD/CAD was around 1.2360 as a result of lower energy prices. AUD/USD is hovering above the 0.70 area. Note that GBP continued to be hampered by its upcoming budget release on Wednesday; GBP/USD is around 1.45.
More Headlines
9:14 AM
US Treasury spokesman: We do not have results for the stress tests yet, there is no basis for report stress tests are complete
9:45:24 AM
(EU) ECB's Nowotny: Latest economic forecasts are becoming more pessimistic; reiterates that he does not believe the refi rate should go below 1%
- There is a clear sentiment at the ECB that the deposit rate should remain positive.
- ECB will discuss how low to cut the benchmark rate.
- Money markets are working more or less, capital markets remain a problem.
- The Euro Zone economy is still in a very negative situation.
- The ECB is not currently seeing deflation.
9:59 AM
*MAR LEADING INDICATORS: -0.3% V -0.2%E- Prior revised from -0.4% to -0.2%
10:02 AM
Fed's Bernanke: Global economy continues to experience unusual turbulence
-A mixture of downbeat data and investor caution tilted indices to the downside in the first half of the week, with the DJIA testing back below 8000 on Tuesday and Wednesday.
Fear of deflation lurked after the US March CPI figure posted its first y/y decline since August 1955.
Lower than expected housing starts data midweek dampened hopes for any signs of improvement in the key housing sector.
Financial sector earnings reports were vital to the week's action. Goldman Sachs blew out earnings on Monday, but a $5B secondary offering priced at $123/share took the shine off the report, and garnered Goldman downgrades from JP Morgan and Sandler O'Neill analysts.
But JP Morgan, Citigroup and GE scattered the naysayers late in the week as all three firms reported strong results on Thursday and Friday, reigniting the six week old stock market rally.
For the week, the S&P 500 rose 1.5%, the DJIA gained 0.6%, while the Nasdaq Composite was up 1.1%.
The VIX volatility index, a measure of fear in the stock market, closed out the week at fresh six-month lows just below 34.
Week of 4/20/2009 thru 4/24/2009
Monday, April 20, 2009
10:00am March Leading Indicators (last -0.4%)
11:00am Treasury's 5-year announcement
Tuesday, April 21, 2009
10:00am TAF results
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Wednesday, April 22, 2009
10:00am Feb House Price Index m/m (last 1.7%)
10:00am Treasury Sec Geithner testifies before Congressional panel on TARP.
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Equity trading is struggling to latch on to a theme this morning as equity indices bounce in and out of negative territory.
Investors are mulling over the Q1 results from Citigroup, General Electric and Google. Similar to other large-cap reports over the last week or so, the companies offered plenty of positive news laced with darker notes.
With no firm resolution of Detroit's woes in hand, the automakers continue to weigh on many minds. Comments from NYSE Euronext CEO Niederauer that trading volumes indicate that the current rally won't last are not helping either. NYMEX crude regained the $51 handle this morning but is losing ground in mid-day trading.
- General Electric beat Q1 earnings estimates while missing revenue targets, reporting net income that was down more than 30% over last quarter's results.
In line with quarterly results from other leading financial firms, GE Capital made a profit in the quarter, and GE executives affirmed expectation that the division would be profitable for the full year. Order backlogs held steady, while revenue at most units fell slightly over last quarter.
CEO Immelt estimates that in-house stress tests indicate GE doesn't need more capital, and also said he does not see GE Capital being subjected to government stress testing. After a 4% drop after the bell, shares of GE are around even.
- Citigroup's quarterly loss was nearly half the expected amount and the firm outpaced expectations on the top line by around $3B.
The results certainly color CEO Pandit's rally-sparking comments back in early March that Citi was “profitable” in the first two months of the year, but on the conference call Citi's CFO still insisted that the quarter was the bank's strongest in over a year, calling the trading environment "unusually favorable."
Citi said its consumer banking unit saw unusually strong activity driven by increases in volume and demand but continues to see economic headwinds in the market. In a spot of good news for markets overall, the CFO also noted that Citi has begun to see moderations in 30+day delinquencies in North American credit cards, with losses apparently breaking their prior correlation with unemployment. Shares of Citi fell as much as 10% early on, before recovering to -6%.
- Google reported its first q/q revenue decline in revenue since the company went public five years ago, coming in a hair below estimates.
Earnings were better than expected. Paid clicks continued to rise, although there was a decline in advertising revenue on q/q basis on Google-owned web sites.
Google's CEO said that the company is feeling the impact of the tough economic environment, but optimistically insisted that Google is well-placed to take advantage of the eventual economic recovery when it comes. Shares of GOOG are up 2%.
- In other news, two regional banks, BBT and Regions Financial, followed in the footsteps of the big financials by offering solid Q1 earnings news.
BBT exceeded earnings and revenue estimates, while RF's CEO said the bank would be profitable in the quarter (analysts expected a $0.42 loss) and said he wants to pay back Federal TARP funds ASAP. Takeover rumor favorite BIIB offered solid earnings and reaffirmed its full-year forecast. Toy maker Mattel missed targets slightly on slumping sales.
Also note that Japanese newspaper Nikkei reported overnight that the US government is planning to classify the 19 banks undergoing stress testing into four categories (A, B, C and D), with “D” indicating the institution is unable to stay in business.
- The currency market is digesting a slew of central banker speak from the last 12 hours. Dealers are focusing their analysis on ECB Governor Trichet's comment that the ECB wants a weaker euro.
One dealer noted that the EUR/USD was around 2% below its 200 week (or four-year) average and noted that the currency could hardly be seen as weak these days. Fed Governor Fisher commented in Asia that the challenges faced by the Euro Zone exceeded those in US. Moody's placing of Ireland's AAA sovereign ratings on review for possible downgrade also weighed on euro sentiment.
Dealers are suggesting that the market would likely see selling of euros to continue on any rallies. EUR/USD did manage to break below the 1.3070, to its lowest level since its March 18th, pre-Fed quantitative easing position.
The EUR/JPY pair retested below 130 as chatter again circulated regarding €45B in eurobond redemptions today. CHF was softer after the SNB's Roth reiterated that "currency intervention has become necessary as the rise in the CHF threatens to offset rate cuts.” Sterling was softer following comments from the UK trade minister that he was not concerned over further declines in GBP.
More Headlines
9:55:05 AM
*APR PRELIMINARY UNIVERSITY OF MICHIGAN CONFIDENCE: 61.9 V 58.5E
- 1 yr median inflation expectations at 3.0% v 2.0% March final
- 5 yr median inflation expectations at 2.7% v 2.6% March final
10:00:43 AM
*(MX) MEXICO CENTRAL BANK CUTS 75BPS to 6.00%; MORE THAN EXPECTED
- Was expected to cut its Overnight rate by 50bps to 6.25%
- Inflation will ease at a faster pace starting in May
- Will issue new price and GDP forecasts later this month
- Sees some signs of global economic stabilization
10:28:18 AM
General Motors Corp Chairman: Group will provide regular updates on restructuring operations; CEO notes that it is still possible to avoid bankruptcy, no decision yet made; Reaffirms June 1 deadline for bankruptcy decision
- Could not imagine consideration of merger with Chrysler as is still focused on restructuring own business
- Expects to need approx $5B in gov financing soon; have not been further awarded funding from US Treasury
- Feels that it is 'more probable' that bankruptcy process will be needed to properly restructure
- All options remain on the table at this point with regards to bankruptcy
- Continues to work on overall business plan with the US Treasury Department
- Potential investors in OPEL brand are serious, investors could include industry and private equity names
- Will be keeping 4 core brands, including GMC as reports that dropping GMC were 'pure speculation'
- Talks with the UAW have been delayed by UAW focusing on it talks with Chrysler.
- Will have new timetable put together as soon as this month
- Talks with bond holders are an ongoing 'dialogue' -need further concessions
- April sales have been 'ok'
11:31:55 AM
(US) EPA notes that it plans to move ahead on regulating carbon dioxide as a health and environmental risk - UPDATE
- Note that the EPA has declared its authority to hold polluters accountable under the Clean Air Act. The decision, ordered by the Supreme Court in 2007 and based upon years of scientific research and analysis, has the potential to significantly alter energy politics and policy.
- Please also note these recent headlines:
- 4/8 White House: Pres Obama is flexible on auctioning process of emissions permits in climate bill
- 3/31 US House climate change bill includes rebates and possible trade protections for industry, which could include 2B tons of annual maximum carbon offsets for industry.
- 3/17 DoE's Chu: US should levy tariffs on CO2 to protect competition.
- 3/5 House Majority Leader Hoyer (D): Congress may pass a climate-change bill by late May.
- 2/22 US climate czar Carol Browner: EPA will soon determine that carbon dioxide emissions represent a danger to the public and propose new rules to regulate emissions of carbon-dioxide from a range of industries.
12:30:20 PM
Fed's Bernanke: Harm stemming from credit crisis will be long lasting; regulation is warranted when the complexity of products harms consumers
- Regulators must manage the risks of innovation, but regulations cannot impede innovation.
- When the complexity of credit products becomes too high, direct regulation may be the only solution.
12:42:35 PM
Bank of America Corp Proxy advisor Glass Lewis recommends shareholders vote against re-election of CEO Lewis at April 29 annual meeting - CNBC
- Also recommends voting against lead director Temple Sloan.
- Calls on shareholders to vote to split chairman and CEO roles.
12:33:39 PM
(US) California March unemployment 11.2% v 10.6% m/m- California March non-farm payrolls -62.1K m/m
12:40:49 PM
(US) Congressional panel on TARP notes Treasury Sec Geithner to testify April 22 at 10amEST
9:55am April prelim Univ of Michigan confidence (last 57.3)
12:00pm Fed Chairman Bernanke speaks at Fed conference in Washington, DC
Todays Headlines
8:30:02 AM
*INITIAL JOBLESS CLAIMS: 610K V 660KE; CONTINUING CLAIMS: 6.022M V 5.893ME; highest Continuing Claims on record
- Prior jobless claims revised from 654K to 663K
- Prior Continuing Claims revised from 5.840M to 5.850M
8:30:03 AM
*MAR HOUSING STARTS: 510K V 540KE; BUILDING PERMITS: 513K V 549KE
- Prior Housing Starts revised from 583K to 572K
- No revisions to prior Building permits first revision of 564K
10:00:04 AM
*APR PHILADELPHIA FED INDEX: -24.4 V -32E
**sub-index readings:
- Prices Paid: -31.5 v -31.3 prior
- New Orders: -24.3 v -40.7 prior
- Employment: -44.9 v -52.0 prior
- Inventories: -40.2 v -55.6 prior
- Six-month business conditions outlook: 36.2 v 14.5 prior (highest in 18 months)
- "Most of the surveys broad indicators of future activity improved notably this month, suggesting that the regions manufacturing executives expect declines to bottom out over the next six months. "
10:30 AM
*EIA NATURAL GAS INVENTORIES: +21 BCF VS. +20 TO +25 BCF ESTIMATE RANGE
11:06:12 AM
*STRESS TESTS TO BE RELEASED BY MAY 4; DETAILS ON STRESS TEST ASSUMPTIONS FRIDAY APRIL 24
- CNBC citing senior regulators
- Monday May 4 release will includes stress test results and subsequently the Treasury will release capital plans for filling holes in banks that are required to raise capital
12:30:32 PM
Fed's Lockhart: Skeptical of calls to break up large banks; still sees recovery starting in 2H 2009
- Sees slow, tentative growth by Q3.
- Feels it will be challenging to address the problem of big bank failures.
- Economy still weak but sees some encouraging signs supporting cautious optimism. Weaker global economy could also dent outlook given forecast cuts for major economies.
- Watching house prices with concern.
2:30:29 PM
IMF's Strauss-Kahn: Global economic freefall may be easing; fixing the financial sector is required if stimulus is to work
- Bank rescues have yet to fix the problem; global economy reaching a turning point
- Warns that 2009 will still be awful, with "deeply negative" growth. Sees economic recovery beginning in 2010.
- Unless toxic assets are cleaned up, restoring demand will be difficult.
- Stimulus spending must be maintained in 2010.
- Sees no reason why USD would lose its position as primary global reserve currency.
6:41:28 PM
(US) Nikkei provides more information on the US bank stress tests
- The government may classify the 19 banks into 4 categories which would range from A to D, with banks labeled as A being the most healthy.
- Banks classified as A are seen as having no major problems and would be allowed to pay back the TARP funds.
- Banks classified as B don't have serious problems and can continue to operate on their own, but have less capital than those in category A and need to boost it.
- Banks classified as C are considerably undercapitalized and require public funds.
- Banks classified as D would have weak finances and deemed unable to stay in business on their own.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Equity indices opened higher this morning for the first time all week, extending yesterday's late rally on expectations and then confirmation of JP Morgan's strong quarterly earnings.
In addition, the morning saw the IPO of Rosetta Stone, for the best opening in quite some time. But things have soured fast as traders dump equities in the face of housing headwinds and two major (but somewhat expected) bankruptcies.
March housing starts and building permits were lower than expected, while RealtyTrac's March foreclosures index showed a 17% jump over Feb levels and a 46% y/y increase, cooling hopes for signs of improvement in housing.
General Growth Properties, the nation's second-largest mall operator, finally declared bankruptcy after debt holders tired of constant pleading for more time to refinance the company's billions in debt, while major newsprint supplier AbitibiBowater has declared Chapter 11 after failing to get financing support for restructuring.
- JP Morgan's results have not been a huge factor for the tier-one financials this morning, given the big moves seen over the last several weeks.
The name was up more than 3% at the open and has since fallen to around even, with other leading banks performing similarly. Wells Fargo is an exception here, as it apparently has more exposure than others to AbitibiBowater; shares of WFC fell as much as 4%.
Some notable data points from JPM's quarterly report include big jumps in ROE & ROA (5.00% v 1.00% q/q and 0.42% v 0.13% q/q, respectively) and a big turnaround in investment banking net revenues ($8.3B v -$302M q/q). CEO Dimon said the firm could pay back its TARP funding tomorrow, but said he is waiting for guidance from the Treasury on repayment, noting that the program has become a "scarlet letter" for banks. In addition, he insisted that the firm has no need to raise any more capital at the moment.
- Manufacturers reported largely positive results mixed with cautionary notes. Illinois Tool Works exceeded earnings expectations on an ex items basis but offered disappointing guidance, warning that it has limited visibility.
Revenues in its major segments declined anywhere from 15 to 32% y/y. Briggs & Stratton missed EPS and revenue targets and slashed its full-year guidance. Genuine Parts beat on the bottom line and missed on revenue. Paint maker Sherwin-Williams came in well ahead of expectations on earnings but missed on revenue, and reaffirmed its full year outlook. Shares of ITW, GPC and SHW are both up 8% or so, while BGG is down 9%.
- Nokia, the world's largest mobile phone maker, came in short of expectations, noting that shipments were -17.6% q/q and -19.3% y/y.
The company sees industry volumes around 255M units in the first quarter of 2009 (-16% q/q, -14% y/y), and expects them to remain about the same next quarter or up a bit, and still sees 2009 industry volumes -10% y/y. Nevertheless, the company's ADRs are up 10% in early trading, pulling selected mobile phone names along with it, with RIMM up as much as 4%.
- Southwest Airlines was the second major airline to report this season, showing a substantial quarterly loss thanks to fuel hedging losses.
Shares of LUV are down more than 12%, with the other major airlines also in the red. Notably American has held up nicely, around even, after beating the street yesterday. Two trucking stocks, Landstar System and USA Truck, reported. Both missed top and bottom line estimates and lamented the stated of the industry. USA Truck's CEO said the quarter presented the most challenging operating environment that he has ever seen, characterized by a severe contraction in freight volumes and and big inventory reductions at both manufacturers and retailers.
- In currencies, the greenback saw its gains from the European morning erode in early New York trading.
Cross-related buying in the EUR/GBP pair helped EUR/USD recover from 1.3130 session lows. Dealers attributed the softer USD and JPY tones to the Chinese announcement of its intention to introduce a series of measures to encourage investment and continuously adjust stimulus policies to meet economic needs. Overall the dealers were noting that the price action was not really looking like a directional-trading day, calling the US data released during the morning a mixed bag.
- In other currency news, USD/CAD was testing three-month lows, dipping below the 1.20 handle. Softer precious metals and steady oil pared earlier gains.
South Africa's president warned that the country's current account deficit is the biggest weakness for its economy and that financing this deficit is a major concern. Fitch commented on Eastern Europe and that it could downgrade almost half of the 21 Emerging European countries and commented that the Baltic region faced a 'savage' economic adjustment. And the IMF reiterated its position that a coordinated global effort was needed to deal with recession and aggressive monetary and fiscal policies were necessary to support short-term demand.
More Headlines
8:30:02 AM
*INITIAL JOBLESS CLAIMS: 610K V 660KE; CONTINUING CLAIMS: 6.022M V 5.893ME; highest Continuing Claims on record
- Prior jobless claims revised from 654K to 663K
- Prior Continuing Claims revised from 5.840M to 5.850M
8:30:03 AM
*MAR HOUSING STARTS: 510K V 540KE; BUILDING PERMITS: 513K V 549KE
- Prior Housing Starts revised from 583K to 572K
- No revisions to prior Building permits first revision of 564K
10:00:04 AM
*APR PHILADELPHIA FED INDEX: -24.4 V -32E
**sub-index readings:
- Prices Paid: -31.5 v -31.3 prior
- New Orders: -24.3 v -40.7 prior
- Employment: -44.9 v -52.0 prior
- Inventories: -40.2 v -55.6 prior
- Six-month business conditions outlook: 36.2 v 14.5 prior (highest in 18 months)
- "Most of the surveys broad indicators of future activity improved notably this month, suggesting that the regions manufacturing executives expect declines to bottom out over the next six months. "
10:30 AM
*EIA NATURAL GAS INVENTORIES: +21 BCF VS. +20 TO +25 BCF ESTIMATE RANGE
11:06:12 AM
*STRESS TESTS TO BE RELEASED BY MAY 4; DETAILS ON STRESS TEST ASSUMPTIONS FRIDAY APRIL 24
- CNBC citing senior regulators
- Monday May 4 release will includes stress test results and subsequently the Treasury will release capital plans for filling holes in banks that are required to raise capital
12:30:32 PM
Fed's Lockhart: Skeptical of calls to break up large banks; still sees recovery starting in 2H 2009
- Sees slow, tentative growth by Q3.
- Feels it will be challenging to address the problem of big bank failures.
- Economy still weak but sees some encouraging signs supporting cautious optimism. Weaker global economy could also dent outlook given forecast cuts for major economies.
- Watching house prices with concern.
8:30am March Housing Starts (last 583K),
- March Building Permits (last 564K),
- Initial Jobless Claims (last 654K),
- Continuing Claims (last 584M)
-
10:00am April Philadelphia Fed (last -35)
10:30am Natural Gas Inventories
Todays Headlines
8:30:02 AM
*APR EMPIRE MANUFACTURING: -14.65 V -35.00E (highest since Sept 2008)
- No revision
Components:
- Prices Paid: -14.61 v -26.7 prior
- New Orders: -3.88 v -44.8 prior
- Employment: -28.09 v -38.20 prior
8:30:02 AM
*MAR CONSUMER PRICE INDEX M/M: -0.1% V 0.1%E; CPI EX FOOD&ENERGY M/M: 0.2% V 0.1%E; CPI NSA: 212.709 V 212.900E
- CPI Y/Y: -0.4% v -0.1%e (Headline CPI y/y at -0.4% lowest since Aug 1955)
- Core CPI Y/Y: 1.8% v 1.7%e
- No revisions
10:30:06 AM
*DOE CRUDE: +5.67M V +2.1ME; GASOLINE: -944K V -500KE; DISTILLATE:-1.17M V -1ME; CAPACITY UTILIZATION: 80.4% V 82%E
- Distillate demand -296K bpd to 3.77M bpd
- Gasoline demand -80K bpd to 8.94M bpd
- Crude inventories now at 366.7M barrels; the largest level since Sept 1990
1:00:03 PM
*APR NAHB HOUSING MARKET INDEX: 14 V 10E (highest since Oct 2008)
- no revisions
- NAHB: "This is a very encouraging sign that we are at or near the bottom of the current housing depression."
1:20:03 PM
(US) White House: Planning a "coordinated" release of some parts of the bank stress test results in May
- says it is important to be as transparent as possible in the interest of financial stability; hopes banks that are discovered to need capital seek it privately
- Reminder: as affirmed yesterday, the Govt expects to have the stress tests completed by the end of April.
2:00:20 PM
*FED'S BEIGE BOOK: ECONOMY CONTRACTED SLOWER IN 5 OF 12 REGIONS; HOUSING MARKETS HAD SIGNS OF WEAK STABILIZATION
- Credit remained tight across regions.
- A few regions saw indications that economic activity was stabilizing at a low level; manufacturing continued to decline in most districts; auto dealers continued to struggle in March.
- non financial services continued contraction across districts; retail spending 'sluggish'; signs of slight improvement in sales.
- Pressures on prices were to downside.
- Non residential real estate continued to deteriorate with demand falling for office, industrial, and retail space.
- report covers information collected through April 6.
4:31:52 PM
(US) Treasury says that 6 banks could receive up to $9.9B in subsidies for easing troubled mortgages under the "Making Home Affordable" program
- The Treasury could approve Wells Fargo for as much as $2.9B, Chase Home Finances for as much as $3.6B, CitiMortgage for as much as $2B.
- Treasury says "there will be plenty more banks in the pipeline" to receive funds.
- The "Making Home Affordable" program has up to $50B in TARP funds and $25B in Housing and Economic Recovery Act funds to allocate among 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.
8:30am March CPI (last m/m 0.4%, y/y 0.2%; ex food & energy last m/m 0.2%, y/y 1.8%),
March CPI Core Index SA (last 217.670),
April Empire Manufacturing (last -38.23)
9:00am Feb Net Long-Term TIC Flows (last -$43B), Feb Total Net TIC Flows (last -$148.9B)
9:15am March Industrial Production (last -1.5%), March Capacity Utilization (last 70.2%)
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
1:00pm April NAHB Housing Market Index (last 9)
2:00pm Fed's Beige Book
10:00pm China Q1 GDP
Todays Headlines
7:21:54 AM
(US) Fed's Chairman Bernanke: "Fundamentally optimistic" regarding the economy
- Have seen tentative signs that the macro econ decline may have been slowing in May.
- Fed takes its inflation mandate seriously; most officials are looking for 2% inflation in the long-term.
- Confident that Fed can exit stimulus in timely fashion.
- Currently reviewing other types of credit for inclusion in TALF
8:30 AM
*MAR PRODUCER PRICE INDEX M/M: -1.2% V 0.0%E;
PPI EX FOOD&ENERGY M/M: 0.0% V 0.1%E- PPI YoY: -3.5% v -2.2%e - PPI Ex Food & Energy YoY: 3.8% v 4.0%e - No revisions
8:30:05 AM
*MAR ADVANCE RETAIL SALES: -1.1% V 0.3%E; LESS AUTOS: -0.9% V 0.0%E
- Prior Advance Retail Sales revised from -0.1% to +0.3%
- Prior Less Autos revised from 0.7% v 1.0%
8:30:05 AM
*MAR ADVANCE RETAIL SALES: -1.1% V 0.3%E; LESS AUTOS: -0.9% V 0.0%E
- Prior Advance Retail Sales revised from -0.1% to +0.3%
- Prior Less Autos revised from 0.7% v 1.0%
10:00 AM
*FEB BUSINESS INVENTORIES: -1.3% V -1.2%E- prior revised from -1.1% to -1.3%
10:30:45 AM
ECB's Constancio: The European recession appears to be "deeper" than the US recession; international responses to the crisis have been "insufficient"
- Monetary policy is less effective as tool to handle economic crisis if rates are below a specific level; has been adequate thus far in dealing with crisis.
- says Europe is not facing a deflation scenario like the one Japan experienced.
11:02:33 AM
NY Fed: Purchased $7.3B in ninth round of $300B purchase program; Dealers submitted $26.4B for consideration (bid to cover 3.62)
- Heaviest purchase was $3.3B for the 02/28/14 maturity
- note: Avg bid to cover for the prior four auctions is 5.54
11:43:01 AM
(US) President Obama: Financial system has been governed by outdated regulations, tough new rules are needed
- Wall Street executive compensation needs to be tied to actual performance.
- Pre-emptive banks takeovers would cost taxpayers too much and hurt confidence.
- Will hold banks that need more aid accountable, and "force the necessary adjustments."
- GM needs a path to profitability, hopes Chrysler can find a viable partner.
- Healthcare reform needs to be dealt with this year.
- Cannot delay introducing cap & trade system to when the economy recovers.
- says future growth will be built on 5 'pillars': new rules for Wall St; new investments in education; new investments in renewable energy; new investments in healthcare to reduce costs;
govt restoring fiscal discipline to reduce the deficit once the economic crisis is over.
12:53:41 PM
(KS) North Korea has ordered IAEA inspectors out of the country - WSJ
- Follow up 1:40pmET: IAEA confirms inspectors were asked to leave by North Korea and that the country intends to reactivate its nuclear facilities
2:19 PM
Fed's Bernanke: Sees USD remaining dominant reserve currency for the foreseeable future - Q&A
4:30 PM
*API PETROLEUM INVENTORIES: CRUDE
: +6.5M V +2.1ME; GASOLINE: -613K V -500KE; DISTILLATE: +87K V -1ME; CAPACITY UTILIZATION: 79.9% V 82%E- Note: Lowest DoE Utilization rate recently was 72.3% on Oct, 1, 2008
9:40 PM
(CH) According to an unconfirmed report that did not cite sources, China's annual GDP growth in Q1 was higher than 6.0%, but lower than the 6.8% reported in Q4 (6.2%e) - Shanghai Securities News- Note: China's Q1 GDP figures are due on tomorrow's session.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Equity indices opened lower for the second morning in a row, as investors disregarded Goldman's big quarterly profit and pulled back on the surprising decline in March advanced retail sales.
The latter data came in at -1.1%, well below the expected +0.3% reading, while the prior figure was revised upward. But stocks have generally pared losses from the open ahead of President Obama's speech on the recovery.
In a newspaper interview published overnight, Fed Chairman Bernanke expressed his “fundamental optimism” regarding the US economy, a view that clashed with comments by Fed Governor Fisher, who told an audience in Hong Kong the US economic data remains “quite grim.”
After spending the European session above $50,front-crude ducked back under this level despite the EIA forecasting a much smaller decline in 2009 world oil consumption over last month's view in its short-term outlook. Treasury prices ticked slightly higher following the retail sales figures pushing the 10-year yield back towards 2.81%.
- Goldman Sachs's Q1 earnings surprise is having a mixed impact on the financials this morning, with many tier-one banks in the red, Bank of America making very modest gains and Citigroup up around 15% early on.
Shares of GS dropped 5% to meet the firm's $123/shr pricing of its $5B offering this morning. On the conference call, Goldman's CFO warned that it's ”still a dangerous environment out there” and insisted that returning government TARP funds is a “duty.” In other comments he confirmed that Goldman's competitive position has improved considerably despite troubles in the industry, noting that it has cut its leveraged loan exposure from around $52B in Q3 to around $2.3B in Q1. Next up: JP Morgan, which reports on Thursday morning.
- In other earnings news, Dow component Johnson & Johnson is up a modest 2% after reporting earnings just a hair ahead of the consensus views and missing revenue targets by a bit.
The firm also reaffirmed its 2009 forecast. WW Grainger blew out the consensus earnings forecast, sending shares of GWW up 8% after the bell. But GWW's CEO warned that the bottom isn't here yet, noting that the company expects increased pricing pressure throughout the remainder of the year. And note also that Dendreon is up a whopping 200% thanks to the pre-release of some positive data from a Phase III study of the company's Provenge prostate cancer drug. Dendreon said the drug met its primary endpoint of improving overall survival, but key findings from the study are due to be discussed at a conference later this month.
- Currencies trading has seen growing expectations that the worst may be over for the global recession, despite plenty of reminders that the road ahead is full of potholes.
Dealers are noting that a certain level of euphoria about the US economy is starting to surface, although the US retail sales data brought back some risk aversion (US job losses are seen adversely impacting consumer spending) ahead of the key Chinese GDP data due out Thursday morning. There are differing opinions between the official and analyst positions on China. European participants returned rather edgy from the long weekend over the pending data, reacting to comments from Chinese PBoC advisor Fan Gang that it might take an dditional 2-3 years to complete China's economic adjustment. But one investment house put out a research note saying that Premier Wen seemed to indicate that China Industrial Production jumped 8.3% in March, which would be above current consensus of 6.3%.
- EUR/USD tested 1.3230 before consolidating its session losses while USD/JPY tested its 200-day moving average just below the 99.00 handle.
Energy-related commodities guided the price action of the CAD and AUD currency pairs. The USD/CAD bounced off the 1.2110 level as continued concerns over the length of the global recession surfaced ahead of US President Obama's economic speech.3
More Headlines
7:21:54 AM
(US) Fed's Chairman Bernanke: "Fundamentally optimistic" regarding the economy
- Have seen tentative signs that the macro econ decline may have been slowing in May.
- Fed takes its inflation mandate seriously; most officials are looking for 2% inflation in the long-term.
- Confident that Fed can exit stimulus in timely fashion.
- Currently reviewing other types of credit for inclusion in TALF
8:30 AM
*MAR PRODUCER PRICE INDEX M/M: -1.2% V 0.0%E;
PPI EX FOOD&ENERGY M/M: 0.0% V 0.1%E- PPI YoY: -3.5% v -2.2%e - PPI Ex Food & Energy YoY: 3.8% v 4.0%e - No revisions
8:30:05 AM
*MAR ADVANCE RETAIL SALES: -1.1% V 0.3%E; LESS AUTOS: -0.9% V 0.0%E
- Prior Advance Retail Sales revised from -0.1% to +0.3%
- Prior Less Autos revised from 0.7% v 1.0%
8:30:05 AM
*MAR ADVANCE RETAIL SALES: -1.1% V 0.3%E; LESS AUTOS: -0.9% V 0.0%E
- Prior Advance Retail Sales revised from -0.1% to +0.3%
- Prior Less Autos revised from 0.7% v 1.0%
10:00 AM
*FEB BUSINESS INVENTORIES: -1.3% V -1.2%E- prior revised from -1.1% to -1.3%
10:30:45 AM
ECB's Constancio: The European recession appears to be "deeper" than the US recession; international responses to the crisis have been "insufficient"
- Monetary policy is less effective as tool to handle economic crisis if rates are below a specific level; has been adequate thus far in dealing with crisis.
- says Europe is not facing a deflation scenario like the one Japan experienced.
11:02:33 AM
NY Fed: Purchased $7.3B in ninth round of $300B purchase program; Dealers submitted $26.4B for consideration (bid to cover 3.62)
- Heaviest purchase was $3.3B for the 02/28/14 maturity
- note: Avg bid to cover for the prior four auctions is 5.54
11:43:01 AM
(US) President Obama: Financial system has been governed by outdated regulations, tough new rules are needed
- Wall Street executive compensation needs to be tied to actual performance.
- Pre-emptive banks takeovers would cost taxpayers too much and hurt confidence.
- Will hold banks that need more aid accountable, and "force the necessary adjustments."
- GM needs a path to profitability, hopes Chrysler can find a viable partner.
- Healthcare reform needs to be dealt with this year.
- Cannot delay introducing cap & trade system to when the economy recovers.
- says future growth will be built on 5 'pillars': new rules for Wall St; new investments in education; new investments in renewable energy; new investments in healthcare to reduce costs;
govt restoring fiscal discipline to reduce the deficit once the economic crisis is over.
8:30am March PPI (last m/m 0.1%, y/y -1.3%, ex food & energy last m/m 0.2%, y/y 4.0%),
- March Advance retail sales (last 0.1%, ex autos last 0.7%)
10:00am Feb Business Inventories (last -1.1%)
10:30am Fed coupon purchase
10:30am Fed's Evans speaks on risk management for banks
4:30pm API Crude Oil/Gasoline/Distillate Inventories
4:45pm Fed's Stern speaks on risk management for banks
Todays Headlines
- Equity markets started are trading off this morning after Thursday's substantial gains, thanks to some analyst skepticism over Wells Fargo's guidance call and the increasing likelihood of a GM bankruptcy.
In general volumes remain particularly light as much of Europe was closed for Easter holiday. Front-month crude ducked below $50 on the overall decline in markets as well as an IEA cut in global demand on Friday. Copper has traded above its 200-day EMA for the first time since last summer ahead of China Q1 GDP figures Wens. Treasury prices are firmer with the weakness in equities and another round of outright coupon purchases by the NY Fed. The US benchmark yield has fallen back below 2.85%.
- Investors sold off shares of the leading banks ahead of the bell this morning on fresh caution in the wake of the big run up late in Thursday's session, prompted by some negative analyst calls.
Note that while the Treasury's stress testing may be over, the banks have not received the results of these widely panned assessments. Keefe Bruyette ran its stress test of Wells Fargo, which showed the bank needs more common equity, and cut shares of WFC to underperform. Most of the financials returned to positive territory after the bell, with shares of Citi jumping 10% on chatter that preferred holders are unwinding some positions. Note that American Express is seeing a +5% bump thanks to being featured in a Barron's cover story.
- Boeing is taking its lumps after a crop of analysts cut the name over the weekend.
Recall that late last week Boeing cut its production estimates for twin-aisle planes and warned of a $0.38 earnings hit in Q1. S&P followed up by putting the company's ratings on review for downgrade.
GM is down 15% after widely reported news that the Treasury has told the company to be ready to declare “surgical bankruptcy” by June 1, with the NYT offering more details on the plan to split the company into “good” and “bad” halves.
Chrysler and Fiat are reportedly discussing a revamped partnership structure that may include adjustments in management and the board.
- Yet another giant pharma deal is moving markets today: Wellpoint is selling its NextRx subsidiaries to Express Scripts for $4.68B in cash and stock.
The transaction also includes a 10-year contract for Express Scripts to provide services to WellPoint. In the tech sector there were reports that the CEOs of Yahoo and Microsoft have held face-to-face talks about possible search partnership, which brings to mind holder Carl Icahn telling Yahoo late last week to make some kind of deal with Microsoft.
Back in the real world, eDaily reported that eBay said it is planning to buy controlling 34.2% stake in South Korean competitor Gmarket $413M at $24/share, giving it around 90% of the Internet auction market in the country. In other tech news, Seagate Technology reported preliminary Q3 revenue that was above the top end of its prior guidance, but also canceled its quarterly dividend. SPX Corporation guided Q1 lower and slashed its full-year forecast.4
- The dollar is losing some ground against the European names.
The euro has climbed back above 1.33 while Cable is testing 1.48. Some comments out of Chinese officials raised some eyebrows when former PBoC advisor Li Yang said China should purchase more short-term US debt while a state council deputy director indicated they could proceed with a plan to fully float the Yuan. Gold has moved back to test $900 on the weakness in the Greenback.
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.
"Willpower is the key to success. Successful people strive no matter what they feel by applying their will to overcome apathy, doubt or fear."
- Equity trading has been relatively subdued this week, with little key economic data on offer, earnings season barely begun and volume light ahead of the Easter holiday weekend.
Automakers moved along their restructuring plans, while banks got a shot in the arm from a positive pre-release from Wells Fargo. March same-store sales were as dismal as ever, with the normally stalwart Wal-Mart forced to cut Q1 EPS guidance.
PIMCO CEO Mohamed El-Erian commented he would not be surprised if equities retested lows and government bonds are "not worth owning," while White House Econ Advisor Larry Summers said the US economy is still facing "substantial downdrafts."
In the meantime, investors await earnings reports from JP Morgan, Goldman Sachs and Citigroup next week that may prove that Summers and El-Erian are pessimists or confirm their grim predictions.
For the four day week, the S&P 500 rose 1.6%, the DJIA gained 0.8%, while the Nasdaq Composite, which is now up 4.8% year to date, was up 1.9%. Notably the VIX volatility index, a measure of fear in the stock market, closed Thursday at its lowest level since September 26 as risk appetite returned.
Week of 4/13/2009 thru 4/17/2009
Monday, April 13, 2009
Note that European markets are closed for Easter Monday.
10:30am Fed coupon purchase
Tuesday, April 14, 2009
8:30am March PPI (last m/m 0.1%, y/y -1.3%, ex food & energy last m/m 0.2%, y/y 4.0%),
March Advance retail sales (last 0.1%, ex autos last 0.7%)
10:00am Feb Business Inventories (last -1.1%)
10:30am Fed coupon purchase
10:30am Fed's Evans speaks on risk management for banks.
4:30pm API Crude Oil/Gasoline/Distillate Inventories
4:45pm Fed's Stern speaks on risk management for banks.
Wednesday, April 15, 2009
8:30am March CPI (last m/m 0.4%, y/y 0.2%; ex food & energy last m/m 0.2%, y/y 1.8%),
March CPI Core Index SA (last 217.670), April Empire Manufacturing (last -38.23)
9:00am Feb Net Long-Term TIC Flows (last -$43B), Feb Total Net TIC Flows (last -$148.9B)
9:15am March Industrial Production (last -1.5%), March Capacity Utilization (last 70.2%)
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
1:00pm April NAHB Housing Market Index (last 9)
2:00pm Fed's Beige Book
10:00pm China Q1 GDP.
Thursday, April 16, 2009
8:30am March Housing Starts (last 583K),
March Building Permits (last 564K),
Initial Jobless Claims (last 654K),
Continuing Claims (last 584M)
10:00am April Philadelphia Fed (last -35)
10:30am Natural Gas Inventories
1:00pm Fed's Lockhart speaks on the economic crisis in New York.
8:00pm Fed's Yellen speaks on the economic crisis in New York.
Friday, April 17, 2009
8:30am Fed's Hoenig speaks at Fed conference in Washington, DC.
9:55am April prelim Univ of Michigan confidence (last 57.3)
12:00pm Fed Chairman Bernanke speaks at Fed conference in Washington, DC.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Equity markets have made strong gains this morning, led by financial names in a situation reminiscent of the start of the current rally back in early March.
Bullish Q1 preliminary results from Wells Fargo only reinforced optimism that no banks under examination have failed the government's stress test, and that has served as the major catalyst.
Note that March same-store sales showed little improvement with Wal-Mart missing consensus estimates. A flurry of rumors has blown across trading desks all morning, with pre-market reports of a Kuwaiti offer for Textron the biggest of the bunch. Front-month crude has returned to the strength seen earlier in the week, rising more than $2.50 to just below $52 as it continues to find traction post yesterday's inventory results.
- Treasury prices are moving lower on the back of firmer stock prices.
The 10-year yield is back above 2.9%, but prices have been bid up some following the $18B 10-year reopening results that were announced early due to the pending Easter holiday. GILT prices have rallied after the BOE announced the next leg of purchases under their quantitative easing program. Before the NY open the BOE also left rates unchanged and indicated they did not plan to extend the plan to buyback GILTS at this time.
- A month ago, Citi, JP Morgan and Bank of America sent indices higher after making positive comments on their first quarter performance.
Today Wells Fargo offered a Q1 earnings forecast that was double the consensus estimates and a revenue number $1B higher than expected. WFC's CFO said strength in traditional banking businesses, strong capital markets activities and exceptionally strong mortgage banking results were behind the improved forecast. In a CNBC interview, he said the bank was “a lot closer to bottom.” Adding to the positive glow, a Fox-Pitt analyst said Citi has an "increased probability of survival."
- Note that the WSJ offered cautious comments on Morgan Stanley's bond business.
Due to the accounting treatments of some bonds issued by the bank before the financial crisis started, it is expected to take a hit of $1.2-1.7B when it reports quarterly results later this month, a bit higher than the $500M-$1B mark that many analysts are predicting from the bond-price move. WFC is up 25%, but off its best levels, while BAC is up 20%, JPM+13%, C+9%, MS+6% and GS+4%.
- Overnight Agence France-Presse picked up on a story in Kuwait's Al-Watan newspaper overnight that a UAE-Kuwait consortium may bid $21/share for Textron, valuing the conglomerate at over $5B.
The company later said they could not confirm or deny any buyout offer for the company. UBS threw cold water on the repots, calling the deal "extremely unlikely." Citigroup analyst comments on takeover speculation, says Boeing and UTX might be interested in TXT's Bell Helicopter unit, believes TXT worth $15+ in a takeover scenario. Various rumors earlier this month named Lockheed Martin as potential bidder for Textron.
- Profit guidance from various small- and mid-cap firms is offering a positive spin on earnings season.
California Pizza Kitchen doubled its Q1 earnings guidance while retailer Charlotte Russe said it would be in the black in Q1 (analysts expect a $0.19 loss). Cash America upped its view of Q1 and reaffirmed its full-year forecast noting better results in its pawn lending operations and online cash advance offerings. Control systems manufacturer Moog offered a downbeat assessment, cutting its full-year earnings and revenue outlook considerably, citing the dramatic slowdown in orders for its industrial products and anticipated reductions in commercial airplane deliveries.
The Dollar has gone bid in the late NY morning after trading lower on the better risk appetite for much of the European session.
The EUR/USD has slid through .1.32 to after Citigroup made cautious comments ahead of the NY open. The note suggested the Euro could sink towards 1.2750 by early next week due to liquidity concerns around the Easter holiday. Cable is down 100 pips approaching 1.46 while USD/CHF is near session highs, up more than 110 pips at 1.1580.
More Headlines
7:00:04 AM
*(UK) BOE LEAVES BANK RATE UNCHANGED AT 0.50% - AS EXPECTED, CONTINUES WITH £75B ASSET PURCHASE FACILITY
- To complete £75B APF in 2 months (note so far bank has purchased £26B in assets under APF) financed by central bank reserves
8:30:02 AM
*(US) INITIAL JOBLESS CLAIMS W/E APR 4TH: 654K V 660KE; CONTINUING CLAIMS W/E MARCH 28TH: 5.84M V 5.8ME
- Prior Jobless Claims revised from 669k to 674K
- Prior Continuing Claims revised from 5.728M to 5.745M
10:30 AM
*EIA NATURAL GAS INVENTORIES: +20 BCF VS. +10 TO +15 BCF ESTIMATE RANGE
12:15:25 PM
Fed's Stern: "Too big to fail" must address incentives; 'healthy' economic growth may resume in mid 2010; will handle any risks of deflation
- Recession to persist for some time due to strains in credit market; recent improvements in credit due to Fed policies
- Fed has ample time to withdraw the liquidity it has provided; economy not far from bottom, not yet there.
12:18 PM
(EU) ECB's Trichet: Recovery could start in 2010; stimulus plans for most part are 'adequate'; further interest rate cuts from ECB are conceivable- says all G20 members want to move quickly
12:46:47 PM
White House Econ Advisor Summers: US economy is still facing "substantial downdrafts," sense of "freefall" should end in next few months
- Sees some easing in credit conditions, inventories running down; declines to comment on where unemployment may peak, notes it is a lagging indicator, but do not expect it to stabilize at the current level.
- Inflation and deflation are both risks.
8:30am Feb Trade Balance (last -$36B),
March Import Price Index (last m/m -0.2%, y/y -12.8%),
Initial Jobless Claims (last 669K), Continuing Claims (last 5.728M)
9:00am Fed's Stern speaks in South Dakota
10:30am Natural Gas Inventories
1:00pm Fed's Hoenig speaks on US economy in Oklahoma
Recommended bond market early close...
Todays Headlines
9:01:04 AM
(US) US Treasury formally launches $5B auto parts supplier support program, to be administered by GM and Chrysler
- Calls on interested companies to contact GM and Chrysler.
- follow up 10:58amET: Chrysler says Treasury may contribute $1.5B credit line via Chrysler, requiring Chrysler to make a 5% capital infusion.
10:00:03 AM
(US) SEC staff recommends updated uptick rule applying to all stocks, recommends bid test limiting shorts to up bids
- SEC staff recommends three circuit breakers, with third circuit would trigger bid test for the rest of the day for an individual stock.
- Chairman Schapiro: Have begun the process of deliberating on how to address short selling
10:00 AM
*FEB WHOLESALE INVENTORIES: -1.5% V -0.7%E- no revisions
10:15:41 AM
(US) US Treasury: Some life insurers meet TARP requirements and will be reviewed for funding; are eligible for capital as bank holding firms
- Reminder: WSJ wrote overnight that the US Treasury was planning to extend TARP to life insurance companies
10:21:26 AM
(US) SEC Chair Shapiro (D): Not aware of any evidence that suggests repeal of uptick rule contributed to recent volatility
- SEC should consider arguments for and against the uptick rule in light of recent market developments.
- Planning May 5th round table to discuss short selling rules.
- Investors may feel somewhat less confident placing capital in markets without restrictions on short selling
10:30 AM
*DOE CRUDE: +1.65M V +1.4ME; GASOLINE: +656K V -1.7ME; DISTILLATE: -3.35M V -500KE; CAPACITY UTILIZATION: 81.8% V 82%E- Distillate demand +400K bpd to 4.06M bpd - Gasoline demand -100KK bpd to 9.02M bpd
10:57:34 AM
SEC's Walter (D): Supports seeking comment, staff recommendations on short sale restriction options
- Notes that the market behavior and investor confidence indicates that its appropriate for consideration of action
- SEC's Aguilar (D): Willing to vote in favor of releasing proposals asking for comments (now fourth SEC commissioner to support)
- SEC's Parades (R): Feels that initial repeal of uptick rule based upon data shows that it must now be reinstated; short sale rules could damage investor confidence; cautious on whether uptick rule could actually help markets (
- Remarks that a very restrictive short sale rule could hurt benefits of short sales (now fifth SEC commissioner to support)
11:10:36 AM
NY Fed: Purchased $2.97B in treasuries in seventh round of $300B purchase program; Dealers submitted $31.29B for consideration (10.5 bid to cover)
- Heaviest purchase was $900M for the 11/30/2010 maturity
- Avg bid to cover for last four auctions has been 3.54
11:33 AM
(US) SEC votes 5-0 to release all five staff proposals on rules restricting short sales for a public comment period of 60 days
2:00:29 PM
*MINUTES OF THE MARCH 17-18 FOMC MEETING:
SAW DOWNSIDE RISKS WERE PREDOMINANT,
STAFF FORECASTED GDP TO FLATTEN IN 2H09,
EXPANDING SLOWLY IN 2010;
- Agreed on Treasury purchases due to risks to the already weak economic outlook
- Staff cut 2H09 and 2010 GDP forecasts; forecasting unemployment rate 'more steeply' higher in 2010.
- Saw indications of some consumer stabilization yet risks remain, including a higher savings rate.
- Inflation risks are subdued, some see risks of deflation; inflation below desirable levels.
- Officials were split on appropriate size for asset purchases; though agreed on Treasury purchases due to risks in weak economy.
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.
- Stocks opened higher this morning after two consecutive sessions marked by declines.
US equity futures rebounded ahead of the open spurred by optimism from the Pulte/Centex deal and broad strength in the life insurers following a WSJ article indicating the US Treasury was ready to give certain companies access to TARP funds. The major indices have come off their best levels after the Treasury confirmed that it would extend TARP funding to “some” life insurance companies, but it remains unclear just how much. All eyes are on the SEC this morning, as commissioners debate the merits of reinstituting the uptick rule.
- Government bond prices benefited from a continued risk aversion trades throughout much of the overnight session.
A well received GILT auction sent prices higher and yields lower in Europe, while both the BOE and Fed also continue to buy securities outright keeping a floor under prices. The US curve has seen some flattening along the curve as a $35B 3-year note auction is keeping a lid on prices at the short end despite the Fed's purchases. The 2-year yield is higher on the day at 0.92% while the 10-year is back below 2.9%
- Energy markets continued to head lower ahead of the weekly DOE inventory data, but have since reversed noticeably.
Crude has rallied from $48 to trade as high as $51 as crude inventory builds were basically in line with expectations. Traders did pick up on a larger than expected draw down of distillate stockpiles coupled with a substantial uptick in demand seen in the latest week, which could point to some much needed balancing in diesel supply/demand dynamics. Heating oil futures are leading the complex up nearly 4% on the day.
- Pulte Homes' offer for Centex is rocking the home builders this morning, sending selected names up 5-10% in early trading.
The deal would create the nation's biggest homebuilder, with Pulte picking up a 68% stake in Centex for $1.3 billion in stock (plus $1.8B in net debt). Moody's put the ratings of both firms on review for downgrade, noting that both firms have considerable land holdings hanging around their necks, which would be a heavy weight for the combined entity to carry in the worst market for homes in generations. Shares of CTX are up 20%, while PHM is down 10%.
- Alcoa kicked off earnings season with its second consecutive quarterly loss, missing consensus earnings estimates by a hair while beating revenue targets.
The CEO was bullish on stimulus, noting that government stimulus programs should drive demand for aluminum. But the company still sees a 7% overall decline in aluminum consumption this year, steeper than its 2% decline estimate on 1/2. Note that UBS raised its price target on AA this morning. Shares of AA were up as much as 5% in early trading, but are around even mid morning. Consumer names Bed Bath and Beyond and Family Dollar both offered another helping of good news for the retail sector. BBBY beat consensus estimates (winning multiple PT hikes overnight), while FDO boosted its quarterly SSS performance and raised its full-year earnings forecast considerably. BBBY+20% is sustaining robust gains, while FDO+4% is off its best levels. Mosaic missed on earnings and revenue, while quarterly margins were one third of year-ago levels. Shares of MOS are down nearly 20% this morning.
- There has been another batch of pre-earnings guidance and profit warnings overnight.
Ryder guided considerably below the consensus view, noting that the weak economy will hit the company's bottom line, especially the company's full service lease and contract maintenance product lines, which had remained more stable until now. Tech names Juniper Networks and F5 Networks both refined their outlook for upcoming earnings very slightly, sending shares of FFIV and JNPR up 10-12% early on. Both are off their best levels. Also note that Sharp [6753.JP] increased its FY08/09 loss estimates overnight.
- The Greenback and JPY showed some relative strength during Asian and European hours but have given some of that back as stocks rallied into and through the NY open.
EUR/USD is up 125 pips from overnight lows to trade into the green for the day. EUR/GBP is also at session highs back above 0.90. The Euro rebound is in the face of fresh downgrades of Eastern European sovereigns Latvia, Lithuania, and Estonia.
More Headlines
9:01:04 AM
(US) US Treasury formally launches $5B auto parts supplier support program, to be administered by GM and Chrysler
- Calls on interested companies to contact GM and Chrysler.
- follow up 10:58amET: Chrysler says Treasury may contribute $1.5B credit line via Chrysler, requiring Chrysler to make a 5% capital infusion.
10:00:03 AM
(US) SEC staff recommends updated uptick rule applying to all stocks, recommends bid test limiting shorts to up bids
- SEC staff recommends three circuit breakers, with third circuit would trigger bid test for the rest of the day for an individual stock.
- Chairman Schapiro: Have begun the process of deliberating on how to address short selling
10:00 AM
*FEB WHOLESALE INVENTORIES: -1.5% V -0.7%E- no revisions
10:15:41 AM
(US) US Treasury: Some life insurers meet TARP requirements and will be reviewed for funding; are eligible for capital as bank holding firms
- Reminder: WSJ wrote overnight that the US Treasury was planning to extend TARP to life insurance companies
10:21:26 AM
(US) SEC Chair Shapiro (D): Not aware of any evidence that suggests repeal of uptick rule contributed to recent volatility
- SEC should consider arguments for and against the uptick rule in light of recent market developments.
- Planning May 5th round table to discuss short selling rules.
- Investors may feel somewhat less confident placing capital in markets without restrictions on short selling
10:30 AM
*DOE CRUDE: +1.65M V +1.4ME; GASOLINE: +656K V -1.7ME; DISTILLATE: -3.35M V -500KE; CAPACITY UTILIZATION: 81.8% V 82%E- Distillate demand +400K bpd to 4.06M bpd - Gasoline demand -100KK bpd to 9.02M bpd
10:57:34 AM
SEC's Walter (D): Supports seeking comment, staff recommendations on short sale restriction options
- Notes that the market behavior and investor confidence indicates that its appropriate for consideration of action
- SEC's Aguilar (D): Willing to vote in favor of releasing proposals asking for comments (now fourth SEC commissioner to support)
- SEC's Parades (R): Feels that initial repeal of uptick rule based upon data shows that it must now be reinstated; short sale rules could damage investor confidence; cautious on whether uptick rule could actually help markets (
- Remarks that a very restrictive short sale rule could hurt benefits of short sales (now fifth SEC commissioner to support)
11:10:36 AM
NY Fed: Purchased $2.97B in treasuries in seventh round of $300B purchase program; Dealers submitted $31.29B for consideration (10.5 bid to cover)
- Heaviest purchase was $900M for the 11/30/2010 maturity
- Avg bid to cover for last four auctions has been 3.54
11:33 AM
(US) SEC votes 5-0 to release all five staff proposals on rules restricting short sales for a public comment period of 60 days
2:00:29 PM
*MINUTES OF THE MARCH 17-18 FOMC MEETING: SAW DOWNSIDE RISKS WERE PREDOMINANT, DISCUSSED WORKING WITH TREASURY; EXPECTED GDP TO FLATTEN IN 2H09
- Staff cut 2H09 and 2010 GDP forecasts
- Forecasting unemployment rate 'more steeply' higher
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
1:00pm Treasury's 3-year note auction
2:00pm FOMC minutes
Todays Headlines
5:00:03 AM
*(EU) EURO-ZONE Q4 GDP Q/Q: -1.6% V -1.5%E; Y/Y: -1.5% V -1.3%E
- Household Consumption: -0.3% v -0.4%e
- Gross Fixed Capital Formation: -4.0% v -3.7%e
- Govt Expenditure: 0.4% v 0.1%e
7:03:48 AM
PIMCO's El-Erian: American consumer will return, but in a more restrained fashion; Government bonds are "not worth owning" -CNBC
- Unemployment is "Not a backward indicator"
- Reiterates that PIMCO remains very underweight on equities. Fears pepole are getting "sucked in" to equities after seeing big 25% increases.
- Would not be surprised if equities retested lows.
- Mortgage-backed, corporate and muni bonds are attractive.
- Fed's corporate paper program has been successful.
9:31 AM
(EU) EU's Kroes: Bankruptcy cannot be excluded for some European banks, nationalization is also an option
3:00:02 PM
*FEB CONSUMER CREDIT: -$7.5B V -$3.0BE
- Prior revised to +$8.1B from +$1.8B
- Feb included -$7.8B decline in credit card debt (a new record)
4:30 PM
*API PETROLEUM INVENTORIES: CRUDE: +6.9M V +1.4ME; GASOLINE: +2.9M V -1.7ME; DISTILLATE: -2.27M V -500KE; CAPACITY UTILIZATION: 82% V 82%E
7:01 PM
*(UK) UK MAR NATIONWIDE CONSUMER CONFIDENCE: 41 V 45E (PRIOR 43); Multi-year Low
8:31 PM
(US) Treasury plans to extend TARP to life insurance companies - WSJ- Announcement is expected within the next several 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.
- With another extremely light economic calendar stock investors continue to turn their attention to the upcoming earnings seasons and are lightening up in equity holdings in the early going.
The US indices are down about 1.5% a piece, although they are off their worst levels mid morning. PIMCO CEO Mohamed El-Erian had plenty to say to CNBC ahead of the open, noting that he would not be surprised if equities retested lows and that government bonds are "not worth owning."
Front-month crude is below $50, around $1.50 off overnight highs, while natural gas is making six-year lows around trading below $3.60. The Colorado States latest forecast for the upcoming hurricane season only confirmed the early weakness in the energy complex when they lowered the number of named storms expected to 6, with only 2 major.
- Pessimism over upcoming earnings at leading financials is sending the banks down 2-4% in early trading.
Overnight "Heard on the Street" wrote that after a strong start in 2009, banking shares may be due for a pullback due to uncertainty over book values, which may fall amid uncertainty of banks being able to earn ROE above the current 13% cost of equity. Meanwhile, the IMF has said that the toxic assets held by financial companies could rise to $4T, with the deterioration in US-originated assets to reach $2.2T by the end of next year. Citi is an exception this morning, spiking up 2.5% in early trading.
- There has been a smattering of guidance reports and profit warnings ahead of earnings season, but nothing like the deluge of highly negative guidance seen ahead of last quarter's earnings season.
Two consumer-facing names offered strong guidance this morning, restaurateur Brinker International and electronics retailer HH Gregg, with EPS forecasts for the coming quarter that blew out consensus estimates. Shares of EAT+6% and HGG+10% have lost a little altitude in early trading. March same-store sales come on Wednesday and Thursday, and the analysts are out talking up retailers. Yesterday Needham was positive on the sector, while Merrill raised price targets on multiple names. But today most retail names are down with overall indices and headed lower in early trading.
- Managed healthcare names traded off somewhat in the premarket after being granted a substantially lower baseline rate increase for Medicare Advantage (0.8% rather than the approx 4% increase in recent years), although the cuts are slightly less severe than those initially proposed in February.
Humana, Aetna, UNH, Cigna, Wellpoint and Health Net slipped 2-3% before quickly heading back toward positive territory, with HUM, AET and UNH up 2-3%.
- Currency markets are still seeing the effects of some risk aversion trades, but the Pound Sterling is showing some relative strength late in the NY morning.
Cable has paired nearly all if its losses for the day to trade back towards 1.4750 after trading below 1.46.
EUR/GBP has dropped below 0.90 for the first time in roughly a month. JPY has also exhibited some relative strength trading pretty much higher across the board. The EUR.USD pair has been down more than 1% for most of the session trading below 1.33.
More Headlines
5:00:03 AM
*(EU) EURO-ZONE Q4 GDP Q/Q: -1.6% V -1.5%E; Y/Y: -1.5% V -1.3%E
- Household Consumption: -0.3% v -0.4%e
- Gross Fixed Capital Formation: -4.0% v -3.7%e
- Govt Expenditure: 0.4% v 0.1%e
7:03:48 AM
PIMCO's El-Erian: American consumer will return, but in a more restrained fashion; Government bonds are "not worth owning" -CNBC
- Unemployment is "Not a backward indicator"
- Reiterates that PIMCO remains very underweight on equities. Fears pepole are getting "sucked in" to equities after seeing big 25% increases.
- Would not be surprised if equities retested lows.
- Mortgage-backed, corporate and muni bonds are attractive.
- Fed's corporate paper program has been successful.
9:31 AM
(EU) EU's Kroes: Bankruptcy cannot be excluded for some European banks, nationalization is also an option
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Todays Headlines
4:46:37 AM
(EU) ECB's Bini Smaghi: FX intervention could be warranted, must be consistent with monetary policy
- Using fx to gain advantage could fuel protectionism.
- Does not expect single market to function if FX sharply fluctuates.
- Euro Zone members should be involved in FX rate discussions with IMF.
- Spot FX market continues to function normally despite volatility.
- Recent dollar strength may be perceived as return of dollar as reserve currency.
- Bad policies in nearby countries may have a drastic impact on euro.
- States that only the ECB and Euro Zone presidents should be making comments on currencies.
7:50:30 AM
Analysts and Morgan Stanley continue to favor cash over equities; states that Bear Market is not over (timing uncertain)
- Continue to sell equities of ratings from sell to neutral, will sell equities into market strength
- Current market action is seen at a 20% bear market rally (there were 5 such rallies between 1930 and 1932)
- Sees credit markets continuing to lag in recent rally, inability to rally in this sector despite gov action very bearish
- State that an additional 5% move out of equities is needed following strong gains (especially in Europe)
- Still awaiting three key signals that bear market has ended, looking for:
*Positive earnings season
*Positive US housing data
*Positive bank balance sheets
- State that changes to mark-to-market regulation could have had major impact in 2008, but will do little now, not seen as game changer for financial firms
7:55:32 AM
Needham is positive on March same-store sales
- Despite the negative impact of a later Easter, (April in 2009 v March in 2008), most retailers are up against easier comparisons due to a cold, wet March last year.
- Warmer weather this year, Spring break and the end of season spring clearance sales sparked traffic and conversion in the second half of March.
- March SSS trends are expected to show minor improvement m/m. Needham believes that most teens spent Spring break in malls rather than on vacation due to the economic environment, which could benefit teen retailers.
- Needham believes the Missy retailers continue to be challenged due to lack of newness and fashion. Shoppers continue to be very choosey in their purchases and continue to spend on fashion and trend-right product that is unique and adds something different to their already full wardrobe.
7:59:45 AM
Calyon Analyst Mike Mayo makes negative comments on US banking sector - recap
- Banks are expected to continue facing fallout from the credit crunch, with loan losses across all structured asset classes to increase from 2.0% to 3.5% by end of 2010.
- Future pretax profits will suffer from further wrirte downs.
- US government help remains a wild card as it can both over regulate the industry and can have banks retain toxic assets on balance sheets.
- Mark-to-mark accounting will bring only short term relief and does nothing to fundamentally change the situation.
- Expects earnings to be below market consensus.
9:00:28 AM
(US) Treasury extends application deadline for public/private toxic asset plan by two weeks, to 4/24
- New deadline for legacy security fund managers is 4/24, preliminary decision to come 5/15
- May open program to smaller fund managers following initial approvals.
- Fund managers will be chosen on their ability to raise $500M in capital and their level of experience.
- Initial fund managers will also need to have $10B in assets under management.
- Notes that $25B in TARP funds will be used to expand TALF, $75B to buy legacy assets and securities, the latter figure to be divided based on market demand (note: On 3/23 the Treasury said it would use $75B to $100B from TARP to finance public-private partnership)
- Legacy securities PPIP will initially include pre-2009, non-agency, non-commercial, residential MBS.
- Plans to seek comment on potentially expanding Legacy securities PPIP to other asset classes.
11:00 AM
US Treasury to sell $35B in 3 year notes, $18B in 10 year reopening- To sell $28B in reopened 4 week bills
11:02:23 AM
NY Fed: Purchased $2.53B in treasuries in sixth round of $300B purchase program; Dealers submitted $11.64B for consideration ( 4.6 bid to cover)
- Heaviest purchase was $1.128B for the 8/15/2019 maturity
- Average bid to cover for last four auctions has been 3.16
12:10:31 PM
(EU) ECB's Nowotny: Sees room for another step on refi rate, but 1% is the limit; Not ECB's job to intervene to support CEE currencies
- Overnight deposit rate should not go to zero. Sees need for expansionary policy in 2010.
- Unilateral EUR adoption by Central and Eastern European states would undermine confidence in the euro. Believes that any such a move by an CEE state would be legally impossible and economically unwise.
- There is only a "faint prospect" of a Euro Zone country needing a bailout, no dangers of any member default.
- Money markets are functioning now, longer-term credit markets could use some improvement.
- Sees weak positive signals on growth in the Euro Zone, economy approaching a bottom.
- Believes 2010 recovery will be "rather slow and weak," with very low inflation.
1:34:27 PM
(US) US Defense Sec Gates discloses details of Pentagon budget proposals; Pentagon base budget up $13B; calls to move away from 'ad hoc' funding
- LMT's Presidential Helicopter program to be ended, F-22 program to be halted at 187 jets.
- Boeing's airborne laser to be limited to one test plane.
- Unmanned aircraft production to be allocated additional $2B.
- Increasing special forces personnel by 5%.
- Plans to buy three littoral combat ships in 2010.
- Increasing purchases of F-35 from 14 in 2009 to 30 in 2010 for $11.2B.
- Restarting DDG 51 program.
- Restructuring missile defense program to focus on "rogue state" capabilities. Increasing funding for missile defense systems by $700M, including $200M for Aegis ships.
- Sticking to plans to buy new air refueling tankers, expects to say more on contracts this summer. Gates notes that splitting the contract is not the best deal for taxpayers.
- CGX Destroyer program delayed.
- No more funding scheduled for new C-17s.
- Ending "transformational satellite" program. Buying two AEHF satellites instead.
- Significantly restructuring the Army's Future Combat System (FCS). Notes that FCS vehicles do not fit the lessons of counter-insurgency warfare learned in Iraq and Afghanistan whereas MRAP vehicles are performing adequately.
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.
- With no economic data to shape expectations and caution in the wind ahead of earnings season, US equity indices have been under pressure as the trading week begins.
The financials have been beaten down by bearish comments from Caylon's Mike Mayo, while Morgan Stanley has been talking down the rally, proclaiming that the bear market is not over and that its analysts are still waiting for positive earnings and housing data and as well as improvements to banks' balance sheets. In particular, Morgan is disturbed by the continuing lag of credit markets, noting that their inability to rally despite lots of government action is a bad sign.
Front-month crude has come off overnight highs around $53 to test $50 once again.
Note that an Exxon exec said this morning that the company is not planning to revise its investment plans and will boost production.
- Treasury markets are attempting to beat back the ongoing wall of supply worries.
Another outright purchase by the NY Fed has kept prices pretty steady despite the Treasuries announcement of another $53B in notes supply to be auctioned of later this week. That amount was generally in line with expectations while prices in Treasury futures remain fractionally higher. The US Benchmark yield trades just below 2.9%. GILT yields jumped higher after the results the BOE latest reverse auction showed no long dated GILTS were purchased. The 10-year GILT yield has ticked back towards 3.45%.
- Calyon Securities threw a wet blanket on the financial sector overnight, initiating most of the major banks (with the notable exceptions of Goldman and Morgan Stanley) with sell ratings.
Calyon analyst Mike Mayo said the banks will continue to deal with fallout from the credit crunch, with loan losses across all structured asset classes rising to 3.5% from 2.0% by the end of 2010. Mayo said the changes to mark-to-mark accounting enacted last week will bring only short term relief and does nothing to fundamentally change the situation.
Reports are making the rounds that bank executives will meet this week to discuss how to deal with the results of the government stress tests. And note that yesterday the UK Sunday Telegraph wrote that Goldman may sell stock to help repay its $10B in TARP funding as soon as it passes its stress test. Goldman is said to have on hand about $100B in cash assets, more than enough to repay $10B TARP loan. Leading bank stocks opened down 3-4% and remain under pressure but off their worst levels in mid morning trading.
- Topping other equity news are reports that Sun Microsystems has broken off talks with IBM over the latter's $7B acquisition offer.
Sun's board reportedly rejected IBM's $9.40/shr offer as too low. The state of the deal, which some had called “at the brink of collapse,” remains unclear. Shares of JAVA fell more than 20% before the open. In other tech news, Goldman removed CSCO-5% from its Americas Conviction Buy List, noting the target price reached and that it still has a positive long-term view on CSCO. Ford has completed its debt restructuring initiatives, cutting its debt by $9.9B and lowering its annual interest expense by more than $500M in exchange for cash and equity. Note that GM's CEO told Meet the Press yesterday morning that a GM bankruptcy, while not inevitable, has become more probable. Shares of Ford spiked over 20% in the early going, before settling down to around +10%. GM is down 5%.
- Risk aversion themes are dominating currency trade. The Greenback and Yen are firmer as traders monitor declines in stocks and commodities pretty much across the board.
Gold is off nearly 3% or $25+ while crude is testing $50. EUR/USD moved below 1.34 which was prior key hourly support post the Fed's QE announcement to trade down a big figure at 1.3380. Cable trades off nearly 100 pips as well at 1.4745.
Overnight USD/JPY tested fresh 5-month highs but has since backed off with risk aversion bids coming into JPY. The Dollar Is also posting gains against the Loonie and Aussie Dollar helped by the commodity weakness.
More Headlines
4:46:37 AM
(EU) ECB's Bini Smaghi: FX intervention could be warranted, must be consistent with monetary policy
- Using fx to gain advantage could fuel protectionism.
- Does not expect single market to function if FX sharply fluctuates.
- Euro Zone members should be involved in FX rate discussions with IMF.
- Spot FX market continues to function normally despite volatility.
- Recent dollar strength may be perceived as return of dollar as reserve currency.
- Bad policies in nearby countries may have a drastic impact on euro.
- States that only the ECB and Euro Zone presidents should be making comments on currencies.
7:50:30 AM
Analysts and Morgan Stanley continue to favor cash over equities; states that Bear Market is not over (timing uncertain)
- Continue to sell equities of ratings from sell to neutral, will sell equities into market strength
- Current market action is seen at a 20% bear market rally (there were 5 such rallies between 1930 and 1932)
- Sees credit markets continuing to lag in recent rally, inability to rally in this sector despite gov action very bearish
- State that an additional 5% move out of equities is needed following strong gains (especially in Europe)
- Still awaiting three key signals that bear market has ended, looking for:
*Positive earnings season
*Positive US housing data
*Positive bank balance sheets
- State that changes to mark-to-market regulation could have had major impact in 2008, but will do little now, not seen as game changer for financial firms
7:55:32 AM
Needham is positive on March same-store sales
- Despite the negative impact of a later Easter, (April in 2009 v March in 2008), most retailers are up against easier comparisons due to a cold, wet March last year.
- Warmer weather this year, Spring break and the end of season spring clearance sales sparked traffic and conversion in the second half of March.
- March SSS trends are expected to show minor improvement m/m. Needham believes that most teens spent Spring break in malls rather than on vacation due to the economic environment, which could benefit teen retailers.
- Needham believes the Missy retailers continue to be challenged due to lack of newness and fashion. Shoppers continue to be very choosey in their purchases and continue to spend on fashion and trend-right product that is unique and adds something different to their already full wardrobe.
7:59:45 AM
Calyon Analyst Mike Mayo makes negative comments on US banking sector - recap
- Banks are expected to continue facing fallout from the credit crunch, with loan losses across all structured asset classes to increase from 2.0% to 3.5% by end of 2010.
- Future pretax profits will suffer from further wrirte downs.
- US government help remains a wild card as it can both over regulate the industry and can have banks retain toxic assets on balance sheets.
- Mark-to-mark accounting will bring only short term relief and does nothing to fundamentally change the situation.
- Expects earnings to be below market consensus.
9:00:28 AM
(US) Treasury extends application deadline for public/private toxic asset plan by two weeks, to 4/24
- New deadline for legacy security fund managers is 4/24, preliminary decision to come 5/15
- May open program to smaller fund managers following initial approvals.
- Fund managers will be chosen on their ability to raise $500M in capital and their level of experience.
- Initial fund managers will also need to have $10B in assets under management.
- Notes that $25B in TARP funds will be used to expand TALF, $75B to buy legacy assets and securities, the latter figure to be divided based on market demand (note: On 3/23 the Treasury said it would use $75B to $100B from TARP to finance public-private partnership)
- Legacy securities PPIP will initially include pre-2009, non-agency, non-commercial, residential MBS.
- Plans to seek comment on potentially expanding Legacy securities PPIP to other asset classes.
11:00 AM
US Treasury to sell $35B in 3 year notes, $18B in 10 year reopening- To sell $28B in reopened 4 week bills
11:02:23 AM
NY Fed: Purchased $2.53B in treasuries in sixth round of $300B purchase program; Dealers submitted $11.64B for consideration ( 4.6 bid to cover)
- Heaviest purchase was $1.128B for the 8/15/2019 maturity
- Average bid to cover for last four auctions has been 3.16
12:10:31 PM
(EU) ECB's Nowotny: Sees room for another step on refi rate, but 1% is the limit; Not ECB's job to intervene to support CEE currencies
- Overnight deposit rate should not go to zero. Sees need for expansionary policy in 2010.
- Unilateral EUR adoption by Central and Eastern European states would undermine confidence in the euro. Believes that any such a move by an CEE state would be legally impossible and economically unwise.
- There is only a "faint prospect" of a Euro Zone country needing a bailout, no dangers of any member default.
- Money markets are functioning now, longer-term credit markets could use some improvement.
- Sees weak positive signals on growth in the Euro Zone, economy approaching a bottom.
- Believes 2010 recovery will be "rather slow and weak," with very low inflation.
"Life is like a trumpet - if you don't put anything into it, you don't get anything out of it."
Here’s what to Expect in April, 2009
A positive tone, or at least selling exhaustion, set in during March, allowing equity markets to post monthly gains for the first time in about a year.
The rebound in stocks during March, though labeled a bear market rally by most pontificators, demonstrated that a glimmer of hope may finally be just over the horizon. March marked a potential turning point as the Obama Administration, after some false starts, fleshed out its three pronged plan for economic stability and recovery. This combined with the launch of the Fed's TALF lending program and quantitative easing via treasury purchases lent some certainty to markets, though Congress' retroactive tinkering with executive bonus plans has undercut some of that certainty. Meanwhile, a lackluster US Treasury auction on the heels of a failed Gilt auction in the UK raised concerns about oversupply in the government bond market as nations seek to fund the unprecedented global stimulus. Given this environment, events this month could take markets either way: cementing certainty that government plans are starting to take effect, or crystallizing the fact that recovery will be a slow process even if all of the stimulus plans are as effective as hoped.
Profits of Doom
Earnings season returns in April, and is not likely to feature much good news as the recession continues. Rather, this season will be measured by the extent of the bad news companies have to offer. Non-financial DJIA components reporting this month include: Chevron (4/9), Intel (4/14), JNJ (4/14), Coca-Cola (4/16 est.), United Technologies (4/21), GE (4/17), IBM (4/20), MRK (4/21), AT&T (4/22), McDonald's (4/22), Boeing (4/22), Microsoft (4/23), MMM (4/24), Verizon (4/27), and P&G (4/30 est.).
Last month's equity market rally began after three national banks, JP Morgan, BoA, and most significantly Citigroup said that they were profitable so far this year and expect to remain so in 2009. All three must confirm these assertions as they report quarterly results in mid-April (JPM reports 4/16, BAC 4/20, C 4/17). Failure to make good on their guidance could send banks spiraling again, and drag down equity markets that have been looking for leadership in the financials to continue the bear market rally.
Reading the "T" Leaves
The competing forces of US government supply and outright Fed purchases should continue to butt heads going forward. With the Fed's $300B in announced outright purchases accounting for roughly 40% of the new issuance of Treasury notes and bonds through the end of the fiscal year, markets will be paying extra attention to all government and Fed auction results. Heading into April US Treasury markets are experiencing a much needed respite from new supply coming to market. March saw the Treasury auction off some $161B in Treasuries but the first week of April will be void of any new coupon supply, and with four Fed reverse auctions on the calendar, yields could remain capped early in the month. But before April comes to a close analysts predict the Treasury could announce coupon auctions off nearly $170B likely pressuring yields higher in the back half of the month. The US benchmark remains some 20 basis points below where it entered the month hovering between 2.70% and 2.75%.
Toward the end of the March traders and commentators began focusing on a developing rift between fixed income and equity market performance. Despite the explosive rally in stocks, signs continue to suggest credit markets remain highly dislocated and far from functioning optimally. Recently the 1-month T-bill saw its yield fall into negative territory for the first time since December while the 3-month yield slipped back to a paltry 0.12%. As during the height of last fall's crisis, investors appear content with parking money in ultra safe and liquid short-term US paper, forgoing little if any return on their investments. Though higher investment-grade corporate paper has seen a noticeable uptick in activity around the world in the past few weeks, lower-quality companies continue to find it extremely difficult and expensive to raise money
Central Bank Soothsaying
Government bond markets will experience a variety of cross currents in April as officials continue implementing reflationary policies. With policy rates having reached a floor in the US, Japan, UK and Switzerland, and with their respective central banks all firmly in quantitative easing mode, the focus on interest rate policy announcements will fall squarely on the ECB. Forecasters expect the ECB to cut another 50 basis points at the April 2 meeting, but much attention will be given to any incremental details regarding possible additional creative measures. Though the ECB has shown its usual reticence with regards to aggressive policy moves, and the 16 different member nations pose real political obstacles in any quantitative easing scenario, recently some members have hinted at a shift in thinking. Vice-President Papademos indicated the ECB was considering purchases of corporate debt in the secondary market, whilst the Dutch representative on the ECB Governing Council Arnout Wellink stated that the ECB could increase liquidity via the commercial paper or asset backed securities markets. Still, of the major central banks, the ECB is the only one that has room to lower interest rates from its current 1.50% level, and the consensus expectation is that the central bank will lower its key interest rate to 1.00%. That may be enough of a token to allow the ECB to reserve the issue of quantitative easing for another day.
The FOMC meets again on April 29, but will likely have little new to say as rates stay near zero and the Fed just launched its Treasury purchasing program.
The next BOJ meeting on April 28 will be watched for indications of expanded JGB buying. Minutes from the March meeting, where the BoJ raised its monthly JGB purchase levels to ¥1.8T from ¥1.4T, will be released on April 9th. The Australian central bank is expected to cut 50 basis points from the current 3.25% when it meets on April 7, after surprising economists by holding rates steady at the last meeting, but the most recent declines in housing figures and a jump in unemployment from 4.8% to 5.2% could return RBA to the easing track. Other major central banks are expected to hold rates at extraordinary levels: the BOE is expected to keep its rate at 0.50% on April 9; Bank of Canada meets April 21 and should leave rates at 0.50%. One sign of hope for the future is that central bankers have begun to proclaim they must formulate exit strategies for the extraordinary stimulus they have provided, though the timing of such withdrawal is likely far off.
Oracular Data
For most forecasters, jobs numbers will be the best harbinger for the economic recovery and thus guide central banks' future actions. To that end, the US unemployment and payrolls data to be released on April 3, will be key data this month. Expectations are that unemployment will surge to 8.5% and payrolls will shrink by another 650,000, adding to the three million jobs lost in the prior five months. Better than expected jobs data may portend happier days ahead, but should monthly job losses approach one million, markets could fear for the future.
The first reading of US Q1 GDP data on April 29 will also be closely watched. Doomsayers will be looking for GDP to slide toward the double digit decline that would be one indicator of a depression after the 6.3% contraction seen in the final reading for Q4 2008. A less dire GDP reading could lend some credence to the notion that the economy is bottoming out.
GDP data out of Asia, and in particular China, will also be observed closely this month. South Korea is expected to report preliminary Q1 GDP data on April 23. After a 3.4% y/y contraction in Q4, the Q1 data will likely confirm Korea has entered recession for the first time since the Asian Crisis in 1998. The IMF forecasts Korea GDP will contract 4% this quarter. Given the rapid deterioration of the global economy, there has been some concern that the Chinese Q1 GDP data, to be released mid-month, will show weaker growth than expected. Chinese officials including Premier Wen, however, have vociferously insisted that their 8% 2009 growth target is still realistic. Most recently, PBOC Advisor Fan Gang said that current "stimulus is sufficient to support 8% GDP growth" and that China's economy has reached a bottom. Other estimates are less upbeat. OECD officials downgraded their China growth targets to 6-7% in late March and the IMF has commented that the 8% target will be "very challenging." Should the Chinese economy slip more than expected it could tarnish the last bright spot in the global economy
Forecasting Forex
The fortunes of the foreign exchange market will rest largely on events early in the month. In Japan the fiscal year ended March 31st, and year end repatriation flows historically have been beneficial for Yen. Thus the start of the new fiscal year could lead to renewed Yen weakness, particularly if carry-related yield appetite returns. Dealer chatter has been circulating that Japanese pension funds are looking to hand money to new managers for foreign equity allocation. Rumors of additional Japanese stimulus programs have also been circulating for several weeks; should it materialize, it could further weaken the Yen as the Government would have to compile an additional budget once the program is officially announced.
Currency market prognosticators will put a lot of focus on the upcoming G20 summit on April 2 being held in London. The agenda will encompass the global economy, overall markets, trade finance, aid to developing countries, financial regulation, IMF reform, and protectionism. Ahead of the meeting, world finance ministers have struggled without success to present an agreeable face to the media, with French President Sarkozy threatening to walk out of the meeting if demands for stricter financial regulation are not met. The French and others want a global regulator, which is strongly opposed by the UK and US. For its own part, the US has pushed for Europe to prepare more stimulus measures, but the Europeans have been resistant. Exogenous events could disrupt the G20 meeting as well—as world leaders meet in London amid throngs of protesters, security is very tight and on the lookout for terrorist threats.
Though the creation of a new non-sovereign reserve currency as posited by Chinese central bank governor Zhou is not likely to be a formal item on the G20 agenda, it could unsettle currency markets again should it come up in London. In March, a misquote of Treasury Secretary Geithner caused a stir as it made it appear he supported the idea of a global currency (which he quickly corrected with a "strong dollar" pronouncement). The lesson appears to be that jittery currency market palmists are ready to force big currency moves at the slightest hint of material news (even false news), rather than see their lifeline come to an abrupt end
The Future is Now
As outlined here, April features a variety of events that could be significant in auguring the future of the global economy. Corporate earnings, economic data, central bank actions and the G20 conclave all have the potential for helping the economy find a bottom. Still, as we read the entrails of an economy that has been eviscerated, the growing consensus is that the worldwide downturn will last a very long time, so we may already be living the future
Calendar of Notable Events
April 7: BoJ rate decision
April 9: BOE rate decision
April 15: China Q1 GDP
April 29: US Q1 Advance GDP data; FOMC rate decision
MONDAY’s Value Area Levels Are Posted Below
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.
"There are two primary choices in life: to accept conditions as they exist, or accept the responsibility for changing them."
-The case for a bottoming in the US economy and a broad-based, lasting rally in equities may have gained some traction this week.
The economic data undoubtedly remains dismal, but in most cases markets just shrugged it off as "lagging" or even chose to focus on points that indicated a moderation in the rates of decline that in some cases exceeded the pummeled down expectations.
Indices took a step down on Monday after the White House rejected the automakers' stability plans, but the DJIA recovered quickly and even managed to top 8000 on Thursday for the first time since early February.
Midweek the March ISM manufacturing reading suggested that activity contracted by less than anticipated with an uptick in new orders and a decline in inventories, while consumer confidence edged up from the Feb lows.
Employment data from around the world has not been pretty, with the US unemployment rate hitting 8.5%, Euro Zone unemployment climbing to its highest level since May 2006 and Canadian PM Harper saying Canada has a "massive and growing" employment problem.
Traders and investors alike seem to be betting that jobs are a lagging indicator and these readings may ultimately represent the trough in the current cycle.
Along that line money has found its way to some of the most economically sensitive commodities, Friday May copper trading at levels not seen since last fall testing $2. Grain futures are hovering near multi-month highs and front-month crude continues to consolidate above $50.
Week of 4/6/2009 thru 4/10/2009
Monday, April 06, 2009
10:00am TAF auction
11:00am Treasury's note announcement
BoJ rate decision.
Tuesday, April 07, 2009
10:00am TAF results
1:00pm Treasury's 10-year note auction
3:00pm Feb Consumer Credit (last $1.8B)
4:30pm API Crude Oil/Gasoline/Distillate Inventories
Wednesday, April 08, 2009
10:00am Feb Wholesale Inventories (last -0.9%)
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
1:00pm Treasury's 3-year note aution
2:00pm FOMC minutes
SEC to vote on restoring the uptick rule.
Thursday, April 09, 2009
7:00am BoE rate decision
8:30am Feb Trade Balance (last -$36B), March Import Price Index (last m/m -0.2%, y/y -12.8%), Initial
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.
- While more or less in line with expectations, the morning's downbeat economic data is weighing on equities.
The widely anticipated March nonfarm payrolls data was every bit as bad as anticipated, while the second revision to the January nonfarm number (to -741K from -655K, now the lowest since Oct 1949) was an unpleasant surprise.
The March US unemployment rate hit 8.5%, up from 8.1% in February. Meanwhile the March ISM non-manufacturing index fell a bit lower than expected.
Fed Vice Chairman Kohn summed it up well, noting that "We're not out of the woods yet," noting the US economy is very weak and will likely remain that way for a while. Equity traders have taken a cautious tone following the jobs data deciding to book some profits.
NYMEX crude spiked above $53 overnight but has shed its gains, trading below $52 mid morning.
- The financials are in the red for the most part. Analysts at Keefe Bruyette cut their earnings forecasts for Wells Fargo, Bank of America and several smaller regional banks yesterday.
Strong Q4 results and a bullish Q1 forecast from Research in Motion send its shares up more than 20% in early trading. The firm saw its account base grow 19% sequentially, noting that device demand has outpaced its expectations. Semi names are under pressure after industry group SIA reported worldwide semiconductor sales -7.6% m/m and -30.4% y/y. In addition, Micron reported steep losses in Q2 thanks to flagging sales. Also note that the WSJ provided more details on IBM's ongoing but still officially unconfirmed bid for Sun, noting that the deal is likely around $9.55/share and talks are in final stages. A related report said that IBM may make an announcement on April 6.
- In currencies, the more-or-less in-line US payrolls data kept EUR/USD from sustaining moves above the 1.35 level. JPY-related were mixed after hitting multi-month earlier in Asia.
Dealer chatter of a EUR/JPY option barrier at 135 provided some volatility as the payroll data came across the tape. The cross fell 150 pips to 133.50 as weak euro longs were shaken from their convictions. The EUR/USD fell from 1.3480 to 1.3365 during the cross selling episode.
More Headlines
7:22:47 AM
(US) Office of the Comptroller's Dugan: Payment modifications on mortgages in Q1 to Q3 of 2008 in led to a higher percentage of re-default
- Administrations plan is moving in right direction, lower rates on modification have, expectedly led to lower re-default on vehicles
- Prime mortgage default rates at approx 2%, subprime at approx 16%
- Too early to speculate on what Q1 2009 will look like
- Must look for system with higher reserves for banks in healthy times (higher cap rates)
- Should not leave notion that banks should be adequatly prepared to handle potential losses on loans that are currently in their loan book
- 37% of Oct- Dec quarter loan modifications resulted in payments falling in excess of 10%; (25% of loan modifications had that result in prior 9 months)
- Approx 10% of loans surveyed were delinquent or in foreclosure v 7% at end of Sept
8:30 AM
*MAR UNEMPLOYMENT RATE: 8.5% V 8.5%E- No revisions
MAR AVERAGE HOURLY EARNINGS M/M: 0.2% V 0.2%E; AVERAGE WEEKLY EARNINGS: 33.2 V 33.3E- No revisions
*MAR CHANGE IN NONFARM PAYROLL: -663K V -660KE; CHANGE IN MANUFACTURING PAYROLLS: -161K V -162KE
- No revisions to Prior (Feb) Nonfarm at -651K
- Jan nonfarm payrolls re revised from -655K to -741K (now lowest reading since Oct 1949 when reached -834K)
- Prior Manufacturing payrolls revised from -168K to -169K
8:35 AM
Jan US payrolls revised from -655K to -741K; largest monthly drop since 1949
9:06:36 AM
(US) Fed's Kohn: "We're not out of the woods yet," believes Fed may need to do more to increase the flow of credit, policies pose risk of both deflation and inflation
- The US economy is very weak, will likely remain that way "for a while."
- Sees a risk of rising real fed funds rate, deflationary spiral
- There is "incredibly large" unused capacity in the US economy.
9:15 AM
(CA) Canadian PM Harper: Canada has a "massive and growing" employment problem, sees more job losses
10:00:02 AM
*MAR ISM NON-MANUFACTURING COMPOSITE: 40.8 V 42.0E
- No Revisions
**Sub-indices:
- Non-Mfg Prices Paid Index: 39.1 v 48.1 prior
- Employment: 32.3 v 37.3 prior
- New Orders Index: 38.8 v 40.7 prior
11:33:39 AM
(US) Fed's Kohn: Risk aversion events have led to mark down of assets below their intrinsic values
- Notes it may be some time before liquidity is loosened and risk aversion subsides.
- Reiterates US Official speak that systemically important firms require additional regulation.
- Remarks that there is no near term inflation risk.
12:02 PM
(US) Fed's Kohn: The Fed would like to have the option to issue its own bills - Fed is working hard to develop an exit strategy
12:03 PM
(EU) ECB's Draghi: There are indications that economic deterioration has slowed; G20 showed there is no split between the US and Europe- Pledges that all systemic financial institutions will be regulated.
12:00pm Fed Chairman Bernanke speaks at credit conference in Charlotte, NC
Todays Headlines
7:45:20 AM
*(EU) ECB CUTS REFI RATE BY 25 BPS TO 1.25% - LESS THAN EXPECTED, CUTS DEPOSIT RATE BY 25 BPS TO 0.25%
- Note: Was expected to cut interest rates by 50bps to 1.0%
***Reminder: ECB press conference to begin at 8:30am ET (12:30 GMT)
7:46:23 AM
Euro vs US Dollar Euro testing 1.3400 areas following the ECB rate decision
***Reminder:
The ECB "surprised" the market with only a 25 basis point interest rate cut, whereas the consensus expectations was for a 50 basis point cut
8:30:03 AM
*INITIAL JOBLESS CLAIMS: 669K V 650K; CONTINUING CLAIMS: 5.720M V 5.590ME (highest continuing claims data on record))
- Prior jobless claims revised from 652K to 657K
- Prior Continuing Claims revised from 5.560M to 5.567M
8:35:15 AM
(EU) ECB's Trichet: Inflation to remain below 2% target in 2009/2010, Risks to economic outlook remain broadly balanced
- Re-iterates seeing weak demand in EMU in 2009, data suggests weak economic activity in Q2
- CPI expectations remain anchored
- Reiterates recovery to begin in 2010, ECB is monitoring all developments
- Lower oil prices support consumption
- Expects inflation declining further in coming months and below 2% target, could go temporarily negative, says short term inflationary moves are irrelevant to interest rate
- Decline in corporate lending could be a reflection of reduced demand
- Many countries must announce more credible fiscal measures for 2010 and beyond
8:38:14 AM
(US) FASB: Notes an "orderly transition" does not include forced liquidations
- Agrees to remove presumption in mark-to-market accounting rule that all transactions in an inactive market can be considered distressed unless proven otherwise.
- Agrees that the objective of mark to market remains what would be received in an orderly transaction in the current inactive market.
8:47:32 AM
(EU) ECB's Trichet: Rate decision made by consensus; rate not at lowest level - Q&A
- Notes these are lowest rates of all time, extremely low by historical standards
- Note: Second month in a row ECB rate decision made by consensus (i.e. not unanimous)
8:49:09 AM
(EU) ECB' Trichet: Refi rate not at its lowest level, although does not expect to cut deposit rate further - Q&A
- Points out that 6 and 12 month interbank rates are lower in EU than US
- ECB has already taken non-standard measures in the zone
- Enlargement of the collateral eligibility seen as a non-standard move by ECB
10:00 AM
*FEB FACTORY ORDERS: 1.8% V 1.5%E- Prior revised from -1.9% to -3.5%
***First increase in orders in seven months
10:30 AM
*EIA NATURAL GAS INVENTORIES: 0 BCF VS. -5 TO +5 BCF ESTIMATE RANGE
11:03:30 AM
NY Fed: Purchased $7.49B in treasuries in fifth round of $300B purchase program; Dealers submitted $26.25B for consideration (3.5 bid to cover)
- Heaviest purchase was $4.35B in the 3/31/2014 maturity
- Average bid to cover over last four auctions has been 3.02
11:17:18 AM
*G20 COMMUNIQUÉ: AGREE ON $850B FUNDING FOR IMF AND WORLD BANK; STIMULUS TO RAISE GLOBAL OUTPUT BY 4% BY END OF 2010
- central banks pledged expansionary policies for as long as needed; to use all policy tools
- G20 will take action to restore flow of credit
- Pledges credible exit strategies
- To refrain from competitive currency devaluations
- G20 committed to stable global monetary system
- To abstain from protectionist measures until end 2010
- Completing DOHA trade round is 'urgently needed'
- To regulate 'systemically important hedge funds'; demand 'sustainable compensation schemes'
- To extend regulatory oversight to credit rating firms
- WTO to report quarterly on protectionist measures
6:52 PM
(US) WSJ reports that the Senate has signaled that it could seek shake up of regional Fed banks
7:04:31 PM
(US) Banks such as Citi, Goldman, Morgan Stanley and JP Morgan are mulling buying toxic assets to be sold by rivals under the Treasury's toxic asset plan - FT - Founder of buyout company Colony Capital, Tom Barrack, seeking to raise $4B to buy distressed bank assets.
- Barrack plans to buy banks at a fraction of their book value, then borrow from the Fed at low interest rates and lend the money out.
9:15:51 PM
(US) Due to losses and defaults, the Federal Housing Administration (FHA) could have to seek a taxpayer bailout - WSJ
- This would be the first time in the agency's 75-yr history that it would need to be bailed out.
- The report cites housing officials and lawmakers.
Please read our disclaimer:
Trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the markets. The videos are neither a solicitation nor an offer to Buy/Sell futures or options. The past performance of any trading system or methodology is not necessarily indicative of future results.
Rule 4.41 - Hypothetical or simulated performance results have certain limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not been executed, the results may have under-or-over compensated for the impact, if any, of certain market factors, such as lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profit or losses similar to those shown. Learn to trade futures forex stocks.
- Equity indices are making robust gains in early trading as the financials drive trade on anticipation of good news from the FASB later this morning.
The data has been mixed, with February factory orders a bit stronger than expected and January orders revised higher, while the weekly jobless claims both making fresh highs once again. NYMEX crude surged by $3.40/barrel or so, aided by “official” Chinese PMI data for March that registered its first increase in six months. Note that Chinese officials have made confident statements of late that the Chinese economy has hit bottom.
- Government bond prices both here and across the pond are moving lower as stocks rally.
The ECB cut only 25 basis points disappointing some, and provided little clarity regarding unconventional measures. The BOE auctioned off another batch of long dated GILTS. Though the auction results did improve from last week's yields prices still ticked higher following the mediocre reception. The 10-year GILT yield is back above 3.3% while the Bund offers 3.12%. The US benchmark is holding close to 2.7%.
- Banking names made big gains in the pre-market this morning on apparent optimism that the FASB would provide the sector with regulatory relief by voting to relax mark-to-market accounting rules later this morning.
As of writing the FASB's board meeting is ongoing, although the body has already noted today that "orderly transition" does not include forced liquidations. Note that more executive compensation drama is in the background: in an interview with CBS last night, Treasury Secretary Geithner said he did not rule out forcing out CEOs of banks who received government funds, and the House approved bill allowing the Treasury to set limits on executive compensation for firms that receive public funds. However, Bank of America's CEO Ken Lewis said earlier today that he does not see the US gov dictating management changes in the banking industry, and confirmed that BAC has paid back a total of $400M of its TARP funds.
- In other equity news, Monsanto reported strong results for Q2, beating earnings estimates somewhat and once again reaffirming its forecast for 2009.
But later in the morning, the WSJ rained on the company's parade, noting that the firm may report a loss in Q4, with a single-digit earnings growth in Q3 thanks to falling market share. MON jumped 4% before the open and then dipped into the red on the WSJ report before recovering somewhat mid morning. Rite Aid reported a loss in Q4 and guided a larger-than-expected loss for the year, sending shares of RAD-15% into a tailspin in early trading. Carmax walloped analysts' estimates in Q4 despite the significant 26% y/y decline in its same-store sales and significant q/q declines in wholesale vehicle sales. Shares of KMX are up 10% today. And with earnings season right around the corner, the profit warnings have begun. Carnival warned that its Q2 earnings would be a bit lower than expected thanks to higher fuel costs - but shares of CLL are up 5% in the early going.
- In currencies, the greenback was on the defensive during the New York session against European pairs after the ECB “surprised” the market with only a 25 basis point cut (consensus expectations were for a 50 bps cut).
At the press conference, Trichet reiterated the standard ECB position that inflation would remain below the 2% target in 2009/2010 and that risks to the economic outlook remain broadly to the downside, with disinflation and not deflation stalking Europe. During the Q&A portion, Trichet noted that the rate decision was made by consensus, with no discussions on holding rates steady. The ECB confessed that rates were not at their lowest level, but still low by historical standards. Looking ahead to the next policy meeting in May, the ECB said it would decide at that time on whether or not to pursue “non-standard measures,” but declined to provide further insight on alternative policies.
- Risk appetite resurfaces as equity markets surged higher ahead of the FASB announcement.
The hope for change on the rules keeping the USD soft and the JPY broadly weaker as well. USD/JPY probed towards the 100 level for 5-month highs before retracing.
- With the G20 meeting ready to wrap up business, there have been plenty of comments from participants.
Russian President Medvedev reiterated his belief that an alternative to the USD should be considered. He suggested a basket of regional currencies could be used instead of USD basket. This reflects similar sentiments from China, which stated that would back IMF support currency. A Brazilian official noted G20 would raise funding for the IMF by $1T G20 and was considering issuing IMF bonds.
More Headlines
7:45:20 AM
*(EU) ECB CUTS REFI RATE BY 25 BPS TO 1.25% - LESS THAN EXPECTED, CUTS DEPOSIT RATE BY 25 BPS TO 0.25%
- Note: Was expected to cut interest rates by 50bps to 1.0%
***Reminder: ECB press conference to begin at 8:30am ET (12:30 GMT)
7:46:23 AM
Euro vs US Dollar Euro testing 1.3400 areas following the ECB rate decision
***Reminder:
The ECB "surprised" the market with only a 25 basis point interest rate cut, whereas the consensus expectations was for a 50 basis point cut
8:30:03 AM
*INITIAL JOBLESS CLAIMS: 669K V 650K; CONTINUING CLAIMS: 5.720M V 5.590ME (highest continuing claims data on record))
- Prior jobless claims revised from 652K to 657K
- Prior Continuing Claims revised from 5.560M to 5.567M
8:35:15 AM
(EU) ECB's Trichet: Inflation to remain below 2% target in 2009/2010, Risks to economic outlook remain broadly balanced
- Re-iterates seeing weak demand in EMU in 2009, data suggests weak economic activity in Q2
- CPI expectations remain anchored
- Reiterates recovery to begin in 2010, ECB is monitoring all developments
- Lower oil prices support consumption
- Expects inflation declining further in coming months and below 2% target, could go temporarily negative, says short term inflationary moves are irrelevant to interest rate
- Decline in corporate lending could be a reflection of reduced demand
- Many countries must announce more credible fiscal measures for 2010 and beyond
8:38:14 AM
(US) FASB: Notes an "orderly transition" does not include forced liquidations
- Agrees to remove presumption in mark-to-market accounting rule that all transactions in an inactive market can be considered distressed unless proven otherwise.
- Agrees that the objective of mark to market remains what would be received in an orderly transaction in the current inactive market.
8:47:32 AM
(EU) ECB's Trichet: Rate decision made by consensus; rate not at lowest level - Q&A
- Notes these are lowest rates of all time, extremely low by historical standards
- Note: Second month in a row ECB rate decision made by consensus (i.e. not unanimous)
8:49:09 AM
(EU) ECB' Trichet: Refi rate not at its lowest level, although does not expect to cut deposit rate further - Q&A
- Points out that 6 and 12 month interbank rates are lower in EU than US
- ECB has already taken non-standard measures in the zone
- Enlargement of the collateral eligibility seen as a non-standard move by ECB
10:00 AM
*FEB FACTORY ORDERS: 1.8% V 1.5%E- Prior revised from -1.9% to -3.5%
***First increase in orders in seven months
10:30 AM
*EIA NATURAL GAS INVENTORIES: 0 BCF VS. -5 TO +5 BCF ESTIMATE RANGE
11:03:30 AM
NY Fed: Purchased $7.49B in treasuries in fifth round of $300B purchase program; Dealers submitted $26.25B for consideration (3.5 bid to cover)
- Heaviest purchase was $4.35B in the 3/31/2014 maturity
- Average bid to cover over last four auctions has been 3.02
11:17:18 AM
*G20 COMMUNIQUÉ: AGREE ON $850B FUNDING FOR IMF AND WORLD BANK; STIMULUS TO RAISE GLOBAL OUTPUT BY 4% BY END OF 2010
- central banks pledged expansionary policies for as long as needed; to use all policy tools
- G20 will take action to restore flow of credit
- Pledges credible exit strategies
- To refrain from competitive currency devaluations
- G20 committed to stable global monetary system
- To abstain from protectionist measures until end 2010
- Completing DOHA trade round is 'urgently needed'
- To regulate 'systemically important hedge funds'; demand 'sustainable compensation schemes'
- To extend regulatory oversight to credit rating firms
- WTO to report quarterly on protectionist measures
*(US) MBA MORTGAGE APPLICATIONS W/E MAR 27TH: 3.0% V 32.2% PRIOR- Refi: 3.7% v 41.5% prior - Avg Rate on 30y Mortgage: 4.61% v 4.36% prior
7:30:03 AM
*MAR CHALLENGER JOB CUTS: 150.4K v 186.4K PRIOR
- 181.0% V 158.4% PRIOR
- Intentions led by Government sector
- Reiterates that heaviest downsizing might be passing (refers to Jan data)
8:15:10 AM
*MAR ADP EMPLOYMENT CHANGE: -742K V -663KE (record low)
- Prior revised Down from -697K to -706K
- No Revisions
--- Small businesses* -284K v -262K m/m
-- Medium businesses** -330K v -314K m/m
-- Large businesses*** -128K v -121K m/m
-- Goods-producing sector: -327K v -338 m/m
-- Service-providing sector: -415K v -359K m/m
Addendum:
-- Manufacturing industry: -206K v -219K m/m
9:35:59 AM
(US) FDIC's Bair: Cautiously optimistic the US banking sector is on a better footing; expects deposit insurance fund to decline more; generally supports FASB proposals on mark to market
- "Many" US banks are "making money."
- Strongly believes US banks should not look for bailouts help for deposit insurance fund.
- Believes Congress will act soon to increase the FDICs lending ability to $100B
- States the systemic firms in the system should be subject to higher forms of regulation
- Could create a different unit with FDIC for regulation of major non-banking systemic firms
- Comfortable with risk FDIC taking with risk guarantee program
- Final bank assessment plan to be adopted by late May 2009
- Legacy loan program to first target high risk CMBS and RMBS vehicles
- notes it will be hard for banks to work through the deterioration in commercial real estate loans
10:00:02 AM
*FEB PENDING HOME SALES (M/M): 2.1% V 0.0%E
- no revisions
- Economist: More buyers are getting into the market to take advantage of stimulus incentives and much improved housing affordability conditions, but it will take a few months before we could see this turn up in measurable sales contract activity,
10:00:04 AM
*MAR ISM MANUFACTURING: 36.3 V 36E; PRICES PAID: 31 V 33E
- Employment Index: 28.1 v 26.1 prior
- New Orders Index: 41.2 v 33.1 prior
- Inventories index: 32.2 v 37 prior
10:00 AM
*FEB CONSTRUCTION SPENDING (M/M): -0.9% V -1.9%E- prior revised from -3.3% to -3.5%
10:06:07 AM
(US) Fed's Fisher: Sees gradual improvement in economy, Q1 contraction may be worse than Q4 - CNBC
- Does not expect economic recovery until 2010
- Consumer confidence is non-existent
- US is ahead of the curve on policy
- Adds that US must be careful not to be seen as monetizing US debt
- Market have reacted well to the US Treasury purchasing program
10:30 AM
*DOE CRUDE: +2.84M V +2.8ME; GASOLINE: +2.23M V -1.5ME; DISTILLATE: +221K V -1ME; CAPACITY UTILIZATION: 81.7% V 82.3%E- Distillate demand -275K bpd to 3.65M bpd - Gasoline demand +25K bpd to 9.13M bpd
11:03:00 AM
NY Fed: Purchased $6B in treasuries in fourth round of $300B purchase program; Dealers submitted $16.9B for consideration ( 2.82 bid to cover)
- Heaviest purchase was $1.2B in the 4.875% 06/30/12 maturities and $1.08B in the 4.625% 7/31/12 maturity
12:01:43 PM
Ford Motor Co Reports March vehicle sales -40.9% v -49%e (unadjusted basis), to 131K units
- Inventories 408K (-27% y/y)
- Discloses Q1 production at 349K ( v 375K forecast)
- F series sales -39.9% y/y
12:56:28 PM
(US) Fed's Pianalto: Economy should stabilize by end of 2009, begin recovery in 2010; Regulation should help lower bank risk
- Regulation alone will not prevent future crises.
- Economy is receiving significant Fed stimulus.
- Housing market has yet to stabilize but sees encouraging signs in housing.
1:46:58 PM
General Motors Corp Reports March vehicle sales -45% v -52%e (unadjusted basis)
- Delivered vehicles 156K
- Q1 production 372K units (380K units prior guidance)
- Reaffirms Q2 production at 550K units (Note on 2/10 a GM exec noted they expected Q2 production above that of Q1)
- Inventories 765K ( 332K cars, 433K trucks) v 873K y/y
- Trucks March Sales -47.1% y/y, Car March Sales -41.3% y/y
2:04:19 PM
General Motors Corp Exec: 'Worst is behind us'; Auto sales may be reaching bottom; currently exceeding target for market share under disclosed viability plans - sales call
- forecasts total US auto industry SAAR at 10M units; April to be better than March.
- notes sales mix shifting away from trucks and toward cars.
- Remarks that March had a 'strong close'; seeing signs of 'brightening' in sales.
- notes only 5% of inventory is 2008 models.
- reminder: Ford made similar comments about "bottoming" earlier today.
5:01 PM
MGM MGM MIRAGE Colony Capital may invest in CityCenter project - WSJ- The investment could limit the probability of CityCenter going bankrupt.
6:24 PM
(JP) Japan's government may increase the Development Bank of Japan's (DBJ) emergency funding program from ¥1T to more than ¥10T – Nikkei
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 indices opened not far above Monday's lows on this the first day of the second quarter, while the G20 gather in London and protesters riot in the streets.
But equities are rallying with enthusiasm in early trading this morning after February pending home sales rebounded strongly from January's record low and the March ISM reading showed manufacturing activity contracted by a bit less than anticipated.
Note that the ISM new orders component was much better than prior, with inventories seen falling. Various commentators have offered doom and gloom this morning, including Fed Governor Fisher, who warned the Q1 contraction in GDP may be worse than Q4's decline, and Harvard Economist Feldstein, who said the economy is getting worse. The FDIC's Bair is not among them, boosting financial names after saying she was cautiously optimistic about the US banking sector.
- With the G20 summit about to get underway in London, recent economic data from around the globe confirms that the politicians in attendance are under great pressure to do something about the world economy.
China's March manufacturing PMI declined again, casting further doubt on whether the country can power any kind of economic recovery. In Japan the quarterly Tankan was dismal, showing that economic conditions remain severe.
German retail sales were worse than expected. European PMI reading remained at or near all-time lows and Euro Zone unemployment climbed to its highest level since May 2006, at 8.5%. The US ADP employment change data registered its largest decline since the inception of the series back in 2001.
One European currency dealer commented that the current G20 conference could be among the three most important summits of all time, just behind the Plaza and Louvre Accords in the 1980. However it's worth keeping in mind that the latter left their marks with substantive agreements while this conference is likely to be marred by discord and naked self interest.
- Both the Fed and BOE purchased government notes as part of their quantitative easing implementation.
GILT prices moved sharply higher after a relatively low bid-to-cover ratio in the reverse auction of £3.5B 2014-2019 paper. Treasury prices have also climbed higher after the NY Fed bought $6B with a bid-to-cover ratio of 2.82, also below the average of the first three reverse auctions.
The US benchmark yield is trading around 2.6% while the long bond offers closer to 3.5%. The yield on the Bund has also moved lower, below 3% after sources indicated the ECB is considering unconventional quantitative measures in the coming weeks. Reminder the ECB is expected to cut by another 50 basis points at tomorrow's meeting.
- Energy prices remain to the downside following weekly inventory data from the DOE.
Distillate stockpiles grew when a decline was expected, and demand dropped off in the latest week indicating the economic weakness continues to weigh on the complex. May crude remains near a 1-week low below $50.
- Today's early rebound in the Indices has been led by the financials.
Trades seem to be buying these names ahead of tomorrow's FASB meeting and official vote on possible changes to the way mark-to-market accounting is implemented. The XLF is up more than 2% after opening down closer to 3%.
- In equity news, consumer-oriented names Sealy and Borders Group both offered surprising positive quarterly reports yesterday after the close.
Sealy reported a modest Q1 profit, while analysts had expected a small loss, earning the company an upgrade at Raymond James.
Borders beat Q4 estimates by a healthy margin, although sales remain very depressed on a y/y basis. Shares of ZZ are up 54% early on, while BGP is up 20% and headed higher. Education Company Apollo Group managed to beat earnings and revenue estimates, but negative comments on debt from the CEO and a Baird downgrade are weighing on the name, with shares of APOL-12%. Shares of Sonic Automotive are hurting, down more than 45% after reporting a big Q4 loss and refraining from offering any guidance for 2009. Biopharma firm Celgene warned that it would barely achieve its 2009 guidance; shares of CELG-14% are down sharply in early trading.
- In currencies, dealers were eyeing key EUR/USD hourly support at the 1.3130 level, where the pair was trading prior to the Fed's quantitative easing announcement on March 18.
This level also corresponds to the 100-day moving average. The pair was seen consolidating in a 1.3130 top 1.3330 ahead of the ECB rate decision and G20 summit.
Chatter has been circulating that the ECB is planning an additional rate cut of up to 50bps and considering some unconventional quantitative measures in the coming weeks.
More Headlines
7:00 AM
*(US) MBA MORTGAGE APPLICATIONS W/E MAR 27TH: 3.0% V 32.2% PRIOR- Refi: 3.7% v 41.5% prior - Avg Rate on 30y Mortgage: 4.61% v 4.36% prior
7:30:03 AM
*MAR CHALLENGER JOB CUTS: 150.4K v 186.4K PRIOR
- 181.0% V 158.4% PRIOR
- Intentions led by Government sector
- Reiterates that heaviest downsizing might be passing (refers to Jan data)
8:15:10 AM
*MAR ADP EMPLOYMENT CHANGE: -742K V -663KE (record low)
- Prior revised Down from -697K to -706K
- No Revisions
--- Small businesses* -284K v -262K m/m
-- Medium businesses** -330K v -314K m/m
-- Large businesses*** -128K v -121K m/m
-- Goods-producing sector: -327K v -338 m/m
-- Service-providing sector: -415K v -359K m/m
Addendum:
-- Manufacturing industry: -206K v -219K m/m
9:35:59 AM
(US) FDIC's Bair: Cautiously optimistic the US banking sector is on a better footing; expects deposit insurance fund to decline more; generally supports FASB proposals on mark to market
- "Many" US banks are "making money."
- Strongly believes US banks should not look for bailouts help for deposit insurance fund.
- Believes Congress will act soon to increase the FDICs lending ability to $100B
- States the systemic firms in the system should be subject to higher forms of regulation
- Could create a different unit with FDIC for regulation of major non-banking systemic firms
- Comfortable with risk FDIC taking with risk guarantee program
- Final bank assessment plan to be adopted by late May 2009
- Legacy loan program to first target high risk CMBS and RMBS vehicles
- notes it will be hard for banks to work through the deterioration in commercial real estate loans
10:00:02 AM
*FEB PENDING HOME SALES (M/M): 2.1% V 0.0%E
- no revisions
- Economist: More buyers are getting into the market to take advantage of stimulus incentives and much improved housing affordability conditions, but it will take a few months before we could see this turn up in measurable sales contract activity,
10:00:04 AM
*MAR ISM MANUFACTURING: 36.3 V 36E; PRICES PAID: 31 V 33E
- Employment Index: 28.1 v 26.1 prior
- New Orders Index: 41.2 v 33.1 prior
- Inventories index: 32.2 v 37 prior
10:00 AM
*FEB CONSTRUCTION SPENDING (M/M): -0.9% V -1.9%E- prior revised from -3.3% to -3.5%
10:06:07 AM
(US) Fed's Fisher: Sees gradual improvement in economy, Q1 contraction may be worse than Q4 - CNBC
- Does not expect economic recovery until 2010
- Consumer confidence is non-existent
- US is ahead of the curve on policy
- Adds that US must be careful not to be seen as monetizing US debt
- Market have reacted well to the US Treasury purchasing program
10:30 AM
*DOE CRUDE: +2.84M V +2.8ME; GASOLINE: +2.23M V -1.5ME; DISTILLATE: +221K V -1ME; CAPACITY UTILIZATION: 81.7% V 82.3%E- Distillate demand -275K bpd to 3.65M bpd - Gasoline demand +25K bpd to 9.13M bpd
11:03:00 AM
NY Fed: Purchased $6B in treasuries in fourth round of $300B purchase program; Dealers submitted $16.9B for consideration ( 2.82 bid to cover)
- Heaviest purchase was $1.2B in the 4.875% 06/30/12 maturities and $1.08B in the 4.625% 7/31/12 maturity
12:01:43 PM
Ford Motor Co Reports March vehicle sales -40.9% v -49%e (unadjusted basis), to 131K units
- Inventories 408K (-27% y/y)
- Discloses Q1 production at 349K ( v 375K forecast)
- F series sales -39.9% y/y
7:30am March Challenger Job Cuts y/y (last 158.4%)
8:15am March ADP Employment Change (last -697K)
10:00am March ISM Manufacturing (last 35.8),
-March ISM Prices Paid (last 29),
-Feb Pending Home Sales m/m (last -7.7%),
-March Construction Spending m/m (last -3.3%)
10:30am DoE Crude Oil/Gasoline/Distillate Inventories
1:00pm Fed's Pianalto speaks at banking event in Columbus, OH
Todays Headlines
6:41:35 AM
Fitch Report: Issues latest global economic forecast, World GDP to decline by 2.7% in 2009
- 2009 US GDP -3.4% y/y, unemployment 10%
- 2009 German GDP -3.7% y/y
- 2009 Japan GDP -6.7% y/y
- 2009 BRIC GDP +3.2% y/y
- Fitch is forecasting double-digit declines in business investment in most advanced economies in 2009, along with sharp rises in unemployment; this is significantly amplifying the impact of adjustments in consumer spending and housing investment.
- 2009 GDP has been revised downwards very sharply, reflecting the abrupt fall in activity and trade at the end of last year, evidence of much more rapid deleveraging by the US household sector, and precipitous declines in business investment.
- This is not only the widest but now also the deepest global recession experienced since WWII
- The global recession is proving much deeper than anticipated. Economic activity and trade declined very abruptly in the last three months of 2008 with the scale and synchronicity of the downturn in industrial production in the advanced economies unmatched by anything seen since the first oil shock in the early 1970s.
- A widespread collapse in consumer and business confidence in the wake of the intensification of the global banking crisis likely played an important role, alongside a dislocation in the process of trade finance
- The forecast global recovery in 2010 is to a rate well below trend, implying a further rise in unemployment, and for some economies including the UK and Spain deleveraging is expected to keep growth particularly low in 2010.
8:30:35 AM
(US) USDA Prospective Plantings Report: Corn -1.2% y/y, Soybeans flat y/y, Wheat -7.1% y/y, Cotton -7.0% y/y
- Corn Plantings (acres): 84.9M v 84.0Me, v 86.0M y/y
- Soybean Plantings (acres): 76.0M v 76.1Me, v 75.7M y/y
- Wheat Plantings (acres): 58.6M v 59.3Me v 63.2M y/y
- Cotton Plantings (acres): 8.81M v 8.07Me, v 9.47M y/y
*JAN CASE SHILLER HOME PRICE INDEX: 146.4 V 147.2E; COMPOSITE 20 INDEX: -18.97% V -18.8%E
- Prior home price revised from 150.66 to 150.56
- Prior Composite 20 Index revised from -18.55% to -18.60%
9:45:01 AM
*MARCH CHICAGO PURCHASING MANAGERS INDEX: 31.4 V 34.3E
**sub-indices:
- Prices Paid: 34.1 v 37.8 last
- New Orders: 30.9 v 30.6 last
- Employment: 28.1 v 25.2 last
- Inventories: 34.9 v 33.0 last
- Supplier Deliveries: 48.4 v 51.0 last
- Production: 32.7 v 34.7 last
- Order Backlogs: 21.3 v 29.3 last
9:52:50 AM
(FR) French Fin Min Lagarde echoes President Sarkozy: France may walk out of G20 if demands are not met
- Note: France has been particularly vocal on the need for a global regulator, while the US and UK want cooperation but say that regulation must be handled in each country separately.
10:00 AM
*MAR CONSUMER CONFIDENCE: 26 V 28.0E- prior revised from 25.0 to 25.3
10:14:33 AM
General Motors Corp New CEO Henderson: States that support from Obama admin was 'unequivocal;' could file for bankruptcy within 60 days if agreement cannot be reached - press conf
- Restructuring plans include the need for a 'clean balance sheet'.
- Continue to examine improving current cash flow structures.
- In continued talks with bondholders and the UAW.
- Any future plans would include further spending for continued R&D operations.
- Sees decision on Hummer unit within weeks; several interested parties.
- Note: 60 day period ends June 1.
10:45:10 AM
OCC's Dugan: Some information from bank stress tests to be made public; unclear what will be disclosed and the method of disclosure
- Remarks that some banks may need to take short term losses in efforts to attract capital
- Reminder on 2/25 a US Treasury official remarked that the Results of the stress tests would not be made public
1:51:36 PM
Fed's Plosser: 'Somewhat encouraged' but recent econ data, may see growth in 2H09, still supports mark-to-market accounting - Q&A
- Notes that does not favor the regulation of hedge funds
- The avoidance of 'too big to fail' issues may involve tax policies
- says economy could rebound before unemployment peaks
4:00:52 PM
(US) Treasury extends money market fund guarantees through Sept 18, 2009
- The Treasury extended the program to support ongoing stability in financial markets.
- This is the second time that the program has been extended.
- The original end date for the program was Dec 19, 2008.
4:30 PM
*API PETROLEUM INVENTORIES: CRUDE: +3.28M V +2.8ME; GASOLINE: -451K V -1.5ME; DISTILLATE: +1.78M V -1ME; CAPACITY UTILIZATION: 81.8% V 82.3%E
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.
