U.S. Preview
- The European DJ Stoxx 50 this morning is trading -0.53% on today's negative German Ifo business confidence report, on higher oil prices (+62 cents), and on some long liquidation pressure after recent gains. Today's German Ifo confidence report (see below) indicated that European businesses are quickly losing confidence in the European business outlook. Daimler dropped sharply today by -7.5% after the automaker reduced its guidance for "earnings before interest and taxes" to "above 7 billion euros" from its earlier guidance of "well above" 7.7 billion euros. Asia-Pacific stocks today closed mixed: Japan +2.18%, Hong Kong -0.20%, China +3.26%, Taiwan +0.80%, Australia +0.76%, Singapore -0.04%, South Korea +2.31%, Bombay -1.11%.
- The US Senate today is expected to approve the Fannie/Freddie legislation that the House passed yesterday. The bill will allow the US Treasury to directly inject capital into Fannie/Freddie to shore up their capital bases and improve their liquidity. The Treasury's plan was critical two weeks ago for halting the run on Fannie/Freddie, which together guarantee about one-half of the $12 trillion in US mortgages.
- The Germany July Ifo business confidence index fell sharply by -3.7 points to 97.5 from 101.2 in June, which was the largest drop since the Sep 11, 2001 terrorist attacks in the U.S. The index fell to a 3-year low. Business confidence was hurt by high gasoline prices, the ECB's recent 25 bp rate hike to address the 16-year high in inflation, the strong euro, weaker economic growth in the the US, and the ongoing US-European banking crisis.
- Claims – Today’s weekly initial unemployment claims report is expected to show a +14,000 increase to 380,000, adding to last week’s increase of +18,000 to 366,000. Continuing claims are expected to rise +38,000 to 3.160 million, reversing part of last week’s –81,000 decline to 3.122 million. The claims series has been volatile in the past two weeks due to the Fourth of July holiday. Nevertheless, initial claims and particularly continuing claims remain near multi-year highs as businesses continue to lay off employees at a relatively high rate and as the number of people on the unemployment rolls piles up. Next Friday’s July unemployment report is expected to show continued labor market weakness with a –68,000 decline in payrolls (which would be the seventh consecutive monthly decline) and a +0.1 point increase in the July unemployment rate to 5.6% (which would be a new 4-year high).
- Existing home sales – Today’s June US existing home sales report is expected to show a –1.0% decline to 4.94 million, falling back after the +2.0% increase to 4.99 million seen in May. Existing home sales activity this year has been bumping along sideways just above the record low of 4.89 million units posted in January 2008 (the data history for the existing home sales series goes back to 1999). Home sales activity is likely to remain weak going forward given (1) concern that home prices will continue to fall, (2) consumer caution due to high gasoline prices, weak economy, and fading labor market, and (3) the relative difficulty of obtaining mortgages.
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Overnight U.S. Stock News
- September S&Ps this morning are trading -5.10 points on this morning's 62-cent rally in crude oil prices and on some long liquidation pressure after the sharp week-long recovery rally. The US stock market yesterday closed moderately higher, extending Monday's upward rebound (Dow Jones +0.26%, S&P 500 +0.41%, Nasdaq Composite +0.95%).
- Bullish factors for stock prices yesterday included (1) yesterday's continued slide in oil prices to a new 1-1/2 month low and the lower close by -$3.98 per barrel (the Amex Airline index closed +8.5% to add to Monday's 22% rally), (2) a rally in S&P 500 financial stocks by +1.9% after the House of Representatives prepared to pass the Fannie/Freddie rescue plan legislation, which in fact occurred late yesterday (Fannie closed +12% and Freddie closed +11% yesterday), (3) stronger-than-expected results from AT&T which prompted a +3.9% rally in AT&T and boosted the overall telecom sector (S&P 500 Telecom Services Index +3.4%), and (4) some strength in the health care sector after stronger-than-expected earnings from Pfizer and WellPoint. The main bearish factor yesterday was the continued slide in T-note prices which have plunged by 3 full points in the past 6 sessions.
- Amazon.com (AMZN) is trading +6.3% higher today after reporting better than expected earnings late yesterday.
- McDonald's (MCD) is down -1% in European trading today after Deutsche Bank cut its recommendation to "hold" from "buy" due to the analysts' expectations for lower earnings tied to higher beef prices and reduced restaurant visits due to the weak economy and high gasoline prices.
- Fannie Mae (FNM) is up +1.4% in European trading this morning as the Senate is expected to follow the move by the House yesterday to approve the Fannie/Freddie rescue plan.
- Qualcomm (QCOMM) is up +18% in European trading this morning after litigation with Nokia over patents ended with Nokia agreeing to license Qualcomm's patents.
- Yahoo (YHOO) is up +2.6% and Google (GOOG) is up +0.3% after Baidu.com (China's most popular search engine) reported stronger than expected earnings and provided stronger-than-expected sales guidance.
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Today's U.S. Market Focus
- September 10-year T-notes this morning are trading +12.5 ticks on short-covering after the recent plunge and on lower S&Ps this morning. Sep T-note prices yesterday closed -14.5 ticks and have now plunged by 3 full points in the past six sessions. Bearish factors included (1) the continued rally in the stock market which is siphoning cash out of the credit market and is prompting expectations for a more hawkish Fed policy, (2) the continued upward rebound in banking stocks and the relatively quick movement of the Fannie-Freddie rescue plan through Congress which is reducing concerns about a fresh banking system crisis, (3) supply overhang with this week's heavy slate of Treasury auctions (20-year TIPS Tuesday, 2-year T-notes yesterday, and 5-year T-notes today), (4) yesterday's Fed Beige Book which reported inflation pressures in all districts, and (5) technical selling with the sharp sell-off.
- The dollar this morning is mixed with the dollar/yen down -0.08 yen and the euro/dollar down -0.31 cents. The dollar index yesterday extended Monday's rally and posted a new 2-week high. Bullish factors included (1) the continued upward rebound in the US stock market and reduced concerns about the US banking system, and (2) expectations for a more hawkish Fed policy which boosted US interest rate differentials.
- Sep crude oil prices this morning are trading +62 cents and Sep gasoline is trading +0.64 cents as the market sees some short-covering after the recent plunge. Sep crude oil prices yesterday fell sharply again and closed -$3.98 per barrel, posting a new 1-1/2 month low and bringing the 7-session sell-off to about $22 per barrel. Bearish factors yesterday included (1) the fact that Hurricane Dolly in fact steered south of the key oil rigs and refineries located farther north along the Gulf of Mexico coast, (2) heavy technical selling, (3) the weekly DOE report which showed a drop in demand and an increase in inventories. Gasoline inventories rose +2.85 million bbl, which was much larger than the expected increase of +200,000 bbl, and distillate inventories rose by +2.42 million bbl (slightly more than the expectation of +2.35 million bbl). US fuel demand fell to a 1-1/2 year low of 19.9 million bbl. A bullish factor was that crude oil inventories fell by -1.56 milli on bbl, which was a larger drop than the expected report of -600,000 bbl.
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Today's U.S. Earnings Reports
Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): MMM-3M (BEST earnings consensus $1.35 per share), OXY-Occidental Petroleum (2.68), LLY-Eli Lilly (0.99), BMY-Bristol-Myers Squibb (0.40), UNP-Union Pacific (0.92), BNI-Burlington Northern (1.30), DOW-Dow Chemical (0.85), CELG-Celgene (0.35), TMO-Thermo Fisher (0.77), RTN-Raytheon (0.93), NEMC-Newmont Mining (na), KMB-Kimberly-Clark (1.04), MHS-Medco Health Solutions (0.54), BEN-Franklin Res (1.66), BDX-Becton Dickinson (1.10), CB-Chubb (1.48), DO-Diamond Offshore (2.73), SII-Smith Intl (0.88), ROH-Rohm & Haas (.85), PLD-Prologis (0.71), F-Ford (-0.26), EPD-Enterprise Prod (0.36), XRX-Xerox (0.26), BG-Bunge (2.21), JNPR-Juniper Networks (0.27), LUV-Southwest Airlines (0.12), LLL-L3 Communication (1.62), ESV-Ensco (1.99), WYNN-Wynn Resorts (0.84), ECL-Ecolab (0.47)
| Thursday 7/24/2008 | |
|---|---|
| United States | |
| 0830 ET | Weekly unemployment claims expected +14,000 to 380,000, previous +18,000 to 366,000. Weekly continuing claims expected +38,000 to 3.160 million, previous –81,000 to 3.122 million. |
| 1000 ET | Jun existing home sales expected –1.0% to 4.94 million, May +2.0% to 4.99 million. |
| 1000 ET | New York Fed President Timothy Geithner and SEC Chairman Christopher Cox testify before the House Financial Services Committee on financial market regulatory restructuring. |
| 1300 ET | Treasury auctions $21 billion in 5-year T-notes. |
| France | |
| 0245 ET | Jul French business confidence indicator expected –2 to 100, Jun unchanged at 102. Jul production outlook indicator expected –2 to -17, Jun –1 to –15. |
| 0300 ET | Jul French PMI manufacturing expected –0.4 to 48.8, Jun –2.3 to 49.2. |
| 0300 ET | Jul French PMI services expected –0.6 to 49.5, Jun –0.4 to 50.1. |
| Germany | |
| 0330 ET | Jul German PMI manufacturing expected –0.6 to 52.0, Jun –1.0 to 52.6. |
| 0330 ET | Jul German PMI services expected –0.6 to 51.5, Jun –1.7 to 52.1. |
| 0400 ET | Jul German IFO business climate expected –1.1 to 100.2, Jun –2.2 to 101.3. Jul IFO current assessment expected –1.8 to 106.5, Jun –1.8 to 108.3. Jul IFO expectations expected –1.5 to 93.2, Jun –2.6 to 94.7. |
| Euro-Zone | |
| 0400 ET | Jul Euro-Zone PMI manufacturing expected –0.5 to 48.7, Jun –1.4 to 49.2. |
| 0400 ET | Jul Euro-Zone PMI services expected –0.3 to 48.8, Jun –1.5 to 49.1. |
| 0400 ET | Jul Euro-Zone PMI composite expected –0.3 to 49.0, Jun –1.8 to 49.3. |
| United Kingdom | |
| 0430 ET | Jun UK retail sales expected –2.6% m/m and +4.4% y/y, May +3.5% m/m and +8.1% y/y. |
| Japan | |
| 1930 ET | Jul Tokyo CPI expected +1.8% y/y, Jun +1.5% y/y. Jul Tokyo CPI ex-fresh food expected +1.6% y/y, Jun +1.3% y/y. Jul Tokyo CPI ex food and energy expected +0.4% y/y, Jun +0.3% y/y. |
| 1930 ET | Jun Japan national CPI expected +1.9% y/y, May +1.3% y/y. Jun national CPI ex-fresh food expected +1.9% y/y, May +1.5% y/y. Jun national CPI ex food and energy expected unchanged y/y, May –0.1% y/y. |
Morning Quote Board
Morning Quotes (ET) Last Chg %chg Updated US Stock Futures S&P (Globex) (U8) 1277.30 -5.10 -0.40% 07:07:19 DJIA (CBOT) (U8) 11563 -50 -0.43% 07:07:05 European Stocks Europe DJ Stoxx 50 2875.38 -15.30 -0.53% 07:02:15 London UK FTSE Index 5408.70 -41.20 -0.76% 07:02:16 German Dax Index 6466.33 -69.76 -1.07% 07:02:18 French CAC 40 Index 4374.29 -34.45 -0.78% 07:02:00 Asian-Pacific Stocks Japan Nikkei Index 13603 290 2.18% 03:00:16 Hong Kong Hang Seng 23088 -47 -0.20% 04:10:45 China CSI 300 Index 2977 94 3.26% 03:01:01 Taiwan TAIEX Index 7368 58 0.80% 01:46:01 Australian S&P 200 5144.1 38.8 0.76% 02:47:03 Singapore Str. Times 2977.91 -1.07 -0.04% 05:10:07 South Korea KOSPI 200 208.34 4.7 2.31% 02:01:43 Bombay Sensex 30 14777 -165.27 -1.11% 06:28:11 Karachi KSE-100 11157 138 1.25% 04:15:16 US Interest Rates 10yr T-notes (CBT)(U8) 113.130 0.125 0.35% 07:07:10 Cash 10yr T-note Price 98.090 0.070 0.22% 07:12:01 Cash 10yr T-note Yield 4.089 -0.028 -0.67% 07:11 5yr T-note (CBT)(U8) 110.095 0.120 0.33% 07:07:16 Cash 5yr T-note Price 99.205 0.055 0.17% 07:17:01 Cash 5yr T-note Yield 3.455 -0.038 -1.10% 07:16 30-yr T-bond (CBT)(U8) 114.01 0.14 0.37% 07:06:58 Cash 30yr T-bond Price 95.110 0.035 0.11% 07:17:01 Cash 30yr T-bond Yield 4.667 -0.007 -0.15% 07:16 Eurodollars (CME)(U8) 97.070 0.040 0.04% 07:06:30 Eurodollars (CME)(Z8) 96.805 0.075 0.08% 07:05:43 Asian & European Rates 10-yr JGBs (TSE) (U8) 135.15 -0.35 -0.26% 02:00:00 EuroyenTibor(SGX)(U8) 99.145 0.000 0.00% 04:10:41 Bunds (Eurex) (U8) 110.62 0.65 0.59% 07:02:17 Euribor (Eurex) (U8) 94.97 0.03 0.03% 06:23:00 UK Gilts (Liffe) (U8) 105.78 0.33 0.31% 07:01:36 Short Stlg (Liffe) (U8) 94.12 0.05 0.05% 07:02:11 Forex US Dollar/Japanese Yen 107.81 -0.08 -0.08% 07:17:19 EuroFX / US Dollar 1.5668 -0.0031 -0.31% 07:17:19 SwissFranc/US Dollar 1.0382 0.0005 0.05% 07:17:17 British Pound (per USD) 1.9851 -0.0146 -1.46% 07:17:18 Canadian Dlr (perUSD) 1.0094 -0.0010 -0.10% 07:17:10 Yen (Globex) (U8) 0.9305 0.0011 0.11% 07:07:20 Euro FX (Globex) (U8) 1.5634 1E-04 0.01% 07:06:48 SwissFranc (Globex)(U8) 0.9639 0.0009 0.09% 07:07:16 British Pound(Glbx)(U8) 1.9781 -0.011 -0.55% 07:06:54 Canadian$ (Globex)(U8) 0.9899 0.0008 0.08% 07:06:56 Commodities Gold (Comex) (Q8) 926.7 3.9 0.42% 06:46:53 Copper (Comex) (U8) 365.4 -0.4 -0.10% 06:44:47 Crude Oil (Nymex) (U8) 125.06 0.62 0.50% 06:47:20 Gasoline (Nymex) (U8) 305.93 0.64 0.21% 06:45:52 Heating Oil(Nymex)(U8) 360.4 2.6 0.73% 06:46:33 NaturalGas(Nymex)(U8) 9.74 -0.111 -1.13% 06:39:00
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