U.S. Preview
- The European DJ Stoxx 50 this morning is trading -0.64%. Bearish factors include mildly higher oil prices and the European Commission's cut its its 2008 GDP forecast for the Euro-zone to +1.3% from +1.7%. Banking sector stocks remained weak with Barclay's down -2.9% and UBS down -1.4%. Asia-Pacific stocks today closed mostly lower: Japan -0.44%, Hong Kong -2.40%, China +0.19%, Taiwan +0.52%, Australia -1.50%, Singapore -1.90%, South Korea +0.81%, Bombay -1.60%.
- This morning's MBA mortgage applications report showed the second straight week of strong increases. The market index rose +9.5% (after last week's +7.5%), the purchases sub-index rose +6.4% (after last week's 10.5%), and the refinancing sub-index rose +15.4% (after last week's +2.1%). The recent 28 bp decline in mortgage rates is providing a boost to refinancing activity.
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Overnight U.S. Stock News
- September S&Ps this morning are trading +7.60 points on some short-covering after yesterday's sharp losses and on hopes that Lehman can stabilize the situation in its conference call today. The US stock market yesterday sold-off sharply and gave back all of Monday's gains (Dow -2.43%, S&P 500 -3.41%, Nasdaq Composite -2.64%).
- Bearish factors for stock prices yesterday included (1) the larger-than-expected decline in July pending home sales, (2) the larger-than-expected increase in July wholesale inventories, implying slowing demand for goods, (3) the recommendation by Credit Suisse that investors should sell stocks after Monday's rally because the housing slump is ongoing and economies in the US and Europe remain weak, (4) the survey from Manpower that said US fourth-quarter hiring plans are at a 5-year low as retailers brace for a dismal holiday shopping season, (5) the 45% plunge to a 10-year low for Lehman Brothers, the fourth-largest US securities firm, after talks to sell a stake to Korea Development Bank broke down and also after S&P warned it may cut Lehman's credit ratings because it believes Lehman will report a "substantial" Q3 loss, and (6) the fear that even with the US government bailout of Fannie Mae and Freddie Mac, structural and fundamental economic issues remain as consumer spending continues to slow with the job market deteriorating and the credit crunch persisting.
- Bullish factors for stock prices yesterday included (1) the drop in crude ol prices to a 5-month low and the overall slump in commodity prices to an 8-month low, easing inflation concerns, and (2) the +1.2% gain in McDonald's after the world's largest restaurant company reported better-than-expected sales for August.
- Lehman Brothers (LEH) rallied 26% in after-hours trading yesterday after announcing that it moved up its earnings announcement to today and will also announce "key strategic initiatives" on a conference call. The Wall Street Journal this morning is reporting that Lehman will announce the sale of UK real estate assets.
- FedEx (FDX) rallied +4% in after-hours trading yesterday after the company said its earnings for the quarter ended August 31 was $1.23 per share, which was above the analyst consensus.
- Texas Instruments (TXN) rallied +5.6% in after-hours trading yesterday as the second-largest US semiconductor maker said it will make 42 to 46 cents a share in Q3, more than the analyst estimate of 44 cents.
- PNC Financial Services Group (PNC) fell -3.4% in after-hours trading yesterday as Pennsylvania's biggest bank said it expects a "significant" drop in its value of its Blackrock stake and expects continued declines in the value of other federally sponsored lenders it owns.
- Salesforce.com (CRM) and Fastenal Co (FAST) rallied 3-4% in after-hours trading yesterday after S&P announced that those two companies were chosen to replace Fannie Mae and Freddie Mac in the S&P 500 index.
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Today's U.S. Market Focus
- December 10-year T-notes this morning are trading -6.5 ticks on higher S&Ps. December T-note prices yesterday rallied throughout the day and closed +16 ticks. Bullish factors for T-note prices yesterday included (1) flight-to-safety with the sell-off in the equity market, (2) the larger-than-expected decline in pending home sales for July (-3.2% versus expectations of -1.5%), (3) the larger-than-expected increase in July wholesale inventories (+1.4% versus expectations of +0.7%), and (4) speculation that investors will buy 10-year T-notes to increase the duration of their bond portfolios as mortgage-bond yields continue to fall with the US government prepared to buy Fannie and Freddie's mortgage bonds to reduce mortgage loan rates. Bearish factors for T-note prices yesterday included (1) a larger-than-expected increase in the Sep IBD/TIPP economic optimism index (+3.0 to 45.8 versus expectations of +1.2 to 44.0), and (2) supply concerns due to fears the Treasury will have to increase debt sales to finance the bailout of Fannie Mae and Feddie Mac.
- The dollar is trading higher this morning with the dollar/yen up +0.67 yen and the euro/dollar down -0.39 cents. The dollar index yesterday gave up some of Monday's gains and closed lower. Bearish factors for the dollar yesterday included (1) the strength in the yen as the weakness in the the equity market forced investors to unwind their carry trades, and (2) the report from the Congressional Budget Office (CBO) that the US budget deficit will grow to a record $438 billion next year, making it harder for the next administration to either cut taxes or increase spening to stimulate growth. Bullish factors for the dollar yesterday included (1) comments from EU Commissioner Almunia that the prospects for Euro-Zone economy in 2008 and the beginning of 2009 "are not very good," and (2) the revised forecasts by the Royal Bank of Scotland Group Plc that lowered its forecast for the euro to $1.40 per dollar by year-end versus a previous forecast of $1.50 and for the euro to fall to $1.35 by the end of Q1 2009 versus a previous forecast of $1.45.
- October crude oil prices this morning are trading +43 cents a barrel and October gasoline is trading +2.23 cents a gallon. OPEC's president today said that OPEC members should cut production to their quota levels, which would ammount to a production cut of about 500,000 bpd given current over-production levels. The National Hurricane Center currently has Hurricane Ike headed towards the southern Texas coast, making landfall on Saturday morning. October crude oil prices yesterday moved lower the entire day and closed -$3.08 a barrel and October gasoline closed -9.77 cents a gallon. October crude oil posted a 5-month low of $101.74 a barrel yesterday. Bearish factors for crude oil prices yesterday included (1) comments from Saudi Oil Minister Ali al-Naimi that the market is "well-balanced" and comments from Venezuela's energy and oil minister that OPEC should leave production levels unchanged, signaling the cartel will make no changes to crude oil quotas at their mee ting in Vienna, (2) weather forecasts that predict Hurricane Ike will miss most energy installations in the Gulf of Mexico, and (3) the action by the US Energy Department in cutting their 2008 crude oil price forecast to $115.81 a barrel from an Aug forecast of $119.09 a barrel. Bullish factors for crude oil prices yesterday included (1) the weaker dollar, and (2) forecasts for a sharp decrease in inventories for crude oil and its products in today's DOE weekly inventory report. Expectations for today's DOE inventory report are for a -3.75 million bbl drop in crude oil inventories, a -3.45 million bbl decline in gasoline stockpiles, a -2.15 million bbl drop in distillate inventories and a sharp -8.7 point decrease in the refinery capacity rate to 80.0% due to the shut down of production because of Hurricane Gustav.
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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): SRZ-Sunrise Senior Living (BEST earnings consensus $0.28 per share)
| Wednesday 9/10/2008 | |
|---|---|
| United States | |
| 0700 ET | Weekly MBA mortgage applications, previous +7.5% with purchase sub-index +10.5% and refi sub-index +2.1%. |
| Japan | |
| 0100 ET | Jul Japan leading index composite index expected 91.9, Jun 91.3. Jul coincident index composite index expected 102.5, Jun 101.6. |
| 1950 ET | Jul Japan machine orders expected –4.0% m/m and –4.9% y/y, Jun –2.6% m/m and +9.7% y/y. |
| France | |
| 0245 ET | Jul French industrial production expected +0.2% m/m and –2.5% y/y, Jun –0.4% m/m and –1.6% y/y. |
| 0245 ET | Jul French manufacturing production expected +0.4% m/m and –3.0% y/y, Jun –0.8% m/m and –2.1% y/y. |
| 0245 ET | Jul French trade balance expected –5.0 billion euros, Jun –5.6 billion euros. |
| Euro-Zone | |
| 0300 ET | ECB President Jean-Claude Trichet and Luxembourg Prime and Finance Minister Jean-Claude Juncker speak at the European Parliament in Brussels, Belgium. |
| 0545 ET | European Commission releases economic growth forecasts. |
| 1230 ET | ECB Council member Axel Weber delivers a speech at the 12th Banking Symposium of the University Duisburg-Essen in Oberhausen, Germany. |
| Canada | |
| 0830 ET | Q2 Canadian labor productivity expected +0.3% q/q, Q1 –0.3% q/q. |
Morning Quote Board
Morning Quotes (ET) Last Chg %chg Updated US Stock Futures S&P (Globex) (U8) 1234.10 7.60 0.62% 07:03:33 DJIA (CBOT) (U8) 11306 59 0.52% 07:03:21 European Stocks Europe DJ Stoxx 50 2824.01 -18.12 -0.64% 06:58:45 London UK FTSE Index 5371.90 -43.70 -0.81% 06:58:46 German Dax Index 6207.89 -25.52 -0.41% 06:58:54 French CAC 40 Index 4284.03 -9.31 -0.22% 06:58:30 Asian-Pacific Stocks Japan Nikkei Index 12347 -54 -0.44% 03:00:15 Hong Kong Hang Seng 20000 -491 -2.40% 04:10:30 China CSI 300 Index 2143 4 0.19% 03:01:05 Taiwan TAIEX Index 6458 33 0.52% 01:46:01 Australian S&P 200 4905.5 -74.6 -1.50% 02:47:03 Singapore Str. Times 2622.41 -50.8 -1.90% 05:10:06 South Korea KOSPI 200 188.5 1.51 0.81% 02:01:40 Bombay Sensex 30 14663 -238.15 -1.60% 06:28:13 Karachi KSE-100 9316 36 0.39% 03:30:21 US Interest Rates 10yr T-notes (CBT)(Z8) 116.230 -0.065 -0.17% 07:03:54 Cash 10yr T-note Price 103.060 -0.130 -0.39% 07:13:31 Cash 10yr T-note Yield 3.615 0.048 1.34% 07:13 5yr T-note (CBT)(Z8) 112.220 -0.060 -0.16% 07:03:51 Cash 5yr T-note Price 100.310 -0.095 -0.29% 07:12:31 Cash 5yr T-note Yield 2.914 0.064 2.24% 07:12 30-yr T-bond (CBT)(Z8) 120.03 -0.03 -0.08% 07:03:45 Cash 30yr T-bond Price 105.020 -0.165 -0.49% 07:13:31 Cash 30yr T-bond Yield 4.200 0.029 0.70% 07:13 Eurodollars (CME)(Z8) 97.130 -0.015 -0.02% 07:01:44 Eurodollars (CME)(H9) 97.210 -0.025 -0.03% 07:01:35 Asian & European Rates 10-yr JGBs (TSE) (Z8) 137.41 -0.43 -0.31% 02:00:00 EuroyenTibor(SGX)(Z8) 99.175 0.010 0.01% 05:59:45 Bunds (Eurex) (Z8) 114.95 -0.13 -0.11% 06:58:56 Euribor (Eurex) (Z8) 94.95 0.00 -0.01% 06:32:37 UK Gilts (Liffe) (Z8) 112.17 -0.10 -0.09% 06:58:56 Short Stlg (Liffe) (Z8) 94.38 0.01 0.01% 06:58:26 Forex US Dollar/Japanese Yen 107.48 0.67 0.63% 07:13:55 EuroFX / US Dollar 1.4095 -0.0039 -0.39% 07:13:55 SwissFranc/US Dollar 1.1328 0.0058 0.58% 07:13:50 British Pound (per USD) 1.7554 -0.0053 -0.53% 07:13:53 Canadian Dlr (perUSD) 1.0699 -0.0015 -0.15% 07:13:52 Yen (Globex) (Z8) 0.9357 -0.0038 -0.38% 07:03:44 Euro FX (Globex) (Z8) 1.4023 -0.0071 -0.50% 07:03:51 SwissFranc (Globex)(Z8) 0.8839 -0.0063 -0.71% 07:02:39 British Pound(Glbx)(Z8) 1.7439 -0.0072 -0.41% 07:03:24 Canadian$ (Globex)(Z8) 0.9335 -0.0011 -0.12% 07:02:22 Commodities Gold (Comex) (Z8) 777.6 -14.4 -1.82% 06:43:55 Copper (Comex) (Z8) 306.3 -2.5 -0.79% 06:43:36 Crude Oil (Nymex) (V8) 103.69 0.43 0.42% 06:43:37 Gasoline (Nymex) (V8) 267.49 2.23 0.84% 06:41:24 Heating Oil(Nymex)(V8) 293.24 0.77 0.26% 06:42:16 NaturalGas(Nymex)(V8) 7.374 -0.161 -2.14% 06:37:37
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