U.S. Preview
- The European DJ Stoxx 50 this morning is trading -1.30% on continued worries about weaker economic growth and earnings. Bank stocks are generally lower this morning with BNP Paribas and Credit Suisse each down more than 6%. BHP Billiton, the world's largest mining company, is down 2.7% after Macquarie Group reduced its 2009 earnings forecast by 31%. Asia-Pacific stocks today closed sharply lower: Japan -2.28%, Hong Kong -4.54%, China -7.42%, Taiwan -3.03%, Australia -3.55%, Singapore -3.26%, South Korea -4.05%, Bombay -3.81%.
- PPI – Today’s Oct PPI report is expected to show a sharp decline of –1.8% m/m, adding to the –0.4% m/m decline seen in September. Excluding food and energy, the Oct core PPI is expected to show a small increase of +0.1% m/m following the increase of +0.4% m/m seen in September. On a year-on-year basis, the Oct PPI is expected to ease to +6.2% y/y from +8.7% y/y in September, and decline further from the 27-year high of +9.8% posted in July. The core PPI is expected to be unchanged from September’s 17-1/2 year high of +4.0% y/y. The PPI statistics are still at high levels that in normal circumstances would pose major inflation concerns with the overall PPI at +8.7% y/y and the core PPI at +4.0% y/y in September. However, the inflation statistics will fall quickly in coming months due to sharply lower energy and commodity prices and an overall price decline caused by weak demand. Indeed, the Fed’s worries are quickly turning to deflation since the economy is falling fast and monetary policy is “pushing on a string” with no real impact on stimulating lending. In this environment, the Fed has flexibility to ease monetary policy further despite the headline inflation statistics. The market expects the FOMC at its next meeting on December 16 to cut its funds rate target by another 50 bp to 0.50%.
- NAHB housing index – Today’s Nov NAHB housing market index is expected to be unchanged at 14, moving sideways after the 3-point decline to the record low of 14 seen in October. The NAHB index only has history back to 1985, which means that the series didn’t exist during the 1973-75 recession and the double-dip recessions of 1980 and 1981-82. The index from the National Association of Home Builders is designed to measure the general state of the single-family home building marketplace, measuring present sales, 6-month sales expectations, and traffic of prospective buyers. The index fluctuates between 0 and 100, with the level of 50 representing the demarcation between a “good” versus “poor” outlook for the single-family home marketplace. The NAHB index is currently at rock bottom. Sentiment can’t get much worse among homebuilders, whom are simply in a survival mode and are only building homes for which they have firm contract.
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Overnight U.S. Stock News
- December S&Ps this morning are trading -14.90 points on lower overseas stocks and general concern about the weaker economy and earnings. The US stock market yesterday swung between gains and losses several times throughout the day and then a late sell-off left it closing on its low (Dow -2.63%, S&P 500 -2.58%, Nasdaq Composite -2.59%).
- Bearish factors for stock prices yesterday included (1) the contraction in New York manufacturing for Nov (-0.8 to -25.4) to a record low since the index was created in July 2001, (2) the prediction by the National Association for Business Economics (NABE) that the US has entered a recession that will last into next year, (3) comments from Kansas City Fed President Hoenig that the Fed should provide emergency lending programs only to financial institutions that create credit and handle payments, and not to non-bank companies, (4) the sell-off in the insurance sector as Hartford plunged nearly 27% after Barclays told investors to limit holdings in the insurer s the company is "still going uphill" and may face nore "negative developments" in the near term, and (5) the 4.1% fall in Target as the second-largest US discount retailer said Q3 profit fell as customers only purchased necessities and shunned higher-priced goods. Target projected lower Q4 earnings than analysts e xpected, suspended its share buyback program, and cut planned capital spending for 2009 by $1 billion.
- Bullish factors for stock prices yesterday included (1) comments from President-elect Obama that the US government will do "whatever it takes" to revive the economy, (2) the prediction from Morgan Stanley that the US financial sector is "fairly valued to moderately cheap" and that the recent fall in the KBW Bank Index to a 12-year low may signal investors are "ignoring" an improvement in credit markets since last month, (3) the prospects for increased buying of US stocks by sovereign wealth funds after Dubai Group, which manages over $40 billion on behalf of Dubai's ruler, said they plan on investing in US companies because the US has the potential to recover quicker from the global financial crisis than Europe, and (4) the 5.7% gain in General Motors on hopes that Congress will approve additional aid for the troubled auto industry.
- Home Depot (HD) reported earnings at 45 cents a share, down from 60 cents a year earlier but better than the market consensus of 39 cents. The home-improvement retailer reduced its guidance outlook for fiscal 2008/09 (ending Feb 1) and said revenue may fall 8% versus its previous estimate for a 5% decline in revenue, and that 2008/09 EPS ex-items may drop 24%.
- S&P announced late yesterday that Life Technologies (LTEK) will replace Applied Biosystems in the S&P 500, and that Stericycle (SRCL) will replace Anheuser-Busch in the S&P 500.
- Medtronic (MDT) is down 1% in European trading this morning before releasing its earnings results today.
- Kellogg (K) is down 1.4% after UBS cut its rating due to "consumer weakness in key economies."
- Yahoo! (YHOO) rallied 16% after CEO Jerry Yang agreed to resign, possibly allowing Microsoft to restart its attempt to acquire the company.
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Today's U.S. Market Focus
- December 10-year T-notes this morning are trading +12 ticks on the lower trade in global stock markets. December T-note prices yesterday rallied to a 1-1/4 month high and closed +17 ticks. Bullish factors for T-note prices yesterday included (1) the prediction from the National Association for Business Economics (NABE) that the US has entered a recession that will persist into 2009 and that the UK, Euro-Zone. Japan, Canada and Mexico are either in a recession already or will be soon, (2) the drop in the Empire manufacturing index for Nov to its lowest level since the index was created in July 2001 (-0.8 to -25.4), and (3) the prediction from Goldman Sachs that the Fed may consider buying Treasuries to hold down yields if the global crisis deepens. Bearish factors for T-note prices yesterday included (1) comments from President-elect Obama that the US government will do "whatever it takes" to revive the economy and that means "we shouldn't worry about the deficit next year or even the year after," stoking fears of burgeoning budget deficits that will cause a massive increase in Treasury issuance, and (2) the better-than-expected Oct industrial production (+1.3% versus expectations of +0.2%).
- The dollar this morning is mixed with the dollar/yen down -0.29 yen and the euro/dollar down -0.17 cents. The dollar index yesterday closed higher. Bullish factors for the dollar yesterday included (1) the drop in the Oct Bank of France business sentiment to its lowest level (-9 to 77) since the data series began in Jan 1987, and (2) comments from President-elect Obama that the US government will do "whatever it takes" to revive the economy. Bearish factors for the dollar yesterday included (1) the prediction from the NABE that the US has entered a recession that will last into next year, and (2) the contraction in manufacturing in New York for Nov to a record low since records began in July 2001, according to the Empire manufacturing index.
- December crude oil prices this morning are trading -17 cents a barrel and December gasoline is trading -0.96 cents a gallon. December crude oil prices yesterday whipped on both sides of unchanged throughout the day before moving lower late and closing -$2.09 a barrel at a 21-month low. December gasoline closed -6.45 cents a gallon at a 3-3/4 year low. Bearish factors for crude oil prices yesterday included (1) continued weakening of global energy demand after China said its imports of diesel fuel dropped to a 14-month low in October, (2) the strength in the dollar, (3) the fact that Japan, the world's third-biggest oil consuming country, has entered its first recession since 2001, and (4) OPEC's cut in its 2009 global crude oil demand forecast for a third month as the cartel lowered its estimate for 2009 oil consumption by 530,000 bpd, or 0.6%, to 86.68 million bpd and said "the downbeat economic forecast has darkened the outlook for oil demand substantially." Bulli sh factors for crude oil prices yesterday included (1) the forecast by the National Weather Service of below normal temperatues for the Eastern US between Nov 22-26, increasing fuel demand, and (2) the highjacking of a Saudi Arabian oil tanker off the coast of Somalia by pirates.
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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): MDT-Medtronic (BEST earnings consensus $0.71 per share), HD-Home Depot (0.39)
| Tuesday 11/18/2008 | |
|---|---|
| United States | |
| 0745 ET | ICSC (Int’l Council of Shopping Centers) weekly retailer sales, previous –1.0% w/w and +0.4% weekly y/y. |
| 0830 ET | Oct producer price index (PPI) expected –1.8% m/m and +6.2% y/y, Sep –0.4% m/m and +8.7% y/y. Oct PPI ex food and energy expected +0.1% m/m and +4.0% y/y, Sep +0.4% m/m and +4.0% y/y. |
| 0855 ET | Redbook weekly retailer sales, previous –1.2% month-to-date m/m and –1.0% month-to-date y/y. |
| 0900 ET | Sep net long-term TIC flows expected +$27.2 billion, Aug +$14.0 billion. |
| 0930 ET | Fed Chairman Ben Bernanke, Treasury Secretary Henry Paulson, and FDIC Chairman Sheila Bair testify before the House Financial Services Committee on the Treasury’s $700 billion bank rescue program. |
| 1130 ET | Weekly 4-week T-Bill auction. |
| 1300 ET | Treasury auctions 1-year T-Bills. |
| 1300 ET | Nov NAHB housing market index expected unchanged at 14, Oct –3 to 14. |
| 1700 ET | ABC U.S. weekly consumer confidence, previous –2 to -50. |
| Japan | |
| 0000 ET | Revised Sep Japan leading index, previous 89.2. Revised Sep coincident index, previous 100.8. |
| 0030 ET | Oct Japan nationwide department store sales, Sep –4.7% y/y. |
| 1850 ET | Sep Japan all industry activity index expected –0.1%, Aug –1.8%. |
| United Kingdom | |
| 0430 ET | Oct UK consumer price index (CPI) expected +0.1% m/m and +4.8% y/y, Sep +0.5% m/m and +5.2% y/y. Oct core CPI expected +2,2% y/y, Sep +2.2% y/y. |
| 0430 ET | Oct UK retail price index (RPI) expected +0.1% m/m and +4.6% y/y, Sep +0.6% m/m and +5.0% y/y. Oct RPI ex mortgage interest payments expected +5.2% y/y, Sep +5.5% y/y. |
| Euro-Zone | |
| 0310 ET | ECB Executive Board member Gertrude Tumpel-Gugerell delivers a speech at the 11th Euro Finance Week. |
| 0500 ET | Sep Euro-Zone construction output, Aug +0.1% m/m and –2.5% y/y. |
| 1000 ET | ECB Executive Board member Juergen Stark delivers a speech at the 11th Euro Finance Week in Frankfurt. |
| 1330 ET | ECB President Jean Claude Trichet delivers a speech in London. |
Morning Quote Board
Morning Quotes (ET) Last Chg %chg Updated US Stock Futures S&P (Globex) (Z8) 836.10 -14.90 -1.75% 07:05:56 DJIA (CBOT) (Z8) 8149 -110 -1.33% 07:05:14 European Stocks Europe DJ Stoxx 50 2069.37 -27.30 -1.30% 07:01:15 London UK FTSE Index 4066.78 -65.38 -1.58% 07:01:16 German Dax Index 4466.14 -91.13 -2.00% 07:01:23 French CAC 40 Index 3133.45 -48.58 -1.53% 07:01:00 Asian-Pacific Stocks Japan Nikkei Index 8328 -194 -2.28% 02:00:16 Hong Kong Hang Seng 12916 -614 -4.54% 03:10:30 China CSI 300 Index 1840 -147 -7.42% 02:01:09 Taiwan TAIEX Index 4305 -135 -3.03% 00:46:01 Australian S&P 200 3523.2 -129.8 -3.55% 00:47:04 Singapore Str. Times 1692.55 -57.12 -3.26% 04:10:09 South Korea KOSPI 200 134.88 -5.69 -4.05% 01:02:32 Bombay Sensex 30 8937 -353.81 -3.81% 05:28:14 Karachi KSE-100 9184 0 0.00% 02:45:38 US Interest Rates 10yr T-notes (CBT)(Z8) 117.265 0.120 0.32% 07:06:24 Cash 10yr T-note Price 101.020 0.070 0.22% 07:15:31 Cash 10yr T-note Yield 3.622 -0.026 -0.72% 07:15 5yr T-note (CBT)(Z8) 117.025 0.070 0.18% 07:06:23 Cash 5yr T-note Price 102.090 0.010 0.03% 07:15:31 Cash 5yr T-note Yield 2.260 -0.007 -0.30% 07:15 30-yr T-bond (CBT)(Z8) 119.17 0.23 0.59% 07:06:24 Cash 30yr T-bond Price 105.255 0.195 0.58% 07:16:01 Cash 30yr T-bond Yield 4.157 -0.035 -0.83% 07:15 Eurodollars (CME)(Z8) 97.898 0.078 0.08% 07:06:24 Eurodollars (CME)(H9) 98.075 0.060 0.06% 07:05:59 Asian & European Rates 10-yr JGBs (TSE) (Z8) 138.61 0.05 0.04% 01:00:00 EuroyenTibor(SGX)(Z8) 99.220 0.000 0.00% 11/18/2008 Bunds (Eurex) (Z8) 118.88 0.14 0.12% 07:01:21 Euribor (Eurex) (Z8) 96.48 0.02 0.03% 06:57:22 UK Gilts (Liffe) (Z8) 115.28 0.56 0.49% 07:01:09 Short Stlg (Liffe) (Z8) 96.62 0.12 0.12% 07:01:15 Forex US Dollar-Japanese Yen 96.15 -0.29 -0.30% 07:16:21 EuroFX-US Dollar 1.2633 -0.0017 -0.17% 07:16:24 US Dollar-Swiss Franc 1.1988 -0.0001 -0.01% 07:16:20 British Pound-US$ 1.5026 0.0037 0.37% 07:16:23 US$-Canadian Dlr 1.2315 0.0059 0.59% 07:16:21 Yen (Globex) (Z8) 1.0413 0.0089 0.89% 07:06:25 Euro FX (Globex) (Z8) 1.2617 -0.0046 -0.36% 07:06:25 SwissFranc (Globex)(Z8) 0.8344 -0.0009 -0.11% 07:06:20 British Pound(Glbx)(Z8) 1.5021 0.0007 0.05% 07:06:22 Canadian$ (Globex)(Z8) 0.8107 -0.0065 -0.80% 07:06:21 Commodities Gold (Comex) (Z8) 734.5 -7.5 -1.01% 06:46:21 Copper (Comex) (Z8) 162.4 -3.3 -1.99% 06:45:48 Crude Oil (Nymex) (Z8) 54.78 -0.17 -0.31% 06:45:45 Gasoline (Nymex) (Z8) 116.5 -0.96 -0.82% 06:27:35 Heating Oil(Nymex)(Z8) 177.93 -1.17 -0.65% 06:44:11 NaturalGas(Nymex)(Z8) 6.49 -0.043 -0.66% 06:43:54
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