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Barchart Morning Call --1/7

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January 07, 2011 – Comments (0)

Barchart Morning CallBarchart.com - 2 hrs 38 mins ago

Overnight Developments

 Global stocks are trading mostly lower with the European Euro Stoxx 50 index down -0.08% and March S&Ps down -0.40 points. The euro sank to a 3-1/2 month low against the dollar on increased sovereign-debt risks after the Markit iTraxx SovX Western Europe Index of credit-default swaps on 15 governments rose to a record high 214. The euro weakened despite comments from PBOC Deputy Governor Yi Gang who said that "the euro and the European financial markets are an important part of the global financial system and were, are and will be one of the most important investment areas for China's foreign-exchange reserves." European bank stocks led declines in the overall market with Banco Santander, Spain's biggest bank, down 3.2% and UniCredit, Italy's largest lender, down by 2.1%. Nov German retail sales unexpectedly declined -2.4% m/m, its biggest drop in 2-1/2 years and Nov German industrial production slid -0.7% m/m, weaker than expectations for a -0.1% decline

.The Asian stock markets today closed mixed with Japan up +0.11%, Hong Kong -0.42%, China +0.22%, Taiwan -1.13%, Australia -0.42%, Singapore -0.56%, South Korea +0.32%, India -2.44%. The yen weakened to a 2-week low against the dollar, which helped to strengthen Japanese exporters and push the Nikkei 225 Stock Index up to a 7-1/2 month high. China's Shanghai Stock Index closed higher after the Xinhua news agency reported that Vice Premier Li Keqiang said that China's economy expanded at about 10% in 2010 and that retail sales rose +18.5% from a year earlier. India's Sensex Stock Index closed lower for a fourth day, the longest losing streak in 6 weeks, on speculation the RBI may boost interest rates, while the Aussie dollar slid to a 3-week low against the US dollar on speculation that the worst floods in 50 years may slow the Australian economy and prompt the RBA from raising interest rates.

Overnight U.S. Stock News

 March S&Ps this morning are trading down -0.40 of a point ahead of this morning's Dec US payrolls report. The US stock market on Thursday fell back from an early rally and finished mixed: Dow -0.22%, S&P 500 -0.21%, Nasdaq Composite +0.28%. The S&P 500 climbed to a 2-1/4 year high and the Nasdaq posted a 9-3/4 year high.

Bearish factors for stocks included (1) valuation concerns as the S&P 500 Index is trading for almost 16 times the operating profits of its companies, the highest in 6 months, (2) weakness in retailers after some Dec retailer sales were reported weaker than expected after blizzards kept shoppers away from stores the last week of Dec, and (3) profit-taking and long liquidation ahead of Friday's all-important monthly payrolls report.Bullish factors included (1) a sign that the US labor market is improving after the US Labor Department reported that the 4-week average of applications for US jobless benefits slipped to 410,750, a nearly 2-1/2 year low, and (2) optimism that company earnings? will continue to improve, as the start of Q4 earnings reporting season begins next week.

Immucor (BLUD) gained 6.2% in pre-market trading after the company said Q2 EPS rose 30 cents, higher than analysts' estimates of 27 cents, and it forecast 2011 adjusted EPS of $1.08-$1.18 a share, 2 cents higher than analysts' projections of $1.16.

Today's Market Focus

 March 10-year T-notes this morning are down -4.5 ticks. T-note prices on Thursday moved higher and finished with moderate gains: TYH11 +18.5, FVH11 +10.2, EDM11 -1.5. Bullish factors included (1) the Fed's action to purchase $6.78 billion of Treasuries as part of its QE2 asset-purchase program, and (2) short-covering and position squaring ahead of Friday's all-important Dec payrolls report. Bearish factors included (1) a sign that the US labor market is improving after the US Labor Department reported that the 4-week average of applications for US jobless benefits slipped to 410,750, a nearly 2-1/2 year low, and (2) supply pressures as dealers set up for $66 billion of T-note auctions next week.The dollar index this morning is higher and at a 1-month high with the dollar/yen +0.24 yen and the euro/dollar -0.25 cents. The dollar on Thursday strengthened throughout the day and settled higher:

Dollar Index +0.533, USDJPY +0.088, EURUSD -0.01464. The dollar index climbed to a 1-month high and the euro tumbled to a 1-month low against the dollar. Bullish factors included (1) euro weakness after Nov Euro-Zone retail sales unexpectedly declined along with concern that the European debt crisis is worsening after KBC Groep NV, Belgium's largest bank, said it will take additional provisions of as much as 330 million euros ($434 million), partly related to its Irish loan book, and (2) increased demand for dollars on speculation that Friday's Dec payrolls report will show strength in the economy with employers adding jobs for a third month. Bearish factors included (1) the biggest monthly increase in Nov German factory orders in the last 10 months, and (2) the larger-than-expected increase in the Dec Euro-Zone business climate indicator to its best level in 3-1/2 years, which is euro positive.

February crude oil prices this morning are trading up +65 cents a barrel and February gasoline is +0.33 of a cent per gallon. Crude oil and gasoline prices on Thursday sold off sharply and finished with large losses: CLG11 -1.92, RBG11 -0.21. Feb crude slid to a 2-week low and Feb gasoline rallied to a 27-month high but relinquished its gains and settled lower. Bearish factors included (1) the rally in the dollar index to a 1-month high, which reduces investment demand in commodities, and (2) concern that a slower recovery in some European nations will prolong the region's debt crisis and reduce its energy demand. Bullish factors included (2) early strength in gasoline which climbed to a 27-month high on optimism about the economic recovery and the potential for increased fuel demand, and (2) comments from the Kuwaiti Oil Minister who said a price of $75 a barrel for crude oil ?is over now? and a higher price range of $80 to $100 a barrel is acceptable.

Today's U.S.Earnings Reports Earnings reports (confirmed releases, sorted by mkt cap) KBH-KB Home (BEST earnings consensus -$0.16), TXI-Texas Industries (-0.55), RBN-Robbins & Myers (0.33), PSMT-Pricesmart (0.05), GBX-Greenbrier Cos. (-0.16), AZZ-AZZ Inc (0.76). 
 

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