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TODAY’S S&P 500 SET-UP - January 19, 2011


Equity futures are trading below fair value as European markets extend losses amid reports Greece may be looking at rescheduling its debt. Under the plan, reportedly being brokered in Berlin, Athens would be allowed to buy back its own debt using a euro zone crisis fund.  As we look at today’s set up for the S&P 500, the range is 18 points or -1.16% downside to 1280 and +0.23% upside to 1298.

 MACRO DATA POINTS:

  • MBA mortgage applications up 5% prior 2.2%
  • 8:30 a.m.: Housing starts, Dec. est. 550k, prior 555k
  • 8:30 a.m.: Building permits, Dec., est. 554k, prior 530k
  • 3 p.m.: USDA broiler eggs set, Jan. 14
  • 4:30 p.m.: API inventories, Jan. 14

TODAY’S WHAT TO WATCH:

  • Mosaic says it will be a “possible” takeover target as Cargill divests $24.3b stake in the co. over the next two yrs
  • Pimco’s Neel Kashkari, a former Treasury official, says U.S. may face a debt crisis without action to limit federal spending
  • Apple, IBM estimate-topping earnings bode well for results due in coming weeks from Hewlett-Packard, Microsoft, Dell and other cos. that supply corporations with computers and software
  • HSBC Global Asset Management’s Absolute Return fund favors stocks including Coca-Cola and Procter & Gamble to beat returns from gold this year as global economy recovers
  • Amgen (AMGN) agreed to sell its rights and assets at Fremont, Calif. manufacturing facility to Boehringer Ingelheim
  • Cree (CREE) forecast sees 3Q adj. EPS 38c-45c vs est. 58c
  • IBM (IBM) reported 4Q EPS $4.18 vs. est $4.08
  • Linear Technology (LLTC) forecast 3Q rev. ~$345.3m-$360.6m vs est. $371.6m
  • Mosaic (MOS): Cargill will spin off 64% MOS stake to Cargill shareholders, bondholders
  • NuVasive (NUVA): CIGNA, Humana change lumbar spinal fusion policy to include coverage for NUVA’s eXtreme Lateral Interbody Fusion
  • Western Digital (WDC) reported 2Q rev. $2.48b vs est. $2.35b, EPS 96c vs est. 59c

EARNINGS:

  • Bank of New York Mellon (BK) 6:30 a.m., $0.57 
  • US Bancorp (USB) 6:45 a.m., $0.47 
  • MGIC Investment (MTG) 7 a.m., $(0.46)
  • State Street (STT) 7:05 a.m., $0.86 
  • Amphenol (APH) 8 a.m., $0.73 
  • Hudson City Bancorp (HCBK) 8 a.m., $0.22 
  • Wells Fargo & Co (WFC) 8 a.m., $0.63 
  • Goldman Sachs (GS) 8:01 a.m., $3.79 
  • Northern Trust (NTRS) 8:01 a.m., $0.72 
  • AMR (AMR) 9:01 a.m., $(0.32)
  • Plexus (PLXS) 4:01 p.m., $0.59 
  • F5 Networks (FFIV) 4:05 p.m., $0.83 
  • Kinder Morgan Energy Partners LP (KMP) 4:05 p.m., $0.43 
  • Raymond James Financial (RJF) 4:12 p.m., $0.53 
  • eBay (EBAY) 4:15 p.m., $0.47 
  • Xilinx (XLNX) 4:20 p.m., $0.52 
  • SLM (SLM) 4:37 p.m., $0.71

PERFORMANCE:

  • One day: Dow +0.43%, S&P +0.14%, Nasdaq +0.38%, Russell flat
  • Last Week: Dow +0.96%, S&P +1.71%, Nasdaq 1.93%, Russell +2.51%
  • Year-to-date: Dow +2.25%, S&P +2.97%, Nasdaq +4.26%, Russell +3.05%
  • Sector Performance - (8 sectors positive and 1 down): - Energy +0.62%, Materials +0.55%, Industrials +0.72%, Healthcare +0.37%, Tech +0.11%, Consumer Disc +0.37%, Utilities +0.24%, Consumer Spls +0.06%, Financials (0.60%)

  EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 250 (-211)  
  • VOLUME: NYSE 1227.72 (15.85%)
  • VIX:  15.87 +2.65% YTD PERFORMANCE: -10.49%
  • SPX PUT/CALL RATIO: 1.48 from 1.46 (+1.49%)

CREDIT/ECONOMIC MARKET LOOK:


Treasuries were weaker with the better risk backdrop in focus.

  • TED SPREAD: 16.11 +0.304 (1.922%)
  • 3-MONTH T-BILL YIELD: 0.16% +0.01%     
  • YIELD CURVE: 2.79 from 2.76

COMMODITY/GROWTH EXPECTATION:

  • CRB: 333.78 +0.22%  
  • Oil: 91.38 -0.17% - trading +0.58% in the AM
  • Crude Oil Supply Drops in Survey on U.S. Pipeline Shutdown: Energy Markets  
  • COPPER: 442.80 +0.36% - trading +0.24% in the AM
  • Copper Gains to Record on Speculation Demand to Outpace Supply on Recovery
  • GOLD: 1,372.68 +0.49% - trading +0.36% in the AM
  • Gold Climbs for Third Day as Dollar Weakens on Concern About U.S. Recovery

OTHER COMMODITY NEWS:

  • Container Ship Rates Rising as Fuel Prices Slow Vessels: Freight Markets
  • Japan May Cut 2011 Ethylene Output on Middle East Competition, Mizuho Says
  • Japan's Petrochemical Maintenance Closures to Drop This Year, Survey Shows
  • Rubber Futures Advance to Record as Thai Supply Concern Spurs Purchases
  • IEA's China Oil-Consumption Outlook Is `Too Conservative,' Bernstein Says
  • Precious Metals Make Up 76% of Commodity ETP Assets, Societe Generale Says
  • Alaska Pipeline System Boosts Crude Oil Flows, Exceeds Operator's Target
  • Mosaic Might Become Takeover Target as Cargill Divests $24.3 Billion Stake
  • Barclays Forecasts U.S. Natural Gas Prices Will Remain Around $4 This Year
  • Thailand Says It May Complete Nation's First LNG Import Terminal by June

CURRENCIES:

  • EURO: 1.3360 +0.49% - trading +0.77% in the AM
  • DOLLAR: 78.962 -0.47% - trading -0.45% in the AM

EUROPEAN MARKETS:

  • FTSE 100: (0.37%); DAX: -0.03%; CAC 40: (0.14%) (as of 06:30 EST)
  • European markets saw session's highs early before paring gains to trade mixed.
  • Strong results from Apple and IBM overnight up +0.1% and +1.9% respectively in Germany failed to help tech shares in Europe as ASML Holding's reversed early gains and the sector is lower.
  • Kesa Electronics update highlighted the potential impact of the recent VAT increase in the UK as sales softened post the rise.
  • Ireland PM survived a vote of no confidence by his party yesterday, though a national election is expected as early as Mar.
  • Declining sectors lead advancers 10-8 as autos and retail lead fallers and basic resources lead gainers.
  • UK Nov ILO unemployment rate +7.9% vs consensus +7.9% and prior +7.9% - UK Dec Claimant count (4.1k) vs consensus +1.5k and prior revised to (3.2k) from (1.2k)
  • German economy ministry raises 2011 growth forecast to +2.3% from previous forecast of +1.8%  - Sees 2011 export growth of +6.5%, import growth of +6.4%
  •  ECB officials are back from a threat to raise interest rates, saying markets have over-reacted to their change in tone on inflation. ECB governing council “sees present rates adequate,” for the “foreseeable future,” council member Ewald Nowotny said at an event in Budapest yesterday.
  • Spanish home sales fell 6.2% Y/y in Nov., third month of declines.

ASIAN MARKTES:

  • Nikkei +0.36%; Hang Seng +1.10%; Shanghai Composite +1.81%
  • Asian markets were mixed, with tech stocks leading the way on the back of strong results from Apple and IBM.
  • China went up strongly on reports that the CPI rose 4.6% y/y in December, above expectations of 4.4%, but below November’s 5.1% rate. The official figures are to be published tomorrow.
  • Property developers led Hong Kong higher on improved risk appetite after Wall Street’s advance. On higher oil prices, Sinopec and Petro China rose 4% and 2%, respectively.
  • High techs lifted South Korea up 0.92%, but construction plays fell on profit-taking.
  • Australia rose 0.18%. Kathmandu Holdings soared 16% after upgrading its profit forecast.
  • Boosted by China’s gain, Japan edged up on a positive start to the US earnings season.
  • Japan November tertiary industry activity index +0.6% m/m.

THE HEDGEYE DAILY OUTLOOK - setup