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TODAY’S S&P 500 SET-UP - January 27, 2011

Equity futures are trading slightly above fair value, having traded modestly lower following news S&P has downgraded Japan's credit rating to 'AA-' from 'AA' due to concerns Japan's debt ratio will grow by more than previously forecast. The move came after the Nikkei had closed and the yen has fallen sharply.  As we look at today’s set up for the S&P 500, the range is 12 points or -0.67% downside to 1288 and +0.26% upside to 1300.

 MACRO DATA POINTS:

  • 8:30 a.m.: Net export sales (cotton, corn, soy meal, soybeans, wheat), Jan. 20
  • 8:30 a.m.: Chicago Fed national activity index, Dec., est. 0.11%, prior -0.46%
  • 8:30 a.m.: Durable goods orders, Dec., est. 1.5%, prior - 0.3% (capital goods non defense ex. air est. 1.2%, prior 3.6%)
  • 8:30 a.m.: Initial jobless claims, Jan. 22, est. 405k, prior 404k; continuing claims, Jan. 15, est. 3872k, prior 3861k
  • 10 a.m.: Pending home sales, Dec., est. 1% M/m, prior 3.5%
  • 10:30 a.m.: EIA natural gas storage change, Jan. 21, est. -170, prior -243
  • 10:45 a.m.: Fed nominee Peter Diamond speaks at MIT symposium
  • 1 p.m.: Fed sells $29b 7-yr notes

TODAY’S WHAT TO WATCH:

  • Align Technology (ALGN) sees 1Q EPS 15c-17c vs est. 19c
  • Amylin Pharmaceuticals (AMLN) reported 4Q loss-shr 8c vs est. loss 31c; also says Bydureon study to begin in Feb.
  • Citrix Systems (CTXS) sees 1Q adj. EPS 40c-41c vs est. 48c, rev. $470m-$475m vs est. $470.5m
  • Covidien (COV) will to replace McAfee in S&P 500
  • Crown Castle International (CCI) sees 1Q EPS as much as 12c vs est. 9c
  • E*Trade Financial (ETFC) reported 4Q loss-shr 11c vs est. profit 4c
  • Motorola Mobility Holdings (MMI) sees 1Q loss-shr 9c-21c vs est. profit 1c
  • Netflix (NFLX) sees 1Q EPS 90c-$1.13 vs est. 87c
  • Owens-Illinois (OI) reported 4Q adj. EPS 45c vs est. 47c
  • Qualcomm (QCOM) sees 2Q adj. EPS 77c-81c vs est. 68c
  • Starbucks (SBUX) sees 2Q EPS 32c-33c vs est. 35c
  • Symantec (SYMC) sees 4Q rev. $1.59b-$1.61b vs est. $1.58b
  • Varian Medical Systems (VAR) forecast 2011 adj. EPS $3.39-$3.45 vs est. $3.38
  • Almost half of investors in Bloomberg global poll say they think a default by a U.S. state or major city this year is likely, though most say govt. would probably step in with a bailout.
  • AIG former chairman Harvey Golub says the bailed-out insurer should be broken up eventually because the firm’s two main businesses have “no strategic fit between them”
  • Sara Lee board meets for second day today to discuss strategic options without new bids from JBS or PE group led by Apollo Global, two people with knowledge of matter say
  • ProLogis is in talks with rival AMB Property on an all-stock merger that would create a $14b REIT
  • Russian TNK-BP shareholders request injunction to halt share swap, Arctic exploration deal between BP and Rosneft, according to copy of filing read by Bloomberg News
  • Delegates at World Economic Forum in Davos identified rising food prices, North African unrest and competing remedies for global recovery as evidence of increasing global economic discord. Forum continues until Jan.

EARNINGS:

  • Tyco Electronics (TYC) 6 a.m., $0.68 
  • Potash of Saskatchewan (POT CN) 6 a.m., $1.62 
  • Polaris Industries (PII) 6 a.m., $1.51 
  • Time Warner Cable (TWC) 6 a.m., $1.01 
  • Danaher (DHR) 6 a.m., $0.66 
  • Ball (BLL) 6 a.m., $0.92 
  • Lockheed Martin (LMT) 6:30 a.m., $2.10 
  • Newell Rubbermaid (NWL) 6:30 a.m., $0.32 
  • Eli Lilly (LLY) 6:30 a.m., $1.10 
  • Eaton (ETN) 6:49 a.m., $1.67 
  • Procter & Gamble (PG) 6:55 a.m., $1.09 
  • Altria Group (MO) 6:58 a.m., $0.44 
  • DR Horton (DHI) 7 a.m., $(0.03)
  • Raytheon Co (RTN) 7 a.m., $1.16 
  • Ametek (AME) 7 a.m., $0.47 
  • Motorola Solutions (MSI) 7 a.m., $1.08 
  • Zimmer Holdings (ZMH) 7 a.m., $1.19 
  • EQT (EQT) 7 a.m., $0.40 
  • Stanley Black & Decker (SWK) 7 a.m., $0.91 
  • Baxter International (BAX) 7 a.m., $1.10 
  • Colgate-Palmolive Co (CL) 7 a.m., $1.23 
  • Xcel Energy (XEL) 7 a.m., $0.31 
  • Consol Energy (CNX) 7 a.m., $0.54 
  • Mead Johnson Nutrition Co (MJN) 7 a.m., $0.56 
  • L-3 Communications Holdings (LLL) 7:07 a.m., $2.31 
  • Caterpillar (CAT) 7:30 a.m., $1.28 
  • AT&T (T) 7:30 a.m., $0.54 
  • JetBlue Airways (JBLU) 7:30 a.m., $0.05 
  • Celgene (CELG) 7:30 a.m., $0.73 
  • Bristol-Myers Squibb Co (BMY) 7:30 a.m., $0.48 
  • Invesco Ltd (IVZ) 7:30 a.m., $0.40 
  • Precision Castparts (PCP) 8 a.m., $1.80 
  • Janus Capital Group (JNS) 8 a.m., $0.21 
  • Royal Caribbean Cruises Ltd (RCL) 8:29 a.m., $0.13 
  • Franklin Resources (BEN) 8:30 a.m., $1.91 
  • Nucor (NUE) 9 a.m., $(0.11)
  • Chubb (CB) 4:01 p.m., $1.57 
  • Amazon.com (AMZN) 4:02 p.m., $0.88 
  • ResMed (RMD) 4:05 p.m., $0.37 
  • VeriSign (VRSN) 4:05 p.m., $0.30 
  • PMC - Sierra (PMCS) 4:05 p.m., $0.15 
  • SanDisk (SNDK) 4:05 p.m., $1.09 
  • Monster Worldwide (MWW) 4:10 p.m., $0.06 
  • Compuware (CPWR) 4:12 p.m., $0.16 
  • Microsoft (MSFT) 4:12 p.m., $0.68 
  • KLA-Tencor (KLAC) 4:15 p.m., $1.05 
  • Varian Semiconductor (VSEA) 4:22 p.m., $0.87

PERFORMANCE:

9 of 9 sectors positive on TRADE and 9 of 9 sectors positive on TREND.

  • One day: Dow +0.07%, S&P +0.42%, Nasdaq +0.74%, Russell 2000 +1.76%
  • Month/Quarter/Year-to-date: Dow +3.52%, S&P +3.10%, Nasdaq +3.27%, Russell +1.29%
  • Sector Performance - (5 sectors up and 4 down): - Energy +2.40%, Materials +2.12%, Industrials +0.59%, Tech +0.57%, Consumer Disc +0.16%, Financials (0.19%), Healthcare (0.12%), Consumer Spls (0.25%), Utilities (0.38%)  

EQUITY SENTIMENT:

  • ADVANCE/DECLINE LINE: 1161 (+942)  
  • VOLUME: NYSE 1087.57 (+3.93%)
  • VIX:  16.64 -5.40% YTD PERFORMANCE: -6.25%
  • SPX PUT/CALL RATIO: 1.06 from 2.44 (-56.59%)

CREDIT/ECONOMIC MARKET LOOK:

Treasuries were weaker today with the pickup in risk appetite and the lack of details in President Obama's State of the Union address regarding deficit reduction measures.

  • TED SPREAD: 15.53 + 0.609 (4.081%)
  • 3-MONTH T-BILL YIELD: 0.16%      
  • YIELD CURVE: 2.83 from 2.73

COMMODITY/GROWTH EXPECTATION:

  • CRB: 332.83 +1.61%  
  • Oil: 87.33 +1.32% - trading -0.89% in the AM
  • COPPER: 426.70 +0.97% - trading +1.03% in the AM
  • GOLD: 1,330.72 -0.18% - trading +0.51% in the AM

OTHER COMMODITY NEWS:

  • Food-exporting countries are “strongly advised” not to restrict shipments to prevent “more uncertainty and disruption” in world markets, the United Nations said. Governments in Egypt, Algeria, Morocco and Yemen have faced protests amid rising costs and high unemployment, and a revolt toppled Tunisia’s leader.
  • Crude oil climbed as new-home sales in the U.S. beat forecasts and traders bet the Federal Reserve will keep stimulus measures to bolster the U.S. economy.
  • Gas futures were steady as a midday update to the National Weather Service’s Global Forecast System weather model showed below-normal temperatures in the eastern and central U.S. from Feb. 5 through Feb. 9. Earlier forecasts had shown mostly normal temperatures in those regions.
  • Investors put 41% less into gold-backed exchange-traded funds and sister exchange-traded notes in 2010 than the previous year, according to a new report by the World Gold Council. 
  • Copper extended gains in New York after a government report on housing added to evidence the U.S. economy is improving without requiring the Federal Reserve to raise interest rates. 
  • Algeria agreed to buy 800,000 metric tons of wheat today and ordered the state-run grain agency to speed up imports, Reuters reported
  • Hog futures touched their highest prices in 14 years amidst heightening Asian demand for pork exported from the U.S., Bloomberg reports.
  • Ethanol futures gained the most in two weeks in Chicago on concern that export demand for corn will rise and increase the cost of making the fuel.  The biofuel climbed for the first time this week. Corn surged to the highest in more than a week on speculation that food riots from Egypt to Yemen will boost demand for the grain, the primary ingredient in U.S. ethanol production.

CURRENCIES:

  • EURO: 1.3683 +0.30% - trading +0.38% in the AM
  • DOLLAR: 77.898 -0.13% - trading -0.18% in the AM

EUROPEAN MARKETS:

  • FTSE 100: +0.30%; DAX: +0.47%; CAC 40: +0.16% (AS OF 6:15 AM EST)
  • European markets opened modestly lower following mixed results from European heavyweights including AstraZeneca, Novartis and H&M and news that Standard & Poor's cut Japan's sovereign credit rating to AA- from AA. Declining sectors lead advancers 10-8. Food, media and banks down (0.5%) lead fallers whilst basic resources +1.4% and autos +1.1% lead gainers 
  • Indices recovered early losses in choppy trading and are currently mixed.
  • Spain, Ireland, Greece and Portugal will probably remain “stuck in recession” for the next 18 months and be the laggards in a three-speed European recovery, Standard & Poor’s said.
  • Spain's government and unions reach a preliminary pact on pension reform.
  • France Jan Consumer Confidence 85 vs prior revised 86
  • Eurozone Jan Consumer Sentiment (11) vs consensus (11) and prior (11)
  •  Germany Jan preliminary CPI due around 7:30ET

ASIAN MARKTES:

  • Nikkei +0.74%; Hang Seng (0.27%); Shanghai Composite +1.49%
  • Most Asian markets rose today.
  • Property shares fell as China announced new moves to cool the market, but commodity and telecom stocks still powered the index to a gain.
  • Japan went up on a weaker yen and expectations for good earnings reports. Inpex rose 3% on higher crude oil futures. Mitsubishi Heavy rose 4% on a report operating profit will likely rise by more than forecast for the FY. Post-close, S&P downgraded Japan, and the yen weakened.
  • Indonesia rose even after the government priced Garuda Indonesia’s IPO at the low end of its indicative range yesterday.
  • In South Korea, Daewoo Shipbuilding & Engineering rose 3% on a report it signed a $1.2B agreement to build ships for Aker Drilling.
  • Australia finished flat, with retailers lower after the government announced a new income tax to pay for rebuilding after the country’s flooding. Downer EDI plummeted 20% on announcing a write down on a train-building contract.
  • Hong Kong fell slightly. China property stocks dragged the market down, erasing early gains. China Overseas Land lost 5%, and China Resources Land fell 4%; both stocks were heavily short-sold.
  • Japan December trade surplus +34.1% y/y to ¥727.7B vs cons ¥469.6B.

THE HEDGEYE DAILY OUTLOOK - 1 27 2011 6 26 46 AM