TODAY’S S&P 500 SET-UP - February 10, 2011
Equity futures are trading below fair value, following equities' lower close on Wednesday, though stocks did finish off session lows. That said, the Dow closed in positive territory, which was its 8th straight gain. After the close, Cisco traded lower, following results for its January quarter, with investors expecting a bit more from results and guidance.
As we look at today’s set up for the S&P 500, the range is 30 points or -1.13% downside to 1306 and +01.14% upside to 1336.
MACRO DATA POINTS:
- 8:30 a.m. Jobless claims Feb. 5, est. 410k, prior 415k
- 8:30 a.m. Continuing claims Jan. 29: est. 3900k, prior 3925k
- 8:30 a.m.: Net export sales (cotton, corn, soybeans, soy meal)
- 10 a.m. Wholesale inventories Dec. est. 0.7%, prior -0.2%
- 10:30 a.m.: EIA natural gas storage change
- 12:45 p.m. Fed Atlanta President Dennis Lockhart speaks as part of forum on managing public debt hosted by the Consulate General of Switzerland in Atlanta
- 1 p.m.: U.S. sells $16b 30-yr bonds
- 2 p.m. Monthly Budget Statement Jan. est. -$55.0b, prior -$42.6b
EARNINGS/WHAT TO WATCH:
- OPEC Raises Crude Demand Forecast by 400k Barrels a Day
- President Barack Obama’s budget will include $10.7b to build a nationwide wireless network for emergency workers and $5b to help Americans get mobile access to high-speed Internet service. Obama would pay for the networks with $27.8b from auctioning airwaves relinquished by television
- Watch Encana after PetroChina agreed yesterday after mkt close to buy 50% stake in its Cutbank Ridge gas assets in Canada for C$5.4b ($5.4b); PetroChina’s largest overseas deal
- Verizon Wireless stores begin offering iPhone today; analysts say VZ may sell 2m or more of the devices this quarter and draw subscribers from AT&T
- Credit Suisse falls most since Oct. after cutting ROE target to >15% from >18%. JPMorgan says concerned about CS capital positioning
- LG Electronics gets accused in two lawsuits by Sony of infringing eight patents for technology used in LCD TVs and monitors; complaints filed in Los Angeles
- U.S. foreclosure filings fell 17% in Jan. Y/y, fourth straight month of declines, RealtyTrac said
- Activision Blizzard (ATVI) forecast sees 2011 adj. EPS
- 70c vs est. 83c
- Akamai Technologies (AKAM) forecast 1Q rev $265m-$275m vs. est. $283.8m
- Allstate (ALL) reported 4Q oper. EPS 50c vs est. 86c, rev. $8.09b vs est. $8.04b
- Amkor Technology (AMKR) forecast 1Q EPS 5c-14c vs est. 22c
- Cisco Systems (CSCO) sees 3Q non-GAAP EPS 35c-38c vs est.40c
- Idenix Pharmaceuticals (IDIX) AIDS drug licensed to GlaxoSmithKline was placed on clinical hold by FDA
- Pacer International (PACR) forecast 2011 EPS of no more than 30c vs est. 39c
- Questcor Pharma (QCOR) will replace Sonic Solutions on smallcap 600
- Select Comfort (SCSS) sees 2011 EPS 68c-74c vs est. 66c
- TriQuint Semiconductor (TQNT) sees 1Q adj. EPS 14c-16c vs est. 20c
- Whole Foods Market (WFMI) raises FY11 EPS forecast to $1.76-$1.80 from $1.66-$1.71 (Nov. 3), est. $1.71
PERFORMANCE:
Fairly sluggish price action throughout much of the day seemed to fit with the lack of meaningful directional drivers. Nevertheless, we have day 3 of perfect = 9 of 9 sectors positive on TRADE and 9 of 9 sectors positive on TREND.
- One day: Dow +0.06%, S&P (0.28%), Nasdaq (0.29%), Russell 2000 (0.54%)
- Month-to-date: Dow +2.93%, S&P +2.70%, Nasdaq +3.30%, Russell +3.59%
- Quarter/Year-to-date: Dow +5.72%, S&P +5.03%, Nasdaq +5.13%, Russell +3.27%
- Sector Performance: - Energy (1.26%), Materials (0.89%), Financials (0.70%), Tech (0.19%), Healthcare (0.22%), Utilities (0.01%), Industrials (0.01%), Consumer Spls +0.17%, Consumer Disc +0.67%
EQUITY SENTIMENT:
- ADVANCE/DECLINE LINE: -721 (-1562)
- VOLUME: NYSE 947.16 (+6.87%)
- VIX: 15.87 +0.38% YTD PERFORMANCE: -10.59%
- SPX PUT/CALL RATIO: 1.46 from 1.37 (+6.15%)
CREDIT/ECONOMIC MARKET LOOK:
Treasuries 10-year yields are within 3bps of four-day low before U.S. sells 30-yr bonds and after yesterday’s sale of 10- yr debt drew most demand on record from foreign central banks.
- TED SPREAD: 18.42 +0.304 (1.680%)
- 3-MONTH T-BILL YIELD: 0.15% -0.01%
- 10-Year: 3.65 from 3.75
- YIELD CURVE: 2.84 from 2.89
COMMODITY/GROWTH EXPECTATION:
- CRB: 339.43 +0.66%; YTD: +1.99%
- Oil: 86.71 -0.26%; YTD: -6.00% (trading +0.17% in the AM)
- COPPER: 452.40 -1.09%; YTD: +1.44% (trading -0.18% in the AM)
- GOLD: 1,363.03 -0.35%; YTD: -4.22% ( trading -0.35% in the AM)
COMMODITY HEADLINES:
- Corn, wheat and soybean futures jumped to the highest since 2008 after a U.S. government report showed smaller crops and rising demand are eroding global inventories as food prices surge.
- The U.S. Department of Agriculture cut its forecasts for inventories held before this year’s harvests and said world supplies of the crops will slump 2.2 percent. Droughts in Russia, Ukraine and other parts of Europe and adverse weather in the U.S., Canada and Australia slashed output as the world economy rebounded from the most-severe recession in 70 years.
- Gasoline supplies advanced 4.66 million barrels to 240.9 million last week, the most since March 1990, the Energy Department said. Stockpiles were forecast to climb 2.6 million barrels, according to the median of 16 analyst estimates in a Bloomberg News survey.
- LME copper stockpiles rose for the first day in four, gaining by 4,375 tons to 396,400 tons, daily exchange figures showed today. The 1.1 percent increase was the largest since Jan 26. Inventories are up 5 percent this year. Orders to draw copper from stocks, or canceled warrants, slid 4 percent to 11,875 tons.
- Supply concerns sent Arabica coffee futures to their highest price since June 1997 on Wednesday, despite two reports this week that pointed to more coffee on the market. Bad weather in Colombia, the world's top producer of mild washed Arabica beans, has slashed harvest output for three consecutive years, and the recent report points to a possible recovery.
CURRENCIES:
Dollar gains vs most peers while euro falls on speculation Bundesbank President Axel Weber’s exit from race to succeed Jean-Claude Trichet as head of ECB will delay rate increase.
- EURO: 1.3709 +0.31% (trading -0.53% in the AM)
- DOLLAR: 77.641 -0.46% (trading +0.46% in the AM)
EUROPEAN MARKETS:
- FTSE 100: (0.89%); DAX: (0.43%); CAC 40: (0.87%); IBEX: (2.13) (as of 07:00 ET)
- European markets open lower and extended declines, currently trading near session lows led by peripheral markets, Spain and Greece down more than 2%.
- The BOE to leave its benchmark interest rate and QE unchanged
- Spain's bank hit by comments from Economy Minister saying some will have to raise core capital ratios above a new minimum to aid investor confidence.
- Plant, machinery output growth in Germany may accelerate this year as Asian demand boosts export orders, VDMA association said in statement earlier today. Production may increase 10% after rising 8.8% in 2010 when adjusted for inflation
- France Dec Industrial Production +0.3% m/m vs consensus (0.4%)
- UK Dec Industrial Production +3.6% y/y vs consensus +3.7%; Manufacturing Production +4.4% y/y vs consensus +5.5%
ASIAN MARKTES:
- Nikkei (0.11%); Hang Seng (1.97%); Shanghai Composite +1.59%
- Asian markets fall on concern U.S. unemployment and inflation-curbing measures will hamper recovery.
- Hang Seng decline of 1.97% is most since November.
- Emerging- market stocks slid for a sixth day.
- Property and bank shares rebounded from yesterday’s losses in China, leading the market to a gain. For no obvious reason, SAIC Motor Corp jumped by its 10% limit at the very end of the day.
- ASX surged 5% as stock markets overseas moved to consolidate, raising hopes that Australia will approve the proposed merger with Singapore Exchange.
- Japan opened to profit-taking ahead of a three-day weekend, though it recovered to finish flat.
- Hong Kong Exchanges & Clearing failed to join in the regional rally for bourse shares, dropping 5% and dragging the entire market down on worries that yuan-denominated shares may not be introduced as soon as originally thought.
- South Korea down 1.81%, Korea Gas Corp fell 3% on a report the company is considering reducing its 15% holding in the Gladstone LNG project by two thirds.
- Japan December core machinery orders +1.7% m/m vs cons +5.3%. January domestic corporate goods price index +1.6% y/y.
- Australia January unemployment 5.0%, unchanged m/m. January job creation +24K.
Howard Penney
Managing Director
