Trade the News Market Internals update at 12:00ET

Dow +117 S&P +17 NASDAQ +35

***Economic Data***

– (US) MBA Mortgage Applications w/e Oct 7th: +1.3% v -4.3% prior
– (SA) South Africa Aug Manufacturing Production M/M: +7.6% v +2.3%e; Y/Y: +5.6% v -0.6%e
– (CA) Canada Aug New Housing Price Index M/M: +0.1% v +0.1%e; Y/Y: +2.3 v +2.3%e
– (MX) Mexico Aug Industrial Production M/M: -1.1% v 0.5% prior; Y/Y: +3.1% v 3.3%e
– (MX) Mexico Sept Vehicle Production: 225.2K v 210.5Ke; Domestic Sales: 73.9K v 75.7K prior
– (US) Aug JOLTs Job Openings: 3.05M v 3.2M prior

– European indices climbed out of the red zone earlier this morning on news that Slovak parliamentarians were meeting to hash out a procedure to vote again on the EFSF measures, helping to boost US futures before the open today. All three major US indices are up by respectable amounts in early trade, with events in Europe totally in the drivers’ seat once again. EU Commission President Barosso released a preliminary outline of rules for Europe’s bank recapitalization plans as well, noting that national regulators should temporarily require significantly higher capital ratios at banks, featuring high-quality capital. In addition, pending recapitalization, banks should be prevented from paying out dividends or bonuses. Note that talks about increasing the haircuts on Greece debt in the pending swap are ongoing, with reports indicating that the new haircuts will be around 30-50%, short of analysts’ call for haircuts of 60-70%, in line with current market pricing. The European Banking Authority said that it might just require all banks to mark their Greek holdings to the market. The euro strengthened further on all the news, with EUR/USD sprinting from 1.3600 at the opening of the European session to 1.3800 in mid-morning US trade. US Treasury markets opened lower once again pushing the long bond yield above 3.2%.

– Shares of Walmart are trading up nearly 3% as executives offer positive commentary at an analyst day event. Note that executives stated that July-September period showed solid SSS growth and that they are confident in the company’s Q3 performance. Alcoa widely missed profit expectations in its Q3 results, citing the global economic slowdown for impacting demand and significantly eroding margins. Profit still showed y/y growth, but was lower than the firm’s Q2 earnings. Executives still see Asia demand compensating for developed market weakness in 2011. Shares of AA are near the lows of the morning, down 5%. PepsiCo met expectations in its Q3 report and reaffirmed its FY11 outlook. Executives warned that it was too early to offer an FY12 forecast, and also threw cold water on calls to separate the firm’s snack and beverage businesses. The CEO emphasized that PepsiCo’s success was tied to drinks and snacks units remaining integrated. PEP is up 2.5%, while rival KO is up marginally. Insurance name Progressive’s Q3 results were a hair below expectations. Shares of PGR are struggling to stay in positive territory on an up day.

– Chevron released its interim Q3 update yesterday evening. The firm said Q3 earnings would be comparable to its Q2 results, potentially putting it above consensus estimates. It said downstream earnings would be stronger thanks to asset sale gains, while upstream earnings would be weaker thanks to lower crude prices. Shares of CVX are flat on the day. Johnson Controls offered slightly soft earnings guidance for its Q4 and initial FY12 at its analyst day event, while the revenue outlook was in line. As with other major manufacturers, JCI said that it has modest growth estimates for developed markets balanced by strong growth in BRIC countries moving forward. JCI is up nearly 6%. Shares of Liz Claiborne are up nearly 30% after announcing that it would sell off more brands, including its flagship brand, to JC Penny.

***Looking Ahead***

– 12:00 (IC) Iceland Sept International Reserves (DKK) No est v 915.3B prior
– 14:00 (US) Minutes of FOMC Meeting
– 14:30 (US) API Weekly Energy Inventories

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