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Trade the News Market Internals update at 14:00ET
Dow +133 S&P +13 NASDAQ 32
***Economic Data***
– (IR) Ireland Oct Live Register Monthly Change: +2.7 v -4.3K prior; Unemployment Rate: 14.4% v 14.3% prior
– (SA) South Africa Sept Electricity Consumption Y/Y: 1.9 v 0.4% prior; Electricity Production Y/Y: 2.4% v 0.5% prior
– (CZ) Czech Central Bank leaves the Repo Rate unchanged at 0.75%, as expected
– (RU) Russia Oct Consumer Prices M/M: 0.5% v 0.3%e; Y/Y: 7.2% v 7.0%; CPI YTD: 5.2% v 5.0%e
– (RU) Russia Oct CPI Core M/M: 0.5% v 0.5%e; Core CPI YTD: 5.6% v 5.10% prior
– (US) Nov RBC Consumer Outlook Index: 39.6 v 39.2 prior
– (US) Q3 Preliminary Nonfarm Productivity: 3.1% v 3.0%e; Unit Labor Costs: -2.4% v -1.0%e
– (US) Initial Jobless Claims: 397K v 400Ke; Continuing Claims:: 3.683M v 3.693Me
– (EU) ECB cut the 7-day Refi Rate by 25bps to 1.25%; Not expected (was expected to hold at 1.50%)
– (US) Oct ISM Non-Manufacturing: 52.9 v 53.5e
– (US) Sept Factory Orders: +0.3% v -0.2%e
– (US) Weekly EIA Natural Gas Inventories: +78bcf vs. +65 to +70 bcf expected range
– (BR) Brazil Oct Commodity Price Index M/M: -3.3% v 7.8% prior; Y/Y: 15.5% v 24.8% prior
– Trading has been very whippy this morning as headline after headline out of Europe alters the market’s perception of events unfolding in the Greek government. As of 11:00ET, it seems that Greek PM Papandreou is fighting hard to remain in power and has engaged in negotiations with various parliamentary factions to form a temporary unity government. Apparently success in these negotiations would cancel the vote of confidence scheduled for tomorrow and put off the referendum on Greece’s participation in the euro zone bailout (or the euro zone as a whole, although even that remains unclear). However Papandreou’s position is very weak and the collapse of the Greek government is still a very real possibility. The ECB’s surprise rate cut and new President Mario Draghi’s first press conference was the other main event. Almost entirely forgotten is the Oct ISM services data, which was weaker than expected, including a decline in the key new orders component. October factory orders were a bit higher than expected. All in all, corporate earnings have been relatively strong today. Treasury prices have traded modestly lower from the outset as money is flowing to riskier assets and the US benchmark 10-year yield is still holding above 2%.
– The biggest story among financial names this morning is Jefferies Group. Before the open independent ratings firm Egan-Jones downgraded Jefferies’ rating to BBB from BBB-, warning that MF Global’s problems have increased scrutiny of sovereign debt held by other medium-sized broker/dealers. Shares of JEF spiked down 20% after the open, only to snap back after Jefferies confirmed in a press release that it was net short European sovereign debt. Shares of JEF remain down about 5%. In earnings, Hartford Financial’s Q3 earnings and revenue were disastrous, and share of HIG are down more than 10%. The biggest impact came from a charge from lower assumptions on future profits due to the decline in global stock values. NYX is up a few percent on double digit growth in revenues.
– In the consumer segment, CVS Caremark modestly topped income estimates on solid growth. The firm warned that gross profit margin would decline significantly in Q4, and its earnings guidance missed expectations for Q4. Kraft easily exceeded expectations and nudged its FY11 guidance slightly higher. Kellogg’s earnings disappointed investors and the firm cut its FY11 guidance slightly. Teva and Procter & Gamble formed a consumer health care partnership for OTC medicines. Both CVS and KFT are up 4%, PG is unchanged and shares of Kellogg are down 8%.
– Media names IACI and News Corp saw strong profit and revenue growth, helping them exceed consensus estimates. Additionally IACI initiated an annual dividend of $0.12. DirecTV missed profit targets, however its net adds in both the US and key Latin American markets were very, very strong. IACI is up 8% and DTV is up 6%.
– In the energy sector, Murphy Oil crushed expectations much like other oil and natural gas names have, thanks to excellent margins. The firm also offered very strong guidance for Q4. Profits at coal major Alpha Natural Resources were extremely strong. The firm’s FY12 coal shipment guidance indicated more than 20% growth y/y, thanks to robust international demand. ANR is up 12% and MUR is up 7%. Ag name Agrium slightly missed bottom line estimates, although its outlook for markets next quarter and into FY12 was very strong. AGU is down 2% but off its worst level.
– FX price action was extremely choppy throughout the New York morning thanks to the political chaos in Greece coupled and the surprise ECB rate cut. EUR/USD tested 1.3835 on headlines that Greece PM Papandreou would resign or even withdraw his plan for a referendum. But later headlines made it appear that he would fight to hold onto power, with the referendum possibly being cancelled. EUR/USD then probed the lower end of its session range after ECB unexpectedly cut its key rates by 25bps as dealers discussed the move as possible decoupling from ECB’s single mandate of price stability and focus on economic growth. ECB president Draghi stated in his prepared remarks commented on possibly lowering the euro zone growth outlook at the next staff projections in Dec and uttered that the euro zone could experience a mild recession. There are still several key events on tap, including the G20 Summit and the US payroll report due out on Friday
***Looking Ahead***
– 12:00 (HU) Hungary Development Min Fellegi speaks at Event
– 14:00 (MX) Mexico Oct IMEF Manufacturing Index: 50.4e v 50.0 prior; Non Manufacturing Index: 50.5e v 49.6 prior
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