Morning Report: May 19, 2011

Ahead of the Bell: Dow futures are trading up 41 points and S&P futures are trading up 4 points.  Investors will be focusing on commodities as prices continue to rise, weekly jobless claims and the news that Japan’s economy has sharply contracted after feeling the effects from the earthquake and tsunami.  The technology sector will be in focus today with the IPO of LinkedIn (LNKD), priced at $45 per share. Crude oil is currently trading at about $100 a barrel following a surprise drop in crude inventories and wildfires in Alberta which threatens to cut supply from Canada. The ECB said it would reject Greek bonds after a restructuring as it would be impossible to continue to use Greece's debt in liquidity operations.     

  • On the economic calendar today, the weekly report on initial jobless claims benefits will be out before the opening and is expected to show a drop to 420,000 from 434,000 in the previous week.  Leading economic indicators will be out after the opening and no change is expected from the April index. The Philadelphia Fed index for May will be out after the markets opens and is forecasted to fall to 18, from 18.5 the previous month.  The National Association of Realtors will report after the opening and economists are looking for an increase in sales.  New York Federal Reserve Bank President William Dudley will speak on economic conditions and the outlook at SUNY New Paltz, the first of two days of events throughout the Hudson Valley.  Chicago Federal Reserve Bank President Charles Evans will speak to AFP Global Corporate Treasurers Forum in Chicago.  Companies reporting earnings include Sears Holdings, Gap, and Williams-Sonoma.  The dollar is up against the major currencies.  
  • Yesterday, stocks were led by the energy and materials sectors as commodities rebounded, crude oil was back above $100 a barrel as crude inventories unexpectedly fell.  According to the minutes from the FOMC meeting, most Federal Reserve officials prefer to raise benchmark interest rates before the QE2 program comes to an end in June.
  • On CNBC today, Richard LeFrak, President of the LeFrak Organization, talked about the housing market.  LeFrak said the commercial real estate business has been good driven by lower interest rates, contributions from 10 year treasuries and foreign investment in the US has helped as well.  The multifamily real estate market has been spectacular, experiencing rent growth and a national vacancy rate in the US below 6% is expected.  However, LeFrak pointed out the single family market needs to drop another 20% as we have about 4 years of supply  in the market.  LeFrak believes smaller banks got stuck with bad mortgage loans and this will be a problem going forward. 
  • Congratulations to LinkedIn (LNKD), welcome to the NYSE.  Happy Thursday, have a nice day.  

Wednesday’s Close

DJIA up 80.60 pts/+0.65%/12,560.18

S&P up 11.70 pts/+0.88%/1,340.68

Nasdaq up 31.79 pts/+1.14%/2,815.00

Thursday’s Futures

Dow Futures up 41.00 pts/+0.33%

S&P Futures up 4.60 pts/+0.35%

Nasdaq Fut up 5.75 pts/+0.24%

Overseas Markets

FTSE +1.01%

CAC 40 +1.28%

NIKKEI 225 -0.43%

HANG SENG +0.66%

Overseas:  World stock markets were higher today. European markets are trading up led by commodity stocks.  Asian markets were lower after a report showed that the Japanese economy had lower growth than forecasted following the earthquake and Tsunami.

Economic Reports:  Jobless Claims expected to be 420K @8:30 a.m. & Existing Homs Sales expected to be 5.2M, Philadelphia Fed Survey expected to be 23.0, and Leading Indicators expected to be flat @10:00 a.m.

Top Headlines:    

  • Reports indicate Big Lots Inc. (BIG) has decided not to sell itself after bids from private equity firms Bain Capital and TPG Capital & Thomas H. Lee Partners came in below what the company was expecting.
  • Takeda Pharmaceutical Co. (TKPHF) announced it is acquiring Nycomed for 9.6 billion euros ($13.7 billion).  The purchase price includes 3.6 billion euros of debt.
  • Johnson Controls (JCI) has filed a dissolution of its joint-venture with Saft SA to make lithium-ion batteries as JCI wish to expand the scope beyond the limits set in the original agreement.
  • General Mills (GIS) announced it is acquiring a 51% interest in Yoplait S.A.S. from PAI partners for about €810 million. The transaction is expected to close during the first quarter of its 2012.
  • IMF Chief Dominique Strauss-Kahn has resigned as leader of the agency and John Lipsky will step in as interim Chief of the IMF.
  • Hershey Co. (HSY) announced CEO David West is leaving the company, operations chief John Bilbrey will take the helm temporarily.  West is expected to be the next head of Del Monte Foods.    

Commodities/Currency:

Gold:down $5.72 to $1,491.85

Oil:up $0.14 to $100.38

EUR/USD 1.4292 +0.0041

USD/JPY 81.9450  +0.2600

GBP/USD 1.6192 +0.0023

Volatility Index (VIX): As of the close of business Wednesday, May 18, the VIX is down 1.38 pts to 16.17

Companies Reporting Quarterly Earnings:   

Williams-Sonoma (WSM): Q1 EPS of $0.30 beats by $0.02. Revenue of $771M (+7.4% Y/Y) beats by $5.6M.

Sears (SHLD): FQ1 EPS of -$1.58 misses by $0.17; adjusted loss of $1.39/share. Revenue of $9.7B (-3.4%) misses by $0.1B.

Today’s Opening and Closing Bells:

LinkedIn Corporation (LNKD) CEO Jeff Weiner, Reid Hoffman, Co-founder and Executive Chairman will ring the opening bell

Sybase, Inc., (SAP) John Chen, Chairman & CEO, with senior executives from IBM, Citibank, Harris Interactive, SunGard and other customers will ring the closing bell.