Morning Report: November 21, 2011

Ahead of the Bell: Dow futures are trading down 167 points and S&P futures are trading down 19 points after reports suggest the Congressional "super committee" is set to report they have failed to reach an agreement between the 12-member bipartisan group on their attempts to find a minimum of $1.2 trillion in savings over the next 10 years.  Moody's Investor Services is warning, France is adding to the worries of the EU debt crisis.  Spain's new Prime Minister, Mariano Rejoy is under pressure to give details of a plan to solve his nations debt crisis.



  • On the economic calendar today, existing home sales for October will be out after the markets opens, and is expected to be 4.800M, compared with 4.910M for September.  Atlanta Federal Reserve Bank President, Dennis Lockhart will make remarks on the work of the Fed, to the Getulio Vargas Business School, Sao Paulo, Brazil.  Companies reporting earnings include Hewlett-Packard and Tyson Foods.  The dollar is up against the major currencies.  Crude oil is currently trading at $97 a barrel.  Gold is trading at $1,704.  

  • Last week, the equity markets were volatile as investors reacted to headline risks from Europe.  Germany and France disagree on the level of involvement the ECB should play in back stopping the euro zone rescue fund, as borrowing cost surged.  Economic data continues to improve, including initial jobless claims, which fell below the 400K mark for a second week in a row.  Leading indicators also improved more than forecasted in October, but the November Philly Fed Business outlook was disappointing.  For the week, the Dow fell 2.9%, and the S&P declined 3.8% and Nasdaq slid nearly 4%. The losses were the worst in two months for all three indexes.

  • The week ahead will be shortened due to the Thanksgiving holidays.  Investors will focus on the Congressional "super committee" which is expected to announced its decision to cut a minimum of $1.2 trillion from the budget.  Investors are not encouraged by preliminary indications from the group, it will likely come down to the final hour and nothing will be accomplished.  This will add to the volatility in financial markets and some analyst are saying the S&P 500 could drop about 10%.  Equity markets will continue to react to news from Europe, as EU officials have so far failed to convince markets that they have a plan to stem the sovereign debt crisis.  Borrowing cost for Italy, France and Spain have increase significantly over the past weeks, and German and French officials continued to disagree over whether the ECB should take on a bigger role in back stopping the debt crisis.  Economic data is expected to improve for the of the year and economist are upping their forecasts.  A few notable economic data points in the coming week include, durable goods, jobless claims, and personal income and spending.

  • On CNBC today, Howard Ward, GAMCO's Chief Investment Officer, talked about the financial markets, the super committee, and Europe.  Ward said he is expecting a shift in institutional investors from fix income into equities, as the economy has been accelerating.  He also said we are about 20% of the world’s GDP, it is possible for Europe to experience its own recession.  Ward pointed out the super committee was doomed from the outset, it was not going to accomplish anything because they are deeply divided. If the committee does not come up with the $1.2 trillion in cuts the defense budget could be cut by about $500 billion over the next nine years .  On Europe, he believes central banks around the world are bias and gold will keep going higher.  Ward thinks, if financial market become very disorderly the ECB will step in and back stop the regions debt crisis.     

  • Happy Monday, have a nice day and a wonderful week.  

Friday’s Close


DJIA up 25.43 pts/+0.22%/11,796.16


S&P down 0.48 pts/-0.04/1,215.65


Nasdaq down 15.49 pts/-0.60/2,572.50


 


Monday’s Futures


Dow Futures down 167.00 pts/-1.43%


S&P Futures down 19.50 pts/-1.61%


Nasdaq Fut down 24.58 pts/-1.06%


 


Overseas Markets


FTSE -1.95%


CAC 40 -2.55%


NIKKEI 225 -0.32%


HANG SENG -1.44%


 


Overseas:  World stock markets were down today.  European and Asian markets were down on concerns the region will struggle to contain the debt crisis.      


 


Economic Reports:  Existing Homes Sales expected to be 4.800M at 10:00 a.m., later in the week  GDP, FOMC Minutes, Durable Goods Orders, Personal Income and Outlays, Jobless Claims, Consumer Sentiment, and the Fed Balance Sheet.


 


Top Headlines:    



  • Gilead Sciences (GILD) announced it is acquiring Pharmasset Inc. (VRUS) for about $11 billion in cash or $137 a share.

  • Alleghany Corp., (Y) announced it is buying Transatlantic Holdings Inc. (TRH) for about $3.4 billion.

  • Chevron (CVX) has accepted responsibility for a oil spill off the coast of Brazil.  The company plans on completing the clean up.

  • Reports indicate Blackstone Group (BX) is about to announce it is buying a portfolio of 16 office buildings for about $800 million.

  • Reports indicate Pfizer Inc. (PFE) will pay about $60 million to settle probes by the government into whether the company paid bribes to win business overseas.    

Commodities/Currency:


Gold:down $19.10 to $1,704.85
Oil:down 1.40 to $97.41

EUR/USD 1.3457 -0.0010
USD/JPY 77.0035  -0.0300
GBP/USD 1.5935 -0.0200


 


Volatility Index (VIX): As of the close of business Friday, November 18, the VIX is down 2.51 at 32.00


Companies Reporting Quarterly Earnings:     


None as of yet.


Today’s Opening and Closing Bells:


Brazil’s Banco Bradesco Celebrates 10th Anniversary of Trading and Hosts Bradesco Day 2011 at the NYSE Chairman of the Board Lazaro de Mello Brandão will ring the opening bell.


 


Consumer Bankers Association will hold a meeting at the NYSE. In honor of the occasion, Susan Faulkner, SVP, Consumer Banking Products Executive, Bank of America, will ring the closing bell.