Morning Update: August 15, 2011

Ahead of the Bell: Dow futures are trading up 45 points and S&P futures are trading up 5.80 points following the second straight day of gains, world markets are higher after Japan reported its GDP for the second quarter fell just 0.3%, less than the 0.7% economists had been expecting, indicating the Japanese economy may be recovering from the earthquake faster than was expected. Investors are looking ahead to tomorrow’s meeting between Nicolas Sarkozy and Angela Merkel, as well as earnings from Wal-Mart and HP to be the driving events of this week’s trading.

  • On the economic calendar today, the Empire State Manufacturing Index is due out at 8:30 am. The Index reading is expected to come in at +1.5, up from the previous reading of -3.76.  Atlanta Fed President Lockhart is expected to speak on the US economy at 1:00 pm.  Companies reporting earnings include Lowes, Sysco Corp. and Estee Lauder. The dollar is up against the Japanese yen and down against the euro & up against the British pound.  Crude oil is currently trading at about $85 a barrel. Gold is currently trading at $1,742.
  • The SEC announced that it will check S&P’s math in the model used to downgrade the US credit rating. The announcement comes after the US treasury accused the credit-rating firm of making a $2 trillion miscalculation.
  • European Central Bank Governing Council member, Yves Mersch, said in an interview over the weekend that it would be financial suicide for any member of the European Union currency bloc to leave if they did not have a working currency to turn to. Also over the weekend, David Miles, policymaker at the Bank of England, said that the British economy does not need more stimulus in the form of quantitative easing at this time.
  • Warren Buffet has an op-ed piece in the New York Times today, calling for higher taxes on households making $1 million or more a year. Full text of the Op-ed can be found here.
  • On CNBC today, Roger Altman, Chairman of Evercore Partners and former Deputy Treasury Secretary, was speaking about the super committee formed to address the debt ceiling and budget. Mr. Altman said the cuts are not enforceable, and he doesn’t think Congress will execute the $600 billion in defense cuts. Also, Mr. Altman says the automatic cuts if the super committee cannot come to an agreement do not approach the $4.0-4.5 trillion in cuts needed to stabilize the debt to GDP ratio.

Friday’s Close

DJIA up 125.71 pts/+1.13%/11,269.02

S&P up 6.16 pts/+0.53%/1,178.80

Nasdaq up 15.30 pts/+0.61%/2,507.98

Friday’s Futures

Dow Futures up 45.00 pts/+0.39%

S&P Futures up 5.80 pts/+0.49%

Nasdaq Fut up 9.70 pts/+0.144%

Overseas Markets

FTSE +0.50%

CAC 40 +0.15%

NIKKEI 225 +1.37%

HANG SENG +3.26%

Overseas:  World stock markets were up today on the better than expected Japanese GDP reading.

Economic Reports:  Empire State Manufacturing Index (expected to be +1.5) at 8:30 am.

Top Headlines:    

  • Google announced that it will acquire Motorola Mobility for $40.00 per share in cash, in a deal valued at $12.5 billion.
  • Ralcorp Holdings rejected the $94 per share bid from ConAgra, saying that the Board of Directors unanimously agreed the proposal was not in the best interests of the country.
  • National Oilwell Varco Inc. announced it has signed contracts to supply seven drillships to Estaleiro Atlantica Sul in a deal value at $1.5 billion.
  • Transocean Ltd. launched an offer for Aker Drilling for NOK 26.50 per share in a deal valued at approximately $2.23 billion.
  • Grainger announced the acquisition of Fabory Group for $344 million this morning.  The acquisition of the distributor of fasteners is expected to close in the third quarter.
  • Sources are reporting that Time Warner Cable is in late talks to purchase Insight Communications for $3 billion.

Commodities/Currency:

Gold:down $1.20 to $1,741.50

Oil:down $0.78 to $84.91

EUR/USD 1.4309 +0.0049

USD/JPY 76.79 -0.12

GBP/USD 1.6300 +0.0033

Volatility Index (VIX): As of the close of business Friday, August 12, the VIX is down 2.64 at 36.36

Companies Reporting Quarterly Earnings:     

Lowe's (LOW):Q2 EPS of $0.64 misses by $0.02. Revenue of $14.5B misses by $280M.

Today’s Opening and Closing Bells:

Western Copper Corporation (NYSE Amex-Listed: WRN) visits the NYSE to celebrate the company's delayed listing on NYSE Amex.Western Copper Corporation listed on February 9, 2011. In honor of the occasion, Chairman and CEO Dale Corman will ring The Opening BellSM

Members Handicapped Children’s Fund visits the NYSE. In honor of the occasion, The Board of Directors and guests of the Members Handicapped Children’s Fund will ring The Closing BellSM.