Morning Report: August 31, 2011

Modern-day meeting of the Federal Open Market ...

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Ahead of the Bell: Dow futures are trading up 81 points and S&P futures are trading up 10 points following Tuesday's volatile trading session. Investors are aware of the three FOMC members who dissented from the central bank's August meeting that were not in favor of providing additional stimulus to the economy. However, according to the FOMC minutes released yesterday, we now know several members are in favor of providing additional monetary aid to boost the lagging economy. Traders are speculating the Federal Reserve will announce soon another round of quantitative easing.

  • On the economic calendar today, ADP private employment report will be out before the market opens. Economists expect the private sector to have created 100,000 new jobs in August, down from the 114,000 the sector hired in the prior month. The Commerce Department will release June factory orders data, and the Institute for Supply Management's will release its index after market opens. Economists are looking for factory orders to fall 1%, and the ISM's index to fall to a reading of 53.1. Companies reporting earnings include Brown-Forman, Hovnanian Enterprise Inc., Zale Corp., Cooper Cos., Greif Inc., and Oxford Indus Inc. The dollar is up against British pound and Japanese yen and down against the euro.  Crude oil is currently trading at $87 a barrel. Gold is trading at $1,827.   
  • Yesterday, stocks closed positive after the Federal Reserve said some FOMC members wanted to take more action to stimulate the economy during their August 9, meeting. 
  • On CNBC today, Brian Belski, Oppenheimer Asset Manger and Barry Knapp, head of Barclays U.S. Portfolio Strategy, talked about the jobs market and the economy. Belski said the political backdrop has a lot to do with job creation, he is looking for a partnership between Washington and corporate America and thinks Washington should take a cue from corporate America and the need to get jobs going. Belski pointed out, when you are running a business you look for ways to cut cost and the government needs to look at ways to cut cost. Belski believes the market will react positively if the government begins to cut waste. Belski also said most economists have been way too bullish and that consensus has been all wrong throughout the whole year. Lastly, Belski thinks bond yields could tick up, but Bernanke’s statements could keep yields low for a while, and in the equity market, he believes we’ve hit the bottom and could be in for a volatile September.  Knapp said the economy was beginning to pick up in 2010, but after some volatility, it has gone south since. Knapp believes job creation is a byproduct of business confidence and that business confidence is lacking because of regulation like Dodd Frank.          
  • Happy Wednesday, have a nice day.

Tuesday’s Close

DJIA up 20.70 pts/+0.18%/11,559.95

S&P up 2.84 pts/+0.23/1,212.92

Nasdaq up 14.00 pts/+0.55/2,576.11

Wednesday’s Futures

Dow Futures up 81.00 pts/+0.47%

S&P Futures up 10.60 pts/+0.63%

Nasdaq Fut up 17.58 pts/+0.34%

Overseas Markets

FTSE +1.06%

CAC 40 +1.80%

NIKKEI 225 +0.01%

HANG SENG +1.64%

Overseas:  World stock markets were up today. European and Asian markets are up on optimism the Fed will announce new stimulus to boost global growth.      

Economic Reports:  ADP Employment Report expected to be 100K at 8:15 a.m., Chicago PMI expected to be 54.0 at 9:45 a.m., and Factory Orders expected to be 2.0% at 10:00 a.m.

Top Headlines:    

  • Reports indicate Bank of America (BAC) is considering selling its correspondent mortgage unit as it does not fit the long term strategy of the company.
  • Exxon Mobil (XOM) announced it has signed an agreement with Russia's Rosneft to explore for oil and gas in the Russian Arctic.   
  • BofA (BAC) is being sued by U.S. Bancorp for poorly-written mortgages sold by Countrywide Financial in 2005.
  • Carl Icahn agreed to sell his Lions Gate Entertainment (LGF) shares for $7 each, roughly his cost, to end a battle for control over the independent film and television company.
  • MBA reports mortgage applications were down 9.6% versus down 2.4% last week.  The thirty-year fixed mortgage rate decreased to 4.32% from 4.39%.

Commodities/Currency:

Gold:down $6.10 to $1,828.85

Oil:down $1.01 to $87.89

EUR/USD 1.4443 +0.0004

USD/JPY 76.5950  -0.1400

GBP/USD 1.6287 -0.0018

Volatility Index (VIX): As of the close of business Tuesday, August 30, the VIX is up 0.61 at 32.89

Companies Reporting Quarterly Earnings:     

Brown-Forman Corporation (BF.B): FQ1 EPS of $0.81 misses by $0.02. Revenue of $840.3M (+12.8% Y/Y) beats by $96M. Sees FY12 EPS of $3.45-3.85.

Joy Global (JOYG): FQ3 EPS of $1.61 beats by $0.07. Revenue of $1.09B (+33.7% Y/Y) misses by $70M. Sees FY12 revenue at $4.3-4.5B and EPS of $5.70-6.00.

Today’s Opening and Closing Bells:

FutureFuel Corp., President and CEO Lee Mikles will ring the opening bell.

Omnicare Inc. (OCR) will ring the closing bell.                                                                                                                                                                                       


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