Morning Report: August 30, 2011

NEW YORK, NY - AUGUST 29:  A girl rides past a...

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Ahead of the Bell: Dow futures are trading down 57 points and S&P futures are trading down 7 points following the previous trading session's hefty gains. Resource related stocks will be in focus today as crude oil is currently trading higher at $86 a barrel. Insurers are also expected to be in focus as investors continue to deal with the fall out of hurricane Irene. Insurers are expected to increase premiums and get new customers in the wake of disaster. Initial estimates put the total cost of Irene at between $5 and $8 billion, significantly lower than anticipated.

  • On the economic calendar today, Case-Shiller Home Price Index will be out before the market opens and the report is expected to fall 4.7% for June after dropping 4.51% the previous month. The Conference Board will release its consumer confidence index, which will be out after the market opens. Economists expect a reading of 52.0 compared with the previous month of 59.5. The FOMC Minutes will be out later in the afternoon. Companies reporting earnings include Barnes & Noble and Dollar General. The dollar is up against the euro and British pound and down against the Japanese yen. Crude oil is currently trading at $86 a barrel. Gold is trading at $1,793.   
  • On CNBC today, Howard Ward, Chief Investment Officer of GAMCO Growth Fund, Edward Keon, Managing Director & Portfolio Manager for Quantitative Management Associates, and Rich Bernstein, CEO of Richard Bernstein Capital Management, talked about where to invest. On Bill Gross of Pimco revising his forecast on treasuries, Ward said he thinks Gross made his call too early to buy treasures.  Ward believes there is an imbedded fear of deflation and almost everyone is revising their forecast for treasuries. Ward expects the jobs data on Friday to be more than 75K jobs.  Bernstein said if investors want diversification you buy corporate bonds and if you want to buy bonds buy municipal bonds, there are no asset classes to buy right now, everything is down. However, equities are still attractive, if wasn’t for the European crisis stocks would have been higher. Keon said American corporations are still attractive to buy, you get some growth to hedge against treasuries by buying stocks. Koen pointed out, we still have gotten out of the first recession and he believes the only way we are going to get out of this slow down in the economy is to invest America.   
  • Happy Tuesday, have a nice day.  

Monday’s Close

DJIA up 254.71 pts/+2.26%/11,539.25

S&P up 33.28 pts/+2.83/1,210.08

Nasdaq up 82.26 pts/+3.32/2,562.11

Tuesday’s Futures

Dow Futures down 57.00 pts/-0.47%

S&P Futures down 7.60 pts/-0.63%

Nasdaq Fut down 7.58 pts/-0.34%

Overseas Markets

FTSE +2.35%

CAC 40 -0.10%

NIKKEI 225 +1.16%

HANG SENG +1.71%

Overseas:  World stock markets were up today. European markets pared gains as Italian bonds were down for seven straight sessions following the ECB’s purchase of the nation’s debt. Asian markets were up after a really in U.S. markets.      

Economic Reports:  Consumer Confidence expected to be 52.5 at 10:00 a.m. and FOMC Minutes at 2:00 p.m.

Top Headlines:    

  • CNBC reports the FDIC filed an objection to Bank of America’s (BAC) proposed $8.5 billion mortgage-bond settlement with investors.
  • Reports indicate JPMorgan Chase (JPM) and Kohlberg Kravis & Roberts (KKR) are in talks to acquire India's Futures Capital Holdings. 
  • ArcelorMittal (MT) and Peabody Energy (BTU) agreed to buy Austrilian Macarthur Coal (MCC) after increasing their bid the company at A$4.8 billion ($5.2 billion) or A$16 a share.
  • Lowes Companies (LOW) announced it is shrinking its executive management team.  Lowes said it stores will now operate under three key divisions, North, South and West, previously, it had divided its largest market into at least five regions.
  • Bank of America Corp (BAC) announced it is selling half of its stake in China Construction Bank Corp. for about $8.3 billion to a group of investors to shore up its capital base.  

Commodities/Currency:

Gold:up $5.10 to $1,796.85

Oil:down $0.65 to $86.56

EUR/USD 1.4398 -0.0116

USD/JPY 76.8650  +0.0100

GBP/USD 1.6287 -0.0129

Volatility Index (VIX): As of the close of business Monday, August 29, the VIX is down 3.31 at 32.28

Companies Reporting Quarterly Earnings:     

Dollar General (DG): Q2 EPS of $0.52 beats by $0.04. Revenue of $3.58B (+11.2% Y/Y) beats by $40M. Sees FY11 revenue growth of 12-14% and EPS of $2.22-2.30.

DSW (DSW): Q2 EPS of $0.74 beats by $0.12. Revenue of $476.3M (+14.7% Y/Y) beats by $17.3M. Sees FY11 EPS of $2.70-2.85.

Today’s Opening and Closing Bells:

Valdi Liquidity Solutions visits the NYSE to celebrate its new membership. Bob Santella, president of brokerage operations for SunGard’s global trading business will ring the opening bell.

The Mexico Fund, Inc. (MXF) celebrate the company’s 30th Listing Anniversary, Jose Luis Gomez Pimienta Hernandez will ring the closing bell.

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