Morning Report: August 18, 2011

Ahead of the Bell: Dow futures are trading down 185 points and S&P futures are trading down 23 points. Investors fear the world economy is close to a global recession and the U.S. might be heading into a slow down.  European and Asian markets were down significantly on euro zone sovereign debt concerns.  Morgan Stanley has cut its global GDP forecast to 3.9% from 4.2% for 2011 and lowered its 2012 forecast to 3.8% from 4.5%.  Traders fear the debt crisis in Europe will drag down the financial sector which could in turn impact U.S. banks.      

  • On the economic calendar today, the Labor Department will release its weekly jobless claims report before the markets opens, and Economists are expecting claims to increase by 5,000 to 400,000.  Consumer price index will also be out before the market opens and inflation is expected to remain at 0.2% after falling 0.2% in June.   Existing home sales, Philadelphia Fed survey, and leading indicators will be out after the market opens.  New York Federal Reserve Bank President William Dudley will be speaking on the regional and national economic outlook in Newark.  Companies reporting earnings include Hewlett Packard, Gap, Sears Holdings, and GameStop.  The dollar is up against other major currencies.  Crude oil is currently trading at about $86 a barrel.  Gold is currently trading at $1,810.

  • Yesterday, stocks were mixed as a weaker sales forecast from Dell Inc. overshadowed better-than-anticipated earnings from Target.  Inflation worries increased on higher prices for tobacco, trucks, and pharmaceuticals.    

  • On CNBC today, Marshall Sonenshine, Chairman of Sonenshine Partners, talked about the European debt crisis and the state of financial intuitions.  Sonenshine said we are at a point of extreme vulnerability, sovereign country debt is weak, and Europe does not have the ability to print money like the U.S which causes an investment dislocation.  Sonenshine pointed out this puts a lot of pressure on the ECB as it has to support a number of countries in the union.  Sonenshine expects to see pressures on European banks if the sovereign debt crisis worsen despite the fact that banks have stopped investing in riskier assets.  Sonenshine sees a slowing of growth in Europe and thinks Germany is the only strong country in the region.  Sonenshine is concerned with the health of the financial institutions which are spooking financial markets but he does not expects another subprime disaster.  Sonenshine went on to say we will see continued consolidation in European banks as we need smaller and less complicated intuitions.  Finally, Sonenshine said Canada, Australia, an India have very sound, intelligent banking regulation and the U.S. and Europe need to adopt better regulation.               

  • Happy Thursday, have a nice day.  

Wednesday’s Close

DJIA up 4.28 pts/+0.04%/11,410.21

S&P up 1.13 pts/+0.09%/1,193.89

Nasdaq down 11.97 pts/-0.47/2,511.48


Thursday’s Futures

Dow Futures down 185.00 pts/-1.63%

S&P Futures down  23.40 pts/-2.01%

Nasdaq Fut down 47.50 pts/-2.18%


Overseas Markets

FTSE -2.30%

CAC 40 -2.58%

NIKKEI 225 -1.25%

HANG SENG -1.34%


Overseas:  World stock markets were down today.  European and Asian markets are down on fears the European sovereign debt crisis is worsening.      


Economic Reports:  Consumer Price Index expected to be 0.2 and Jobless Claims expected to be 400k at 8:30 a.m. & Existing Home Sales expected to be 4.920M,  Philadelphia Fed Survey expected to be 4.0, and Leading Indicators expected to be 0.2% at 10:00 a.m.


Top Headlines:    


  • Report indicates McGraw-Hill Cos. (MHP) is exploring a separation of its education business, the company hired Evercore Partners in March to assess options for its education unit.

  • Coca-Cola Co. (KO) announced it will invest $4 billion in China over three years from 2012 and plans to build more factories to boost distribution.

  • Bloomberg reports Bank of NY Mellon (BK) has asked a judge to reject a bid by NY AG Eric Schneiderman to intervene in a proposed $8.5 billion mortgage- bond settlement involving BofA (BAC).

  • CNBC reports the DOJ is investigating Standard and Poor’s over mortgages whether S&P executives overruled when analysts wanted to give lower ratings on dozens of mortgage bonds.    


Gold:up $16.10 to $1,810.85
Oil:down $1.35 to $86.18

EUR/USD 1.4365 -0.0061
USD/JPY 76.5950  -0.0001
GBP/USD 1.6495 -0.0046


Volatility Index (VIX): As of the close of business Wednesday, August 17, the VIX is up 1.27 at 31.58

Companies Reporting Quarterly Earnings:     

J.M. Smucker Company (SJM): FQ1 EPS of $1.12 beats by $0.04. Revenue of $1.19B (+13.6% Y/Y) misses by $60M.

SpectraSite (SSI): Q2 EPS of $0.29 in-line. Revenue of $352.83M (+2.3% Y/Y) misses by $1.5M.

Buckle (BKE): Q2 EPS of $0.50 in-line. Revenue of $212.4M (+12.6% Y/Y) beats by $3.3M.

Sears (SHLD): Q2 EPS of -$1.13 misses by $0.48. Revenue of $10.3B (-1.2% Y/Y) beats by $170M.  

Today’s Opening and Closing Bells:

Oklahoma Governor Mary Fallin, the first-ever female governor of Oklahoma, visits the NYSE. Governor Mary Fallin will ring the opening bell.


International Film Star, Jet Li, with China World Champion Wushu Team will ring the closing bell.