Morning Report: May 20, 2011

Ahead of the Bell: Dow futures are trading down 36 points and S&P futures are trading down 4 points.  Investors will focus on the Federal Reserve and its quantitative easing program due to expire in June. Traders are expecting the Fed to delay raising interest rates until 2012, following yesterdays weak housing and manufacturing data.  Investors will be watching for developments in the Euro zone sovereign debt crisis, hoping central bankers from the region will agree on a bailout package for Greece.  Commodities have stabilized and crude oil is trading about $99 a barrel.

  • On the economic calendar today, no reports are due.  New York Federal Reserve Bank President William Dudley will be speaking on economic conditions and the outlook before the Dutchess County Chamber of Commerce in Fishkill, NY.  Bloomberg is reporting French Finance Minister Christine Lagarde has emerged as a leading candidate to replace Dominique Strauss-Kahn at the International Monetary Fund.  Companies reporting earnings include Foot Locker, Dangdang, and Yingli Green Energy.  The dollar is up against the major currencies.  
  • Yesterday, mixed economic news kept the equity markets from advancing further.  Commodities settled and crude oil fell below $100 a barrel.  LinkedIn Corp had a very successful IPO as the stock more than doubled.  
  • On CNBC today, Dan Greenhaus, Chief Economic Strategist of Miller Tabak and David Kelly, Chief Market Strategist of J.P. Morgan Funds, talked about driving forces in the markets.  Greenhouse said the lower GDP in the first half of the year has most economist reevaluating their second half forecast.  However, Greenhause expects GDP to increase in the second half of the year and risk assets will appreciate.  Greenhause remains bullish on the economy, he expects QE2 to end in June, and the Fed will start increasing interest rates by the middle of 2012.  Greenhouse also said the global investing landscape has changed as most of growth comes from outside the U.S., about 40% to 60%.   David Kelly said he sees strong growth in the second half of this year and he will be watching to see how the economy deals with the ending of QE2 and the debt ceiling issue.  Kelly expects interest rates to go higher and the overall economy will move back to normal, growth stocks look cheap and he sees investors moving into dividend stocks. 
  • Happy Friday, have a nice weekend.  

Thursday’s Close

DJIA up 45.14 pts/+0.36%/12,605.32

S&P up 2.92 pts/+0.22%/1,343.60

Nasdaq up 8.31 pts/+0.30%/2,823.31

Friday’s Futures

Dow Futures down 36.00 pts/-0.29%

S&P Futures down 4.20 pts/-0.31%

Nasdaq Fut down 7.75 pts/-0.31%

Overseas Markets

FTSE +0.50%

CAC 40 +0.18%

NIKKEI 225 -0.14%

HANG SENG +0.16%

Overseas:  World stock markets were higher today. European markets are up following gains in U.S. markets yesterday. Asian markets were mixed after Japan kept interest rates unchanged at about zero.

Economic Reports:  None 

Top Headlines:    

  • Reports indicate Goldman Sachs (GS) is anticipating a subpoena from the DOJ on it involvement with mortgage backed securities during the financial crisis.    
  • Liberty Media Corporation (LCAPA) announced a proposal to acquire Barnes & Noble Inc. (BKS) for $17 per share in cash or about $1 billion.
  • BP Plc (BP) said a unit of Mitsui & Co., MOEX Offshore 2007 LLC has agreed to pay $1.065 billion after reaching a settlement over last year’s Gulf of Mexico oil spill.       
  • Reports indicate BofA (BAC) plans to sell its remaining stake in BlackRock Inc. (BLK).  The bank will sell 13.6 million shares for $187.65 apiece, a 3.6 percent discount to the average closing price.
  • Thermo Fisher Scientific (TMO) announced it is acquiring private equity-owned Phadia, a maker of allergy and autoimmune tests for $3.5 billion.      

Commodities/Currency:

Gold:down $8.72 to $1,501.85

Oil:up $0.16 to $99.05



EUR/USD 1.4292 +0.0041

USD/JPY 81.9450  +0.2600

GBP/USD 1.6192 +0.0023

Volatility Index (VIX): As of the close of business Thursday, May 19, the VIX is down 0.71 pts to 15.52

Companies Reporting Quarterly Earnings:   

Yingli Green Energy (YGE): Q1 EPS of $0.38 misses by $0.01. Revenue of $527.3M (+46.9% Y/Y) misses by $46.16M.

Foot Locker (FL) reports Q1 EPS 60c vs. consensus 44c Reports Q1 revenue $1.45B vs. consensus $1.34B

Today’s Opening and Closing Bells:

Russell launched a new Product Series: The Russell Investment Discipline ETFs will ring the opening bell

Peabody Energy Celebrates 10 Years of Trading on the NYSE Chairman and CEO Greg Boyce will ring the closing bell.