Morning Report: May 24, 2011

Ahead of the Bell: Dow futures are trading up 38 points and S&P futures are trading up 4 points.  Traders will focus on the Euro zone again following steep losses yesterday on downgrade of Greek debt.  Financial markets are on edge after Moody's warned a Greek debt default would have wide implications on other EU countries including Italy.  European finance ministers and central bankers are at a crossroads on how to address Greece's debt.  If the EU restructures Greece's debt, then Portugal and Ireland will want the same.  And, if Greece is allowed to default, then the whole region will be in financial distress.  Crude oil is currently trading about $98 a barrel. 

  • On the economic calendar today, new home sales index for April will be out after the opening and is expected to remain unchanged from the previous month at an annual rate of 300,000 units.  Boston Federal Reserve Bank President Eric Rosengren will be speaking to a conference on a framework for financial stability and regulatory priorities in St. Petersburg, Russia.  Federal Reserve Gov. Elizabeth Duke will be speaking on financial education at Boston University and Kansas City Federal Reserve Bank President Thomas Hoenig will be speaking to the 29th Annual Monetary and Trade Conference in Philadelphia.  Also, St. Louis Federal Reserve Bank President James Bullard will be speaking to the Cape Girardeau West Rotary Club in Cape Girardeau, Mo.  Companies reporting earnings include AutoZone, DSW Inc., and Medtronic Inc.  The dollar is up against the euro and Japanese yen and down against the British pound.
  • Yesterday, the equity markets declined sharply following downgrades of Greece and Italy, crude oil settled below $98 a barrel and the dollar strengthened.
  • On CNBC today, Stuart Freeman, Chief Equity Strategist, Wells Fargo Advisors Services Group, talked about the current state of the markets.  Freeman said the decline in the equity markets is a good opportunity to buy; the markets are facing uncertainty right now.  Freeman also said the treasury markets are saying things are slowing; China is tightening rates and world markets are expected to have lower growth.  Freeman went on to say the bond markets will have tepid growth, perhaps about 2%.  Freeman also expects the markets to go sideways for a while and the second leg of the recovery will begin in the summer or fall. 
  • Also, on CNBC today, Ken Duberstein, Chairman and CEO, The Duberstein Group and former Chief of Staff under President Ronald Reagan, talked about the jobs markets.  Duberstein said the number one thing for the U.S. economy is not Dodd-Frank and healthcare but jobs, the president needs to provide leadership.  Duberstein pointed out the American people vote their pocketbooks; the White House needs to focus on employment.  Duberstein is hoping the president will bring the two parties together, Ronald Reagan would have build a consensus among congress, the people want the president and congress to address the deficit and budget.  Duberstein went on to say there is a huge disconnect between the president and the business community, he needs to address the trade agreements with Colombia, Panama, and South Korea. 
  • Happy Tuesday, have a nice day.  

Monday’s Close

DJIA down 130.78 pts/-1.05%/12,381.26

S&P down 15.90 pts/-1.19%/1,317.37

Nasdaq up 44.42 pts/-1.58%/2,758.90

Tuesday’s Futures

Dow Futures up 38.00 pts/+0.23%

S&P Futures up 4.20 pts/+0.24%

Nasdaq Fut up 3.00 pts/+0.13%

Overseas Markets

FTSE +0.32%

CAC 40 +0.01%

NIKKEI 225 +0.17%

HANG SENG +0.09%

Overseas:  World stock markets were up today. European markets are mixed on Euro zone sovereign debt concerns. Asian markets were mixed after Goldman Sachs says it has lowered its growth forecast for china.

Economic Reports:  New Home Sales expected to 300K @10:00 a.m.

Top Headlines:    

  • Valeant Pharmaceuticals International (VRX) announced it is acquiring AB Sanitas (SAN1L) for approximately EUR314 million in cash and approximately EUR50 million in debt. 
  • Reports indicate Hertz Global (HTZ) is planning an exchange offer for Dollar Thrifty Automotive (DTG).  Hertz has offered to buy Dollar Thrifty for $72 a share or $2.08 billion.
  • The DOJ has filed a antitrust lawsuit against H&R Block (HRB) from buying 2nd Story Software, a unit of TAIX L.P. as it would create a duopoly.  H&R Block had agreed to buy the unit for $287.5 million.
  • Toyota Corp (TM) announced it is forming a social network for Toyota owners which allow drivers to stay current on regular scheduled maintenance and conduct chats and receive tweet-like messages.
  • AIG and the treasury department is scheduled to price the long awaited secondary offering after the close today.  The company is expected to price 300 million shares at about $30 per share.   

Commodities/Currency:

Gold:up $7.72 to $1,522.85

Oil:up $1.23 to $98.95



EUR/USD 1.4074 +0.0026

USD/JPY 81.8150  +0.1200

GBP/USD 1.6138 +0.0019

Volatility Index (VIX): As of the close of business Monday, May 23, the VIX is up 0.84 pts to 18.27

Companies Reporting Quarterly Earnings:     

AutoZone (AZO): FQ3 EPS of $5.29 beats by $0.31. Revenue of $1.98B (+8.6% Y/Y) beats by $0.07B.

Medtronic (MDT): Q1 EPS of $0.90 misses by $0.03. Revenue of $4.30B (+2.4% Y/Y) beats by $0.02B.

Today’s Opening and Closing Bells:

QR Energy Visits the NYSE; CEO Alan L. Smith will ring the opening bell.    

Wiley’s For Dummies Brand Celebrates 20 Years of Making Everything Easier John Wiley & Sons’ Deborah Wiley, President & CEO Steve Smith and Dummies Man will ring the closing bell.