Morning Report: June 2, 2011

Ahead of the Bell: Dow futures are trading up 9 points and S&P futures are trading up 2 points after the equity markets ended a four-day rally yesterday with its worst trading session since last August. Traders are bracing for more choppy trading as other jobs data are due today and Friday, which will provide indications whether the economic recovery is slowing down. Also, Moody's has cut its rating on Greece to Caa1 from B1. The Agency cites growing concerns that Greece will be unable to stabilize its financial position without assistance from the EU to restructure existing debt.

  • On the economic calendar today, the Labor Department will release its initial jobless claims report before the opening and is expected to fall to 413,000. First quarter productivity data will also be out before the opening and is expected to remain unchanged at 1.6%. The Commerce Department will release its April factory orders report after the bell and is expected to fall 0.9%. Companies reporting earnings include Cascade, Met-Pro Corp., and Quiksilver Inc. The dollar is down against the major currencies.
  • Yesterday, stocks were down sharply as jobs and manufacturing data showed a slowing of economic growth.  According to Cleveland Fed Reserve President Sandra Pianalto, the high unemployment rate means the Fed’s quantitative easing program is on the right track. The unemployment situation is not an easily resolvable problem, however, the economic recovery remains on strong grounds.
  • On CNBC today, Steven Rattner, former Auto Czar and founding partner of Quadrangle Group, talked about the jobs market. Rattner said we have had a series of soft numbers and the economy is hitting a soft patch right now. He expects a continuation with soft jobs numbers on Friday, but says the economy is not in a double dip recession. Given the pull back in consumer confidence and the importance of both consumer and business confidence to the economy, Rattner believes the Fed will have to do more with quantitative easing, although we don’t have the tools because we don’t have the political support.  If we were to go back into a recession then the politics would change. Rattner pointed out we have to ride this out for a while and see what happens. 
  • Also, on CNBC today, Ed Keon, Managing Director, Quantitative Management Associate, talked about where the equity markets are going from here. Keon said the markets have been very overweight for a while and that investors are becoming a little too complacent on earnings and profit margins. He believes the sharp decline yesterday is a correction rather than a bear market, and that we can’t expect good earnings to continue forever. Keon thinks the pull back is temporary as a result of what happened in Japan, but that the markets will correct a little more. He went on to say that we should expect a slowdown in the financial markets thru the summer and an acceleration in the fall.        
  • Happy Thursday, have a nice day.  

Wednesday’s Close

DJIA down 279.65 pts/-2.22%/12,290.14

S&P down 30.65 pts/-2.28%/1,314.55

Nasdaq down 66.11 pts/-2.33%/2,769.19

Thursday’s Futures

Dow Futures up 9.00 pts/+0.04%

S&P Futures up 2.60 pts/+0.11%

Nasdaq Fut up 5.75 pts/+0.24%

Overseas Markets

FTSE -0.72%

CAC 40 -1.03%

NIKKEI 225 -1.69%

HANG SENG -1.58%

Overseas:  World stock markets were down today. European markets are trading down after Moody's downgraded Greece again. Asian markets were down on disappointing economic data from the U.S.

Economic Reports:  Jobless Claims expected to be 413K, Productivity and Cost expected to be 1.6% @8:30 a.m.& Factory orders expected to be 0.9% @10:00 a.m.

Top Headlines:

  • BankUnited (BKU) said it is acquiring Herald National Bank (HNB) for about $22.9 million in cash and 1.7 million in stock equal to $1.35 plus 0.0990 shares of BKU common stock.
  • Google (GOOG) said Chinese hackers have targeted the Gmail accounts of hundreds of high profile individuals in new computer attacks on concerns about the security of the internet.
  • Marathon Oil Corp (MRO) announced it is acquiring oil and gas properties in Texas Eagle Ford shale field for $3.5 billion from KKR & Co (KKR) and Hilcorp Resources Holdings LP.
  • Orbitz Worldwide, Inc. (OWW) said a U.S. court has ruled that American Airlines (AMR) must return its schedule and airfares to the Orbitz website.
  • Bloomberg reports Citigroup ( C ) has shut down a $400 million hedge fund that uses the banks funds to invest in light of new regulation aimed at stopping proprietary trading.
  • CNBC reports Gores Group LLC a private-equity firm is bidding for at least half of bankrupt Borders Group.

Commodities/Currency:

Gold:up $2.57 to $1,542.85

Oil:up $0.04 to $100.34



EUR/USD 1.4481 +0.0151

USD/JPY 80.8350  -0.0400

GBP/USD 1.6407 +0.0085

Volatility Index (VIX): As of the close of business Wednesday, June 1, the VIX is up 2.85 pts to 18.30

Companies Reporting Quarterly Earnings:     

Joy Global (JOYG): FQ2 EPS of $1.52 beats by $0.27. Revenue of $1.1B (+19% Y/Y) beats by $0.07B.

Today’s Opening and Closing Bells:

Cambria Global Tactical ETF (GTAA) will ring the opening bell. (see our post)

Future Faces of Wall Street visits the NYSE and will ring the closing bell.