Morning Report: June 23, 2011

Bernanke in Congress

Image by TalkMediaNews via Flickr

Ahead of the Bell: Dow futures are trading down 65 points and S&P futures are trading down 9 points adding to weakness from the previous trading session after the Federal Reserve cut its forecast for economic growth in the U.S. for this year and 2012. The Fed did not give any hints whether it is considering additional stimulus. Traders were anticipating the central bank to provide clues on a QE2 1/2 but analysts conclude the agency could implement a number of options including purchasing additional treasuries. The European sovereign debt crisis appears to be at a standstill after German chancellor Angela Merkel warned a full-scale Greek debt restructuring could be harmful for the Euro zone.

  • On the economic calendar today, the Labor Department will release its weekly jobless claims data before the market opens and economists are looking for weekly claims to increase to 418,000 from last week's 414,000 claims. The Census Department will release May’s new home sales after the market opens and new home sales are expected to fall to 305,000 annualized units from April's 323,000 annualized units. Chicago Federal Reserve Bank President Charles Evans will provide welcoming remarks to conference on state budgets under stress in Chicago. Companies reporting earnings including Oracle, ConAgra Foods, H&R Block, and Lennar.  The dollar is down against the major currencies.  Crude oil is currently trading at about $93 a barrel.
  • Yesterday, stocks declined and halted a four-day rally after the Federal Reserve lowered its forecast for economic growth and said it plans to finish its $600 billion bond-purchase program on June 30. 
  • On CNBC today, Harry Wilson, Chairman and CEO, MAEVA Advisors, talked about the Greek situation and implications for the U.S. Wilson said the Greek debt crisis may be worse than we anticipate and that a set of principles and a firm plan is needed for the region all of which could take about a year to develop. The alternative is to let the country default on its debt. Right now, if Greece was to refinance its debt it would have to grow about 15% just to be even. Wilson pointed out that shipping and tourism in Greece are robust sectors, but the private sector is not going to buy Greek debt right now. Wilson believes eventually either the Europeans will come up with a plan or the Greek people will say they have had enough. He also points out that the Greeks have enormous leverage, especially if they stop paying their debt and the ECB becomes insolvent. Wilson commented that the enormous lesson for the U.S. here is we need to learn from the situation going on in Europe now and focus on what happened with General Motors and some big banks where people were not paying attention to the real problem.
  • Happy Thursday, have a nice day. 

Wednesday’s Close

DJIA down 80.34 pts/-0.66%/12,109.67

S&P down 8.38 pts/-0.65%/1,287.14

Nasdaq down 18.07 pts/-0.67/2,669.19

Thursday’s Futures

Dow Futures down 65.00 pts/-0.53%

S&P Futures down 9.50 pts/-0.70%

Nasdaq Fut down 13.50 pts/-0.62%

Overseas Markets

FTSE -1.10%

CAC 40 -1.37%

NIKKEI 225 -0.34%

HANG SENG -0.46%

Overseas:  World stock markets were down today. European markets are trading down after the Federal Reserve cut its growth forecast for the U.S. and disappointing economic data. Asian markets were down after the Feds decision to cut forecast.    

Economic Reports:  Jobless Claims expected to be 418K @8:30 a.m. and New Home Sales expected to be 305K @10:00 a.m.

Top Headlines:   

  • Private-equity firm Carlyle Group said it is acquiring Aviva Plc’s RAC division for 1 billion pounds ($1.6 billion). Carlyle expects to complete the deal by the end of the 3rd quarter.
  • Regions Financial (RF) announced its Morgan Keegan division has settled with the SEC with respect to issues concerning certain mutual funds and closed-end funds and agreed to pay $210 million.  Regions Financial is also exploring strategic alternatives for the Morgan Keegan unit.
  • Reports indicate BJ's Wholesale (BJ) is holding out for a higher offer of $55 per share or about $3 billion.  Leonard Green and CVC Capital reportedly offered to buy BJ’s for $50 per share.
  • LSE Group announced it is paying $4 per share of special dividend or about $678.9 million for TMX Group.  Also, Canadian consortium Maple Group has raised its offer to C$50 a share from C$48 a share for TMX Group Inc.  
  • Reports indicate Electronic Arts (ERTS) is looking to buy PopCap Games for about $1 billion.
  • Bloomberg reports AMR Corporation (AMR) is in talks with Airbus to purchase about 100 aircrafts.

Commodities/Currency:

Gold:down $11.85 to $1,538.85

Oil:down $2.39 to $93.02

EUR/USD 1.4222 -0.0113

USD/JPY 80.6150  +0.2800

GBP/USD 1.5984 -0.0084

Volatility Index (VIX): As of the close of business Wednesday, June 22, the VIX is down 0.34 pts to 18.52

Companies Reporting Quarterly Earnings:     

Lennar (LEN): FQ2 EPS of $0.07 beats by $0.02. Revenue of $764.5M (-6.1% Y/Y) beats by $96.9M.

ConAgra Foods (CAG): FQ4 EPS of $0.62 beats by $0.14. Revenue of $3.21B (+5.3% Y/Y) beats by $0.02B.

Today’s Opening and Closing Bells:

Scorpio Tankers Visits the New York Stock Exchange Emanuele A. Lauro, Chief Executive Officer will ring the opening bell.    

Cabela’s Celebrates 50th Anniversary Jim Cabela, Vice Chairman and Director will ring the closing bell.  

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