Morning Report: June 27, 2011

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Ahead of the Bell: Dow futures are trading up 15 points and S&P futures are trading up 3 points as Greece's Parliament begins to debate the much anticipated austerity measures required by the EU and IMF to receive the next tranche of bail-funds. A framework of the new austerity measures is expected by Wednesday in order for the Greece to avoid default. Traders expect some continued volatility at the opening this morning as the final make-up of Russell Index reconstitution is announced.

  • On the economic calendar today, the Commerce Department will release personal income and spending for May which will be out before the market open. Economists surveyed by Briefing.com are expecting personal incomes to rise 0.3% while spending is expected to remain flat. President Barack Obama and Vice President Joe Biden will meet separately with the Democratic and Republican Senate leaders in an effort to get talks on the budget and long-term debt reduction restarted.  Minneapolis Federal Reserve Bank President Narayana Kocherlakota will be speaking on leverage subsidies to the Tri-State Bankers Summit in Big Sky, Montana. Kansas Federal Reserve Bank President Thomas Hoenig will be speaking on systemically-important financial institutions to a conference on the Dodd-Frank reform in Washington. The dollar is down against the major currencies. Crude oil is currently trading at about $90 a barrel.
  • Last week, the equity markets were down again, the Dow has been down 7 out of the last 8 weeks, for the week the Dow declined 0.6%, the S&P 500 fell 0.2%, and Nasdaq was up 1.4%. The jobless claims data was disappointing as well as the housing data.  GDP came in line with expectations and durable goods orders for May were positive as a result of a smaller than expected decline in residential construction and lower imports.  The Federal Reserve said after the conclusion of its two-day meeting that it’s lowering it’s forecast for the U.S. for the remainder of 2011 and 2012. The central bank also said it expects the unemployment situation to improve in the second half of this year.  The International Energy Agency announced a program to release 60 million barrels from reserves to drive crude oil to about $90 a barrel. The European sovereign debt crisis continues to drag on financial markets even after Greece reportedly struck a deal with the EU and IMF which requires the country to raise taxes and cut spending in order to avoid a default. 
  • The week ahead, the Greek sovereign debt situation, the end of the Federal Reserve's quantitative easing program, and the debt ceiling and budget discussions could provide another reason for a choppy week of trading, leading into the 4th of July weekend. Fed watchers expect the central bank to continue buying about $25 billion of Treasuries a month. However, traders are looking for the economy to recovery in the second half because of inventory built up, available business capital, and no more Japanese earthquake and weather-related issues. The market will get a full slate of economic reports including ISM manufacturing data, which economists will be paying special attention to if it has improved since May. Other notable economic reports for the week include monthly auto sales, consumer sentiment, construction spending, consumer confidence, week jobless claims, and Chicago PMI.
  • On CNBC today, Anne Mulcahy, former Chairwoman & CEO of Xerox Corporation, talked about the budget negotiations and the debt ceiling vote. Mulcahy said she hopes lawmaker are taking the debt ceiling vote seriously, she sees a little political dance going on right now. Mulcahy believes you have to approach taxes and revenues as if you were running a business where you have to address revenues and cost.  Mulcahy is very concerned as we have had two years of a downward turn in the economy and the highly politicized debt ceiling vote does not help. Mulcahy said when you are running a business you want to see a stretch of sustainable growth and we have not seen this thus far. Mulcahy said she does not see a double recession, but countries have to take on cuts and come up with a plan with more sustainable outcomes for the future. Mulchay commented that there is not much growth encouraging business leaders to hire more employees, she hopes a rebound from the Japanese earthquake and corporate earnings will provide some growth and a stronger 2Q11.
  • Disney’s Cars 2 sped to the top of the box office this past weekend.  Happy Monday, have a nice day.  

Friday’s Close

DJIA down 115.42 pts/-0.96%/11,934.58

S&P down 15.05 pts/-1.17%/1,268.45

Nasdaq down 33.86 pts/-1.26/2,652.89

Monday’s Futures

Dow Futures up 15 pts/+0.12%

S&P Futures up 3.50 pts/+0.19%

Nasdaq Fut up 5.75 pts/+0.26%

Overseas Markets

FTSE +0.14%

CAC 40 +0.03%

NIKKEI 225 -1.04%

HANG SENG -0.59%

Overseas:  World stock markets were mixed today. European markets are trading up as Greece begins to debate harsher austerity measures. Asian markets were down on weak Japanese exports as a result of the earthquake and Tsunami.    

Economic Reports:  Personal Income and Outlay expected to be 0.4% @8:30 a.m., later in the week Consumer Confidence, Jobless Claims, Chicago PMI, Motor Vehicle Sales, Consumer Sentiment, ISM Mfg Index, and Construction Spending.

Top Headlines:

  • CNBC reports global central bank heads as required by the Basel Committee on Banking Supervision have proposed rules that would require the world's biggest banks to hold an extra 1% to 2.5% of capital on their balance sheets in wake of the financial crisis.
  • Stanley Black & Decker (SWK) is offering to acquire all of the outstanding common stock and warrants of Niscayah (NISC) for SEK18.00 per share in cash including debt for about SEK7.6 billion (USD$1.2 billion).
  • Metropolitan Health Networks (MDF) announced it is acquiring Continucare Corporation (CNU) for about $416 million or $6.25 per share in cash and 0.0414 of a share of Metropolitan common stock.
  • Meredith Corporation (MDU) announced it is acquiring EatingWell Media Group, and Recipe.com for an undisclosed sum.
  • Reports indicate Home Depot (HD) is accused of violating the Buy American Act with Chinese-made goods and the Department of Justice is investigating.
  • Reports indicate Philip Morris (PM) plans to sue the Australian government over its plans to be the first country to use plain, brand-less packaging for cigarettes.

Commodities/Currency:

Gold:down $1.10 to $1,502.85

Oil:down $0.32 to $90.82

EUR/USD 1.4233 +0.0045

USD/JPY 80.6850  +0.2750

GBP/USD 1.5997 +0.0038

Volatility Index (VIX): As of the close of business Friday, June 24, the VIX is down 0.88 pts to 21.85

Companies Reporting Quarterly Earnings:     

None as of yet.

Today’s Opening and Closing Bells:

Quest Rare Minerals Ltd. Team Celebrates Recent Listing on NYSE Amex. President and CEO Peter Cashin will ring the opening bell.

The Securities Transfer Association Celebrates 100th Anniversary. President of the STA Charles V. Rossi will ring the closing bell.

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