Morning Report: August 10, 2011

NEW YORK - JULY 13:  Traders work on the floor...

Image by Getty Images via @daylife

Ahead of the Bell: Dow futures are trading down 88 points and S&P futures are trading down 9 points after yesterday's huge rally. The Dow gained 3.9% and the S&P climbed 4.7% following the Federal Reserve's announcement that it will keep interest rates low for two years. The Fed is trying to convince investors the cost of borrowing will not increase until Mid-2013. China reported data showing export growth accelerated in July, stabilizing markets in Europe and Asia. The bank of England has cut it 2011 growth forecast for the UK by half a percentage point as the economy remains sluggish. Japan raised its assessment of its economy.

  • On the economic calendar today, wholesale inventories will be out after the market opens and are expected to increase by 1%. Companies reporting earnings include Macy’s, Cisco Systems, and Polo Ralph Lauren. The dollar is up against the major currencies.  Crude oil is currently trading at about $82 a barrel. Gold is trading at an all time high of $1,763.
  • Yesterday, stocks roared back in wild trading as the market gained the most in more than two years after the Fed vowed to keep interest rates near zero through mid-2013.   
  • On CNBC today, Doug Dachille, CEO and CIO of First Principles Capital Management, talked about the Fed’s announcement to keeping interest rates low for two years. Dachille believes the Fed should have not left interest rates low until mid-2013 as savers, banks, and pension funds will lose. Dachille said lowering interest rates will have adverse consequences for the economy. Dachille also said there are about $2 trillion mortgages where homeowners are paying mortgages on time, about 6% interest rate, and those are performing mortgages. While you have other homeowners, who have mortgages with lower rates at 2% to 3% and are not making payments on time. Dachille went on to say the Fed needs to do less, Chairman Bernanke needs to put more pressure on legislators to do more on policy changes, so the economy can pick up again, and get people back to work.  Finally, Dachille pointed out the Chairman has done enough already, Washington needs to put in place the policy changes so the economy can create jobs.         
  • Happy Wednesday, have a nice day.

Tuesday’s Close

DJIA up 429.92 pts/+3.98%/11,239.77

S&P up 53.07 pts/+4.74%/1,172.53

Nasdaq up  124.83 pts/+5.29/2,482.52

Wednesday’s Futures

Dow Futures down 88.00 pts/-0.79%

S&P Futures down  9.40 pts/-0.80%

Nasdaq Fut down 18.50 pts/-0.86%

Overseas Markets

FTSE +0.83%

CAC 40 +0.19%

NIKKEI 225 +1.05%

HANG SENG +2.34%

Overseas:  World stock markets were up today. European and Asian markets are up after the Federal Reserve announced it will not increase short-term interest rates until the middle of 2013.

Economic Reports:  Wholesale Trade expected to increase by 1% at 10:00 a.m.

Top Headlines:

  • Capital One Financial Corp., (COF) announced it acquiring HSBC Holdings Plc’s U.S. credit card business for about $2.6 billion.
  • CNBC reports Bank of America (BAC) is selling part of its home-loan portfolio to Fannie Mae.
  • Reports indicate Goldman Sachs Group Inc. (GS) is being investigated by the SEC whether the firm broke bribery laws in its dealings with Libya's sovereign-wealth fund.
  • Bank of America Corp. (BAC) CEO Brian Moynihan said he has no plans to step aside as CEO of the bank and may sell some businesses but not Merrill Lynch.
  • MBA reports mortgage applications were up 21.7% versus up 7.1% last week.  The thirty-year fixed mortgage rate decreased to 4.37% from 4.45%. 

Commodities/Currency:

Gold:up $19.10 to $1,762.85

Oil:up $3.20 to $82.98

EUR/USD 1.4375 -0.0017

USD/JPY 76.4650  -0.7800

GBP/USD 1.6256 -0.0074

Volatility Index (VIX): As of the close of business Tuesday, August 9, the VIX is down 12.94 at 35.06

Companies Reporting Quarterly Earnings:     

Macy's (M): Q2 EPS of $0.55 beats by $0.04. Revenue of $5.94B (+7.3% Y/Y) beats by $70M.

Polo Ralph Lauren (RL): FQ1 EPS of $1.90 beats by $0.44. Revenue of $1.5B (+33.4% Y/Y) beats by $70M.

Today’s Opening and Closing Bells:

Representatives from Long Island Youth Mentoring will ring the opening bell.

Hanger Orthopedic Group (HGR) to commemorate the company’s 150th anniversary of founding. President and CEO Thomas F. Kirk and Chairman Ivan R. Sabel will ring the closing bell.

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