Morning Report: September 22, 2011

Ahead of the Bell: Dow futures are trading down 226 points and S&P futures are trading down 26 points following the previous trading session's sell-off; after the Federal Reserve announced it plans to lower borrowing cost by selling short term bonds in favor of long term securities.  Traders don't seem to be convinced operation twist is enough to kick start the lagging economy given the Fed's downbeat outlook and investors are concerned after HSBC's China Flash PMI data showed factory orders declined for a third straight month in a row.                                             



  • On the economic calendar today, the Department of Labor will release its weekly jobless claims data before the market.  According to Briefing.com, economists expect weekly jobless claims to increase to 420K claims last week compared with 428K claims reported the prior week.  The Conference Board's index of leading economic indicators will release its report after market opens. Economists expected the index to have risen 0.1% in August after having risen 0.5% in July. The Federal Housing Finance Agency (FHFA) will also release its July home price index after the market opens.  Companies reporting earnings include FedEx, Rite Aid, and Nike. The dollar is up against major currencies.  Crude oil is currently trading at $82 a barrel.  Gold is trading at $1,750.   

  • Yesterday, stocks declined after the Federal Reserve announced plans to buy $400 billion of long-term debt and said there are significant downside risks to the economy.

  • On CNBC today, Stephen Roach, member of the faculty of Yale University and Non-Executive Chairman of Morgan Stanley Asia spoke about the latest Fed moves and the global economy.  Roach said we are certainly in a double dip recession or at least a relapse.  He thinks America is in a Japanese-like state and the Fed is lacking in its ability as it did not learn the lessons from Japan.  He holds the Fed, both Greenspan and Bernanke accountable for leading the U.S. into the pre-subprime crisis.  Roach believes we need to encourage consumers to save more:  automatic saving, tax refunds and reforms, and 401K’s as the savings rate is too low, and people have too much debt.  Roach thinks if people have more money in the bank they will step up and spend.  He does not believe the Fed’s operation twist will accomplish anything, QE1 worked, QE2 failed, QE3 will fail, and the Fed’s duel mandate has failed. The economy has not been responsive to extraordinary monetary policies and the Fed needs to fix its balance sheets.  Roach believes we also need to address the log jam in the system with housing.  Finally, Roach pointed out while we did rush in and save the financial system a few years ago, he questions that strategy and doesn’t believe we were on the cusp of a global meltdown.                                                                                                    

  • Happy Thursday, have a nice day.

Wednesday’s Close


DJIA down 283.82 pts/-2.49%/11,124.84


S&P down 35.33 pts/-2.94/1,166.76


Nasdaq down 52.05 pts/-2.01/2,538.19


 


Thursday’s Futures


Dow Futures down 226.00 pts/-2.02%


S&P Futures down 26.30 pts/-2.23%


Nasdaq Fut down 47.58 pts/-2.10%


 


Overseas Markets


FTSE -4.54%


CAC 40 -4.65%


NIKKEI 225 -2.07%


HANG SENG -4.85%


 


Overseas:  World stock markets were down today.  European and Asian markets are lower on a grim outlook for the U.S. economy and China manufacturing slowed.


 


Economic Reports:  Jobless Claims expected to be 420K at 8:30 a.m. & FHFA Housing Price index expected to be 0.2% and Leading Indicators at 10:00 a.m.


 


Top Headlines:    



  • United Technologies (UTX) announced it is acquiring Goodrich Corp. (GR) for $16.5 billion or $127.50 per share.  United Technologies will finance about 25% of the deal with equity and the rest with new debt.

  • Reports indicate Hewlett-Packard (HPQ) board is weighting whether to oust CEO Leo Apotheker.   The board could appoint former EBay CEO Meg Whitman as his successor.

  • Exxon Mobil (XOM) and Venezuela stated oil company Petroleos de Venezuela re negotiating an arbitration settlement of about $6 billion for assets seized by Chavez in 2007.   

Commodities/Currency:


Gold:down $31.10 to $1,750.85
Oil:down $3.52 to $82.53

EUR/USD 1.3449 -0.0139
USD/JPY 76.3650  -0.0700
GBP/USD 1.5418 -0.0093


 


Volatility Index (VIX): As of the close of business Wednesday, September 21, the VIX is up 4.46 at 37.32


Companies Reporting Quarterly Earnings:     


FedEx (FDX): FQ1 EPS of $1.46 beats by $0.01. Revenue of $10.5B (+11.3% Y/Y) beats by $160M. Sees FQ3 EPS of $1.40-1.60; FY12 EPS of $6.25-6.75.


Carmax (KMX): Q2 EPS of $0.49 misses by $0.02. Revenue of $2.59B (+11% Y/Y) misses by $30M.


Today’s Opening and Closing Bells:


 


H.E. Bronislaw Komorowski, President of the Republic of Poland, Visits the New York Stock Exchange and will ring the open bell.


 


BT Group CEO Ian Livingston to Visit the NYSE will ring the closing bell.