Morning Report: August 17, 2011

Ahead of the Bell: Dow futures are trading up 40 points and S&P futures are trading up 4 points.  Investors are concerned that the German and French plans for fiscal integration may be insufficient to contain the region's debt crisis from spreading to peripheral countries. The plan announced yesterday, by German Chancellor Angela Merkel and French President Nicolas Sarkozy calls for closer integration of the euro zone particularly with regards to governance.  The plan also increases the size of the rescue fund for the debt laden region, rejects the idea for a common euro bond and of most concern to traders, proposes a financial transaction tax.



  • On the economic calendar today, the Department of Labor will release its July reading on PPI which will be out before the market opens.  Economists expect July PPI to be flat, after being down 0.4% in June.  Dallas Federal Reserve President Richard Fisher (FOMC Voting Member) will be speaking on Fed functions and monetary policy.  Companies reporting earnings include Deere, BJ's Wholesale Club, and Target.  The dollar is up against the British pound and Japanese yen & down against the euro.  Crude oil is currently trading at about $87 a barrel.  Gold is currently trading at $1,791.

  • Yesterday, stocks were down sharply on volatile trading due to worries about Europe's economic and debt problems; after a report showed that Germany's economy stalled last quarter, halting the Dow’s three-day rally. 

  • On CNBC today, Byron Wien, Vice Chairman of Blackstone Advisory Partners, talked about the equity markets over the past three weeks.  Wien points out that the market was down almost 20% which is close to a bear market, but believes we are in a bottoming process, not in a recession and he expects to see a rally.  When the stock markets goes through like what it did in the last few weeks it significantly affects consumer confidence.  Wien still thinks 2011 will be an up year, he is not a bear, but acknowledges that growth has slowed considerably.  Wien pointed out interest rates should be a lot higher but the government needs to keep rates low in order to keep budget deficits in check.  On the housing market, Wien said it has probably hit the bottom, but will not get good again for a while.  On Germany, Wien believes growth has slowed a little but that Germany is the key beneficiary of a lower euro and a breakup of the Euro zone would not be good for the country.      

  • Happy Wednesday, have a nice day.  

Tuesday’s Close


DJIA down 76.97 pts/-0.67%/11,405.93


S&P down 11.73 pts/-0.97%/1,192.76


Nasdaq down 31.75 pts/-1.24/2,523.45


 


Wednesday’s Futures


Dow Futures up 40.00 pts/+0.36%


S&P Futures up  4.40 pts/+0.39%


Nasdaq Fut up 2.50 pts/+0.03%


 


Overseas Markets


FTSE -0.33%


CAC 40 +0.81%


NIKKEI 225 -0.55%


HANG SENG +0.38%


 


Overseas:  World stock markets were down today.  European and Asian markets are down as investors are concerned the German and French plans are not enough to stem the euro zone debt crisis.      


 


Economic Reports:  Producer Price Index expected to be flat 8:30 a.m. 


 


Top Headlines:    


 



  • Reports indicate Bank of America Corp (BAC) is negotiating to sell about $1 billion of real estate assets it inherited when it acquired Merrill Lynch in 2009 to Blackstone Group (BX).

  • Motorola Mobility shareholder John Keating is suing both the company and Google, saying that the deal has vastly undervalued the company even though it represented a 63% markup. 

  • General Dynamics (GD) announced it is acquiring healthcare information technology firm Vangent Inc for about $960 million from private equity firm Veritas Capital in a cash deal..

  • Williams Cos (WMB) said it was still prepared to pay $5.5 billion in cash for Southern Union (SUG) as tries to win the company from a deal it signed with Energy Transfer Equity  (ETE). 

  • SABMiller has made a second bid for the Foster’s Group, taking its $10 billion offer directly to the company’s shareholders after being rejected in June.  SABMiller’s offer remains 4.90 Australian dollars ($5.16) a share in cash.

  • MBA reports mortgage applications were up 4.1% versus up 21.7% last week.  The thirty-year fixed mortgage rate decreased to 4.32% from 4.37%.    

Commodities/Currency:


Gold:up $5.10 to $1,791.85
Oil:up $1.02 to $87.59

EUR/USD 1.4442 +0.0042
USD/JPY 76.5550  -0.2700
GBP/USD 1.6428 -0.0024


 


Volatility Index (VIX): As of the close of business Tuesday, August 16, the VIX is up 1.50 at 32.85


Companies Reporting Quarterly Earnings:     


Target (TGT): Q2 EPS of $1.03 beats by $0.06. Revenue of $16.24B (+4.6% Y/Y) beats by $90M. Sees Q3 EPS of $0.70-75, FY11 EPS of $4.15-4.30.


Flowers Foods (FLO): Q2 EPS of $0.23 misses by $0.03. Revenue of $642.6M (+5.7% Y/Y) beats by $5.3M.


Deere (DE): FQ3 EPS of $1.69 beats by $0.02. Revenue of $7.72B (+24.1% Y/Y) beats by $220M.


BJ's Wholesale Club (BJ): Q2 EPS of $0.84 beats by $0.07. Revenue of $2.98B (+10.8% Y/Y) misses by $2M.


Abercrombie & Fitch (ANF): Q2 EPS of $0.35 beats by $0.06. Revenue of $916.8M (+22.9% Y/Y) beats by $36.8M.


Chico's FAS (CHS): Q2 EPS of $0.25 beats by $0.01. Revenue of $551.4M (+18.5% Y/Y) beats by $15M.


Staples (SPLS): Q2 EPS of $0.22 beats by $0.02. Revenue of $5.82B (+5.2% Y/Y) beats by $170M. Sees FY11 EPS of $1.39-1.45.


Today’s Opening and Closing Bells:


Lake Shore Gold Celebrates Listing on NYSE Amex President and CEO Tony Makuch will ring the opening bell


 


Humana Inc. (HUM) to commemorate the company’s 50th anniversary. CEO Michael B. McCallister joined by co-founder David A. Jones, COO James E. Murray will ring the closing bell.