Morning Report: June 17, 2011

Chancelor of the Federal Republic of Germany D...

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Ahead of the Bell: Dow futures are trading up 94 points and S&P futures are trading up 11 points after German Chancellor Angela Merkel indicated on a conference call she is willing to compromise on demands that private bondholders voluntarily share a part of the rescue package for Greece. Merkel said she is willing to work with the ECB to resolve the Greek debt crisis and seek a solution immediately. Greece's Prime Minister George Papandreou has reshuffled his cabinet in a push to implement stiffer austerity measures. Technology stocks will be in focus today after blackberry maker Research In Motion Ltd (RIMM) cut its profit forecast, shares were trading down sharply after hours yesterday.

  • On the economic calendar today, the University of Michigan will release its initial June consumer sentiment index after market opens. Economists are forecasting the index to fall to a reading of 73.5 from May's reading of 74.3.
  • Leading indicators will also be out after the market opens and are expected to be 0.2 percent. Today is Quadruple witching (See Tara Dziedzic post), which is the expiration date for stock options, stock index options, stock index futures, and single stock futures. Quadruple witching occurs four times a year, on the third Friday of the last month in each quarter. Traders are expecting an increase in trading volume towards the close today.  Crude oil is currently trading at about $93 a barrel. The dollar is up against the Euro and the Japanese yen and down against the British pound.
  • Yesterday, the equity markets were mixed on weakness in the tech sector and concern about Greece’s debt crisis countered stronger-than-expected reports on the housing market and unemployment. According to former Federal Reserve Chairman Alan Greenspan, in an interview with Charlie Rose, he is almost certain Greece will default, which could send the U.S. economy into a double dip recession.
  • On CNBC today, PNC Financial Services Group, CEO James Rohr, talked about the European crisis and EU banks. Rohr said the EU has the ability and scale to deal with the Greek situation, however, he is not comfortable with the ECB kicking the can down the road with Greece. Rohr also said he is concerned with how regulators determine what is the right capital ratio for U.S. banks, U.S. banks are held to a higher capital ratio as compared with European banks, who have lower capital ratios. Rohr went on to say the contagion issue in the Euro zone is a problem, if you restructure Greece, you would have to restructure Ireland, then Portugal, and Spain. The contagion effected with Greece is modest but when you start restructuring one nation after another, and then you get to Spain it is a big problem.     
  • Happy Friday, have a nice day and a pleasant weekend.

Thursday’s Close

DJIA up 64.33 pts/+0.54%/11,961.52

S&P up  2.22 pts/+0.18%/1,267.64

Nasdaq down 7.76 pts/-0.29/2,623.70

Friday’s Futures

Dow Futures up 94 pts/+0.79%

S&P Futures up 11.50 pts/+0.94%

Nasdaq Fut up 17.75 pts/+0.77%

Overseas Markets

FTSE +0.12%

CAC 40 +0.90%

NIKKEI 225 -0.64%

HANG SENG -1.17%

Overseas:  World stock markets were mixed today. European markets are up on optimism after French Prime Minister Nicolas Sarkozy hinted there could be a deal for Greece. Asian markets were down on lower corporate earnings from the U.S.   

Economic Reports:  Consumer Sentiment expected to be 74.5 @9:55 a.m. and Leading Indicators expected to be 0.2% @10:00 a.m. 

Top Headlines:    

  • Reports indicate the SEC is considering filing civil fraud charges against Standard and Poor's (MHP) and Moody's Investors Service (MCO) for their role in developing mortgage-bond deals that helped bring about the financial crisis.
  • ING Groep (ING) said it is selling its online bank ING Direct USA to Capital One Financial (COF) for about $9 billion in cash and stock. ING will receive $6.2 billion in cash and $2.8 billion in shares.
  • Bloomberg reports Leonard Green & Partners and CVC International made a proposal to buy BJ’s Wholesale Club Inc. (BJ). No financial details of the proposal were disclosed.
  • Reports indicate Sara Lee (SLE) plans to spin off its beverage business and not its meat unit as was previously anticipated. The switch in the spin off would leave investors with a heavy load of debt in the meat division.

Commodities/Currency:

Gold:down $2.10 to $1,527.85

Oil:down $1.44 to $93.51

EUR/USD 1.4278 +0.0062

USD/JPY 80.3150  -0.2900

GBP/USD 1.6167 -0.0001

Volatility Index (VIX): As of the close of business Thursday, June 16, the VIX is up 1.41 pts to 22.73

Companies Reporting Quarterly Earnings:     

None as of yet.

Today’s Opening and Closing Bells:

Oasis Petroleum Inc. Celebrates First Anniversary on the NYSE President and CEO Thomas B. Nusz will ring the opening bell.    

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