Barchart Morning Call - 1/10

Barchart Morning Call

Barchart.com - 52 mins ago

Overnight Developments

• Global stocks are trading lower with the European Euro Stoxx 50 index down -0.68% and March S&Ps down -5.90 points. The dollar index climbed to a 1-1/4 month high and the euro slumped to a 3-3/4 month low against the dollar as bond risks increase in Europe. Portugal, Spain and Italy are scheduled to hold their first bond auctions this year after borrowing costs rose at bill sales last week. European sovereign-debt risks continue to pressure stocks as the Markit Group Ltd.'s index of credit-default swaps protecting the debt of 15 western European governments rose 3.5 bp to a record 223. Bank stocks are leading European stock prices lower with Banco Espirito Santo, Portugal's biggest publicly traded bank by market value, down 5.2% on concern that Portugal may be forced to seek a bailout. According to the Handelsblatt newspaper, EU leaders may discuss expanding the 750 billion-euro ($967 billion) rescue fund for indebted nations at their next meeting in Feb, while Der Spiegel magazine said the EU could time such a pledge to coincide with granting aid to Portugal. Limiting declines in European stocks was strong industrial and manufacturing data from France after Nov French industrial production rose +2.3% m/m and Nov French manufacturing production increased +2.2% m/m, both rising more than expected. Also aiding stock prices was an increase in M&A activity after Danisco A/S surged 25% after DuPont agreed to buy the world's largest maker of food ingredients for $5.8 billion.
• The Asian stock markets today closed mostly lower with Japan closed for holiday, Hong Kong down -0.67%, China -1.85%, Taiwan +0.40%, Australia +0.16%, Singapore -0.98%, South Korea -0.59%, India -2.38%. China reported a smaller-than-expected +$13.1 billion trade surplus for December, its smallest since April, after Dec China exports rose +17.9% y/y to $154.2 billion and Dec imports increased +25.6% to $141.1 billion. China's full-year trade gap narrowed 6% to $183.1 billion even as exports and imports rose to records in Dec, which supports China's case that it is contributing to global economic rebalancing by ramping up domestic consumption. Most Asian stock markets closed lower on speculation central banks in China, India and Indonesia will raise interest rates to curb inflation.

Overnight U.S. Stock News

• March S&Ps this morning are trading down -5.90 points. The US stock market last Friday settled moderately lower: Dow -0.19%, S&P 500 -0.18%, Nasdaq Composite -0.25%. Bearish factors for stocks included (1) (1) the smaller-than-expected increase in Dec nonfarm payrolls (+103,000 versus expectations of +150,000), (2) comments from Fed Chairman Bernanke who said the US economy is in a "weak" and "fragile" condition and that "it could take 4 to 5 more years for the job market to normalize fully," (3) weakness in financial shares after US Bancorp and Wells Fargo lost a foreclosure case in Massachusetts’s highest court, which increases concern about results in other lawsuits between bank practices and state real estate laws.
• Bullish factors included (1) the larger-than-expected decline in the Dec unemployment rate (-0.4 to a 19-month low of 9.4% versus expectations of -0.1 to 9.7%), (2) the upward revision to Nov nonfarm payrolls (+71,000 versus the originally reported +39,000), and (3) the 9 bp drop in the yield on the 10-year T-note.
• ConocoPhillips (COP) lost 1.3% and Exxon Mobil (XOM) slid 0.8% in pre-market trading after an oil leak forced the companies and partner BP Plc to shut down the Trans Alaska Pipeline System, which carries 15% of US crude output.

Today's Market Focus

• March 10-year T-notes this morning are up +1 tick. T-note prices last Friday shot higher after the release of the Dec payrolls report and then continued even higher the rest of the day: TYH11 +27.5, FVH11 +21, EDM11 +2.0. Bullish factors included (1) the smaller-than-expected increase in Dec nonfarm payrolls (+103,000 versus expectations of +150,000), (2) comments from Fed Chairman Bernanke who said the US job market may take 5 years to "normalize," (3) the Fed's action to purchase $7.199 billion of Treasuries as part of its QE2 asset-purchase program, (4) increased safe-haven demand for Treasuries as the stock market fell, and (5) comments from former Fed Governor Kroszner who said "we're not getting consistent job growth" and that "it's going to be a long march to get to back to low unemployment levels seen 4 to 5 years ago." Bearish factors included (1) the larger-than-expected decline in the Dec unemployment rate (-0.4 to a 19-month low of 9.4% versus expectations of -0.1 to 9.7%), and (2) the upward revision to Nov nonfarm payrolls (+71,000 versus the originally reported +39,000).
• The dollar index this morning is stronger and trading at a 1-1/4 month high with the dollar/yen +0.06 yen and the euro/dollar -0.04 cents. The dollar last Friday gyrated between gains and losses and finally finished slightly higher: Dollar Index +0.148, USDJPY -0.291, EURUSD -0.00935. The dollar index climbed to a 1-1/4 month high and the euro slumped to a 3-1/2 month low against the dollar. Bullish factors included (1) euro weakness on increased sovereign-debt risks after the Markit iTraxx SovX Western Europe Index of credit-default swaps on the debts of 15 European governments rose to a record high 214, (2) the unexpected decline in Nov German retail sales by -2.4% m/m, its biggest fall in 2-1/2 years, and (3) comments from ECB President Trichet who said governments shouldn't rely on the ECB to get Europe out of its debt crisis as he urged for more fiscal tightening, which may slow the Euro-Zone economy and weaken the euro. Bearish factors included (1) the smaller-than-expected increase in Dec US nonfarm payrolls, which may prompt the Fed to further increase its quantitative easing measures, and (2) comments from Fed Chairman Bernanke who said the US economy is in a "weak" and "fragile" condition and that "it could take 4 to 5 more years for the job market to normalize fully."
• February crude oil prices this morning are trading up +69 cents a barrel and February gasoline is +0.96 of a cent per gallon. Crude prices rallied in overnight trading after an Alaskan pipeline carrying about 15% of US crude output was shut on Saturday following a leak. Crude oil and gasoline prices last Friday erased early rallies and finished lower: CLG11 -0.35, RBG11 -2.99. Feb crude fell to a 3-week low. Bearish factors included (1) the rally in the dollar index to a 1-1/4 month high, which discourages investment demand in commodities, (2) the smaller-than-expected increase in Dec US nonfarm payrolls, which signals a struggling labor market that may crimp fuel demand, and (3) the slide in stock prices which decreases confidence in the economic outlook and energy demand. Bullish factors included (1) the larger-than-expected drop in the Dec US unemployment rate to a 19-month low of 9.4%, and (2) the action by Canadian Natural Resources to shut its 100,000 bpd Horizon oil-sands project because of a fire, which may curtail crude supplies to the US.

Today's U.S. Earnings Reports Earnings reports (confirmed releases, sorted by mkt cap) AA-Alcoa (BEST earnings consensus $0.18), APOL-Apollo Group (1.35), AYI-Acuity Brands (0.57), HELE-Helen of Troy Ltd (0.75), SMSC-Standard Microsystems (0.42), WDFC-WD-40 Co.(0.60).

Van Meerten is a professional investor with over 40 year experience in investing in stocks, mutual funds and ETFs.  He shares his knowledge on Barchart in his daily blogs -- Barchart Portfolio Blogs.

Through Marketocracy Capital Management you can have a Separately Managed Account that mirrors his Barchart Van Meerten New High portfolio.