Barchart Morning Call
Overnight Developments
- Global stocks are trading higher with the European Euro Stoxx 50 index up +1.29% and March S&Ps up +7.40 points at a new contract high. The dollar and Treasuries weakened as European debt risks temporarily subside on speculation European officials are stepping up efforts to solve the debt crisis. European Union Economic and Monetary Affairs Commissioner Rehn said that Europe's bailout fund "should be reinforced and the scope of its activity widened." European bank stocks are leading the market's advances with Banco Santander SA, Spain's biggest lender, up 6.4% and UniCredit SpA, Italy's largest bank, up 5.3%. The euro received a boost today after Portugal raised 599 million euros ($778 million) in the sale of 10-year bonds at an average yield of 6.72%, down from a yield of 6.81% on Nov 10. Also benefiting European stocks and the euro was the larger-than-expected increase in Nov Euro-Zone industrial production which climbed +1.2% m/m, stronger than expectations of a +0.5% m/m increase.
- The Asian stock markets today closed higher with Japan up +0.02%, Hong Kong +1.54%, China +0.56%, Taiwan +0.38%, Australia +0.29%, Singapore +0.11%, South Korea +0.39%, India +1.76%. According to 2 Japanese officials familiar with the matter, Japan may extend purchases of bonds sold by a European financial aid fund in coming months beyond what Finance Minister Noda said Japan would purchase later this month. China and Japan, with the two largest foreign-exchange reserves in the world, are working to prevent the European sovereign-debt crisis from spreading. Japanese banks closed higher on speculation that BOJ Governor Shirakawa, who was appointed vice chairman of the Bank for International Settlements, will seek to prevent regulations that could hurt the profits of Japanese banks. Asian chip stocks also advanced led by a 3.7% gain in Hynix Semiconductor after the second-largest maker of computer-memory chips said it expects a Q4 operating profit and it will repay 700 billion won ($626 million) of debt this year.
- March S&Ps this morning are trading up +7.40 points at a fresh contract high. The US stock market yesterday traded sideways in positive territory the entire day and finished with modest gains: Dow +0.30%, S&P 500 +0.37%, Nasdaq Composite +0.33%. The Nasdaq rose to a 3-year high. Bullish factors for stocks included (1) carry-over support from a rally in European stocks after Japan pledged to buy European bonds, (2) strength in energy producers after crude oil rallied and gasoline climbed to a 27-month high, and (3) expectations for positive Q4 company earnings results after companies in the S&P 500 posted higher-than-expected results in all three quarters so far for 2010.
- Bearish factors included (1) the unexpected decline in Nov wholesale inventories (-0.2% versus expectations of +1.0%), which signals inventories will provide less of a boost to economic growth, (2) data from the BLS that showed the US job openings rate, or the number of job openings as a percent of total employment plus job openings, fell to 2.4% in Nov from 2.5% in Oct, and (3) comments from ECB Council member and Bundesbank President Weber who said optimism on containing the European sovereign-debt crisis is "premature."
- Lululemon Athletica (LULU) jumped 6.7% in pre-market trading after the company raised its forecst for Q4 profit to 55 cents a share, topping analysts' estimates of 50 cents.
- March 10-year T-notes this morning are down -8 ticks. T-note prices yesterday moved lower on supply pressures and stock market strength: TYH11 -10.5, FVH11 -5.2, EDM11 +0.5. Bearish factors included (1) reduced safe-haven demand for Treasuries after the stock market rallied, (2) comments from Philadelphia Fed President Plosser who said the Fed's $600 billion QE2 asset-purchase program "may soon backfire on us" and spur inflation if "we don't begin to gradually reverse course," which indicates he is not in favor of completing the entire asset-purchase program, and (3) supply pressures ahead of the Treasury's $21 billion auction of 10-year T-notes on Wed. Bullish factors included (1) the Fed's action to purchase $7.802 billion of Treasuries as part of its QE2 asset-purchase program, (2) comments from Minneapolis Fed President Kocherlakota who said "this is not the time to start" the Fed's exit strategy due to high unemployment and disinflation, and (3) data from the BLS that showed the US job openings rate, or the number of job openings as a percent of total employment plus job openings, fell to 2.4% in Nov from 2.5% in Oct.
- The dollar index this morning is lower with the dollar/yen +0.13 yen and the euro/dollar +0.03 cents. The dollar index yesterday closed little changed: Dollar Index -0.035, USDJPY +0.536, EURUSD +0.00225. Bearish factors included (1) strength in the euro after Japanese Finance Minister Noda said his country plans to buy more than 20% of bonds to be issued later this month by the European Financial Stability Facility as Japan joins China in promising to purchase Euro-Zone debt in an attempt to stem the European debt crisis, (2) comments from Portuguese Prime Minister Socrates who said that Portugal doesn't need a bailout from the European Union and its 2010 budget deficit will be lower than forecast, and (3) strength in the yuan after China's foreign-exchange reserves climbed to a record and China's bank lending exceeded the government's annual target. Bullish factors included (1) apprehension ahead of Portugal's, Spain's and Italy's debt auctions later this week, which may see increased safe-haven demand for the dollar as the indebted European nations struggle to fund their deficits, (2) comments from ECB Council member Weber who said optimism on containing the European sovereign-debt crisis is "premature," and (3) comments from Philadelphia Fed President Plosser who said the Fed's $600 billion QE2 asset-purchase program "may soon backfire on us" and spur inflation if "we don't begin to gradually reverse course," which indicates he is not in favor of completing the entire asset-purchase program.
- February crude oil prices this morning are trading unchanged and February gasoline is down -1.82 cents per gallon. Crude oil and gasoline prices yesterday closed higher for a second day: CLG11 +1.86, RBG11 +2.41. Feb gasoline posted a 27-month high. Bullish factors included (1) the continued shutdown of the Trans Alaska Pipeline System, which carries 15% of US crude output, after an oil leak in the pipeline prompted its closure over the weekend, (2) the report from the National Commission on the BP Deepwater Horizon Oil Spill that recommended that exploration in US deep waters be overseen by an independent agency in the Interior Department, which raises concern that it will become more difficult to drill for new crude supplies, (3) comments from the Kuwaiti Oil Minister who said that OPEC will not hold an emergency meeting if crude prices hit $100 a barrel, and (4) the action by the US Energy Department to increase its 2011 crude oil price forecast to average $93.42 a barrel, up from a Dec forecast of $86.08 and to hike its global crude consumption estimate for 2011 to 89.65 million barrels a day from 87.78 million estimated last month. Expectations for Wednesday's weekly inventory report from the DOE are for crude oil stockpiles to fall -1.2 million bbl, gasoline supplies to increase +2.13 million bbl, distillate inventories to rise +1.0 million bbl and the refinery capacity rate to remain unchanged at 88.0%.
Jim 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.
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