Barchart Morning Call 5/8

Barchart Morning Call

BC - 1 hr 20 mins ago

Overnight Developments

E-mini S&Ps are down 8.00 points this morning (-0.59%), undercut by lower European stocks. The dollar index is mildly higher this morning while commodity prices are mostly lower. Gold is down $11.90 and crude oil is down $1.02. Oil prices were undercut after the Saudi Oil Minister Ali al-Naimi said that oil prices are still too high. Mr. Al-Naimi has been consistently saying in recent weeks that the oil market is well supplied and that prices are too high. European stocks are trading moderately lower this morning with the Euro Stoxx 50 down -0.58%. European stocks are being weighed down by the drawn out process in Greece of trying to put together a coalition government. However, European stocks received a boost from today's German March industrial production report of +2.8% m/m and +1.6% y/y, which was substantially stronger than the market consensus of +0.8% m/m and -1.2% y/y. In addition, Feb was revised higher to -0.3% m/m and unch y/y from -1.3% m/m and -1.0% y/y. The German Economy Ministry said that Germany "industrial activity is gathering pace and the outlook has improved markedly." Strength in the German economy is necessary to make sure that the current recession in the overall Eurozone is shallow and relatively short. In Greece, Syriza (Coalition of the Radical Left) today will try to form a coalition government in talks with other parties. Syriza is not expected to find enough support to form a government. The winner of Sunday's election, New Democracy, was unable to form a government and gave up yesterday after 6 hours of talks. If Syriza cannot form a government, then Socialist Pasok will have a turn. The odds still favor a coalition with New Democracy and Pasok, along with one or more smaller parties. If no coalition can be formed, then new elections can be called. If New Democracy and Pasok can form a coalition, then the markets will be satisfied that the Greek political situation has been stabilized for the time being and that the Greek bailout and Greece's position in the Eurozone is safe for the time being. However, if Syriza somehow forms a government, or if no government can be formed, then concern will rapidly grow about the increased chances of Greece eventually defaulting completely on its debt and exiting the Eurozone. The Greek ASE Stock index today is down 0.5% after falling 6.7% on Monday. Greece today was able to sell 1.3 billion euros of 26-week bills with a yield of 4.69% and a bid cover ratio of 2.6 times. In Israel, Prime Minister Netanyahu canceled his proposed early election for September after the Kadima party agreed to join Likud's coalition government. There had been some speculation that Mr. Netanyahu may have called the early election to strengthen his hand for an attack on Iran late in the year as well as to take advantage of his current popularity in the polls. Now that the election has been canceled, Mr. Netanyahu will have a freer hand to deal with Iran. Israel is not likely to attack Iran while talks with Iran are ongoing. The second round of talks with Iran is scheduled for two weeks on May 23. Stock markets in Asia today closed mostly higher as market participants were encouraged by Monday's rally in the Euro Stoxx 50 and by the slightly higher close in the S&P 500 index. Japan +0.69%, Hong Kong -0.25%, China -0.32%, Taiwan +0.10%, Australia +0.30%, Singapore +0.24%, South Korea +0.54%, India -2.17%. Chinese and Hong Kong stocks were undercut by news that residential and land sales dropped 92% in major Chinese cities.

Overnight U.S. Stock News

June E-mini S&Ps this morning are down -8.00 points (-0.59%) mainly because European stocks are down -0.58%. There are earnings reports today from Disney, DirecTV, Discovery Communications and others. US stocks yesterday closed narrowly mixed after recovering from early losses: S&P 500 +0.04%, Dow Jones -0.23%, Nasdaq 100 +0.05%. Stocks on Monday opened on a weak note on the European election results and continued overhang from last Friday's disappointing payroll report of +115,000. However, the U.S. stock market was able to recover to close mostly higher on the recovery in European stocks and short-covering after last week's sharp sell-off. U.S. bank stocks received a boost yesterday after Warren Buffett said at his annual meeting that American banks are in ?fine shape.? He said that U.S. banks have ?liquidity coming out of their ears.?

Today's Market Focus

June 10-year T-notes this morning are up 9 ticks on the lower trade in U.S. and European stocks. The Treasury today kicks off its $72 billion coupon package by selling $32 billion in 3-year T-notes. T-note prices on Monday closed little changed: TYM2 unch, FVM2 +0.25. T-notes initially traded higher on the European election results but then faded as the stock market recovered. A bearish factor was the $21.4 billion surge in March consumer credit, which illustrated some consumer confidence. The recent surge in consumer credit will eventually become worrisome to the Fed if it continues and indicates that interest rates are too low. Most of the loans have been for education and autos. The dollar index this morning is trading is trading mildly higher by 0.13 (+0.16%) with EUR/USD down 0.24 cents and USD/JPY down 0.18 yen. The euro is seeing some weakness tied to the Greek political uncertainty. The dollar index on Monday closed mildly higher: Dollar Index +0.105, EUR/USD -0.0019, USD/JPY +0.19. The euro was undercut by the European election results and the dollar index was boosted by increased safe-haven demand. June crude oil prices this morning are down $1.02 and June gasoline is down 0.53 cents on Saudi Oil Minister al-Naimi's comment that oil prices are still too high. Crude oil and gasoline prices on Monday closed lower again to add to the sharp losses seen last week: CLM12 -0.55, RBM2 -0.0017. Crude oil prices fell on the European election results and continued bearish overhang from last Friday's weak payroll report and rise in crude oil inventories to a new 21-1/2 year high. In addition, the market is looking for another inventory increase tomorrow. The market consensus for Wednesday's weekly DOE report is that crude oil inventories will increase by another 1.9 million bbls to a new 21-1/2 year high, gasoline inventories will increase by +250,000 bbls, distillate inventories will increase by +750,00 bbls, and the refinery utilization rate will rise by 0.5 point to 86.5%. The Seaway pipeline between Cushing and the Gulf coast is scheduled to be reversed next Thursday (May 17), which should start to produce a decline in Cushing inventories in June and beyond.

Today's U.S. Earnings Reports Earnings reports (sorted by mkt cap): DIS-Disney (consensus $0.55), DTV-DirecTV (1.05), DISCA-Discovery Communications (0.60), HCN-Health Care REIT (0.24), ETE-Energy Transfer (0.38), LINTA-Liberty (0.16), PRGO-Perrigo (1.21), FOSL-Fossil (0.92), TAP-Molson Coors (0.43).
Global Financial Calendar

Tuesday, May 8
United States
0745 ET	ICSC (Int?l Council of Shopping Centers) weekly retailer sales.
0855 ET	Redbook weekly retailer sales.
0945 ET	Richmond Fed President Jeffrey Lacker holds roundtable discussion with Guildford Technical Community College students.
1000 ET	May IBD/TIPP economic optimism, Apr +1.8 to 49.3.
1130 ET	Weekly 4-week T-bill auction.
1245 ET	Dallas Fed President Richard Fisher speaks on panel at ?Growing DFW: Strengthening Our Economy? in Dallas.
1300 ET	Treasury auctions $32 billion in 3-year T-notes.
1630 ET	API weekly U.S. oil statistics.
Germany
0600 ET	German Mar industrial production expected +0.8% m/m and -1.2% y/y, Feb -1.3% m/m and -1.0% y/y.

Barchart.com provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.