- New 2009 highs. U.S. stocks hit fresh 2009 highs Tuesday, the first day of a two-day FOMC interest rate meeting. Financial, energy and materials stocks led the way as investors returned to betting on a global recovery after a brief pullback. Over 200 stocks hit new 52-week highs, including Google (GOOG), which traded above $500 for the first time since Aug. 2008.
- FDIC wants banks to prepay fees. Sources say the FDIC will likely ask banks to prepay future fees in order to replenish its depleted deposit insurance fund. Officials played down recent reports that the FDIC was considering borrowing money from healthy banks, saying that while it's an option, it is not under serious consideration. The FDIC had just $10.4B in its fund at the end of June to protect more than $6.2T in deposits, though it does have another $32B already earmarked for expected losses in the next year.
- All eyes on the FOMC. Fed officials are expected to say the U.S. economy has started to recover, but maintain their pledge to keep target lending rates at the current record low of 0-0.25% for an extended period. Officials might weigh in on whether the Fed will extend its emergency purchases of $1.45T in mortgage debt into 2010. Economists currently project 2.9% growth for Q3, far more than the 1% growth they expected in July. FOMC decision and statement due out at about 2:15 p.m.
- Geithner to push for broad reforms. Lawmakers must take advantage of the current crisis to initiate broad reforms of the financial industry, Tim Geithner will tell a House committee today. "We simply cannot walk away from the worst financial crisis since the Great Depression and not do everything in our power to reform the system." In a strong message to opponents of a proposed consumer financial protection agency, Geithner will say, "Without a strong framework of regulation, banks and other providers compete to take advantage of consumer confusion... This must end." (read Geithner's full remarks (.pdf))
- Same old same old. Despite months of scrutiny and some internal changes, a recently departed Moody's (MCO) analyst says ratings firms continue to issue inflated ratings. The whistleblower - Eric Kolchinsky - cites one case in which Moody's gave a complicated debt security a high rating in early 2009, even though it was planning to (and subsequently did) downgrade the underlying assets. Kolchinsky is scheduled to testify on ratings-firm reform before a House committee on Thursday.
- Towns backs down. Rep. Edolphus Towns said Bank of America (BAC) agreed to hand over more documents to a Congressional committee investigating its questionable takeover of Merrill Lynch - but not those it claims are protected by attorney-client privilege. For those documents, BofA will provide a 'privilege log' that Towns says Congress "will review and use to determine which documents are critical to the committee’s ongoing investigation." Towns called yesterday's meeting with BofA officials "constructive." (read Towns' statement)
- Intel's Otellini grows even more bullish. The global PC market is rebounding more quickly than expected, and could defy predictions by growing this year, Intel (INTC) chief Paul Otellini told investors on Tuesday. Since declaring PC sales had bottomed in April, Otellini has been more aggressive in his forecasts than even Intel's biggest customers. Research firm Gartner predicts a 2% decline in PC shipments for 2009, which is still far better than the 6% drop it forecast a few months ago.
- Dark shadows over housing market. Well-meaning efforts to keep families in their homes and bureaucracy are slowing the flow of properties headed toward foreclosure sales, creating a growing 'shadow' inventory of pent-up supply that analysts warn could stop the feeble housing recovery in its tracks when it hits the market.
- Mortgage apps jump to a 4-month high. U.S. mortgage applications jumped to their highest since late May as interest rates on the benchmark 30-year fixed mortgage dropped below 5%, according to the MBA's weekly survey. MBA's composite index increased by 12.8%, while rates fell 0.11 points to 4.97%, the first trip below 5% since May. Refinancings were up an even more robust 17.4%, with the refinance share of applications increasing to 63.8% from 61% a week ago.
- Consumer confidence builds. ABC's consumer confidence index moved up to -46 this week from -49. Of those surveyed, only 10% rate the national economy positively; 26% say it's a good time to buy things, and 45% rate their personal finances as positive.
- Home prices edge higher. FAHA's index of U.S. home prices rose 0.3% in July, short of consensus estimates of a 0.5% gain, but building on June's 0.1% increase (revised from +0.5%). Pacific region saw the strongest pickup, +1.6%, while East South Central was the weakest at -0.9%.
- Manufacturing a recovery. The Richmond Fed's index of manufacturing activity in the Atlantic region was unchanged in August at 14, just short of the 16 economists forecast. It was the fifth straight month of expansion (above 0), with all broad indicators (shipments, new orders and employment) in positive territory. Manufacturers also reported the first increase in worker numbers since Dec. 2007.
Earnings: Wednesday Before Open
- AutoZone (AZO): FQ4 EPS of $4.43 misses by $0.02. Revenue of $2.23B (+1%) in-line. Same-store sales were up 5.4%. Inventory was 2.7% higher than a year ago. (PR)
- General Mills (GIS): FQ1 EPS of $1.28 beats by $0.25. Revenue of $3.52B (+0.6%), in-line. Sees full-year EPS of $4.40-4.45 vs. $4.26 consensus. "We're seeing continuing strong consumer demand for our products." (PR)
Earnings: Tuesday After Close
- AAR (AIR): FQ1 EPS of $0.27 beats by $0.02. Revenue of $342M (-5%) vs. $336M. Shares +0.4% AH. (PR)
- H. B. Fuller Company (FUL): FQ3 EPS of $0.48 beats by $0.12. Revenue of $315M (-13%) in-line. Shares +5.7% AH. (PR)
Asia markets moved lower on Wednesday, including another day of heavy losses in China. Europe stocks and U.S. futures are showing modest gains.
- Asia: Hang Seng -0.49% to 21,596. Shanghai -1.89% to 2,843. BSE -0.99% at 16,719.
- Europe at midday: London +0.3%. Paris +0.15%. Frankfurt +0.2%.
- Futures at 6:45 a.m.: Dow flat at 9775. S&P +0.1% to 1,068. Nasdaq +0.1%.
Nov. crude -0.72% to $71.24. Dec. gold -0.1% to $1,014.50.
Wednesday's Economic Calendar
- 7:00 MBA Mortgage Applications
9:30 Geithner Testifies on Proposals for Financial Regulatory Reform
10:00 Mass Layoffs
10:00 Transparency International's Global Corruption Report 2009
10:30 EIA Petroleum Inventories
1:00 PM $40B 5-Year Note Auction
2:00 PM Sheila Bair, John Dugan, John Bowman Testify on Financial Regulatory Reform Proposals
2:15 PM FOMC Interest Rate Decision and Statement
- Notable earnings before Wednesday's open: AZO, GIS
- Notable earnings after Wednesday's close: BBBY, CTAS, PAYX, RHT
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