Wall St. Breakfast's Pre-Market Snapshot:
U.S. Futures As of 8:18 AM ET
S&P 500: +5.20; 1,447.10
NASDAQ 100: +10.25; 2,042.75
Dow: +24; 13,010
NIKKEI 225: +1.66%; 15,135.21 (+246.44)
HANG SENG: +4.09%; 27,626.62 (+1,085.53)
SHANGHAI SE COMPOSITE: -1.46%; 4,958.85 (-73.28)
BSE SENSEX 30: +2.09%; 19,247.54 (+394.67)
FTSE 100: -0.31%; 6,243.00 (-19.10)
CAC 40: -0.04%; 5,519.07 (-2.10)
XETRA-DAX: -0.10%; 7,601.36 (-7.60)
Commodity Futures (Reuters/Jefferies CRB)
Oil: +0.04%; $98.22 (+$0.04)
Gold: +0.93%; $832.40 (+$7.70)
Natural Gas: +3.08%; $7.94 (+$0.24)
Silver: +0.98%; $14.88 (+$0.145)
U.S. Breaking Newssee today's Wall Street Breakfast for earlier news
HSBC to Move SIVs to Balance Sheet, Provide $35B in Funding
HSBC Holdings Plc said early Monday it will provide up to $35 billion in funding for its two structured investment vehicles [SIVs], both of which will be moved to its balance sheet. Accordingly, its balance sheet will expand by $45B. The bank doesn't expect any "material impact" on earnings or capital strength. In a statement, HSBC said, "We believe that HSBC's actions will set a benchmark and restore a degree of confidence to the SIV sector, while providing a specific solution to address the challenges faced by investors in Cullinan and Asscher, the two SIVs managed by HSBC." A London-based Sanford Bernstein analyst commented that HSBC is using its "balance sheet scale and strength to reassure investors in these vehicles and create a long-term solution," which "prevents the need for a fire sale of the assets" and likely means HSBC will not join the "SuperSIV." HSBC's two SIVs are said to have enough funding to last into the new year. However, HSBC said it believes "there is not likely to be a near-term resolution of the funding problems faced by the SIV sector." Bank of America, Citigroup and JPMorgan are leading an effort to create a so-called SIV superfund (or "SuperSIV") backed by the U.S. Treasury by year's end (full story). Ordinary shares of HSBC were last down 1.0% to 818.50 pence in London, after initially trading to the upside on the news. HSBC's ADRs gained 2.6% to $84.74 on Friday.
Commentary: SIV Superfund to Begin Soliciting Investors - WSJ • HSBC Up on Profit Outlook Despite Higher Subprime Writedowns • Tales From the Mortgage Trenches
Stocks to watch: HBC. Competitors: BAC, C, JPM. ETFs: EWU, ADRU, ADRD
Occidental Petroleum Inks Major Production Deal with Libya
Occidental Petroleum Corporation became the second U.S. company in a week to ink an energy exploration and production deal with Libya. The 30-year deal will "will enable NOC (Libya's National Oil Company) and Occidental to design and implement major field redevelopment and exploration programs in contract areas in the prolific Sirte Basin." The agreement covers approximately $2.5 billion barrels of oil - an upgrade from Occidental's current Libyan production of 100,000 barrels a day to more than 300,000 barrels a day. Reaching that production goal will require roughly $5 billion in CapEx over the next five years. Said CEO Ray R. Irani, "This agreement is consistent with our strategy of focusing our business in core geographic regions. This new project establishes Libya as a core country for Oxy's production and we believe it will open the door for us to add additional growth projects in a country with large oil and gas reserves." Last week, Exxon signed an agreement with Libya to explore for oil and gas off the North African nation's coast (full summary).
Commentary: Occidental Petroleum, Devon Energy: Peak Oil Is Here • PowerShares Dynamic Energy ETF: Small Oil, Big Returns • Occidental Petroleum: Well-Positioned for Peak Oil Test
Stocks to watch: OXY. Competitors: XOM, COP, RDS.A. ETFs: PXE, IEO, IYE
Earnings call transcript: Occidental Petroleum Corp. Q3 2007
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Today's Market (via Sam Collins, ChangeWave.com)
Recap of Last Week's Action
Stocks rallied on Friday in a shortened session, bouncing back from a sell-off on Wednesday (as the markets were closed on Thursday for Thanksgiving).
The financial stocks and retailers were the big winners late last week. The financials' success came as a result of being extremely oversold earlier in the week, followed by plans to form a superfund to bail out some of the worst cases. The retailers' spike was a result of early reports from key malls across the country of very heavy volume.
When the stores closed, sales were higher than expected and, in addition, Internet sales topped even the most optimistic forecasts. And so, with "Black Friday" behind us, there is a more positive tone after the nervousness early last week. At the close Friday, the Dow Industrials gained 182 points at 12,981, the S&P 500 was up 24 at 1,441, and the Nasdaq gained 34 points to end at 2,597. Volume on the shortened session was expectedly light, as just 670 million shares traded on the NYSE and 796 million on the Nasdaq, and breadth was about 5-to-1 positive on both exchanges. But despite Friday's strong rally, the week ended on the minus side: The Dow was down 1.5% (196 points), the S&P 500 was down 1.2% (18 points), and the Nasdaq lost 1.5% (41 points). For the year, though, the Dow is up 4.2%, the S&P 500 is ahead by 1.6% and the Nasdaq is up by 7.5%. The futures markets were open on Friday, but trading was very light. Crude oil (January contract) gained 89 cents at $98.18, and December gold rose by $26 to $824.70 per troy ounce. The Amex Energy SPDR (NYSEARCA:XLE) was up $1.90 at $74.05, and the Philly Gold/Silver Index [XAU] closed at $176.07, up $6.90.
What the Markets Are Saying
A low-volume holiday session like Friday isn't supposed to give us much to go on technically, but it again showed the importance of Dow 12,800/S&P 1,430. Last week, each of the major averages reversed intraday from below these lines twice and once closed on the line.
Friday's strength also indicated that, despite the vagaries of a holiday weekend and the risks associated with a long pause, there are buyers willing to take a stand.
As we enter the first week of the big retail season, reports from that sector will no doubt influence trading. But the bulls may have a temporary advantage since almost all internal indicators are very oversold and the sentiment indicators show that the public has turned very bearish, with the current American Association of Individual Investors' [AAII] numbers now at just 25.58% bullish and 52.71% bearish.
For now, then, we remain cautiously bullish but not enough to engage much of our accumulated cash.
Today's Trading Landscape
There are no economic reports or important earnings reports due today, so the focus will be on retail sales reports and further developments in the mortgage markets. In Europe, there are moves to shore up the mortgage markets as HSBC bails out two of its structured investments and Northern Rock is getting help from the Virgin Group.
Asian Headlines (via Bloomberg.com)
Asian Stocks Rise After U.S. Retail Sales Climb; Westfield, Nintendo Gain Asia's benchmark stock index rose the most in nine weeks after U.S. retail sales climbed during the post-Thanksgiving weekend, boosting the prospects for exports to the region's biggest overseas market.
Yen Falls Against High-Yielding Currencies; Stock Gains Spur Carry Trades The yen declined against all 16 of world's most-active currencies as a rally in global stocks prompted investors to increase holdings of higher-yielding assets funded with money borrowed in Japan.
Singapore's Industrial Production Misses Estimates as Drug Output Declines Singapore's industrial production rose less than economists expected in October as pharmaceutical output declined for a second month.
Hexaware Plunges on Probe Into `Potentially Fraudulent' Currency Trades Hexaware Technologies Ltd. had its biggest drop in more than six years after the Indian computer- services company said it is investigating ``potentially fraudulent'' currency trades that could trigger losses.
European Headlines (via Bloomberg.com)
Northern Rock Says U.K. Treasury Backs Virgin as Preferred Bidder for Bank Northern Rock Plc, the U.K. mortgage lender bailed out by the Bank of England two months ago, said the government backed Richard Branson's Virgin Group Ltd. as the preferred bidder for the company.
Aegon Raises New Business Target on Margins, Volumes in Americas, Europe Aegon NV, the largest Dutch insurer after ING Groep NV, raised its value of new business target, a gauge of future sales, by 14 percent on higher margins and volumes in the Americas, Europe and Asia.