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Jim Van Meerten is an advisor to Marketocracy Capital Management and writes on financial subjects here and on Barchart Portfolio Blogs. He earned a BS in Accounting and Business Administration from Berry College; a Juris Doctorate from the Woodrow Wilson School of Law; and attended... More
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  • Barchart Morning Call 5/16 0 comments
    May 16, 2012 10:53 AM | about stocks: TGT, DE, LB, SPLS, NTES, ANF
    Barchart Morning Call Wed, 16 May 2012 07:00:00 -0500

    Overnight Developments

      The E-mini S&P this morning is little changed despite the fact that European stocks are down another 0.62% on the Greek political impasse. Commodity prices are mostly lower again this morning with July crude oil down 1.7%, gold down 1.4%, copper down 1.7% and most agricultural commodities trading lower. The dollar index is mildly higher by +0.26% and EUR/USD is trading slightly lower by -0.13%. Greek political leaders will meet later today to name an interim government that will call new elections, likely for either June 10 or 17. The anti-bailout party Syriza is likely to gain a few percentage points of votes in a new election and the traditional Pasok and New Democracy parties are likely to lose 1-3 percentage points of votes. Syriza right now has 20.5% support in the polls versus 19.4% for Pasok and 11.8% for Pasok. However, the political situation will not be much different after the election than it is now, meaning that there is no obvious path forward for Greece at present unless Radical Left Syriza leader Tsipras eases up and agrees to join a government. The only good news was that Greece yesterday paid in full its 435 billion euro floating-rate note debt, thus preventing a default cascade from the trigger of cross-collateral default provisions in other Greek notes not covered by Greek law. The debt payment at least bought Greece some time to figure out how to get through the next couple of months of political turmoil. Greece has only enough cash to survive through early July without another bailout tranche payment from the Eurozone. The main point that came out of last night's Merkel-Hollande meeting was that the new Greek vote in June will be a referendum on whether Greece wants to stay in the euro. German Chancellor Merkel and French President H Hollande both made concessionary remarks of concern for Greece, but basically said that Greece will have to live up to the main tenets of the bailout agreement. Ms. Merkel said requests for measures to bolster growth will be "considered" and that the EU may "approach Greece with proposals." She added, "Greece can stay in the euro area," and "Greek citizens will be voting on exactly that." Mr. Hollande said, "The Greeks need to know we'll come with growth measures that will allow them to stay in the euro zone." The Bank of England today lowered its growth and inflation forecasts and said that UK officials are tuning up their contingency plans for weaker growth being caused by the European debt crisis. The BOE in its quarterly Inflation Report forecast that UK inflation will remain above 2% longer than last forecast but will drop to +1.6% in two years, below the 2% inflation target. The BOE last week voted to halt its quantitative easing program and said that the inflation risks are "broadly, evenly balanced." The BOE forecast that GDP will be at +2.6% in two years. Today's UK March ILO unemployment rate fell to 8.2% from 8.3% in Feb and was more favorable than expectations for an increase to 8.4%. In addition, April jobless claims fell by 13,700 versus expectations for a 5,000 rise. For the Eurozone, the April CPI was reported at +2.6% y/y and the core CPI at +1.6% y/y. The March Eurozone seasonally-adjusted trade balance rose to 4.3 billion euros was larger than the market consensus of 3.8 billion euros and up from Feb's revised 4.0 billion euros. Asian stocks fell nearly across the board today: Japan -1.12%, Hong Kong -3.19%, China -1.63%, Taiwan -2.18%, Australia -2.36%, Singapore -1.58%, South Korea -3.33%, India -1.83%, Turkey +0.11%. Chinese stocks today fell 1.2% and were down for the fourth consecutive day on continued concern about weaker Chinese economic growth and weaker export prospects to Europe, which is China's biggest export market with an 18% share of Chinese exports. The market consensus shifted downward for Chinese Q2 GDP after last Thursday night's weaker than expected Chinese industrial production report of +9.3% y/y. Japan's JGBs today rallied and 10-year yields fell to 0.82% to match the lowest level since 2003 on safe-haven demand. The Bank of Japan in today's purchase program was unable to get enough offers to fill its bid since JGBs are in high demand as a safe-haven asset. Japan March machine orders fell -2.8% m/m, which was better than the market consensus of -3.5%.

    Overnight U.S. Stock News

      June E-mini S&Ps this morning are trading -0.25 points, which could be considered a sign of strength considering that the Euro Stoxx 50 this morning is down by another 0.62%. Due to strong demand, Facebook raised the size of its IPO by 25% to 421.2 million shares with existing holders boosting their sales to 241.2 million shares from 157.4 million. There are earnings reports today from Target, Deere and Limited Brands. US stocks on Tuesday closed moderately lower: S&P 500 -0.57%, Dow Jones -0.98%, Nasdaq 100 -0.37%. The U.S. stock market on Tuesday fell on the collapse of Greek talks to form a new government, which substantially increased the chances that Greece may eventually be forced to exit the Eurozone. However, the stock market received support from better-than-expected U.S. economic news as the May U.S. NAHB housing market index rose by 4 points to a new 5-year high of 29 and the May Empire manufacturing index rose to 17.09 from 6.56. In addition, the Eurozone Q1 GDP report of unchanged was stronger than market expectations of -0.2% q/q and the German Q1 GDP report of +0.5% q/q (+2.0% annualized) was stronger than market expectations of +0.1% q/q. The U.S. retail sales report of +0.1% m/m overall and ex-autos, however, was slightly weaker than market expectations of +0.2%.

    Today's Market Focus

      June 10-year T-notes this morning are trading -1 tick as the market awaits this morning's housing starts and industrial production reports and the FOMC minutes. T-note prices on Tuesday closed slightly lower: TYM2 -1.5, FVM2 -2.75. There was still safe-haven demand from the Greek situation, but T-note prices closed lower on long liquidation pressure, and stronger-than-expected U.S. and European economic data. The 10-year T-note yield yesterday closed little changed at 1.77%, which was just 10 bp above the record low of 1.67% posted last September. The question is whether the rally in T-note prices can continue now that the markets have to wait a month for Greek elections and further developments on whether Greece will eventually exit the Eurozone. The dollar index this morning is trading mildly higher by +0.21 points on continued support from safe-haven demand with the Greek political impasses. EUR/USD is down 0.17 cents and USD/JPY up 0.26 yen. The dollar index on Tuesday closed moderately higher: Dollar Index +0.62, EUR/USD -0.0094, USD/JPY +0.33. The dollar index on Tuesday broke out to a new 4-month high and EUR/USD fell to a new 4-month low on the breakdown in Greek political talks and the need for new elections. The dollar index has rallied sharply by 3% in the past two weeks, but the dollar index could soon run out of fuel as the markets wait for the new Greek election and further developments on whether Greece will exit the Eurozone. July WTI crude oil prices this morning are trading sharply lower by $1.58 (-1.57%) and July gasoline is down 2.63 cents (-1.08%) on global economic doubts, this morning's stronger dollar, and ahead of this morning's DOE report, which is expected to show inventory increases for crude oil and products. Crude oil and gasoline prices on Tuesday closed moderately lower: CLN12 -0.78 RBN2 -0.0100. Crude oil prices were pressured once again by the rally in the dollar index to a new 4-month high and concerns about the global economy, although there was a least some better than expected U.S. economic data (NAHB market index and Empire manufacturing index) and European GDP data. Crude oil prices yesterday were also pressured by expectations that today's weekly DOE report will show another increase in crude oil inventories to a new 21-3/4 year high.

    Today's U.S. Earnings Reports

    Earnings reports (sorted by mkt cap): TGT-Target (consensus $1.06), DE-Deere (2.53), LTD-Limited Brands (0.40), SPLS-Staples (0.30), NTES-Netease (1.04), ANF-Abercrombie (0.01).

    Global Financial Calendar

    Wednesday 5/15/12
    United States
    0700 ETWeekly MBA mortgage applications, previous +1.7%, purchase sub-index +3.4%, refinancing sub-index +1.3%.
    0830 ETApr housing starts expected +4.7% to 685,000, Mar -5.8% to 654,000. Apr building permits expected -4.7% to 728,000, Mar +6.4% to 764,000.
    0915 ETApr industrial production expected +0.6%, Mar unchanged. Apr capacity utilization expected +0.4 to 79.0%, Mar -0.1 to 78.6%.
    1000 ETQ1 mortgage delinquencies, Q4 7.58%. Q1 foreclosures, Q4 4.38%.
    1030 ETDOE Weekly Petroleum Status Report.
    1230 ETSt. Louis Fed President James Bullard speaks about the U.S. economy and monetary policy at an event in Louisville, KY.
    1400 ETMinutes of the Apr 24-25 FOMC meeting.
    Euro-Zone
    0200 ETEU Apr 25 new car registrations, Mar -7.0%.
    0500 ETEurozone Apr CPI expected +0.5% m/m and +2.6% y/y, Mar +1.3% m/m. Apr core CPI expected +1.5% y/y, Mar +1.6% y/y.
    0500 ETEurozone Mar trade balance (sa) expected 3.8 bln euros, Feb 3.7 bln euros.
    United Kingdom
    0430 ETUK Mar ILO unemployment rate expected 8.4%, Feb 8.3%. Apr claimant count expected 5.0%, Mar 4.9%. Apr jobless claims change expected +5,000, Feb +3,600.
    0430 ETUK Mar weekly earnings expected +1.0% 3M/yoy, Feb +1.1% 3M/yoy. UK Mar weekly earnings ex-bonus expected +1.4% 3M/yoy, Feb +1.6% 3M/yoy.
    0530 ETUK Bank of England Inflation Report.
    Japan
    1950 ETJapan Q1 housing loans, previous +2.2%.
    1950 ETJapan Q1 GDP expected +3.5% q/q annualized, previous -0.7%. Q1 GDP deflator expected -1.4% y/y, previous -1.8%.

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

    Stocks: TGT, DE, LB, SPLS, NTES, ANF
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