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Barchart Moring Call 1/2

|Includes: Cal-Maine Foods, Inc. (CALM)

Barchart Morning Call

BC - Mon Dec 31, 7:00AM CST

Overnight Developments

  • March E-mini S&Ps are mildly higher by +0.22% as the market treads water ahead of today's fiscal cliff deadline. European stocks this morning are up +0.31%. Asia stocks today closed mixed. The main supportive factor this morning is the stronger-than-expected Chinese manufacturing PMI report released on Sunday night. The Japanese markets are closed today for a holiday. Commodity prices this morning are down -0.28%. Feb crude oil is down -0.66%, Feb gasoline is down -1.19%, Dec gold is up +0.37%, March copper is up +0.54%, grains are down about -0.8% on average, and softs are mostly higher. The dollar index is up +0.17%, EUR/USD is down -0.25%, and USD/JPY is up +0.23%. March 10-year T-note prices are unchanged.
  • Senate leaders on Sunday were unable to reach a fiscal cliff deal but negotiations will resume today. The deadline for a fiscal cliff deal is tonight at midnight. Starting tomorrow, tax rates will rise to pre-Bush levels, the top tax rate on dividends will rise to 43.4% from 15%, the top capital gain tax rate rises to 23.8% from 15%, the estate tax will rise to 55% from 35%, automatic spending cuts will start to kick in, the alternative minimum tax will kick in for millions more taxpayers, and employees will lose their 2 percent payroll tax holiday. Emergency unemployment benefits already expired as of Saturday. If there is no fiscal cliff agreement, then President Obama has asked for a vote on a stripped-down bill that just involves extending tax rates on income under $250,000 and extending emergency unemployment benefits. However, that vote is unlikely to happen given opposition by Republicans. Treasury Secretary Geithner said that the U.S. will hit the debt limit today, but that the Treasury can use emergency maneuvers to prevent a Treasury default for about 2 months. The current negotiations do not involve a debt ceiling hike, which means even if there is a fiscal cliff agreement today, the markets will still have a potential Treasury default hanging over their heads for the next two months until an agreement is reached on spending and entitlement cuts and a debt ceiling hike. The new session of Congress will begin on Thursday, Jan 3. Speaker Boehner will be reelected as House Speaker at a vote on Thursday. The Chinese HSBC manufacturing PMI for December was reported Sunday night at +1.0 to 51.5, which was stronger than the earlier flash report of +0.4 to 50.9. The HSBC manufacturing PMI report has now risen for four consecutive months (Sep-Dec) and posted a new 19-month high of 51.5 in December.
    Market Comments
    • March E-mini S&Ps this morning are up +3.00 points (+0.22%) on support from Sunday night's stronger-than-expected Chinese manufacturing PMI report. The S&P 500 index on Friday closed sharply lower on pessimism about a fiscal cliff deal, although there was at least some underlying support from the stronger-than-expected Chicago PMI and Nov pending home sales reports. Closes: S&P 500 -1.10%, Dow Jones -1.21%, Nasdaq -1.01%.
    • March 10-year T-notes this morning are unchanged. March 10-year T-note prices on Friday closed slightly higher on increased safe-haven demand with the sharp sell-off in stock and the pessimism about a fiscal cliff deal: Closes: TYH3 +1, FVH3 +0.75.
    • The dollar index this morning is up +0.13 points (+0.17%) on some increased safe-haven demand ahead of tonight's fiscal cliff deadline. EUR/USD is down -0.0033 (-0.25%) and USD/JPY is up +0.20 (+0.23%). The dollar index on Friday closed slightly higher on increased safe-haven demand with the sharp sell-off in U.S. stock on pessimism about a fiscal cliff deal. Closes: Dollar index +0.06 (+0.07%), EUR/USD -0.0020 (-0.15%), USD/JPY -0.14 (-0.16%).
    • Feb WTI crude oil prices this morning are down 0.60 (-0.66%) and Feb gasoline is down -0.03828 (-1.19%). Feb crude oil and gasoline prices on Friday closed lower on (1) concern about the global economy and fuel demand as Washington went into the weekend without being close on a fiscal cliff agreement, and (2) a bearish DOE report. Closes: CLG3 -0.07 (-0.08%), RBG3 -0.0308 (-1.10%). Friday's weekly DOE report showed a bearish -586,000 bbl decline in crude oil inventories (vs expectations for a -1.7 mln bbl decline), a bearish +3.782 mln bbl rise in gasoline inventories (larger than market expectations of +700,000 bbl), and a bearish 2.423 mln bbl increase in distillate inventories (vs expectations for a 1 mln bbl decline). The refinery utilization rate fell by 1.2 points to 90.3%, which was a larger decline than market expectations for a -0.3 points decline to 91.2%. U.S. oil production rose sharply by 121,000 bpd (+1.8%) to post a new 19-3/4 year high of 6.984 mln bpd.
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      Today's U.S. Earnings Reports Earnings reports (ranked by market cap): CALM-Cal-Maine Foods (Consensus EPS: $0.90).
      Global Financial Calendar
      Monday 12/31/12
      United States
      0900 ET Dec Milwaukee NAPM, Nov 45.5.
      1030 ET Dec Dallas Fed manufacturing activity, Nov -2.8.
      1100 ET USDA weekly grain export inspections.
      n/a U.S. Bush tax cuts expire.
      n/a Markets closed for bank holiday.
      2000 ET China Dec manufacturing PMI expected +0.4 to 51.0, Nov +0.4 to 50.6. provides Financial Quotes, Charts a