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Barchart Morning Call 5/5

May 05, 2011 9:22 AM ET
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Long Only, Momentum, Portfolio Strategy

Seeking Alpha Analyst Since 2009

Jim Van Meerten writes on financial subjects here and on Barchart Portfolio Blogs and Seeking Alpha. He earned a BS in Accounting and Business Administration from Berry College; a Juris Doctorate from the Woodrow Wilson School of Law; and attended post-baccalaureate and graduate courses in Business Administration, Quantitative Math, and Education at Florida Atlantic University, Georgia State University and University of North Carolina at Charlotte. In the past he has been an accountant, attorney, adjunct professor in Business Law, Accounting and Internal Auditing, financial advisor, supervisory principal, and compliance officer. He also passed the Georgia CPA Exam, the Certified Internal Auditor Exam, and the FINRA Series 7, 24 and 9/10 exams.He is presently also a contributor on MSN Top Stocks Blog, Motley Fool and is a member of the M100 on Marketocracy, an elete honor chosen by the editors of Marketocracy as being in the top 100 portfolio managers of over 100,000 portfoiios they review. He would enjoy hearing your comments at JimVanMeerten@gmail.com.

 Barchart Morning Call

Barchart.com - 1 hr 20 mins ago
Overnight Developments
  • Global stocks are mostly lower with the European Euro Stoxx 50 down -0.85% and June S&Ps down -4.50 points. Treasuries are firmer and the dollar is little changed, while commodities are weaker with crude oil sliding to a 2-week low. Mar German factory orders unexpectedly declined -4.0% m/m, the biggest monthly fall in 2 years, which undercut European stocks and sent copper tumbling to a 5-month low. The BOE as expected maintained its benchmark interest rate at 0.50% and kept its asset purchase plan at 200 billion pounds. The market now awaits in earnest the ECB meeting later today and comments from ECB President Trichet into just how fast he's prepared to raise interest rates over the coming months. A sell-off in bank stocks is leading European shares lower with Lloyds Banking Group Plc plunging 8.2% after Britain's largest mortgage lender reported a Q1 loss after setting aside 3.2 billion pounds ($5.3 billion) to compensate clients mis-sold insurance on loans, while Societe Generale lost 3.7% after reporting Q1 net income of 916 million euros, below analysts' estimates of 1.06 billion euros.
  • The Asian stock markets today closed mixed with Japan closed for holiday, Hong Kong -0.23%, China -0.09%, Taiwan +0.80%, Australia +0.29%, Singapore -0.13%, South Korea closed for holiday, India -1.40%. Asian stocks were undercut after lower-than-expected growth in US service industries and jobs sparked concern the US economy is weakening. March Australia retail sales unexpectedly fell -0.5% m/m, its first drop in 5 months, and weaker than expectations for a +0.5% m/m increase. The Japanese yen strengthened to less than 80 yen per dollar for the first time in 1-1/2 months, which increases the chances of further intervention in currency markets by Japanese and or G-7 central banks to stem the yen's strength.
Overnight U.S. Stock News
  • June S&Ps this morning are trading down -4.50 points. The US stock market yesterday settled lower as weaker-than-expected economic data dampened optimism about the health of the economy: Dow Jones -0.66%, S&P 500 -0.69%, Nasdaq Composite -0.47%. The S&P 500 fell to a 1-week low and the Nasdaq posted a 1-1/2 week low. Bearish factors included (1) the smaller-than-expected increase in the Apr ADP employment change (+179,000 versus expectations of +195,000), (2) the unexpected decline in the Apr ISM non-manufacturing index which matched its lowest level in 14 months (-4.5 to 52.8 versus expectations of +0.2 to 57.5), and (3) weakness in energy and raw-material producers after crude and metals prices plunged.
  • Bullish factors for stocks included (1) reduced European sovereign-debt concerns after Portugal's government announced an agreement on a 78 billion-euro ($116 billion) 3-year loan package, (2) increased M&A activity after ConAgra said it offered to buy Ralcorp Holdings and Applied Materials offered to buy Varian Semiconductor Equipment Associates, and (3) the drop in the 10-year T-note yield to a 1-1/2 month low of 3.206%.
  • Con-Way (CNW) gained 3.2% in European trading after the trucking company reported Q1 net income of 12 cents a share, better than analysts' estimates of 4 cents.
  • Whole Foods (WFMI) rose 4.3% in European trading after the company boosted its full-year earnings projection to $1.90 a share in 2011 from an earlier estimate of $1.80 a share.
  • Freeport-McMoRan (FCX) fell 1.4% in pre-market trading after copper prices tumbled to a 5-month low.
Today's Market Focus
  • June 10-year T-notes this morning are up +4 ticks. T-note prices yesterday rallied to a 1-1/2 month high on weaker-than-expected economic data along with dovish Fed speak: TYM11 +6.5, FVM11 +1.5, EDU11 +1.0. The 10-year T-note yield fell to a 1-1/2 month low of 3.206%. Bullish factors included (1) the smaller-than-expected increase in the Apr ADP employment change (+179,000 versus expectations of +195,000), (2) the unexpected decline in the Apr ISM non-manufacturing index which matched its lowest level in 14 months (-4.5 to 52.8 versus expectations of +0.2 to 57.5), and (3) dovish comments from Boston Fed President Rosengren who said "with significant slack in labor markets, stable inflation expectations, and core inflation well below our longer run target, there is currently no reason to slow the economy down with tighter monetary policy." Bearish factors included (1) supply pressures ahead of the Treasury's auctions of $72 billion in T-notes and T-bonds in next week's quarterly refunding, and (2) the prediction from Principal Global Investors that "the economy is on a sustainable recovery" and the yield on the 10-year T-note will climb to 3.75% by year-end.
  • The dollar index this morning is weaker with the dollar/yen -0.80 yen and the euro/dollar +0.04 cents. The dollar index yesterday sank to a 2-3/4 year low on weak US economic data along with strength in the euro which rallied to a 17-month high against the dollar on speculation ECB President Trichet will signal further rate increases when he speaks on Thursday: Dollar Index -0.109, USDJPY -0.311, EURUSD +0.00017. Bearish factors included (1) weaker-than-expected US economic data on Apr ISM non-manufacturing and Apr ADP employment, which may prompt the Fed to keep interest rates at record lows and further weaken the dollar's interest rate differentials, (2) speculation that ECB President Trichet will signal further interest rate increases when he speaks at Thursday's monthly press conference, and (3) dollar negative comments from Boston Fed President Rosengren who said he sees "no reason" to raise interest rates amid higher oil prices. Bullish factors included (1) increased safe-haven demand for the dollar after the equity market tumbled, and (2) the weaker-than-expected Mar Euro-Zone retail sales, which is euro negative.
  • June crude oil prices this morning are trading down -$2.40 a barrel at a 2-week low and June gasoline is -6.25 cents per gallon. Crude oil and gasoline prices yesterday retreated after US crude inventories climbed to a 6-month high and weaker-than-expected economic data raised demand concerns: CLM11 -$1.81, RBM11 -0.69. Jun crude fell to a 2-week low and Jun gasoline posted a 1-week low. Bearish factors included (1) weaker-than- expected US economic data on Apr ISM non-manufacturing and Apr ADP employment, which raises concern a slowdown in economic growth will also curb energy demand, (2) the larger-than-expected increase in weekly crude inventories which climbed to a 6-month high (+3.42 million bbl to 366.5 million bbl versus expectations of +1.9 million bbl), and (3) weakened fuel demand after US gasoline demand in the week ended Apr 29 fell -2.2% w/w to 8.94 million barrels a day. Bullish factors included (1) the fall in the dollar index to a 2-3/4 year low, which boosts investment demand in commodities, (2) the larger-than-expected decline in weekly gasoline inventories which fell to a 1-3/4 year low (-1.05 million bbl to 204.5 million bbl versus expectations of -500,000 bbl), and (3) the unexpected decline in weekly distillate inventories (-1.40 million bbl versus expectations of a +500,000 bbl increase).
Today's U.S. Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap) KFT-Kraft Foods (BEST earnings consensus $0.47), V-Visa (1.20), AIG-American International Group (0.12), GM-General Motors (0.91), CVS-CVS Caremark (0.55), DTV-DirecTV (0.71), EOG-EOG Resources (0.55), PCLN-Priceline.com (2.46), CTL-CenturyLink (0.70), PSA-Public Storage (0.77), EL-Estee Lauder (0.57), WMB-Williams Companies (0.36), PEG-Public Service Enterprise Group (0.76), PPL-PPL Corp. (0.72), ED-Consolidated Edison (1.01), EP-El Paso (0.28), CI-CIGNA (1.09), FLR-Fluor (0.76).

Global Financial Calendar

Thursday 5/5/11
United States
0830 ET Weekly initial unemployment claims expected -19,000 to 410,000, previous +25,000 to 429,000. Weekly continuing claims expected +9,000 to 3.650 million, previous 68,000 to 3.641 million.
0830 ET Q1 U.S. nonfarm productivity expected +1.1% Q4 +2.6%. Q1 unit labor costs expected +0.8%, Q4 ?0.6%.
0830 ET USDA weekly export sales.
0915 ET Chicago Fed President Charles Evans delivers welcoming remarks at the Chicago Fed?s conference on Bank Structure and Competition.
0930 ET Fed Chairman Ben Bernanke speaks at the Chicago Fed?s conference on Bank Structure and Competition.
1030 ET Apr ICSC chain store sales, Mar +2.0% y/y.
1315 ET Minneapolis Fed President Narayana Kocherlakota delivers a speech on ?Some Contingency Planning for Monetary Policy? to the Santa Barbara Economic Summit.
1630 ET Weekly money supply report and Fed balance sheet.
United Kingdom
0430 ET Apr UK PMI services expected -1.1 to 56,0, Mar +4.5 to 57.1.
0700 ET BOE announces interest rate decision and asset purchase target (expected no change to the 0.50% benchmark rate or to the 200 billion pound asset purchase target).
0600 ET Mar German factory orders expected +0.4% m/m and +15.4% y/y, Feb +2.4% m/m and +20.1% y/y.
0745 ET ECB announces interest rate decision (expected no change to the 1.25% 2-week refinancing rate).
0830 ET ECB President Jean-Claude Trichet speaks at monthly press conference.
0830 ET Mar Canada building permits expected -2.2% m/m, Feb +9.9% m/m.
1000 ET Apr Ivey purchasing managers index expected -7.2 to 66.0, Mar +3.9 to 73.2.
n/a Japanese markets closed for Children?s Day.


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