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Barchart Morning Call 3/15

|Includes: AMCX, CATO, DOLE, GEVA, GTY, MAPP, NAT, PWRD, QRE, RNF, Ross Stores, Inc. (ROST), SCHL

Barchart Morning Call - 1 hr 3 mins ago

Overnight Developments

  • Global stocks this morning are mixed with the Euro Stoxx 50 down -0.12% and Jun S&Ps up +2.40 points. 10-year Treasuries dropped to a 4-1/2 month low and the dollar index fell back from a 1-3/4 month high as the market awaits U.S. reports on unemployment claims and manufacturing activity. The euro rebounded from a 4-week low against the dollar after strong demand was seen at Spanish and French auctions of government debt. Spain sold 3 billion euros of securities maturing between 2015 and 2018 and had a bid-to-cover ratio of 4.13 on 976 million euros of 3.25% notes due in 2016, stronger than the 2.21 ratio seen at a similar auction in Jan, while France sold 3.26 billion euros of benchmark 5-year debt at an average yield of 1.78%, below the 1.93% seen at a similar auction last month. The British pound weakened against the dollar after Fitch Ratings lowered the outlook on Britain's sovereign debt to "negative" from "stable," indicating a "slightly greater" than 50% chance its AAA credit rating will be reduced within 2 years.
  • Asian stocks today closed mostly lower with Japan up +0.72%, China -0.75%, Australia -0.22%, South Korea -0.03%, India -1.36%. Japan's Nikkei 225 Stock Index climbed to a 7-1/2 month high as a fall in the yen to an 11-month low against the dollar buoyed the earnings outlook for exporters. Mining stocks in Australia and China declined and dragged their respective bourses lower as gold and copper prices slumped. As expected, the RBI kept interest rates unchanged for a third consecutive month after it left India's repurchase rate at 8.5%, although it kept its easing bias intact when it said "recent growth-inflation dynamics have prompted the Reserve Bank to indicate that no further tightening is required and that future actions will be towards lowering the rates."
Overnight U.S. Stock News
  • June S&Ps this morning are trading up +2.40 points. The U.S. stock market Wednesday fell back from their best levels and settled a tad higher on increased economic optimism from the Fed's upbeat assessment of the economy on Tuesday along with strength in most bank stocks that passed the Fed's stress tests: Dow Jones +0.12%, S&P 500 -0.12%, Nasdaq Composite +0.03%. The S&P 500 posted a 3-3/4 year high, the Dow rose to a 4-year high and the Nasdaq climbed to an 11-year high. Bullish factors Wednesday included (1) carry-over support from Tuesday's rally after the Fed said economic conditions improved, (2) strength in most U.S. bank stocks after the Fed said 15 of the nation's 19 largest banks could maintain adequate capital levels even in a recession, (3) increased economic optimism after the VIX volatility index or "fear gauge" that typically moves in a direction opposite to stock prices, held near Tuesday's 5-year low of 13.99, and (4) reduced European sovereign-debt concerns after Fitch Ratings raised Greece's credit rating 4 levels to B- from restricted default with a stable outlook.
  • Bearish factors Wednesday included (1) weakness in insurance companies on speculation the industry may face tighter capital rules, (2) comments from former Fed Chairman Volcker who said he sees a "long slog" before the U.S. attains adequate economic growth, and (3) the surge in the 10-year T-note yield to a 4-1/4 month high of 2.287%.
  • Guess? (NYSE:GES) may be active on the downside today after the company forecast full-year earnings of no more than $2.65 a share, well below analysts' estimates of $3.16 a share.
Today's Market Focus
  • June 10-year T-notes this morning are down -7 ticks. T-note prices Wednesday plunged to a 3-1/4 month low on carry-over weakness from Tuesday's slide in prices after the Fed's upbeat assessment of the economy reduced speculation for further easing: TYM2 -1-11.5/32, FVM2 -23.7, EDU2 -1.0. The 10-year T-note yield climbed to a 4-1/4 month high of 2.287%. Bearish factors Wednesday included (1) increased inflation expectations after the 10-year break-even rate, a gauge of the outlook for consumer prices derived from the difference between yields on conventional and inflation-linked bonds, rose to 2,39 bp, the highest in 7-1/2 months, (2) reduced safe-haven demand for Treasuries as the S&P 500 climbed to a 3-3/4-year high and after Fitch Ratings raised Greece's credit rating 4 levels to B- from restricted default with a stable outlook, and (3) technical selling as T-note prices accelerated lower to their lowest level this year. Bullish factors included (1) the weaker-than-expected Feb U.S. import price index (+0.4% m/m and +5.5% y/y versus expectations of +0.6% m/m and +5.9% y/y with the +5.5% annual gain the smallest increase in 14 months, and (2) decent demand for the Treasury's $13 billion auction of 30-year T-bonds that had a bid-to-cover ratio of 2.70, stronger than the 12-auction average of 2.68.
  • The dollar index this morning is weaker with the dollar/yen -0.24 yen and the euro/dollar +0.16 cents. The dollar index Wednesday rallied to a 1-3/4 month high as interest rate differentials moved in the dollar's favor and after the yen plunged to an 11-month low against the dollar after a MOF official said Japan's fiscal situation is worse than Greece: Dollar Index +0.372, USD/JPY +0.785, EUR/USD -0.00509. Bullish factors included (1) improved U.S. interest rate differentials that increases demand for dollars after the spread between U.S. and German 2-year note yields increased to 17 bp, the most since June 2010, (2) weakness in the yen after the International Bureau at Japan's MOF said Japan's debt-to-GDP ratio has risen to 230% and that the large amount of the nation's debt held by domestic financial institutions makes the Japanese financial system more vulnerable to fiscal shocks than Europe, and (3) the fall in the euro to a 3-week low against the dollar after Jan Euro-Zone industrial production was weaker than expected. Bearish factors included (1) the larger-than-expected increase in the Q4 U.S. current account balance which widened to a deficit of -$124.1 billion, the most in 3 years and (2) reduced safe-haven demand for the dollar after Fitch Ratings raised Greece's credit rating 4 levels to B- from restricted default with a stable outlook on optimism that a debt swap will reduce the risk that Greece reneges on its debt obligations.
  • Apr crude oil prices this morning are up +17 cents a barrel and Apr gasoline is -0.80 of a cent per gallon. Crude oil and gasoline prices Wednesday settled lower as a stronger dollar and Saudi comments that it will meet any supply shortages overshadowed record Chinese crude imports: CLJ12 -$1.28, RBJ -0.76. Apr gasoline posted a 1-1/2 week high but erased its gains and closed lower. Bullish factors included (1) the larger-than-expected decline in weekly DOE distillate supplies to a 3-1/2 month low (-4.68 million bbl to 134.8 million bbl versus expectations of -1.45 million bbl) and (2) strong crude demand in China, the world's second-largest oil consumer, after Feb China crude imports rose to a record 23.64 MMT, up +1% m/m and +18.5% y/y. Bearish factors included (1) the rally in the dollar index to a 1-3/4 month high, which discourages investment demand in commodities, (2) the as-expected +1.75 million bbl increase in weekly DOE crude stockpiles to a 6-month high of 347.4 million bbl, and (3) comments from Saudi Arabian Oil Minister Ali al-Naimi who said "Saudi Arabia and others remain poised to make good any shortfall, perceived or real, in global crude supplies."
Today's U.S. Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap): ROST-Ross Stores (BEST earnings consensus $0.85), AMCX-AMC Networks (0.60), SCHL-Scholastic (-0.70), PWRD-Perfect World Co. Ltd. (0.56), RNF-Rentech Nitrogen Partners LP (0.63), DOLE-Dole Food (-0.09), QRE-QR Energy LP (0.37), CATO-Cato Corp. (0.34), NAT-Nordic American Tankers Ltd. (-0.34), GEVA-Synageva BioPharma (-0.38), GTY-Getty Realty (0.48), MAPP-MAP Pharmaceuticals (-0.29).

Global Financial Calendar

Thursday 3/15/12
United States
0830 ET Weekly initial unemployment claims expected -5,000 to 357,000, previous +8,000 to 362,000. Weekly continuing claims expected -8,000 to 3.408 million, previous +10,000 to 3.416 million.
0830 ET Mar Empire manufacturing index expected -2.0 to 17.5, Feb +6.0 to 19.5.
0830 ET Feb PPI expected +0.5% m/m and +3.3% y/y, Jan +0.1% m/m and +4.1% y/y. Feb PPI ex food and energy expected +0.2% m/m and +2.9% y/y, Jan +0.4% m/m and +3.0% y/y.
0900 ET Jan net long-term TIC flows expected +$38.5 billion, Dec+$17.9 billion.
1000 ET Mar Philadelphia Fed manufacturing index expected +1.8 to 12.0, Feb +2.9 to 10.2.
1100 ET Treasury announces amount of 10-year TIPS to be auctioned Mar 22 (previous $15 billion).
1630 ET Weekly money supply report and Fed balance sheet.
0500 ET ECB publishes monthly report for March.
0600 ET Q4 Euro-Zone employment, Q3 -0.1% q/q and +0.3% y/y.
0600 ET Q4 Euro-Zone labor costs expected +2.3% y/y, Q3 +2.7% y/y.
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