Morning Call

0 CommentsFriday • May 29, 2009 • by alwaters

Morning Call
May 29, 2009

“Wall Street is not a casino. The drinks are free in a casino.”
Vahan Janjigian

The Dow gained back most of its prior day’s losses yesterday with the energy and basic materials sectors leading the way. Solid gains among for our favorites among the drillers should be followed up with another big move today. Diamond Offshore (DO), Union Drilling (UDRL), and Atwood Oceanics (ATW) are poised for another 5% upside, adding to strong gains for the week. We are also seeing signs for movement in the tech sector as well. In particular, chip makers and companies providing support services within the sector will see positive movement in the coming week. Intel (INTC), Qualcomm (QCOM), and Advanced Micro Devices (AMD) are among those that should move today and in the coming week.

Futures have been climbing slowly throughout the morning, suggesting that some buying will continue at the open. In Asia, the indexes all finished higher by modest amounts with China, once again, leading the way with a 1.6% gain on the Hang Seng. Financials were lower once again and the industrial sector added to its gains. European equities are up well over 1% at mid-day with generally mixed performance among sectors. Based on aftermarket trading, it appears the financials may be weak again here in the US today.
Commodities are very strong this morning, with gains across the board. Gold has been gathering momentum; finishing just under $960 yesterday after testing $965 during the day. This morning, gold is up another $12 to reach $975; currently near the highs of the session. Gold will, once again, test the $1000 mark soon. We expect that there may be some retracement along the way, but also believe that gold will hold and surpass that mark this time around.

Today we will have some preliminary GDP numbers and Consumer Sentiment on the economic calendar. A relatively light earnings day will include Tiffany, and the Royal Bank of Canada.

As has been the case lately, there have been several reasons for hope and an equal number of causes for concern. A rosy picture in Japan as industrial production rose by the most in 56 years. Also in India where the economy grew by more than experts predicted. In Europe, however, word is that the Euro-zone inflation rate has fallen to zero which is not a positive sign. Here in the US, there is a growing concern regarding State and County budget shortfalls, municipal bond defaults and, of course, an accelerating pace of small bank failures. Now, if you think the global economy has bottomed out and is beginning a recovery phase, then one could argue that some of the factors are simply lagging indicators. The same has been argued about jobless claims to play down the usefulness of following the weekly numbers. Some economic indicators do, in fact, follow along like a tail following the head. This analogy, however, is only useful if you are absolutely sure that the head is done falling.

Posted in: Morning Call: Daily Analysis of the Global Markets and Economy

Tagged with: economy, stocks, wall street