Morning Call

0 CommentsTuesday • June 30, 2009 • by alwaters

“Victory belongs to the most persevering.”

Napoleon Bonaparte

The Dow managed to pull off a respectable gain of nearly 1% yesterday and futures this morning are slightly positive. Oil made an early run this morning but has fallen off slightly as the morning progressed. The major integrated oil stocks had a strong day yesterday and we expect that the drilling companies may follow suit today. Stable prices for crude will lead to Exploration and Development activity and thus benefit the drillers. Watch for the best in breed drillers such as Diamond Offshore (DO) and TransOcean (RIG) to move higher this week. Two other names to watch will be Noble Energy (NE) and Atwood Oceanics (ATW). The energy sector was the leading performer yesterday and we do believe that oil prices will hold up today.

Asian stocks followed sentiment in the US with about a 1.5% upside. One exception was China’s Hang Seng which failed to stay positive; finishing the day down by nearly 1%. European equities are having a little more trouble staying positive with most indexes slightly lower at mid-day. One similarity between Europe and Asia has been positive movement for the financial sector.

Commodities are mostly higher this morning although oil and some metals are to the downside. Despite oil’s pullback, prices appear to be stabilizing near the $71 mark. Oil traders are mostly awaiting today’s Petroleum Status Report which should fall close to expectations in terms of supply. Gold is essentially unchanged this morning at $940. The Dollar is lower against the major currencies this morning which should add support to gold process today, but it appears, for now, that a lot of cash is simply waiting on the sidelines.

In addition to the EIA Petroleum Status Report, other economic news includes some Retail Sales figures, the Purchasing Managers Index, and the Consumer Confidence Index. The earnings calendar includes FSI International, Sealy Corporation, Synnex, and a few others.

We are beginning to see an increase in M&A activity in a broad range of sectors; which is actually a positive sign. Although the deal making process remains arduous many deals simply haven’t come to fruition yet, we still see the large number of talks in the works as an indication that some executives see this as a good time to make a move. Most of us expected to see a lot of industry consolidation but few actual deals were happening because so many feared that the economy was too bleak to make a bet on the future. Now the business environment appears to have stabilized enough at least to get the corporate dealmakers to the table. There are, at this point pending talks in energy, mining, technology and several other sectors. This doesn’t necessarily mean that we are on the verge of an economic recovery. It more simply suggests that the corporate “shoppers” may finally believe that bargains and opportunities exist today, rather than wondering if tomorrow’s sale will be even bigger.

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

Tagged with: bonds, economy, gold, money management, oil, stocks, wall street