Archive for the ‘Morning Call: Daily Analysis of the Global Markets and Economy’ Category
Morning Call
“Everything is chicken but the bill, and the bill is chicken still.”
Marion Waters
Morning Call
July 28, 2009
The bulls came back after lunch, yesterday, and proceeded to buy the markets back to positive territory. Once again, however, futures are pointing to a lower opening this morning. We pointed to the drillers and gold stocks for gains yesterday, and most performed well. Transocean (RIG) finished flat on the day, but many others such as Diamond (DO), Union Drilling (UDRL) and Parker (PKD) moved about 1% higher. We also mentioned the dry bulk shippers, many of which soared above expectations. DryShips (DRYS) and Ocean Freight (OCNF) gained an average of about 12%. We will expect a slight pullback in these stocks as profit taking will rule the morning trading.
Asian stocks were somewhat mixed, although China’s Hang Seng showed strength with an upside close to 2%. Within sectors trading was mostly mixed in Asia as well, with industrial stocks being among the best performing overall. The European indexes are averaging about a half percentage point downside at mid-session. Again, trading has been very selective among stocks with no clear winners or losers in Europe. It appears, based on afterhours trading in the US, that it will be much the same story here. There are no clear sectors to be in as traders are buying and selling on a case by case basis.
Commodities are relatively positive this morning, although both oil and gold have given up some of their momentum. Oil has traded slightly lower but remains above the $68 mark. Gold lost its momentum during the day yesterday and was trading flat up to an hour ago when it began to move lower. Presently, gold is down by $3 at the $950 mark. The sudden selling momentum at 7AM this morning was a little steeper than expected and, as such, we will watch to see if gold can regain its momentum during the morning. In the currency market, the Dollar is higher only against the Euro this morning.
An important economic calendar today includes Retail Sales figures, Consumer Confidence, the EIA Petroleum Status Report, and the Fed Beige Book. On the earnings side, we will hear from Coventry Healthcare, Ecolab, FMC Technologies, Massey Energy, National Oilwell Varco, Office Depot, Rockwell, US Steel, and several others.
Once again, we are watching the Baltic Dry Index as it continues to show some positive movement. After sharp moves yesterday, it would be expected that we will see some of the bulk shipping companies to pullback today. The general trend for this sector, however, should remain strong in the coming weeks. Crude oil also has some room left to move, but anything much higher than $70-72 will become a bit speculative and would be a good time to get out. We should continue to see selective trading today with the indexes staying close to even.
Morning Call
“The greatest pleasure in life is doing what people say you cannot do.”
Walter Bagehot
Morning Call
July 27, 2009
US futures are higher this morning, adding to a two week rally that has the S&P at its highest level since November. Earnings numbers for S&P companies have been down by an average of 26%, but have also been higher than analysts’ estimates in 75% of the cases. Many investors also anticipate that new homes sales figures will be higher for the month of June. A relatively full agenda on the earnings calendar today will determine whether the optimism will hold up. On the other side of the coin, a flood of Treasury debt continues to drive bond values lower and yields to new 15 year highs. Commodities and related stocks continue to be appealing as oil and gold remain strong. We will expect some positive movement in the major integrated oil companies, particularly Conoco Philips (COP) and Chevron (CVX) today as well as the drillers such as Noble (NE) and Diamond Offshore (DO). We are however, seeing some weakness in the coal sector, at least for today.
Stocks in Asia rose by an average of about 1.5% with financials and the tech stocks among the strongest. European equities have climbed slowly to nearly a 1% upside at mid-day. With a few exceptions, it is the banking stocks that are shining in Europe as well. Afterhours trading in the US has been a little more vague in terms of dominant sectors, but most trading has been modestly higher.
Commodities are mostly higher, particularly among the metals and energy sectors. Oil has tacked on another 1% to reach the high $68 mark early in the day. Gold has shown a strong pattern as well, touching $960 along the way and pulling back slightly. With a $5 early in the day, we will expect further upside during the day and we should see somewhere near $965 later in the session. The Dollar is lower against all but the Yen this morning.
New Housing Sales sits alone on the economic calendar, although many will also be turning an ear toward Washington as House Financial Services Chairman Barney Frank speaks on the future of financial regulation. For earnings news, we will hear from Aetna, Amgen, Corning, Honeywell, Lorillard, Verizon, and several others.
Looking ahead, we have also observed some positive indications in the Baltic Dry Index which tracks average costs of shipping goods. If the trend continues it can be a good economic sign and also bode well for the shipping companies and their stocks. In the broader view, however, it is the emerging markets that will provide the greatest opportunity in the near term. Mountains of debt built up by the US and European economies will, at the very least, handicap growth in these markets for some time. The economies of China, Brazil, and India have held up well during the past year and have an advantage moving forward because they were not forced to take drastic fiscal and monetary measures to avoid disaster. Even US companies with significant revenue exposure in these markets will become an investment of choice for the next few years.
Morning Call
“The early bird gets the worm, but the second mouse gets the cheese.”
Author Unknown
Morning Call
July 24, 2009
The bulls ran strong yesterday as the US indexes added on over 2% in gains. This morning, futures are holding up in modestly positive territory as we head into the final day of trading for the week. One has to find this an interesting phenomenon considering the negative news circulating on the Street. CIT Group, despite raising some $3 Billion from bondholders, is largely expected to be headed toward bankruptcy and a fire sale of assets. The commercial lender, in the past, has turned down offers from the likes of Berkshire Hathaway for portions of their business operations. They may now wish they took the offers as it is likely that any new deals offered will carry leaner price tags. Meanwhile, recent earnings reports have been a mixed bag of news at best. Microsoft, for one, missed estimates and shares traded lower late in the day. Jobless Claims rose by 30,000 from last week, although slightly less than estimates. Overseas, the UK economy shrank by double what analysts had expected. The numbers showed a 0.8% quarterly contraction and 5.6% on an annual pace; the largest declines since quarterly records began in 1955. For now, at least, investors appear more interested in the green shoots than the obvious weeds.
In Asia, equities rose by well over 1% on average. A look at the most active by volume shows a relatively mixed performance among all sectors. European stocks are heading higher, albeit slightly, with financial stocks and many tech and industrial stocks holding to positive territory. Despite positive numbers in the US futures market, the high volume trading has all been to the downside. Among those taking the hardest hit are Microsoft, Citigroup, and Intel.
Commodities are considerably mixed this morning. Oil has added slightly to yesterday’s gains and is now trading at well over the $67 mark. Gold is higher by $5 at $953 after threatening the $960 mark in overnight trading. Most industrial metals are also moving higher this morning. The Dollar is lower on both the Yen and Euro, but has gained against the Pound after the dismal economic news coming out of the UK.
Consumer Sentiment stands alone on the economic calendar, although it remains an important indicator for economic recovery. The earnings calendar includes Black & Decker, Fortune Brands, Schlumberger, T. Rowe Price, and a few lesser companies.
In the week ahead, the Treasury will reportedly auction about $236 Billion in securities. The flood of supply will, of course, lead values lower and yields higher. Since yield rates on government treasuries have a trickle effect on lending rates throughout the economy, this is an unwanted side effect of raising funds for the government coffers. As money flows out of the fixed income market, it may be directed toward equities which could create a strong bullish run on Wall Street. We also believe that gold will have another run towards the $1000 mark early next week. The strength in gold will depend largely on sentiment toward equities as economic and earnings news continues to sway the mood of investors.
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