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U.S Market Update

Tue, Dec 9 2008, 16:28 GMT
by Trade The News Staff

TradeTheNews.com

- US equity indices faltered before the bell, opening lower before making a late morning run at unchanged led by a rebound in the NASDAQ. Pre-market focus was centered on the lowered guidance from the economic bellwethers FedEx and Nucor. October pending home sales handily beat dreary expectations which added to the upside momentum gained traction after the open. Front-month crude is hovering near overnight lows around $43 while Treasury prices are marginally lower. US yields have been unable to gain any real momentum to the upside with the 10-year still below 2.75%. The Jan fed fund future now nearly fully prices in a 75 basis point cut by the FOMC, this after the Bank of Canada cut by 75 basis points this morning.

- News out of Sony and Nucor has traders' attention this morning, with both firms noting the impact of the economic crisis. Sony said it would cut investment in its electronics business by 30% and eliminate 16K positions, or 8% of its workforce. The company expects to close five or six facilities and is considering further cost cutting moves in operations besides electronics. Nucor said its Q4 profitability would be marginally above breakeven, compared to consensus expectations of $1.46. The firm expects steel shipments to fall 40% q/q, with the crisis reducing demand for steel and forcing customers to reduce inventories due to liquidity concerns. Interestingly Nucor is already seeing raw material prices increase and expects to see this hit steel pricing going forward. The comments dragged NUE down before the open, along with other US steel names X, TONS and STLD, although shares in all four have rebounded to trade well into positive territory in early trading.

- A handful of small- and mid-cap firms in diverse industries updated outlook for the coming year to account for the slowdown. Automobile component manufacturer ArvinMeritor withdrew its guidance for 2009 while also offering a Q1 revenue view that was more or less in line with expectations. ARM noted it expects to divest its remaining light vehicle business in 2009. Sports & recreational products manufacturer Jarden Corp offered revenue guidance for the coming quarter and full year that was somewhat below consensus estimates, noting that it believes overall retail market declines in 2008 and 2009 will exceed its still growing market share. Agilent lowered its Q1 earnings and revenue guidance due to deteriorating economic conditions particularly in electronic measurement markets. Semi manufacturer Novellus Systems disclosed that its quarterly loss would be much, much larger than expected.

- Supermarket name Kroger reported earnings in-line with the analyst community and beat on the top line, guiding a hair behind expectations for the year, noting that same-store sales would remain in positive territory. KR is down 7% on the news, while competitors SWY-4% and WINN-2% are down slightly; WFMI is in positive territory. Auto parts retailer AutoZone beat estimates, helping it rise 7% or so. Medical technology developer Analogic Corp missed on the top and bottom lines, sending the name down around 25% on the day.

- In currencies, the greenback continued to maintain its firmer, steady tone from the European morning. The EU's Juncker, who stated that positive growth would be more likely to return by 2011, aided USD strength ahead of the New York morning. His cautious comments are in contrast to most of his EU and ECB colleagues, who have consistently predicted a recovery by late 2009 or 2010. The ECB's Constancio, for example, noted this morning that he expecteda global recession through 2009, with a muted recovery in 2010 (also saying that that US interest rates would fall to zero). Juncker emphasized that it would be years to overcome the economic crisis.

- The EUR/USD selling pressure has been offset by a degree by the EUR/GBP's price action, with the cross hitting fresh all-time highs above the 0.8750 level. The GBP continued its heavy tone against the major pairs as economic data keeps highlighting the pains in the UK economy. The data out of Britain was broadly weaker, with both manufacturing production and industrial production coming in below expectations. Dealers are noting that the data would likely reinforced bearish sentiment in GBP-related pairs. GBP/USD at 1.4740 (off 120 pips from opening levels in Asia, while GBP/JPY fell by 170 pips to just above the 136.50 area. BoE's Sentence said that recent interest rate cuts would take time to take effect, adding that rates should be used to counter the global slowdown but warning that rate policy alone can not prevent booms or busts.

- The CAD was broadly weaker following the aggressive Bank of Canada Interest rate cut. The BoC lowered its key rate by 75bps to 1.50%, more than the consensus expectations of a 50bps. Initial CAD price action was choppy immediately following the BOC decision. The BOC Statement does not mention possibility of further rate cuts; but BOC remained cautious on growth front and note it will take time to markets and growth to recover. The BOC stated that the global recession was broader and deeper than previously expected.

Published on  Wed, Dec 10 2008, 15:46 GMT