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U.S Market Update

Tue, Jun 23 2009, 15:29 GMT

TradeTheNews.com

- US equity indices remained down in the premarket as investors brood over yesterday's big slide and more negative macroeconomic forecasts. The 10:00amEST round of economic data didn't provide much to lift spirits, with the April Housing price index a bit better than expected and the NAR's May existing home sales slightly lower than expected. The NAR's chief economist warned that sales were less than expected because poor appraisals were stalling transactions, noting that contracts are falling through from faulty valuations that keep buyers from getting a loan. Front-month NYMEX crude has sustained recent declines, trading down $0.50 or so below $67.

- Value buyers stepped in to buy leading bank holding names this morning after yesterday's sell off, although shares of the banks were pointing back toward even by mid morning. Bank of America priced its 200M depositary share exchange offer at $12.7048 per share as the bank works to complete its extensive capital raising process in the wake of the government stress tests last month. Ratings of regional banks Keycorp and Fith Third Bancorp were cut at Fitch this morning, sending FITB shares down 6% or so in early trading.

- The EU and US filed a joint complaint with the WTO against China over Chinese export curbs on various raw materials, specifically bauxite and phosphorus. Also keep in mind that Boeing has postponed the first flight of the 787 Dreamliner due to the discovery of a weak body joint, although a company played down the fix as being inexpensive and assured the public that the company believes the production schedule will not be affected. Shares of Boeing are down 8%, with key suppliers like HXL also taking hit, trading down almost 10%.

- In earnings, shares of Kroger are under pressure after the grocery giant beat earnings estimates but came in a bit below top line targets. Kroger also reaffirmed its full-year earnings and same-store sales targets. Shares of Smith & Wesson are down 10% after a lackluster quarterly report and in line guidance yesterday. Office furniture name Steelcase was up as much as 15% before trading off to around +4% this morning after breaking even in its Q1 (the Street expected a $0.14 loss) and forecasting breakeven earnings for next quarter as well. Steelcase's CEO said that recent order patterns have reflected modest seasonal improvements, and insisted that the Q1 may prove to be the company's low watermark. Commercial Metals' quarterly loss was slightly smaller than expected, while the company predicted a similar loss next quarter. CMC traded up 4% or so in the early going. CMC's CEO warned that any volume improvement in the quarter was seasonal and not reflective of any stimulus effect, and also said that destocking appears to be in its last stages.

- In currencies, the greenback was on the defensive throughout the New York morning after comments from a US Treasury official failed to convince markets not to fear rising US bond yields. The Treasury's Ramanathan said his department "doesn't read much" into rising yields given that issuance was "completely blind" to quantitative easing that higher yields might not only be due to increased supply. Russia Deputy PM Shuvalov used the opportunity to comment that while US Treasuries may be among his country's top investments, the Russian Central Bank could quickly adjust its reserves policy if necessary. The ECB's Weber reiterated his usual hawkish comments, noting that the ECB has used up its room to lower interest rates and that the bank's exit strategy would not be influenced by politics. He reiterated that Germany needed to keep an eye on state and national budget deficits. There were a slew of comments from various European debt agency heads regarding their comfort with scheduled 2009 and 2010 issuances. In addition, word that Boeing would delay its first flight of the dreamliner added to risk aversion sentiment that took a brief hiatus during the European morning. EUR/USD holding above its prior resistance level of 1.40 ahead of the first leg of the US refunding schedule. JPY price action continued to follow the equity markets on the risk aversion/appetite themes. USD/JPY is holding in the mid-95 neighborhood

Published on  Tue, Jun 23 2009, 15:29 GMT