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U.S Market Update

Mon, Jul 20 2009, 15:17 GMT

TradeTheNews.com

- With an apparently hopeful outcome in the offing for CIT Group and European markets making gains, US equity indices opened modestly higher in New York with volumes even closer to normal and the DJIA back in positive territory for the year to date for the first time since early June. In the premarket, Goldman Sachs boosted its forecast for the S&P 500 Index, saying that improving earnings will spur the steepest second-half rally since 1982. But the enthusiasm has leaked away in mid morning trading and the leading indices are back around even. Note that business group NABE stated earlier this morning that the recession is abating although there are few signs of a robust economic recovery, and warned that conditions are continuing to weaken. Front-month Sep NYMEX crude, which tested $65 earlier today, is back around even near $63.50. Treasury prices opened lower on the back of equities' gains but have worked back towards unchanged on the day. The 10-year yield is hovering at 3.65% while the 2-year is just below 1%. Gold prices moved back above $950 for much of the morning but are relinquishing some of their gains.

- CIT seems to have come to an agreement with its bondholders over the weekend. According to widespread press reports, the bondholders will extend $3B in new credit to the company backed by its unsecured assets, allowing it to restructure outside of bankruptcy. No confirmation of the deal has come out of CIT as of yet, but is expected sometime today. Shares of CIT nearly doubled in value in the premarket, and remain up more than 80% in early trading. Financial sector names are up in the low single digits this morning, with the exception of Citi and BoA; there have been unconfirmed reports that Citi is considering a 30-year note, and Citi is down 5% on the news.

- Mid-cap manufacturing firms Johnson Controls and Eaton are both up 7% in early trading. JCI beat earnings estimates while missing revenue targets; investors are enthusiastic as the auto parts manufacturer returns to profitability after two consecutive losing quarters. The CEO said the company would increase its profitability next quarter and into 2010. Eaton's top line results were in line and revenue was below par, while its guidance for next quarter was better than expected.

- Oil services names Haliburton and Weatherford are headed in different directions in the wake of earnings reports this morning. Haliburton was more or less in line with the Street, although it said there would be little recovery in North America this year. Shares of HAL are up 5%. Weatherford is down 8% after missing top and bottom-line estimates. In other earnings, Hasbro is up 4% after earning more than expected and reducing the expected dilution from its JV with Discovery Communications.

- In currencies, risk appetite firmly underpinned sentiment in New York trading this morning, with USD and JPY currencies were under pressure against most other currencies, particularly the commodity-related and emerging market units. The Russian Ruble surged over 3% at one point against the USD to test the 30.80 level. This was the largest one-day gain for the ruble in over a decade. The NY morning was marked by consolidation of the price moves seen during the Asian and European session. EUR/USD is holding above the 1.42 level with some minor stops below the 1.4190 area. The pair was unable to break above the 1.4250 level where some quasi-government offers were rumored to be lurking. Note also that the IMF approved a $250B Special Drawing Rights (SDR) allocation to increase global liquidity. The proposal still needs to be submitted to Full Board of Governors for final approval.

Published on  Mon, Jul 20 2009, 15:17 GMT