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U.S Market Update

Wed, Aug 5 2009, 15:02 GMT

TradeTheNews.com

- US equity markets are down somewhat this morning after the ISM reading came in lower than expected and selected corporate names missed estimates. The July ISM non-manufacturing data was just shy of expectations and the June ADP job losses were smaller than the consensus view, but this, coupled with nervousness ahead of Friday's payroll readings, has been enough to upset investors. The White House acknowledged that the looming jobs report on Friday would likely show "hundreds of thousands" of jobs lost (the July Nonfarm Payrolls consensus is -328Ke). Note that the June factory orders data showed a third consecutive month of growth, although a smaller move up than was seen in the May data. There were patches of sunshine, with financial names making solid gains thanks to much better than expected results out of leading European banks. Front month crude is down a hair, trading just below $71.

- US Treasury prices were losing ground once again ahead of the equity open in NY. Prices reversed course after the ADP jobs data as equity markets headed South. The 10-year note future has rallied more than half a point from lows and the yield is back below 3.65%.  The 2-year yield has declined by 10 basis points from its highs to trade back at 1.15%.  

- Consumer staples names are not helping markets this morning. Dow component Proctor & Gamble missed revenue estimates by a significant amount, spooking investors, although bottom line profit met expectations. Proctor's CFO expects more contraction in consumer discretionary markets and warned that FX would continue to be a problem this year. Kraft also missed on the top line, while earnings were slightly better than expected. The company said it would concentrate even more on cutting costs and increase promotion spending. Dean Foods missed on revenue too, and offered tepid guidance for next quarter and the full year. Shares of PG are down 3%, KFT is down 2% and DF is down a whopping 8%.

- Cult tech stocks Garmin and Coinstar both crushed earnings expectations, sending both names much higher in early trading. Note that Garmin's gross margin was significantly higher sequentially in the quarter. GRMN is up more than 20%, while CSTR is off its best levels around +5%. Video game giant Electronic Arts cut its losses more than expected but still didn't manage to break even. On the conference call, ERTS's CEO noted the game industry is "weaker than originally expected," and that the company remains cautious on the macro environment.

- In other earnings, bond insurer Radian Group astonished with a very large quarterly gain (versus expectations of a sizable loss), sending its shares up 50% and competitors ABK, PMI and MTG up 10-20% a piece in sympathy. Agrium destroyed earnings and revenue targets. The CEO said Agrium is seeing signs of improving demand fundamentals as fall approaches and continues to anticipate a recovery in potash demand later in the second half of 2009. Shares of AGU rose to as much as +4% in early trading, lifting POT and MOS along with it, before it lost altitude with sinking equity indices.

- In currencies, USD and JPY pairs benefited from a combination of profit taking and risk aversion in the New York session on the ISM data and ahead of Friday's big employment data. The greenback did manage to shrug off the Treasury's record $75B quarterly refunding package. The Treasury said it would work with Congress to ensure the national debt limit was raised in a timely fashion and insisted it was not concerned about demand. EUR/USD again retesting its trend high, testing around 1.4440 before retreating well below the 1.44 handle. GBP/USD posted 9½ month highs earlier in the European session at 1.7043, although in New York trading it fell around 80 pips. USD/JPY continues to muddle around the 95 level, although it managed to recover from session lows against its European counterparts. GBP/JPY tested 162.45, although earlier it was probing below the 161.00 level; EUR/JPY drifted over 100 pips from its session highs of 137.60.

Published on  Wed, Aug 5 2009, 15:02 GMT