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U.S Market Update

Tue, Aug 11 2009, 15:46 GMT

TradeTheNews.com

- US equity indices are making fresh lows in late NY morning trade as investors position themselves ahead of Wednesday's FOMC decision. The non-farm productivity and unit labor costs readings are only adding weight to equities, as they paint an unsettled picture for those looking for a solid rebound in employment: unit labor costs saw their biggest sequential decline since early 2000 while productivity made its largest gain since 2003. Energy and metals are seeing gains from the European session erode, with front-month NYMEX crude off over $1.50 and ready to dip below $69, while copper is down over 8 cents from its electronic session highs of around 2.81 to test 274.  Treasury prices remain bid up on the back of lower stock prices globally despite some trepidation around today's Fed coupon pass and tomorrow's FOMC statement.  The 10-year yield is back below 3.7% while the 2-year is sub 1.2% ahead of this afternoon's 3-year auction results.

- A broad selection of financial names are in the red this morning. Before the open Rochdale's Dick Bove recommended taking short term profits in bank holding companies, noting that bank stocks are "running on fumes." Adding to weight in the sector were fresh CIT bankruptcy fears stemming from the company's delay of its 10-Q. CIT warned that "going concern" issues remain and reiterated it still expects to report a net loss of more than $1.5B. Citigroup published its Q2 TARP report, crowing that it approved $6B in new TARP-supported initiatives in the second quarter. A Citigroup analyst commented on Bank of America, noting that BoA has a "clear intention" to "partially repay" TARP "before the end of 2009." The analyst also said that credit quality trends at BAC seen in 2Q are carrying through into 3Q, clearing the way for TARP repayment.

- In earnings, engineering firm Fluor modestly exceeded consensus EPS estimates and missed revenue targets by 10% or so. Shares of FLR are down in the mid single digits. Watchmaker Fossil beat bottom-line estimates while falling short on revenue. The firm guided lower for next quarter, although it said revenue and earnings should really pick up in Q4. Shares of FOSL are down 12% and heading lower. Force Protection is really blowing up in early trading, with shares down 18% after barely eking out a profit in the quarter. The company was hurt by manufacturing costs related to lower vehicle shipments. In other news, GM was bragging about the Volt's fuel efficiency this morning, claiming it would get 250 mpg in city driving. A closer look at the figures shows that this would be for the first 50 miles (40 on the battery alone, 10 on the gas generator), while longer driving on the gas generator would make for efficiency of 50-100 mpg.

- Numerous firms have filed to launch secondary offerings over the last 24 hours and most of them are deep in the red this morning. Bunge is down 6% after filing to offer 10M shares to repay debt. Boardwalk Partners is selling 7M shares to fund its expansion plans; shares of BWP are down 4%. Small cap names SPH and PSB are down around 8% after launching offerings. Pharma name Chelsea Therapeutics was initially up 4% after filing a mixed shelf that was equal to 40% of its market cap, while its shares have fallen to -6% in early trading. PETD is down 20% after filing to sell shares equal to around 25% of its float.

- In currencies, risk aversion slowly gathered momentum as the New York session wore on, with the yen leading the charge. Dealers say the yen's firm tone gathered momentum after word went around that CIT would delay its Q2 report amid rumors of bankruptcy. Note that there are numerous USD/JPY sell stops lurking below the 95.80 level. EUR/USD slowly gave away its European highs to probe 1.4110, where alleged sovereign bids from Asian and Middle Eastern names were lurking. There was also plenty of dealer chatter of massive euro sell-stop orders building below 1.4100, which corresponds with a late April uptrend line for the pair and could set the tone for a test toward 1.39. CAD and AUD maintained a softer tone on weaker energy and metal prices, with USD/CAD over the 1.10 handle and AUD/USD moving below 0.84. July Canadian housing starts came in below expectations to add to bearish Cad momentum.

Published on  Tue, Aug 11 2009, 15:48 GMT