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U.S Market Update

Tue, Aug 18 2009, 15:28 GMT

TradeTheNews.com

- US indices are in positive territory this morning on a few decent earnings from the retail sector and a sense of relief that yesterday's weakness seems to have abated. The data picture is mixed: the July housing starts registered its fifth consecutive month of growth, although the total figure fell short of expectations, while July PPI inflation data remains in negative territory. PIMCO's El-Erian reiterated once again that the equity rally had "hit a wall" and insisted that valuations were ahead of fundamentals. Front-month NYMEX crude has gained somewhat in mid morning trade but remains below $68.  Bond prices remain right near the unchanged mark with the benchmark yield remaining below 3.55. Trading across all markets is in generally lackluster with more typical summertime volumes.

- CIT reported a $1.68B loss in its Q2, missing analysts expectations by wide margins, and again warned it might have to file for bankruptcy protection if it fails to restructure its business. Just last month, CIT was bailed out with a $3B loan from some of its largest bondholders as it faced a cash crunch. CIT does not expect to return to profitability during 2009. Nevertheless, shares of CIT were up as much as 9% right after the bell, and are still up % in mid morning trading. BBT's CEO appeared on CNBC this morning to discuss his bank's takeover of Colonial Bank, noting that the deal with the FDIC should limit potential losses to a maximum of $500M.

- Home Depot has trounced rival Lowe's in quarterly earnings out this morning. Home Depot beat earnings expectations (ex items) and came in even with revenue targets, and improved its full-year forecast. Executives said concerns remain over housing, but that the company had its best gain in market share in the last five years in the quarter and saw improving comps in troubled markets in California and Florida. Shares of HD are up 3%, while LOW is sustaining losses suffered yesterday post-earnings. Department store Target also beat bottom-line expectations and met top-line targets, while apparel name TJX was a bit ahead of earnings estimates and in line on revenue. Saks reported a quarterly loss that was half the expected amount and insisted that its business is on the rebound. Shares of TGT and SKS are up about 5% or so on the day, while TJX is down 4%.

- Currency trading during the New York session has been quiet in terms of volatility so far, with price moves in the dollar continuing to reflect equity moves. Note that cautionary comments from German ZEW officials seem to have capped the rally in European equity markets. IMF Chief Economist Blanchard also reiterated caution towards all the optimism, saying that the economic recovery has begun but the potential for economic output is lower than it was before the crisis began. EUR/USD was drifting backs towards its key hourly pivot level of 1.4050 (near Monday's lows, on chatter of Asian sovereign bids). Some chatter was also circulating regarding option-related flows picking up, with 1.38 and 1.35 strikes going through with October expirations in the pair.

- Swiss National Bank Chief Jordan commented that the economic recovery in Switzerland would arrive later given its recession has lagged the ones in other countries. He also said that markets have understood the SNB's currency intervention policies, and also confirmed that the bank is content with the recent 1.50-1.53 range in the franc and would not accept appreciation against the euro.

Published on  Tue, Aug 18 2009, 15:28 GMT