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U.S Market Update

Thu, Aug 20 2009, 15:23 GMT

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- Ahead of the NY open Chinese markets were leading Europe and US equity markets higher after the Shanghai Composite registered its second biggest one-day gain of the year, right on the heels of yesterday's big losses. The S&P500 crossed back above 1,000 just after the open, although some hesitation can be expected below early August highs around 1,010. Thus far markets are shaking off both initial and continuing jobless claims that rose more than analysts' forecasts.  Initial claims are averaging 568k in August compared to a 558k average in July but a bit below averages of 612k in June. Second quarter mortgage delinquencies unsurprisingly hit another record high at 6.24%, although the rise in the prime mortgage delinquency rate to 6.41% is providing cause for real concern. Brighter data was seen in the August Philadelphia Fed survey, which posted much better-than-expected numbers and a big improvement in its employment sub-index. Front-month NYMEX crude is making fresh weekly highs above $72, while natural gas is looking to test the $3 mark despite reports overnight that an unnamed hedge fund placed a big bet that prices would be at $10 by January.  Treasury prices are marginally lower even after the US Treasury said they were going to be auctioning off $109B in notes next week, which was a little below what many analysts were expecting.  The 10-year yield remains just below 3.5% while the 2-year is pinned at 1%.

- On the fifth anniversary of its IPO yesterday, Goldman Sachs added Google to its Conviction Buy list and set a price target for the stock of $560, noting that Google merits a bigger premium than downstream customers like Ebay and media companies, which are slower growing and less global. Shares of Google are up more than 4%. In other tech news, Tech Data crushed earnings and revenue estimates, noting that the IT market in the Americas is showing signs of stability. TECD is up nearly 10% in the session. Goldman published a bullish report on Chinese solar names and warned that major European manufacturers face intense competition from China due to industry oversupply and China's cost advantages. Shares of Renesola are up around 20% after Goldman singled it out for praise in the report. In other solar news, Chinese solar name STP did fairly well in Q2, beating profit targets, and said Q3 shipments would rise 50% sequentially, although for the year the company said its shipments would fall to 600MW, below its prior estimates. Shares of STP have slipped into negative territory in mid morning trading.

- Another crowd of retail earnings came out yesterday and today. Sears Holding dramatically missed earnings estimates, reporting -$0.17 (ex items) v $0.35e. The firm noted that costs for store closings and hedging losses were a big impediment in the quarter. Limited Brands beat expectations and raised its 2009 guidance. Ross Stores met expectations and increased its full-year outlook somewhat. Sears is down more than 10%, ROST is struggling to sustain modest gains while LTD has given up 2% gains and moved into negative territory. Consumer staples names Heinz and Hormel both beat earnings expectations and offered strong guidance for the full year, sending shares of both companies up 2% in early trading.

- Currency trading in the USD has continued following in the wake of the equity action in the New York. Some risk aversion surfaced following the higher initial and continuing US jobless claims data, as the numbers reflected cautious comments about the global economic recovery. S&P noted earlier today that a sluggish US economy would hinder a rebound in the Asian region. The Q2 mortgage delinquencies data also supported risk aversion with another month of rising prime mortgage delinquencies and mortgages in foreclosure. EUR/USD is around 1.4225  in mid-NY morning trading while the USD/JPY is moving back above the 94 handle.

Published on  Thu, Aug 20 2009, 15:24 GMT