Market Outlook
Monday, December 13, 2010

Monday provides very little in the way of economic reports. The following is the schedule:-

  • 10:00 … Wholesale Trade Quarterly Report

Also the following company is reporting its quarterly earnings:-

• FuelCell Energy Inc. (FCEL)

monday outlook

Monday sees U.S. stocks poised to open slightly higher, following on the heels of a global stock rally, as China's central bank held off on raising interest rates.

The Dow Jones industrial average (INDU), the S&P 500 (SPX) and Nasdaq (COMP) futures were all up slightly ahead of the opening bell.

Economic Concerns

No major economic reports are scheduled to be released Monday.

However, a raft of reports on unemployment, consumer prices and new home construction will be released later in the week.

In addition, the Federal Reserve will release its scheduled policy statement Tuesday.

Tax Deal

President Barack Obama's tax deal with Republicans will likely win grudging passage in the U.S. Congress, backers and critics agreed on Sunday, after Obama clashed with liberals in his own party who branded it a giveaway to the rich.

Notes of Importance

There are a few further points to the mornings trading which need to be considered:-

Crude Oil futuresfor January delivery gained $1.11 cents to $88.90 a barrel.

Gold futures for February delivery rose $6.40 to $1,391.30 an ounce.

Bonds:The price on the benchmark 10-year U.S. Treasury edged down slightly, pushing the yield up to 3.35%.

Overseas Concerns

China's economy has been booming, fueling fears of an imminent interest rate hike. There has been wide speculation for several weeks that China's government would raise interest rates to slow the economic growth. So far, that rate hike has yet to be announced.

Meanwhile, Chinese consumer prices rose 5.1% for the 12 months ended Nov. 30, according to government data released early Saturday in China. That comes on the heels of a 4.4% jump in October. And once again, a surge in food costs is the culprit. Food prices rose 11.7% during the period. Excluding food prices, China's CPI edged up only 1.9%.

European shares extended their two-week rally on Monday, reaching a 26-month high in the wake of upbeat U.S. and Chinese data.

The Financial Times said on Monday that European officials are considering plans to overhaul the euro zone's 440 billion euro rescue fund and use it to buy bonds of distressed governments, making it easier to help debt-swamped countries without resorting to fully-fledged bail-outs.

In currencies: The dollar was up against the euro, the Japanese yen and the British pound.

European Markets

European share markets were higher in morning trading. Britain's FTSE 100 ticked up 0.7%, the DAX in Germany edged up 0.3% and France's CAC 40 added 0.8%.

Europe, at midday, London +0.7%. Paris +0.8%. Frankfurt +0.3%.

Asian Markets

Earlier, Asian markets ended the session higher. The Shanghai Composite surged 2.9%, the Hang Seng in Hong Kong added 0.7% and Japan's Nikkei rose 0.8%.

In Asia: Japan +0.8% to 10294. Hong Kong +0.7% to 23318. China +2.9% to 2923. India +0.9% to 19692.

Futures Trading

Futures at 7:00: Dow +0.05%. S&P +0.1%. Nasdaq +0.1%. Crude +1.25% to $88.89. Gold +0.5% to $1391.40.


Company News

General Electric (GE) said early Monday morning that it would make a $1.3 billion offer for Wellstream Holdings PLC (WSM), an engineer and manufacturer of products for oil and gas transportation in the subsea production industry. Shares of General Electric fell slightly in premarket trading.

Genzyme (GENZ) will be in focus after Sanofi-Aventis (SASYPA) extended its $18.5 billion cash offer for the biotech firm until Jan. 21 and left open the option to prolong it further, a sign the French drugmaker is getting ready for a long battle.

Wal-Mart Stores Inc (WMT) is in advanced talks with New York's construction unions to get their backing for its entry into New York City's retail market, The Wall Street Journal reported on Sunday.

Capital Shopping Centres (CSCG.L) has slammed as "incapable of implementation and completely impracticable" an alternative funding offer from its shareholder and would-be bidder Simon Property Group Inc (SPG.N), who quickly responded, urging CSC to postpone a vote on its planned acquisition of Trafford Centre mall.

• Grocery store chain Great Atlantic & Pacific Tea Co (GAP) filed for bankruptcy on Sunday, drained of cash by tough competition and a sluggish economic recovery.

Carlyle Group's [CYL.UL] Chief Financial Officer Peter Nachtwey has resigned and the move could delay the U.S. private equity firm's planned initial public offering, the Financial Times said, citing people familiar with the matter.

Some Interesting News

BofA looks to sell toxic mortgages. Bank of America (BAC) is reportedly looking to sell at least $1B of toxic mortgage assets. BofA has already written those loans off, so the sale shouldn't negatively impact BofA's shares. Bids are due by the end of the month. The bank owns and services mortgage assets totaling $2.1T, so while this sale is small relative to BofA's overall holdings, analysts believe it is probably the assets most expensive to service. Premarket: BAC +1.3% (7:00 ET).

Credit Suisse looks to coco bonds. Credit Suisse (CS) CEO Brady Dougan said he hoped to begin issuing billions of dollars in contingent-capital bonds in the next year to help shore up the bank’s finances before tougher capital rules go into effect. Credit Suisse has until 2019 to meet the new requirements, but wants to issue as much as $30B in so-called coco bonds over the next few years as a sign of strength meant to assure both investors and regulators. Coco bonds convert into equity or other capital if a bank's financial strength begins to weaken.

Economists raise U.S. outlook. Economists have grown more positive on the U.S. economic outlook, according to the most recent WSJ survey, and expect the expansion to accelerate in 2011. On average, respondents now expect GDP to grow 2.6% this quarter on a seasonally adjusted and annualized basis, up from previous forecasts of 2.4%. For 2011, respondents expect GDP growth of 3%, and most think there's a higher chance the economy will outperform their expectations than underperform them.

Wal-Mart shuts Moscow office. Wal-Mart (WMT) said it's shutting its business office in Moscow, but remains interested in entering the Russian market. CEO Doug McMillon said "since we have decided to enter the market through acquisition, not greenfield development, and since there is no clear acquisition partner in the near term, there is not a business reason to continue our Moscow representative office." The company remains on the lookout for an 'attractive' takeover target.

Friday's failures. Another two bank closures on Friday bring this year's failures to 151 so far. The closures in Michigan and Pennsylvania will cost the FDIC's insurance fund an estimated $113M.


On Friday, the S&P 500 closed at a two-year high, breaching technical levels that suggest the year-end rally will persist, as stocks advanced on upbeat economic news and a dividend hike by General Electric.

The Dow Jones industrial average .DJI added 40.26 points, or 0.35 percent, to 11,410.32. The Standard & Poor's 500 .SPX gained 7.40 points, or 0.60 percent, to 1,240.40. The Nasdaq Composite .IXIC rose 20.87 points, or 0.80 percent, to 2,637.54.

Investors have been looking to Washington with uncertainty. Resistance from House Democrats is threatening to stymie a deal the White House struck with Republican leaders to extend Bush-era tax cuts.

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