Friday has quite a few economic reports scheduled. They are:-
8:30 … GDP Q1
8:30 … Corporate Profits
9:55 … Reuters/UofM Consumer Sentiment
10:30 … ERCI Leading Index
Also the following company is reporting its quarterly earnings:-
• KB Home (KBH)
Friday sees U.S. stock futures turning higher, with bank stocks rising as a package of banking reform rules agreed by Congressional negotiators wasn't as onerous as some had feared.
Reversing early losses, S&P 500 futures rose 4.6 points to 1,075.10 and Nasdaq 100 futures added 3.5 points to 1,853.00. Futures on the Dow Jones Industrial Average rose 33 points.
U.S. stocks suffered through a rocky session Thursday, with the Dow Jones Industrial Average retreating 145 points on a day when 30-year mortgage rates fell to their lowest point in nearly 40 years. Worries about the health of the housing market as well as financial and energy reform weighed.
Wall Street Reform Bill
After marathon talks beginning Thursday morning, lawmakers in the House and Senate finalized negotiations on a bill that would overhaul the financial system.
The votes were 20-11 among House negotiators and 7-5 among Senate negotiators, strictly along party lines.
Negotiations, which ended at 5:39 a.m. ET Friday, focused on a measure calling for Wall Street banks to spin off their swaps desks.
Lawmakers eventually agreed on a weakened version of the provision that would allow banks to make traditional trades of contracts. But banks that want to engage in riskier trades would be required to spin off the divisions that trade derivatives contracts into affiliates in two years.
Controversial parts such as proprietary trading bans, also known as the Volcker Rule, remain intact in the finished bill.
Nonetheless, the bill which still needs to be voted on by the full House and Senate would craft new consumer protections, install new capital and leverage limits on large banks as well as limit proprietary trading activities.
The final vote by the House and Senate will be next week with hopes to get the bill to President Obama by July 4.
Controversial parts such as proprietary trading bans, also known as the Volcker Rule, remain intact in the finished bill.
Gross Domestic Products and June's Consumer Sentiment Reports
Later this morning, Wall Street will get a third read on first-quarter gross domestic product from the Commerce Department followed after the opening bell by a final reading on June's consumer sentiment by the University of Michigan.
Economists on average forecast 1Q GDP rose by 3%, unrevised from last month’s reading, while consumer sentiment remained unchanged at a reading of 75.5.
The Energy Sector
Shares in BP (BP.L) fell as much as 7.5 percent, hitting a 14-year low on Friday morning, with traders citing investor concerns the oil major may need to raise cash to cover costs on the Gulf of Mexico spill.
BP is continuing its battle to clean up and contain the oil spill, which threatens an ecological and environmental catastrophe in the U.S. Gulf, as bad weather looms.
The company said on Friday it had so far spent $2.35 billion on the response effort to the oil leak.
Nomura said in a note that equity-linked financing could be the attractive short-term solution for BP to help cover the costs.
"A heavy inversion of both credit yield and equity volatility suggests the market is concerned about a near-term credit event around BP," it said in a note.
The broker said pressure was mounting on the oil major to improve its liquidity position to "assure sufficient fund to cap the well and meet "fat tail" scenarios around near-term expenses."
"With debt expensive and asset sales taking time, we consider that equity-linked financing -- perhaps backed by Sovereign Wealth as a show of support -- could prove the attractive short-term solution," it added.
Five-year BP credit default swaps, an insurance-like instrument against debt default, widened 19 basis points to 555 basis points, CDS monitor Markit said.
BP shares were down 7 percent at 0916 GMT.
Traders also cited concerns over looming bad weather, which could hamper BP's efforts to clean up the spill.
A tropical wave over the western Caribbean Sea has a high chance of developing into a tropical depression over the next couple of days, the U.S. National Hurricane Center and other weather forecasters said.
Notes of Importance
There are a few further points to the mornings trading which need to be considered:-
• The Dow Jones Industrial Average (DJIA) could find short-term support in the 10,100 area, while the 10,000 remains a key psychological backstop.
• The S&P 500 Index (SPX) will look for short-term support near 1,065, with the May 2010 lows of 1,040 a key level for the bulls to hold.
• The small-cap focused Russell 2000 Index (RUT) became the latest major market index to breach its 200-day trend line. Small caps have led Wall Street's rebound out of this economic morass, and the RUT's dip below this key technical moving average is yet another warning sign for bullish investors.
• Gold futures are showing signs of early weakness, with the front-month contract slipping $1.40 to $1,244.50 an ounce in London.
• The U.S. Dollar Index is rebounding from lows in Asian trading, rising 0.29% to 85.99.
• Benchmark crude futures are also lower, with the lead contract down 22 cents at $76.29 per barrel.
• Bonds : Treasury prices rose, pushing the yield on the 10-year note down to 3.12%.
• Equity option activity on the Chicago Board Options Exchange (CBOE) saw 969,164 call contracts traded on Thursday, compared to 795,712 put contracts.
Ahead of the weekend G20 summit in Toronto, officials tried to downplay differences between the U.S. and Europe over how quickly to shift from crisis-fighting mode to budgetary belt-tightening.
Bank reform globally also is in the spotlight ahead of this weekend's G-20 event in Toronto. A committee of banking regulators will pare back some of its planned rules to force banks to set aside billions of dollars of extra capital, the Financial Times reported Friday.
European share markets fell in morning trading. The FTSE 100 in Britain, the CAC 40 in France and Germany's DAX all posted mild losses.
The Stoxx Europe 600 fell 0.2% in early afternoon trade.
• In Europe at midday, London -0.6%. Paris -0.5%. Frankfurt -0.7%.
Earlier in Asia, shares finished the session in negative territory. Japan's benchmark Nikkei index tumbled 1.9% and the Hang Seng in Hong Kong dipped 0.2%. The Shanghai Composite fell 0.5%.
• In Asia, Japan -1.9% to 9737. Hong Kong -0.2% to 20691. China -0.5% to 2553. India -0.9% to 17575.
As of 7:15 a.m. in New York, the Dow Jones Industrial Average futures gained 13 points to 10113, the S&P 500 index futures were up 2.2 points to 1072.70 and the Nasdaq 100 futures were lower by 1.25 points to 1848.50.
Futures: Dow -0.15%. S&P -0.1%. Nasdaq -0.3%. Crude -0.55% to $76.09. Gold -0.2% to $1243.90.
Research In Motion Limited (RIMM) said that its first-quarter net income soared 20% as the BlackBerry maker shipped 11.2 million handsets. RIMM reported a profit of $768.9 million, or $1.38 per share, with revenue jumping 24% to $4.24 billion. Analysts were looking for earnings of $1.35 per share, on revenue of $4.35 billion. Looking ahead, RIMM predicted adjusted earnings of $1.33 to $1.40 per share, on revenue ranging from $4.4 billion to $4.6 billion. Wall Street is currently forecasting a profit of $1.32 per share on revenue of $4.52 billion. Finally, the company also said it will repurchase up to 31 million shares during the next 12 months. In pre-market trading, RIMM has plunged more than 5% following the report.
Oracle Corp. (ORCL) said its fourth-quarter net income rose to $2.4 billion, or 46 cents per share, as revenue rose 39% to $9.5 billion. Excluding special items, Oracle said earnings for the quarter were 60 cents per share. Analysts had expected earnings excluding items of 54 cents per share, and $9.5 billion in revenue. In electronic trading, ORCL is up more than 4.6%.
H&R Block Inc (HRB), the largest U.S. tax preparer, posted a better-than-expected quarterly profit, partly helped by lower operating expenses, but declined to provide guidance.
Some Interesting News
• Financial reform finalized. Lawmakers working into the early hours this morning reached a final agreement on the financial reform bill. They agreed to a modified Volcker rule, allowing banks to invest up to 3% of their equity in hedge funds and private equity funds, and will mandate that banks separate much (but not all) of their derivatives activities. Banks and hedge funds will be disappointed by the inclusion of a $19B fee they will have to pay to cover the costs of financial reform. With the negotiations done, both houses of Congress will proceed with a vote on the full bill next week.
• No extension for unemployment benefits. A third attempt by the Senate to pass an extension to unemployment benefits failed to win the 60 votes needed for cloture, as lawmakers showed increasing concern about the country's fiscal position. As a result, the bill will be shelved and 1.3M unemployed will lose their unemployment assistance by the end of the week. The move will also leave several states with large budget holes they had expected to fill with federal money.
• For sale: Greek Islands. Greece is preparing to sell, or put up for long-term lease, around 6,000 of its islands to help repay its debts, reports the Guardian. The areas for sale include part of Mykonos, one of Greece's top tourist destinations, and the island of Rhodes. Potential investors are said to be predominantly Russian and Chinese.
• BP faces scrutiny on Alaskan well. BP (BP) is facing increased regulatory scrutiny over its plans to develop an oil field five miles off Alaska's coast. Though BP plans to create a manmade island as its base for operations, the Interior Department is applying the rules for offshore drillers and has told BP it must provide information on the possibility of a well blowout along with third-party verification that equipment used to stop spills works. In its latest update, BP said it has now spent $2.35B on containment and cleanup costs. Separately, a federal judge rejected the government's request to keep its deepwater drilling moratorium in place while the government appeals an earlier decision overturning the ban. Premarket: BP -6.3% (7:00 ET).
• Lions Gate, MGM in merger talks. Lions Gate Entertainment (LGF) has reportedly held merger talks with studio Metro-Goldwyn-Mayer. Lions Gate had dropped out of the bidding for the debt-laden studio earlier this year, but has now resumed informal talks. Any deal will likely face opposition from Carl Icahn, the activist investor who raised his stake in Lions Gate to 31.8% earlier this month and who has been openly critical of an MGM bid.
• Morgan Stanley settles subprime probe. Massachusetts Attorney General Martha Coakley announced a $102M settlement with Morgan Stanley (MS) over charges that the bank took part in "unfair" residential loans contributing to a housing crash in the state. Morgan Stanley neither admitted nor denied wrongdoing. A similar deal was reached with Goldman Sachs (GS) last year.
• Hasbro to stay public. Hasbro (HAS) said it is not involved in talks to potentially sell the company, denying earlier media reports that it is considering a leveraged buyout from private equity firm Providence Equity Partners. The toymaker said it had been approached by a private equity firm regarding a possible transaction, but the board had decided against pursuing it.
• Santander buys Citi auto loans. Santander Consumer USA, an affiliate of Banco Santander (STD), agreed to buy $3.2B of auto loans from CitiFinancial Auto (C) at 99% of gross receivables. Santander will also service $7.2B in auto loans that Citi will retain. The deal is part of Citi's ongoing efforts to shed non-core assets.
• Regulators need more info from Comcast, NBC. The FCC said yesterday that Comcast (CMCSA) and NBC (GE) had failed to fully comply with recent information requests regarding their proposed joint venture. As a result, the FCC's 180-day review period will be halted with the effective date of June 11, the date the information was due, and will resume only when the two firms submit the requested documents.
• Hitachi, GE discuss alliance changes. GE (GE) and Hitachi (HIT) are in talks to change the ownership structure of their nuclear-power alliance. Hitachi president Hiroaki Nakanishi said he wants to reevaluate how the partnership works in order to boost sluggish nuclear-power-plant orders outside of the U.S. and Japan. The focus on nuclear power is critical for Hitachi, which is trying to generate more stable earnings by shifting away from its money-losing semiconductor and consumer-electronics operations.
• Boeing grounds test planes. Boeing (BA) temporarily grounded a fleet of Dreamliner test planes after discovering a problem in the horizontal tail. Dreamliner spokeswoman Yvonne Leach said the problem was "regrettable but under control," and that the temporary grounding shouldn't further delay the already behind-schedule timeline for testing and delivering the planes. Premarket: BA -0.7% (7:00 ET).
• Bearish bets in the stock market continued to rise in the first half of June in the face of growing caution over the economic outlook, with short interest on the NYSE at its highest in almost a year.
• Goldman Sachs reclaimed the top spot for mergers and acquisitions advice in the first half of 2010, underlining the Wall Street giant's resilience even as it battles U.S. civil fraud charges.
• U.S. aluminium giant Alcoa Inc (AA) said it ratified a new four-year contract with the United Steelworkers union covering 5,400 employees at ten of its locations in the U.S. • Miners will be in focus after New Australia Prime Minister Julia Gillard started her first full-day in office pledging to end a mining tax row threatening $20 billion in investment.
Economic woes have worried investors all week and are likely to hang over investors until there is a definitive sign that the economy is on solid footing.
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