Monday has very little in the way of economic reports scheduled. The following is all that is happening:-
8:30… Chicago Fed National Activity Index
10:30 … Fed's Hoenig: "Too Big Has Failed: Learning from Midwest Banks and Credit Unions"
Also the following company is reporting its quarterly earnings:-
• Focus Media Holding Limited (FMCN)
Monday sees the U.S. stocks set to open higher, as investors maintained a wary outlook after two rough weeks of trading.
Stock futures were modestly higher this morning as sentiments partially recovered from the late last week sell off along with optimism about continued M&A in the future.
Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were slightly higher.
Trading has been volatile on Wall Street as investors have grappled with positive company news on the one hand and downbeat economic readings on the other.
"We're seeing a bit of a bounce after two weeks of declines," said Peter Cardillo, chief economist at Avalon Partners. "With corporate earnings out of the way, investors will focus on the economy and scrutinize every piece of data to the maximum level."
Kicking off what is expected to be a light week for trading, there are no S&P 500 companies scheduled to report quarterly results today, and no major economic indicators.
"With no major announcements due out of the U.S. and the earnings calendar looking almost empty, we could be in for a quiet session here," said David Jones, chief market strategist at IG Index.
"Overall, stock markets remain under some pressure, so it would not be surprising to see these early gains eroded, as markets struggle for any real reason to build on the short-term positive momentum," Jones said in a note to clients.
Notes of Importance
There are a few further points to the mornings trading which need to be considered:-
• The Dow Jones Industrial Average (DJIA) has pulled back roughly 4.7% since peaking near 10,720 in mid-August. While the DJIA closed out last week with a 60-point drop on Friday, the blue-chip barometer closed off its session lows, and comes into this week trading above potential support near 10,200.
• The S&P 500 Index (SPX) held at the 1,070 level on Friday, though the broad-market index is once again staring up at potentially stiff resistance in the 1,100 region.
• Gold futures are trading essentially flat, rising 50 cents to trade at $1,229.30 an ounce in London.
• The U.S. Dollar Index: With the euro struggling to move higher, the U.S. Dollar Index is once again flirting with resistance near its 10-week moving average. The greenback has pulled back a bit in early European trading, with the index down 0.11% at $82.97.
• Benchmark crude futures: are up 28 cents at $74.10 per barrel.
• Bonds: Prices for Treasurys were higher. The yield on the 10-year note fell to 2.61% from 2.62% late Friday.
• Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,331,720 call contracts traded on Friday, compared to 967,871 put contracts.
• The CBOE Market Volatility Index (VIX) remains somewhat in check, with the index closing above its 10-week trendline for a second week in a row, but unable to surmount its 20-week moving average in the 27 area. If the VIX were to move lower from this point, it could be bullish for the market. That said, we are entering a post-expiration week, which could be fraught with headwinds as investors work to re-establish hedges that expired last week.
Australia's benchmark stock index closed marginally lower, as traders digested the implications of weekend elections that failed to produce a clear winner. Other Asian markets finished broadly in the red.
European markets rose, which could be providing a lift to U.S. markets. They are getting a lift from a fresh round of merger and acquisition activity. HSBC Holdings PLC is in talks to buy a controlling stake in Nedbank Group Ltd. of South Africa from Old Mutual PLC for as much as $6.8 billion. Potash Corp. of Saskatchewan Inc. formally rejected BHP Billiton's offer to acquire the fertilizer company.
European share markets were modestly higher in mid-morning trade. The CAC 40 in France rose 0.6%, Britain's FTSE 100 gained 0.5% and the DAX in Germany was up 0.3%.
• In Europe at midday, London +0.8%. Paris +1.0%. Frankfurt +0.5%.
In currencies: The dollar rose against the euro, but fell versus the U.K. pound and the Japanese yen.
Earlier, Asian markets: slipped. Japan's benchmark Nikkei index ended down 0.7%, the Hang Seng in Hong Kong fell 0.4% and the Shanghai Composite edged lower 0.1%.
• In Asia, Japan -0.7% to 9117. Hong Kong -0.4% to 20889. China -0.1% to 2639. India flat at 18409.
As of 6:45 a.m. in New York, the Dow Jones Industrial Average futures rose 38 points, or 0.37%, to 10240, the S&P 500 futures were up 6.4 points to 1076.70 and the Nasdaq 100 futures rose 9.5 points to 1825.00.
• Futures: Dow +0.4%. S&P +0.6%. Nasdaq +0.7%. Crude +0.2% to $73.98. Gold flat at $1228.70.
• Shares of fertilizer producer Potash (POT) rose 1.5% in premarket trading after its board of directors recommended shareholders reject an unsolicited $38 billion takeover offer by mining company BHP Billiton (BHP), and said "superior offers or other alternatives are expected to emerge." Shares of BHP were up 1.8% in premarket trading.
• The Gulf Coast Claims Facility, led by Kenneth Feinberg, will take over the BP oil spill claims process Monday. The claims will be paid using the $20 billion escrow account established by BP to compensate for damage. Shares of BP (BP) were down 0.3% in premarket trading.
• On the corporate front, Bank of America Corp. (BAC) will be in focus after Fitch Ratings raised late Friday its preferred stock rating to an investment grade of BBB- from BB-.
• Sanderson Farms Inc. (SAFM) reported declines in quarterly profit and revenue, as lower prices for poultry products hurt its bottom line.
• Hewlett-Packard Co. (HPQ) has outbid Dell Inc. (DELL) for 3PAR Inc. (PAR), offering $24 per share for PAR, a 33.3% premium to Dell's offer of $18 per share. H-P hopes the deal will close by the year's end.
• HSBC Holdings plc (HBC) has entered into exclusive talks to acquire a majority stake in Nedbank Group Ltd. from U.K. insurer Old Mutual plc. HSBC stated that talks are in progress and that any deal would be subject to conditions including regulatory clearances. The Financial Times reported Sunday that HSBC was set to win the bidding for a 52% holding in Nedbank, South Africa's fourth-largest lender.
Some Interesting News
• Potential suitors circle as Potash snubs BHP. Sinochem, the Chinese-state owned chemical group, and Vale (VALE), the world's biggest iron-ore exporter, have reportedly contacted Potash's (POT) board with initial inquiries about holding merger talks. Other companies have also made preliminary contact with Potash, though talks may not materialize. While talks with potential suitors could eventually help fend off BHP Billiton's (BHP) unsolicited offer, an offer which Potash flatly rebuffed this morning, the strategy could also backfire; some analysts think a tie-up with Sinochem could hurt future flows and send Potash's stock price down as a result. Premarket: POT +1.6%, BHP +1.7% (7:00 ET).
• Blackstone bets on China's booming housing market. Blackstone Group (BX) reached a deal with Great Eagle, one of Hong Kong’s largest property developers, to build high-end apartments in China, marking Blackstone's first significant investment in China's booming housing market. The project will include more than 1,000 new homes and over 400 hotel rooms, and is consistent with Blackstone's efforts to focus its investments in developing markets, particularly China and India.
• Brookfield Infrastructure's prime acquisition. Brookfield Infrastructure Partners (BIP) will buy the 60% of Prime Infrastructure Group it doesn't already own in a deal that values the Australian firm at A$1.6B ($1.4B). The acquisition will create a global infrastructure company worth more than $2.5B. Premarket: BIP +3.8% (7:00 ET); Prime Infrastructure closed +20.8% in Australian trading.
• Foster's froths on beer buyout rumors. Shares of Foster's Group (FBRWY.PK) closed up 7.6% in Australian trading on speculation SABMiller (SBMRY.PK) or Japan's Asahi Breweries could make a bid for Foster's Group's beer operations. Sources said SABMiller and Asahi are still considering their options, and haven't yet decided whether to make formal offers which analysts expect to top $10B. Foster's announced earlier this year that it plans to split its beer and wine operations.
• Miners may be the winners in Aussie election saga. Australia's Labor Party failed to win a clear majority in the weekend's federal elections, marking Australia's first hung parliament in 70 years. This is potentially good news for miners, as a government formed by the Liberals would scrap the country's controversial mega-mining tax, which has already been watered down once. As political coalitions begin to take shape, keep an eye on firms like Rio Tinto (RTP), BHP Billiton (BHP) and Xstrata (XSRAF.PK). Premarket: RTP +1.9%, BHP +1.7%, AA +1.2% (7:00 ET).
• Campbell eyes the cookie jar. Campbell Soup (CPB) may make a £1.5B ($2.3B) bid for the biscuit-making operations of the U.K.'s United Biscuits. Private equity owners Blackstone (BX) and PAI Partners were considering selling the company for over £2B, according to earlier media reports, but apparently would consider a separate offer for the biscuit division because of lack of interest in the whole company.
• AIG aircraft unit repays $4B in aid. ILFC, AIG's (AIG) aircraft leasing unit, paid back nearly $4B in government aid after raising new debt from investors, sources said. The repayment reduced the principal balance of the government loan to just over $15B, its lowest level since the March 2009 restructuring of government aid.
• Content providers reluctantly embrace online viewing. Starting tomorrow, customers of Dish Network (DISH) will for the first time be able to watch television shows from several cable networks through Dish's new video portal website. The rollout signals a turnaround may be starting among content providers, who thus far have been relatively slow to adopt the "TV Everywhere" concept pioneered by Comcast (CMCSA) and Time Warner (TWX).
• Korean pension fund aims for U.S. pipeline stake. South Korea's state-run National Pension Service said it's looking to acquire a 23% stake in U.S. pipeline operator Colonial Pipeline from Chevron (CVX). Chevron puts its pipeline stake up for sale in March and will likely select a preferred bidder in the next couple weeks. The stake is valued at 1T won ($845M).
• Mortgage fraud creeps back. Mortgage fraud, which was on the decline in the two years after its 2006 peak, is on the rise again. In 2009, mortgage fraud was up 17%, accounting for $14B in loans, or roughly 0.7% of all mortgage loans made in the U.S. Though lawmakers did tighten lending rules after the housing market collapse, this hasn't deterred scammers as much as prompted them to create more complex schemes.
• Friday's failures. It was a busy Friday for regulators as they shuttered eight banks (I & II, III, IV, V & VI, VII, VIII), bringing this year's failure count to 118 so far. The closures, including ShoreBank of Chicago - the subject of a high-profile bank rescue in May - are expected to cost the FDIC's deposit insurance fund a total of $473.5M.
Concerns about the strength of the recovery have intensified in recent weeks, with weak economic data adding to the cautious tone and depressing trading volume levels.
U.S. stocks slipped on Friday and the S&P 500 and Dow fell for a second straight week on persistent concerns the recovery has tapered off. For the week, the S&P 500 was down 0.7 percent and the Dow slipped 0.9 percent, while the Nasdaq gained 0.3 percent on some positive outlooks in tech shares.
"The markets are still extremely nervous about the prospects for the U.S. economy and if anything the downturn in U.S. indicators in the past two months or so has been the key driver of global markets over that period," said Philip Shaw, chief economist for Investec Securities in London. Tuesday's home sales data would be key, he said.
Even so, major indexes pared losses from Friday's session lows as some investors homed in on positive outlooks in the tech sector and used recent M&A news as an excuse for late-day buying. Potential acquisitions are a sign companies are confident the economy will grow and business will improve in the coming quarters.
U.S. economic reports later this week will be closely watched to see if they can break a run of disappointing numbers. Many reports recently have shown growth in the domestic economy is slowing. That has reignited worries that the U.S. economy could fall back into a recession and curb a global recovery.
Last Thursday's report on weekly claims for unemployment benefits was particularly troubling because claims jumped to their highest level since November. That sparked a two-day sell-off in stocks to end the week.
High unemployment remains the biggest obstacle to a stronger recovery. Analysts widely believe, though, that high unemployment will remain for a while because companies are still tentative about economic growth and unsure about potential increases in taxes and costs from health care reform passed earlier this year.
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