Market Outlook
Wednesday, November 10, 2010

Wednesday has quite a few economic reports scheduled. They are:-

  • 7:00 …MBA Mortgage Applications

  • 8:30… Trade Balance

  • 8:30 …Initial Jobless Claims

  • 8:30… Import/Export Prices

  • 10:30… EIA Natural Gas Inventory

  • 11:00 …EIA Petroleum Inventories

  • 1:00 PM… Results of $16B, 30-Year Note Auction

  • 2:00 PM …Treasury Budget

Also the following companies are reporting their quarterly earnings:-

• Maidenform Brands Inc. (MFB), Macy's Inc. (M), Polo Ralph Lauren Corp. (RL), Sara Lee Corp. (SLE), and Cisco Systems Inc. (CSCO).

wednesday outlook

Wednesday sees U.S. index futures pointed to a slightly higher open on Wall Street, as investors anticipate a morning full of economic data.

Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were set to rise ahead of the opening bell.

Investors were cautious after European stocks fell in morning trade, tracking losses in commodity prices that were sparked by weak Chinese imports data and strength in the U.S. dollar.

Economic Concerns

Initial Jobless Claims

The Department of Labor releases its weekly jobless claims report Wednesday morning. The number of Americans filing new claims for unemployment last week is forecast to fall to 450,000, from 457,000 in the previous week, according to a consensus of economists surveyed by

U.S. Trade Balance

U.S. trade balance, also due in the morning from the Commerce Department, is expected to have narrowed to $44.8 billion in September, from $46.3 billion in August.

Other reports to be released before the bell include import and export prices, and weekly crude oil inventories. The October Treasury budget is on tap for Wednesday afternoon.

Notes of Importance

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

The Dow Jones Industrial Average (DJIA): Heading into the open, support for the DJIA has shifted to the 11,300 region, with potential resistance in the 11,400-11,450 region.

The S&P 500 (SPX)’s support lies at 1,210, with resistance near 1,220.

• The U.S. Dollar Index: The U.S. dollar remains front and center today, with the greenback gaining ground on the euro in the wake of renewed concerns for European debt. What's more, the dollar edged fractionally higher versus the Japanese yen. At last check, the U.S. Dollar Index was up 0.28% at 77.67.

Gold futures: for December delivery fell $10.80 to $1,399.70 an ounce.

Benchmark crude futures for December delivery gained 11 cents to $86.83 a barrel.

Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 2.68% from 2.66% late Tuesday.

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,628,409 call contracts traded on Tuesday, compared to 921,560 put contracts. The resultant single-session put/call ratio arrived at 0.57, while the 21-day moving average held at 0.58.

Overseas Concerns

China's central bank also rattled investors by ordering some banks to boost reserve requirements by 0.5 of a percentage point in an apparent move to curb rapid credit growth, three industry sources told Reuters on Wednesday.

Currencies: The dollar lost ground against the euro and British pound, but strengthened against the Japanese yen.

European Markets

European share markets edged lower in morning trading. Britain's FTSE 100 lost 0.3%, the DAX in Germany declined by 0.45 and France's CAC 40 slipped 0.6%.

In Europe at midday, London -0.5%. Paris -0.5%. Frankfurt -0.3%.

Asian Markets

Earlier in Asia, markets ended the session mixed. The Shanghai Composite dropped 0.6% and the Hang Seng in Hong Kong lost 0.9%, while Japan's Nikkei rose 1.4%.

In Asia, Japan +1.4% to 9831. Hong Kong -0.8% to 24501. China -0.6% to 3115. India -0.3% to 20876.

Futures Trading

As of 6:45 a.m. in New York, the Dow Jones Industrial Average futures were up 1 point to 11314, the S&P 500 futures were up 0.1 points to 1211.00 and the Nasdaq 100 futures rose 0.75 points to 2177.00.

Futures at 7:00am: Dow flat. S&P flat. Nasdaq +0.05%. Crude -0.3% to $86.49. Gold -1% to $1396.20.



Company News

International Game Technology (IGT) posted a fiscal fourth-quarter profit of $20 million or 7 cents per share, up from a loss of $29 million or 10 cents per share, last year. On an adjusted basis, the company would have earned $53 million or 18 cents per share. Revenue came in at $496 million. Wall Street was expecting a profit of 19 cents per share on revenue of $496 million.

MBIA Inc. (MBI) reported a third-quarter net loss of $213 million, or $1.06 per share. Last year, the firm lost $728 million, or $3.50 per share. MBIA said its adjusted pre-tax loss was $68 million in the latest period. Chief Financial Officer Chuck Chaplin said insured losses continued to moderate in the third quarter, versus the same periods of 2008 and 2009.

Tesla Motors, Inc. (TSLA) reported a third-quarter loss of $34.9 million, or 38 cents per share, compared with a loss of $4.6 million, or 66 cents per share, a year earlier. Sales came in at $31.2 million, down from $45.5 million, a year ago. Analysts were looking for a loss of 50 cents per share with sales of $31.4 million.

• Shares of financial institutions will be in focus after Britain's largest insurer Prudential Plc (PRU.L) on Wednesday reported a better-than-expected 17 percent rise in third-quarter sales, helped by strong growth in its flagship Asian markets.

Lenovo (0992.HK), the world's No.4 PC brand, posted its best profit growth in four quarters, helped by its mature markets returning to profitability but warned that growth in its key China market could slow.

Some Interesting News

Bankrupt Ambac sues the U.S. Ambac (ABK), which filed for bankruptcy on Monday, is suing the U.S. to block the seizure of $700M in tax refunds. The company said the IRS may try to recoup the refunds stemming from losses on credit default swaps, but that doing so could destroy Ambac's ability to reorganize while under bankruptcy protection. Ambac also reported unsurprisingly poor Q3 results yesterday.

FDIC favors small banks in new fee system. The FDIC is recalculating how much banks pay for deposit insurance, shifting the fee burden towards larger banks. Under the initial plan approved yesterday, banks with $10B or more in assets would pay 80% of total insurance fund fees, up from 70%, and most of the increase will be paid by banks with $100B or more of assets. Officials call the new system a 'sea change' that "breaks the link between deposit insurance and deposits for the first time," and smaller banks set to save billions of dollars in fees have cheered the move. Larger banks like Bank of America (BAC), Citigroup (C), JPMorgan (JPM) and Wells Fargo (WFC) are less pleased. The new system is slated to start April 1, 2011. In yesterday's trading: BAC -2.6%, C -3.1%, JPM -1.5%, WFC -3.1%.

ING plans two insurance IPOs. ING (ING) is planning two initial public offerings, instead of one, for its insurance unit in order to fulfill a requirement of its state bailout. CEO Jan Hommen said a Europe-focused insurance IPO would have a solid cashflow and strong growth positions in developing markets, while a U.S.-focused insurance IPO will have a strong position in retirement services. ING hopes the dual IPOs will allow it to achieve a higher valuation. The company also reported a six-fold increase in banking profit, though Q3 net income fell to €371M ($511M) and a planned change in accounting practices could lead to a €1B writedown next quarter. Premarket: ING +4.1% (7:00 ET).

Microsoft sues Motorola, again. Microsoft (MSFT) is once again suing Motorola (MOT) over patents, this time claiming that Motorola is charging excessive royalties for wireless and video coding patents that are used in Microsoft's Xbox. Last month, Microsoft sued Motorola for infringing smartphone patents, and the tech world in general has been lawsuit-obsessed in recent months, with suits and countersuits involving such heavyweights as Apple, Google, RIM (RIMM), Nokia (NOK) and others. Separately, a regulatory filing yesterday shows BlackRock (BLK), one of Microsoft's biggest shareholders, has cut its stake below 5%.

GGP is back in the game. Mall operator General Growth Properties (GGP) has emerged from bankruptcy, a year and a half after it filed for Chapter 11. The company has restructured $15B of debt and obtained $6.8B of equity capital and, unusually, managed to repay creditors in full while giving equity investors a 'substantial' recovery on their claims. GGP is commencing an offering of 135M common shares, and will use the proceeds to repurchase $1.6B of stock that was issued to hedge funds Fairholme Funds and Pershing Square Capital Management. GGP also announced it plans to begin paying a cash dividend in 2011 and has completed the spin-off of the Howard Hughes Corp. [HHC].

G-20 to opt for two-tier bank plan. The G-20 summit doesn't kick off until tomorrow, but is already causing controversy. Sources briefed on the summit's agenda said the group had concluded that major banks with global businesses will be subject to a stricter global regulatory regime while major banks primarily focused on their domestic markets will be exempt. This means many big banks in China and Japan will fall under the supervision of domestic regulators only. The Financial Stability Board has been putting together a list of the roughly 20 global banks which will be subject to stronger regulatory scrutiny and required to hold more capital, with the original draft list including such banks as GS, JPM, BAC, MS, C, HBC, BCS, RBS, UBS, CS, STD, BBVA, DB, and ING.

Partial dismissal of Citi suit. A judge dismissed part of a shareholder lawsuit against Citigroup (C) alleging securities fraud, but will allow the investors to pursue claims related to the bank's CDOs from a fifteen-month period in 2007-2008. Shareholders claim that Citigroup misled them by understating its subprime exposure via its CDOs. Citi plans to "defend the balance of this case vigorously."

More turbulence for Boeing's Dreamliner. A Boeing (BA) Dreamliner had to make an emergency landing yesterday after the crew reported smoke in the cabin during a test flight, according to the FAA. Sources said crew members had reported a fire, possibly in the plane's rear electronics bay, before experiencing at least a partial power failure. Boeing declined to comment, other than to say it's gathering data on the incident. It's unclear whether this latest setback for Boeing's Dreamliner will further delay the plane's delivery timetable, which is already three years behind schedule.

Singapore switches out Airbus engines. In further airline news, Singapore Airlines will replace engines on three of its Airbus (EADSY.PK) A380 planes after finding oil stains on them, just days after Qantas grounded its A380 fleet because of an engine failure. Singapore Airlines stressed the move was cautionary and unrelated to Qantas' problems, but the move will likely cause further damage to engine-maker Rolls-Royce Group (RYCEY.PK).

Goldman fined for disclosure delays. The Financial Industry Regulatory Authority fined Goldman Sachs (GS) $650,000 for failing to disclose in a timely manner that it had received notices that two employees were facing government probes. The window for reporting employees' receipt of Wells notices from the SEC is thirty days, but it took Goldman more than seven months to disclose that Fabrice Tourre had received such a notice. Goldman neither admitted nor denied wrongdoing.

EPA subpoenas Halliburton. The EPA subpoenaed Halliburton (HAL), noting that of the nine companies that practice hydraulic fracturing in natural gas drilling, Halliburton is the only one that has declined to provide information requested by the agency as it works to determine the safety of 'fracking.' Halliburton responded that the EPA's demands are 'unreasonable,' requiring the company to prepare around 50,000 spreadsheets of data, and that the company has been working 'in good faith' with regulators to provide the required documentation.

TiVo sinks on appeal case suspense. Share of TiVo (TIVO) fell a hefty 15% yesterday as the company awaits the results of a patent infringement appeal. TiVo's lawyers appeared in a U.S. appeals court yesterday to argue that EchoStar (SATS) and Dish Networks (DISH) violated a previous court injunction that protected TiVo's intellectual property. The court's decision could impact TiVo's viability, while some analysts say a favorable ruling could boost TiVo's shares to $19 from a recent $9.60 and help the company in related litigation.


Wall Street fell for a second day on Tuesday as selling accelerated into the close, led by sharp losses in bank and metal stocks.

The gold rush pressed forward as the precious metal hit another record high, along with several other commodities.

The Dow Jones industrial average .DJI slid 60.09 points, or 0.53 percent, to 11,346.75. The Standard & Poor's 500 Index .SPX dropped 9.85 points, or 0.81 percent, to 1,213.40. The Nasdaq Composite Index .IXIC lost 17.07 points, or 0.66 percent, to close at 2,562.98.


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