Market Outlook
Friday, November 26, 2010

Friday has very little in the way of economic reports scheduled. The following is all that is happening:-

• There are no major economic reports scheduled for Friday.

  • 1:00 PM… Markets close early

  • 4:30 PM … Money Supply

  • 4:30 PM … Fed Balance Sheet

Also the following companies are reporting their quarterly earnings:-

• There are no major earnings reports scheduled for Friday.

friday outlook

Friday sees U.S. stocks headed for a weak open to a shortened trading day after a drop in overseas markets besieged by ongoing eurozone debt worries.

Dow Jones industrial average (INDU), S&P 500 (SPX) and Nasdaq (COMP) futures were all lower ahead of the opening bell. Futures measure current index values against perceived future performance.

Stock futures took a big hit this morning, signaling Wall Street is in store for a rocky start as the euro renewed its steep descent against the U.S. dollar and the markets mull the kickoff to the holiday-shopping season.

Trading volumes are expected to be light, with many investors absent for the Thanksgiving holiday. All U.S. markets were dark Thursday and will close Friday at 1 p.m. ET.

Retail stocks will be on the radar, as consumers across the nation flock to stores for Black Friday related deals. The day after Thanksgiving is one of the most lucrative for retailers, as this is time when most hope to move "into the black" for the year.

Notes of Importance

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

The Dow Jones Industrial Average (DJIA) rallied more than 150 points heading into the Thanksgiving holiday, but the blue chip barometer is on the verge of erasing nearly all of those gains this morning.

Black Friday could see Wall Street slip deep into the red, as the DJIA plunges toward the 11,100 region.

The S&P 500 Index (SPX) eyes support at the 1,180 level.

The U.S. Dollar Index: The U.S. dollar continues to flex its muscles as a safe-haven investment amid euro zone debt concerns, placing downward pressure on dollar-denominated commodities. At last check, the U.S. Dollar Index was up 0.80% at 80.39 - the index's first trip above the 80 level since late September.

Benchmark crude futures for January delivery slipped 74 cents to $83.12.

Gold futures for December delivery dropped $7.20 to $1,365.8.

Bond: The price on the benchmark 10-year U.S. Treasury dropped, pushing the yield up to 2.88%.

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 994,971 call contracts traded on Wednesday, compared to 514,857 put contracts. The resultant single-session put/call ratio arrived at 0.52, while the 21-day moving average slipped to 0.57.

Overseas Concerns

The latest aversion to the euro comes as the European Union denied putting pressure on Portugal to accept a bailout similar to the ones Greece and Ireland have already agreed to. The cost to insure Portugal's bonds have hit record highs as the markets bet the slow-growing country's debt woes will continue.

The markets were also rattled by the tensions in Asia as explosions were heard overnight near the North Korean coastline just days after North Korea fired artillery rounds into South Korea. According to reports, it's not clear yet whether the new sounds were the result of new fire.

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

All eyes were on the euro once again as the currency tumbled 1% to $1.3214 against the dollar to fresh two-month lows amid continued fears about the European sovereign debt crisis. A stronger dollar is seen as a negative for stocks because it puts pressure on commodities and exports.

European Markets

European share markets were lower across the board. Britain's FTSE 100 lost 1.2%, the DAX in Germany dropped 1.2% and France's CAC 40 dipped by 1.4%

In Europe, at midday, London -1.7%. Paris -1.7%. Frankfurt -1.4%.

Asian Markets

Earlier in Asia, markets ended lower. The Shanghai Composite slipped 0.9%, the Hang Seng in Hong Kong dropped 0.8% and Japan's Nikkei lost 0.4%.

In Asia, Japan -0.4% to 10040. Hong Kong -0.8% to 22877. China -0.9% to 2872. India -0.9% to 19137.

Futures Trading

• As of 6:22 a.m. ET, the Dow Jones Industrial Average futures fell 92 points to 11062, the Standard & Poor's 500 futures slid 11.80 points to 1184.70 and the Nasdaq 100 futures declined 19.80 points to 2138.20.

Futures at 7:00: Dow -0.8%. S&P -0.9%. Nasdaq -0.9%. Crude -1.2% to $82.89. Gold -0.9% to $1360.10.


Company News

Del Monte Foods (DLM), the pet food and consumer products manufacturer, agreed on Thursday to be purchased by a group of investors led by private equity firm KKR (KKR) in a deal worth $5.3 billion. The buyers will pay $19.00 per share in cash -- a premium of roughly 40% over Del Monte's share price, before rumors of the deal elevated shares in recent weeks.

CPI International Inc. (CPII) agreed to be purchased by an affiliate of private equity firm Veritas Capital for $19.50 per share in cash - a premium of 35% over Wednesday's close. CPI said the deal is valued at around $525 million.

Harbinger Capitalcut its stake in New York Times (NYT), according to a regulatory filing. Harbinger reduced its stake in the newspaper to 2.58%. Prior to the move, a filing in October revealed that Harbinger held a 7.41% stake in the company.

Retailers will be front and center today. Traders will be focusing on big names such as Inc. (AMZN), eBay Inc. (EBAY), Wal-Mart Stores Inc. (WMT), Target Corp. (TGT), Best Buy Co. Inc. (BBY), as data begins to trickle in from the front lines on Black Friday.

Some Interesting News

Boeing turkeyed by another Dreamliner delay. Boeing (BA) plans to make 'minor design changes' to the electrical system of its troubled and heavily-delayed 787 Dreamliner, after an in-flight fire and power failure on a test flight earlier this month that was "most likely caused by the presence of foreign debris." A new delivery schedule will be finalized in the next few weeks, and no word yet on when Boeing plans to resume test flights.

POSCO, KT add stuffing to bid in Woori auction. POSCO (PKX) and KT Corp. (KT) have reportedly joined a consortium led by Woori Finance Holdings (WF) to bid for South Korea's 57% stake in Woori. The stake in South Korea's biggest financial services firm is valued at over $6B, and the government plans to close its first round of bidding today in one of the final steps in completing its bank privatization plan.

Germany wants just desserts for debt-laden countries. The EU Commission suggested that the EU double the size of its €440B ($588B) bailout fund for eurozone governments, but sources said Germany dismissed the idea. The EU Commission is concerned that the same debt woes and investor fears which forced Greece and Ireland to accept bailouts could fell larger nations like Portugal and Spain; the Commission's official position is that both Portugal and Spain can get by without a bailout, and Portugal's government flatly denied that it's under pressure by Europe to accept a bailout. Referring to the bailout fund, Germany's Angela Merkel said yesterday "everything will remain as it has been agreed to."

Retailers celebrate Thanksgiving, push Black Friday sales. Black Friday, the biggest shopping day of the year, got off to an early start, with some consumers queuing in line for hours ahead of store openings. Toys R Us CEO Jerry Storch summed up the feelings of many retailers, who are expressing a rare optimism after a long stretch of depressed sales: "I believe it’s going to be the biggest Black Friday we’ve had. Everyone has been focused on decreasing prices and these prices may never be repeated." However, with many of the consumers lured in by rock-bottom prices, it's unclear whether retailers' boost in sales will translate into a boost in profit.

Vale cooks up Hong Kong listing. Vale (VALE) reportedly received approval to list on the Hong Kong stock exchange, making it the first depository receipt to trade in Hong Kong. Bankers expect the development, a coup for the exchange, to pave the way for other global companies to issue depository receipts in Hong Kong. Sources said a listing is scheduled for early December.

Constellation Energy gives thanks after court approves power plant purchase. A U.S. bankruptcy court approved the sale of five Boston Generating LLC power plants to Constellation Energy (CEG) for $1.1B. Boston Gen had arranged the sale in August as part of its bankruptcy filing but needed court approval to finalize the deal.

Persistent deflation drives BoJ gravy. Japan's core consumer price index fell 0.6% from a year earlier, according to data released today, following a 1.1% decline in September. Though deflation has been easing since last summer, the pace of improvement has been slowing in recent months and the Bank of Japan's forecast for an end to deflation in the fiscal year starting next April looks unlikely. Since its benchmark interest rate is already effectively at zero, BoJ has little choice but to increase asset purchases if the economy and the price outlook deteriorate.

Stick a fork in Aussie rate hikes, for now. Reserve Bank of Australia Governor Glenn Stevens indicated this morning that interest rates could remain steady for the next few months, but suggested he wasn't done tightening policy as medium-term inflation risks were still high. The RBA will meet next on December 7.


With no economic reports or corporate results on the agenda, the few investors in the market will probably take their cues from developments overseas -- including the volatile situation on the Korean peninsula.

Concerns about the long-term debt problems facing some European economies have weighed on stocks in recent weeks. Investors are also worried about China's efforts to avoid an economic crash landing by curbing bank lending.

The bearishness threatens to erase nearly Wednesday’s entire 150-point rally on the Dow, which was fueled by generally upbeat economic indicators, including a fresh two-year low for initial jobless claims and an unexpected rise in consumer sentiment.

Friday's session could be marked by volatility as trading volumes are expected to be very light due to the Thanksgiving holiday and the fact the markets will close early at 1 p.m. ET.

Happy Thanksgiving Weekend!


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