Market Outlook
Monday, November 29, 2010

Monday provides only a couple of basic economic reports. The following is the schedule:-

  • 10:30… Dallas Fed Mfg. Outlook

  • 12:00 PM … Chicago Midwest Mfg. Index

  • 1:30 PM … St. Louis Fed event: Consumer Financial Protection

Also the following company is reporting its quarterly earnings:-

• Inergy, L.P.

monday outlook

Monday sees U.S. stocks set for a mixed open as investors reacted to news of an €85 billion bailout of Ireland.

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

The nation's major retailers will be in the spotlight Monday following this year's Black Friday, which is typically one of the biggest shopping days of the year. Initial observations appear to be positive, with Macy's (M) and Target (TGT) both saying that traffic was well above 2009's levels.

According to BigResearch, a research organization that tracks the industry, approximately 212 million people shopped over the weekend up from last year's 195 million. The average shopper spent 6.4% more than they did a year ago, BigResearch said.

Economic Concerns

Investors are bracing for a number of high-profile economic indicators this week -- including the government's all-important monthly jobs report on Friday.

Notes of Importance

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

The Dow Jones Industrial Average’s (DJIA) retreated nearly 100 points on Friday, closing below its 10-day moving average and the 11,100 level in the process. What's more, the Dow appears poised to extend those losses today.

Look for the DJIA to potentially test support at the 11,000 level once again, with resistance holding firm at 11,200.

The S&P 500 Index (SPX) has support at 1,175 and resistance near 1,200.

The U.S. Dollar Index: The Irish bailout is also having a negative effect on the euro this morning. In fact, the European currency was last seen hovering near a fresh two-month low versus the U.S. dollar. Against this backdrop, the U.S. Dollar Index has gained 0.29% to trade at 80.59 in premarket activity, the index's highest level since Sept. 21.

Crude Oil futures for January delivery increased 61 cents to $84.37 a barrel.

Gold futures for December delivery rose $3.50 to $1,358.90 an ounce.

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

Equity option activity on the Chicago Board Options Exchange (CBOE) saw 425,612 call contracts traded on Friday, compared to 280,807 put contracts. The resultant single-session put/call ratio arrived at 0.66, while the 21-day moving average held at 0.57.

Overseas Concerns


European officials on Sunday announced an €85 billion bailout of Ireland and its banks. They also detailed a new protocol for similar rescues of European nations in the future.

The move raised worries about the stability of the European Union if other member nations require emergency financial aid. Portugal has emerged as the next likely candidate for a bailout, while investors are particularly worried about the outlook for Spain -- one of the EU's largest economies.


The eruption of violence on the Korean Peninsula last week, has added an additional source of uncertainty to the market.

In currencies: The dollar strengthened against the euro, but fell against the Japanese yen and the British pound.

The euro hovered near two-month lows against the dollar on Monday as investors looked past the rescue package to debt problems in other peripheral euro zone economies.

European Markets

European stocks rose in morning trade, in a rollercoaster session as a rescue deal for Ireland failed to dissipate worries that the country's debt crisis could spread to other euro zone economies.

European share markets were lower. Britain's FTSE 100 slipped 0.2%, the DAX in Germany dropped 0.6% and France's CAC 40 lost 0.8%.

Europe at midday, London -0.3%. Paris -0.6%. Frankfurt -0.6%.

Asian Markets

Earlier, Asian markets ended the session mixed. The Shanghai Composite lost 0.2%, while the Hang Seng in Hong Kong gained 1.3% and Japan's Nikkei rose 0.9%.

In Asia: Japan +0.9% to 10126. Hong Kong +1.3% to 23166. China -0.2% to 2866. India +1.4% to 19405.

Futures Trading

As of 6:55 a.m. in New York, the Dow Jones Industrial Average futures rose 12 points to 11042, the S&P 500 futures were up 3.1 points to 1186.30 and the Nasdaq 100 futures rose 1.5 points to 2147.50.

Futures at 7:00: Dow +0.2%. S&P +0.25%. Nasdaq +0.1%. Crude +0.6% to $84.27. Gold -0.2% to $1359.80.



Company News Inc. (AMZN) and eBay Inc. (EBAY) should attract a wealth of attention today, with "Cyber Monday" in full swing. AMZN tagged a fresh all-time high of $178.38 on Friday, before pulling back to close at $177.20.

Kraft Foods Inc. (KFT) initiated an arbitration proceeding to challenge Starbucks Corp.'s (SBUX) attempt to end its retail grocery coffee business with the firm. Kraft says that under the agreement, Starbucks must compensate it for the fair market value of the business plus a premium of up to 35%.

Cardinal Health Inc. (CAH) announced that it purchased privately held Zuellig Pharma China for $470 million. The acquisition is expected to add to Cardinal's adjusted 2011 earnings. Cardinal assumed about $60 million in debt as part of the deal.

Some Interesting News

BP sells $7B Pan American stake. BP (BP) agreed to sell its 60% stake in Argentina-based oil and gas company Pan American Energy to Bridas Corp. for $7.06B in cash. Bridas, which is half-owned by CNOOC (CEO), already owns the other 40% of Pan American. BP said the sale is part of its plan to divest up to $30B of assets by the end of 2011 to help cover costs related to the Gulf of Mexico spill; this sale brings BP's divestitures to $21B. Premarket: BP -1% (7:00 ET).

Ireland details aid package. Ireland's aid package came in at €85B ($114B), as expected, with €67.5B coming from the EU and IMF and carrying an average interest rate of 5.8% with an average duration of 7.5 years. Subordinated bank bondholders may have to take 'big haircuts,' said Irish Finance Minister Brian Lenihan, adding "I don't believe there were any other real options. We are not an irresponsible country" and leaving the euro or defaulting on bank bonds was unrealistic. Irish banks will get as much as €35B of the aid funds, and Ireland will provide €17.5B from its own reserves. Premarket: AIB +12%, IRE +20.8% (7:00 ET).

France, Germany defend euro. French government spokesman Francois Baroin was steadfast in his defense of the euro this morning: The Irish bailout is "a measure which is not simply a single shot taken in response to an important crisis, it forms part of the absolute determination of Europe — of France and Germany – to save the eurozone. [The euro] is an instrument which will not be taken hostage." Eurozone ministers also backed a long-term mechanism intended to prevent the debt crisis from tearing the zone apart; the new European Stability Mechanism outlined yesterday would make private investors accept losses in the case of a debt default or restructuring, but it would apply only to debt issued after 2013. Investors remain unsettled. Euro -0.8% vs. the dollar (7:00 ET).

Wal-Mart confirms Massmart move. Wal-Mart (WMT) confirmed it made a formal $2.3B offer for a 51% stake in Massmart (MMRTY.PK), a discount retailer in South Africa. Massmart's board recommended shareholders accept the deal, which will help Massmart speed up its sub-Saharan Africa expansion and give Wal-Mart a head start in the region over European rivals Carrefour (CRERY.PK) and Tesco (TSCDY.PK).

Black Friday, Cyber Monday in spotlight. Shoppers hit the stores in droves on Black Friday, and around 212M shoppers visited a store or retail website over the weekend, an 8.7% increase from last year. However, Black Friday retail spending rose only 0.3% from the previous year, to $10.69B from $10.66B, as a more discriminating public shopped more carefully for discounts and bought more goods online. E-commerce sales rose 28% from the previous year, with Amazon (AMZN) posting a Black Friday sales jump of 82.3%, and e-retailers may continue to see gains during today's 'Cyber Monday' sales. Stocks to keep an eye on today: AMZN (+0.7% premarket), EBAY, TGT, SPLS, M, JCP, KSS, TJX, BBY and the like...

Shell looks to sell Texas gas fields. Royal Dutch Shell (RDS.A) has reportedly put its South Texas gas fields up for sale in an auction that could bring the company around $1B. An energy-focused private-equity firm or master limited partnership are seen as the most likely buyers. The sale of Shell's 400 South Texas wells are part of a portfolio-restructuring effort which includes the divestiture of $7B-8B of assets through 2011.

Greenergy angles for Total's U.K. gas stations. Greenergy has reportedly launched a £1B-plus ($1.6B) bid to buy Total SA's (TOT) 780 gas stations in the U.K. Greenergy CEO Paul Lester said he has held preliminary discussions on the issue, and the company is also interested in buying 460 stations from U.S. oil firm Murco. Tesco (TSCDY.PK) holds a 35.6% stake in Greenergy. Premarket: RDS.A -1.1% (7:00 ET).

Philips CFO resigns. Royal Philips Electronics (PHG) said CFO Pierre-Jean Sivignon is leaving the company March 31 for 'personal reasons' and will be replaced by Ron Wirahadiraksa, who is currently the top financial executive at the company's healthcare arm. The timing is significant, since CEO Gerard Kleisterlee had already announced his plans to retire on April 1; the company will have to simultaneously handle the transition of both the CEO and CFO positions. Premarket: PHG +0.6% (7:00 ET).


Stocks tumbled in Friday's holiday-shortened session, with the Dow ending the week about 1% lower, as concerns about a broader debt crisis in Europe pressured markets around the world.

Even a better-than-expected turnout for Black Friday has fallen on deaf ears. According to the National Retail Federation, roughly 212 million shoppers visited a store or a website during the Black Friday weekend, 8.7% more than last year.

With Black Friday sales likely topping expectations, the spotlight on the retailing sector could intensify today. In particular, Macy's Inc.'s (M) flagship store in New York's Herald Square saw 7,000 shoppers waiting outside before the doors opened, compared with 5,000 last year, Chief Executive Terry Lundgren said in an interview with MarketWatch.



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