Market Outlook
Tuesday, November 30, 2010

• 7:45… ICSC Retail Store Sales

• 8:30… ISM New York Business Index

• 8:55 … Redbook Chain Store Sales

• 9:00… S&P Case-Shiller Home Price Index

• 9:45 … Chicago PMI

• 10:00… Consumer Confidence

• 10:00 … State Street Investor Confidence Index

• 12:30 PM… Fed's Kocherlakota: Monetary and Fiscal Policy

• 3:00 PM… Bernanke: Conversation on the Economy

• 3:00 PM… USDA Ag. Prices

• 6:00 PM… Fed's Lacker: The Future of Finance

Also the following companies are reporting their quarterly earnings:-

• Barnes & Noble Inc. (BKS), Trina Solar Limited (TSL), and OmniVision Technologies Ltd. (OVTI).

At 0951 GMT, futures for the Dow Jones DJc1, S&P 500 SPc1 and Nasdaq NDc1 were down between 0.2 and 0.5 percent.

Stocks cut losses late in the day Monday, ending the session lower but holding above the 11,000 point level on the Dow.

The market has been whipsawed recently by worries about troubled European economies such as Ireland, Portugal and Spain, as well as the uncertain military situation on the Korean Peninsula.

The outlook for the U.S. economy will be back in the spotlight Tuesday with reports due on the housing market, manufacturing activity and consumer confidence.

Consumer Confidence

The Conference Board's index of consumer attitudes for September is expected to show a steady, if plodding improvement, with the average of 60 analysts Reuters polled calling for a rise to 52.6, from 50.2 in October and a revised 48.6 in September. U.S. consumer confidence has been picking itself up from historically low levels, where it has been hostage to weak labour markets.

S&P Case-Shiller Home Price Index

Also due is the S&P Case Shiller report on prices in 20 major U.S. real estate markets, which is expected to show a 1.1 percent rise from a year ago. On a month-by-month basis though, prices are expected to have stayed soggy, slipping 0.3 percent the same rate of decline as was seen in August.

Chicago PMI

A measure of manufacturing in the Chicago area is expected to show that activity slowed slightly in November. Economists expect the November reading of Chicago PMI to fall to 59.6 from 60.6 in October. Any index reading over 50 indicates expansion.

Ben Bernanke

Investors will take in comments from Federal Reserve chairman Ben Bernanke, who is scheduled to speak before a gathering of Ohio business leaders in Columbus.

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

• The Dow Jones Industrial Average (DJIA) rebounded from a triple-digit loss on Monday, as a late-session rally helped the blue chip barometer to reclaim psychological support at the 11,000 level. It was the DJIA's fourth such rebound in nine sessions.

Given the poor disposition of U.S. stock futures heading into the open, Wall Street bulls will be pressured to extend this streak.

• The S&P 500 Index (SPX), the broad-market index,
is facing a similar technical showdown, with the broad-market index bouncing along support in the 1,175 area.

Both the DJIA and the SPX are at risk of ending the month with losses.

• The U.S. Dollar Index : Currency traders continue to punish the euro this morning, with fears of European debt contagion running rampant across the region. So far this morning, the euro has broken below the $1.30 level, the currency's first breach of this region since September. Weakness in the euro has translated into strength for the greenback, as the U.S. Dollar Index has added 0.41% to trade at 81.17 in premarket activity, placing the index in contention with former support/resistance in the 81.50 region.

• Gold futures for December delivery rose $8 to $1374 an ounce.

• Benchmark crude futures for January delivery fell 31 cents to $85.42 a barrel.

• Bonds: The price on the benchmark 10-year U.S. Treasury rose, pushing the yield down to 2.78% from 2.82% late Monday.

• Equity option activity on the Chicago Board Options Exchange (CBOE) saw 964,930 call contracts traded on Monday, compared to 682,920 put contracts. The resultant single-session put/call ratio arrived at 0.71, while the 21-day moving average rose to 0.60.

Now that Ireland's debt situation is being handled by a EU-backed financial aid package, eyes have now turned to Spain and Portugal. Yields on both Spanish and Portuguese bonds struck new highs overnight as many widely expected these two Mediterranean would be next in line to need financial assistance.

Many traders have expressed concerns about Spain's financial situation, saying its economy is considerably larger than Ireland, Greece and Portugal.

Currencies: The dollar was up against the pound and the euro, but fell slightly against the yen.

The euro skidded to 10-week lows against the dollar on Tuesday after a rescue package for Ireland failed to dampen speculation that other bailouts will be needed in the euro zone.

European Markets

European stocks rallied. Britain's FTSE 100, the DAX in Germany and France's CAC 40 were all up less than 1%.

• In Europe at midday, London +0.2%. Paris -0.1%. Frankfurt +0.6%.

Asian Markets

Earlier, Asian markets fell. The Shanghai Composite, the Hang Seng in Hong Kong and Japan's Nikkei all ended lower.

• In Asia, Japan -1.9% to 9937. Hong Kong -0.7% to 23008. China -1.6% to 2820. India +0.6% to 19521.

As of 6:55 a.m. in New York, the Dow Jones Industrial Average futures were down 20 points to 11019, the S&P 500 futures fell 2 points to 1184.50 and the Nasdaq 100 futures fell 3.75 points to 2141.75.

• Futures at 7:00: Dow -0.1%. S&P -0.1%. Nasdaq -0.2%. Crude -0.5% to $85.32. Gold +0.6% to $1373.60.

Pharmaceutical concern Merck & Co. Inc. (MRK) announced that Kenneth C. Frazier has been appointed as chief executive officer and president. Frazier will also serve on the company's board. The appointments are effective on Jan. 1, 2011.

Lowe's Companies Inc. (LOW) reiterated its 2010 earnings forecast for a profit of $1.37 per share to $1.40 per share. The company also backed its 2010 same-store sales growth forecast of 1% to 2%, as well as its total sales growth expectations of 3% to 4%. Analysts are currently looking for 2010 earnings of $1.41 per share. Lowe's also said that it will announce new strategies to "serve what it called more exacting consumers." "In no way are we stepping away from the retail operations that are the foundation of our success, but we recognize that the store experience alone is not enough for customers today," Chief Executive Robert Niblock said.

• ABB to buy Baldor. ABB Ltd. (ABB) announced it will buy Baldor Electric (BEZ), a maker of factory robots and electrical equipment, for $3.1B, and will also assume $1.1B of net debt. The $63.50/share deal, a 41% premium to Baldor's closing price yesterday, will "substantially improve ABB’s access to the industrial customer base in North America." The energy and power sector has been the most active for M&A this year, with $422B of deals to date.

• Google nears Groupon deal. Google (GOOG) is said to be nearing a deal to buy e-commerce coupon website Groupon for as much as $5B-6B, with an announcement possible as soon as this week. A deal valuation that high would make this Google's largest acquisition to date, and some say a foolish one, as Groupon's business model is seen as fairly easy to duplicate. The valuation is also twice as high as previous whispers about the deal had suggested. Google is undoubtedly betting that becoming the market leader in the fast-growing market of locally-tailored discounts will ultimately prove lucrative. Yahoo (YHOO) had also been interested in Groupon, sources said, but its bid range of around $2B was deemed too low. Premarket: GOOG -0.9% (7:00 ET).

• Google faces EU antitrust probe. The European Commission is launching a formal antitrust investigation into whether Google (GOOG) has abused its position as the dominant player in online search. The probe was prompted by complaints from other online search providers that Google had put them at an unfair disadvantage.

• Seagate ends bid to go private. Seagate Technology (STX) called off discussions with private-equity firms over possibly selling itself, telling shareholders the valuations didn't appear to be sufficiently attractive. Instead, Seagate will begin a $2B share repurchase. The company also released some projections for the December 2010 quarter, and expects revenue of $2.7B and a gross margin of at least 19.5% vs. analysts' expectations of 19.12%. Shares closed -6% in after-hours trading.

• Insider-trading probe expands, but targets still unclear. Diamondback Capital Management, among the hedge funds searched by the FBI last week, said the raid was focused on one of its employees, who was put on leave. Diamondback also disclosed that it received a federal grand jury subpoena and is cooperating with a probe that includes research consultants but was told by the government it isn’t the target of the probe. Attorney General Eric Holder confirmed a criminal investigation into Wall Street insider trading is 'ongoing' and 'very serious,' but declined to provide details. Sources also said Gerson Lehrman Group, the nation's largest 'expert-network firm,' could be drawn into the probe as well.

• Level 3 slams Comcast. Level 3 (LVLT) issued a strongly-worded statement late yesterday accusing Comcast (CMCSA) of threatening the open internet and abusing its market dominance. Comcast informed the company last week that it would begin collecting a recurring fee for the transmission of certain web content, and Level 3 said it felt it has no choice but to comply despite the 'violation in spirit' of net neutrality. Comcast's decision could cause damage to Level 3, which recently won a deal to help Netflix (NFLX) deliver its shows, and could impact Comcast's proposed takeover of NBC Universal (GE).

• Morgan Stanley's CICC stake to change hands. China International Capital Corp (CICC), China's top investment bank, won regulatory approval for a shareholding change involving a stake of more than 5%. The statement by Chinese regulators didn't specify which shareholder was involved, but a CICC spokeswoman said "we do not deny that it has to do with Morgan Stanley." Sources said private-equity firms KKR (KKR) and TPG Capital plan to buy stakes of around 11% each from Morgan Stanley (MS) for a total value of around $1B. Morgan Stanley has been working to dispose of its 34.3% stake.

• BP commits to oil sands project. BP (BP) is pushing ahead with a controversial plan to extract oil from Canadian sands, calling it a 'significant milestone' as JV partner Husky Energy (HUSKF.PK) gave the green light for the project's first phase. Environmentalists are likely to protest, as are some shareholders since BP owns 50% of the venture but will completely fund the first $2.5B spent on the project. This is BP's first large new commitment since the Deepwater Horizon disaster in April. Premarket: BP -1.55% (7:00 ET).

• Toyota to fix Prius flaw. Toyota (TM) will pay to fix around 650,000 Prius hybrids worldwide because of a glitch that could cause the car to overheat and lose power. The repair campaign is not a formal recall, and Toyota said the flaw poses no safety risk. Premarket: TM -1.6% (7:00 ET).

• Obama calls for federal pay freeze. Federal workers are less than thrilled with President Obama this morning, after his call yesterday for a two-year pay freeze for federal civilian employees. The White House said the action is expected to save $2B for the rest of fiscal 2011; a nice number on paper, perhaps, but just a drop in the bucket next to this year's estimated $3.8T budget.

U.S. stocks fell on Monday but finished well off their lows of the day as the dollar retraced some of its earlier gains and energy and financial stocks rallied late in the session.

The Dow Jones industrial average .DJI dropped 0.4 percent; the Standard & Poor's 500 Index .SPX fell 0.1 percent; the Nasdaq Composite Index .IXIC lost 0.4 percent.

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