Wednesday has quite a few economic reports scheduled. They are:-
7:00… MBA Mortgage Applications
8:15 … ADP Jobs Report
8:30… ISM New York Business Index
9:00 … Fed's Duke: Credit Availability
9:00… Hearing: The Role of Derivatives in the Financial Crisis
9:45… Chicago PMI
10:30… EIA Petroleum Inventories
12:30 PM… Fed's Lockhart: Economic Outlook
Also the following companies are reporting their quarterly earnings:-
• Canadian Solar Inc. (CSIQ),
• Monsanto Company (MON) and
• Apollo Group Inc. (APOL)
Wednesday saw U.S. stock futures for the Dow Jones industrial average DJc1, the S&P 500 SPc1 and the Nasdaq 100 NDc1 rise 0.4 to 0.5 percent, pointing to a firmer start on Wall Street on Wednesday, after steep losses in the previous session.
Wall Street was poised to recover a small portion of yesterday's losses as a banking report out of Europe showed signs of recovery while U.S. investors waited for a private-sector jobs report.
The rise in stocks provides some relief at the end of an otherwise dreary quarter that saw major indexes plunge on fears that a global economic recovery would come to a halt. Futures are higher.
* Automatic Data Processing (ADP) releases its June employment report at 1215 GMT. Economists in a Reuter’s survey expect the report to show that 60,000 jobs were created in June versus 55,000 new jobs in May.
The ADP report is often seen as a precursor to the Labor Department's big monthly jobs report due out Friday. ADP's data only includes jobs created by private companies so it can vary widely from the Labor Department data, which also includes government jobs.
In fact, Friday's report is expected to show employers cut a total of 110,000 jobs in June. However, the net loss of jobs is tied primarily to the government laying off temporary workers that were hired to work on the 2010 census.
Traders will be focused more on the ADP report and the government's specific details about private sector hiring for signs that companies are more confident in the economy and starting to rehire workers.
Companies have been slow to add new jobs coming out of the recession, which has hurt the pace of a recovery. Consumer confidence has fallen and spending has not picked up as investors had hoped because there are so many people still out of work. Consumer spending is the primary driver of economic activity in the country.
Still any signs of job growth will likely be welcomed by investors, looking for some signs of improvement.
* At 1230 GMT, the Institute for Supply Management-New York releases June index of regional business activity. In May, the index read 449.3.
* The Institute of Supply Management Chicago releases at 1345 GMT Chicago index of manufacturing activity. Economists in a Reuter’s survey forecast a reading of 59.0 in the month compared with 59.7 in May.
*The Mortgage Bankers Association releases at 1100 GMT Weekly Mortgage Market Index for the week ended June 25 versus the prior week.
*U.S. Democrats are mounting a final push to send President Barack Obama their landmark overhaul of financial regulations, but the death of a colleague and cold feet among Republican allies could postpone a final victory.
The Energy Sector
BP oil spill: The season's first Atlantic hurricane is disrupting cleanup of BP's (BP) massive oil spill in the Gulf of Mexico, delaying plans to boost containment capacity and threatening to push more oily water onshore.
BP Going Back to Banks for More Funding
BP Plc (BP) has approached four major banks in an effort to raise money either through a private placement of debt and lines of credit, looking to raise as much as $10 billion sometime this week to help pay tens of billions of dollars in liabilities stemming from its massive oil spill in the Gulf of Mexico, FOX Business Network has learned.
It is unclear if the four firms said to be involved in the potential funding -- Goldman Sachs (GS), Citigroup (C), JPMorgan (JPM) and Bank of America (BAC) -- have agreed to raise money for the beleaguered oil company, or if they have sufficient investor demand for a private placement of debt. That option is attractive because BP would have to disclose far less information to investors about the massive liabilities it could face. The company has already agreed to pay $20 billion into a cleanup fund administered by the Obama administration, but private estimates of the total costs facing the company are much higher, leading several analysts to speculate that BP might seek bankruptcy protection.
A BP spokesman declined to comment on the new efforts to raise cash but a person close to the company said BP has risen close to $15 billion through a combination of asset sales and bank lines as of last week, and expects to raise at least $5 billion by the end of this week. Press officials at the four banks would neither confirm nor deny their involvement in the money-raising effort.
These additional funds are in part needed to drum up much needed cash not just for the company’s long-term liabilities, but because of what the company is spending now. BP is spending up to $100 million a day on the Gulf of Mexico oil spill clean-up and the company reported last week that is has already spent $2.65 billion on the spill response.
Adding to the claims, BP announced today that it would give a financial lifeline to owners, operators and suppliers of gas stations bearing the company’s name, and have been the targets of boycotts because of the Gulf Spill. In addition, more than 80,000 claims have been filed against BP and payments of more than $128 million have been made, according to the firm. That does not include the $20 billion fund set up for Gulf damages created in an agreement with President Obama.
BP has said it expects completion of two relief wells in August to seal the oil spill. So far the company confirms recovery of 435,600 barrels of oil since the disaster on the Deepwater Horizon rig on April 20.
Notes of Importance
There are a few further points to the mornings trading which need to be considered:-
• The Dow Jones Industrial Average (DJIA) plunged past the 10,000 level yesterday, dropping nearly 270 points to test its 2010 lows near 9,800. The blue-chip barometer paused briefly near the 9,900 region, but fear surrounding a weakening global economy proved too much. Should the market turn lower today, support might be found near 9,800 for the Dow.
• The S&P 500 Index (SPX) breached its 2010 nadir, to close at its lowest point since Oct. 20, 2009. Should the market turn lower today, support might be found near the 1,030 for the SPX.
• Gold futures are up a mere $1.50 at $1,243.90 an ounce in London.
• The U.S. Dollar Index is off 0.37% heading into the open due to the European Central Bank auction which has returned some confidence to world markets this morning, and traders are once again moving out of safe-havens, like currencies, and back into stocks.
• Benchmark crude futures are taking advantage of the drooping dollar, with the most-active contract up 50 cents at $76.44 per barrel.
• Bonds: Treasury prices fell, pushing the yield on the 10-year note up to 2.97% from 2.96% late Tuesday, the first time the yield has fallen below the critical 3% level since April 2009.
• Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,178,380 call contracts traded on Tuesday, compared to 927,616 put contracts.
• The CBOE Market Volatility Index (VIX) spiked more than 17% yesterday. However, the fear index was held in check by the 35 level. While we are far from out of the woods just yet, we may see a pullback in the VIX today, should pre-market equities trading carry over into the open.
European banks are due to repay 442 billion euros to the European Central Bank on Thursday.
The European Central Bank said Wednesday that a 442 billion euro alternative lending program designed to lend to banks who couldn't find credit elsewhere drew much less than expected demand during the past year the program has been in place.
Of the 442 billion euros available for one-year loans, only 131 billion was ever used the central bank said, a sign that despite the recent European debt crisis and the ongoing concerns about tight credit, banks are still able to find credit in the private sector.
The news lifted the European financial sector and the euro, which was up more than 0.8% on the news. Banks such as HSBC (HBS), Deutsche Bank (DB), Credit Suisse (CS) and UBS (UBS) were all broadly higher.
European share markets struggled but were in positive territory in morning trading. Britain's FTSE 100, France's CAC 40 and the DAX in Germany were all modestly higher in the early going.
• In Europe at midday, London +0.7%. Paris +0.8%. Frankfurt +0.6%.
The pan-European FTSEurofirst 300 .FTEU3 index of top shares was up 0.1 percent at 996.90 points by 0858 GMT, as investors picked up beaten down stocks after equities fell to a three-week closing low on Tuesday.
The euro used by 16 European Union members, rose Wednesday after the European Central Bank said it will lend European banks $161 billion to help refinance loans coming due.
The euro, which has become a proxy for confidence in Europe's economy, rose to $1.2287. But, it has dropped about 9 percent this quarter.
The euro rebounded after two days of steep losses, but investors remained worried about the global recovery and concerned the European Central Bank may be pulling back emergency funds too quickly.
Earlier in Asia, economic woes continued to hammer markets, where stocks extended losses. The Shanghai Composite lost 1.1%, Japan's Nikkei tumbled 2% and the Hang Seng in Hong Kong declined 0.6%.In Asia, Japan -2.0% to 9383. Hong Kong -0.6% to 20129. China -1.2% to 2398. India +0.9% to 17701.
As of 6:30 a.m. in New York, the Dow Jones Industrial Average futures added 68 points, or 0.69%, to 9865 the S&P 500 futures rose 8.2 points to 1043.50 and the Nasdaq 100 futures were up 11.5 points to 1775.00.
Futures: Dow +0.5%. S&P +0.7%. Nasdaq +0.55%. Crude +0.8% to $76.54. Gold +0.1% to $1244.10.
• General Mills Inc (GIS) reported earnings of 41 cents per share on revenue of $3.6 billion. Analysts were expecting a profit of 41 cents per share on revenue of $3.55 billion. GIS results fell slightly short of those from the year-ago period, when the company posted a profit of 43 cents per share on $3.65 billion in revenue.
• Sanofi-Aventis (SASY) is to buy U.S. biotech TargeGen Inc., which is developing treatments against blood diseases, for as much as $560 million as part of the French drugmaker's drive to boost its cancer treatments.
• Sealy Corporation (ZZ) reported a second-quarter profit of 2 cents per share on revenue of $316.5 million. The results were just shy of the consensus estimate for a profit of 2 cents per share on revenue of $319.86 million.
Some Interesting News
• The Boeing Company (BA) announced that it is buying combat-systems provider Argon ST (STST) for $34.50 per share, or about $775 million. The transaction is expected to close by the end of the third quarter, pending regulatory approval. "Combining the strength of Boeing with the experience of Argon ST will significantly accelerate our capabilities in sensors, communications technologies and information management," said Dennis Muilenburg, chief executive of Boeing Defense, Space & Security.
• Google Inc (GOOG) said it will end the automatic redirection of users from its China portal within the next 24 to 48 hours, while Beijing kept silent on whether the move would allow Google to keep its China business.
• A U.S. commission is planning to focus on the ties between Goldman Sachs Group Inc (GS) and American International Group Inc (AIG), and how derivatives transactions between the two financial giants may have contributed to the financial crisis.
• Celgene buys Abraxis. Celgene (CELG) agreed to buy Abraxis BioScience (ABII) in a cash-and-stock deal that values the firm at $2.9B. For Celgene, the purchase will provide access to Abraxis' oncology treatments, including Abraxane, for breast cancer patients. The deal is a 17% premium to Abraxis' closing price yesterday.
• Sanofi-Aventis picks up TargeGen. In another acquisition related to oncology treatments, Sanofi-Aventis (SNY) will buy closely-held TargeGen to add treatments for certain forms of leukemia and blood disorders. Sanofi will pay $75M at the deal's close, and additional payments at different stages of drug development. All told, Sanofi's payments could reach as much as $560M.
• Lawmakers scrap bank fee. Congressional Democrats abandoned a controversial proposal in the financial reform bill that would have levied a $19B tax on the country's largest banks and hedge funds. Several Republicans who are crucial to the bill's passage were uncomfortable with the tax, which was added to the bill at the last minute. Instead, lawmakers will offset the bill's costs by winding down TARP early and assessing a $5.7B fee on banks through the FDIC.
• Telefonica ups Vivo bid. Telefonica (TEF) raised its bid for Vivo (VIV) for the second time, ahead of Portugal Telecom's (PT) shareholder meeting today. The offer is now €7.15B ($8.7B) for PT's share of their Vivo joint venture, a 10% increase from Telefonica's earlier bid. It's unclear whether the sweetener will be enough to convince PT's core shareholders, who have opposed a deal thus far. Premarket: TEF +2.4%, PT +6.4% (7:00 ET).
• ECB tender demand lower than expected. The ECB's tender was met with low demand today, a positive reflection on banks' abilities to raise money from capital markets. A total of €131.93B ($160.92B) in funds were allotted with a 91-day maturity, at a fixed rate of 1%, well shy of forecasts that had run as high as €250B. The news helped lift European markets and the euro: London +0.8%, Paris +1%, Frankfurt +0.5%, Spain +2.1%, euro +0.8% vs. the dollar (6:00 ET). In the banking sector, premarket: UBS +2%, STD +4.5%, LYG +1.5%, CS +1.9%, BCS +4.8%, HBC +1.4%.
• AstraZeneca rises on court ruling. A U.S. District Judge ruled that a patent on the active ingredient in AstraZeneca's (AZN) Crestor cholesterol drug is valid and enforceable, and will remain in effect until 2016. Companies including Teva Pharmaceutical (TEVA) had challenged the patent as they sought to market copies of the medicine. Crestor was AstraZeneca's third-biggest seller last year, and the ruling helped AstraZeneca's shares gain nearly 9% in the closing minutes of yesterday's trading session.
• Anadarko approved BP well designs. Anadarko (APC), a minority partner on the leaking Gulf well, has largely tried to stay out of the spotlight, but media reports show that Anadarko approved several key aspects of BP's (BP) well designs, aspects that have been sharply criticized by lawmakers. Anadarko also signed off on significant operational decisions made by BP that could have been a factor in the explosion at the well. An Anadarko spokesman acknowledged that the company knew the "long string" design was being used and was aware of the number of centralizers, but said they "all met industry standards if executed correctly. The problems were caused by BP’s execution of each of these.” Premarket: BP +6.3% (7:00 ET).
• AT&T loses iPhone exclusivity. Verizon Wireless (VZ) will start selling the iPhone (AAPL) in January, sources said, bringing an end to AT&T's exclusive hold on the smartphone in the U.S. Apple and Verizon declined to comment, but the media reports were enough to push AT&T's shares down nearly 2% yesterday. Research in Motion (RIMM) closed -4.4% yesterday as broader iPhone availability could hurt BlackBerry sales. Analysts suggest Verizon customers could buy as many as 3M iPhones per quarter.
• Qatar may take Greek bank stake. The Qatar Investment Authority is reportedly in talks to take a strategic stake in National Bank of Greece, Greece's largest lender. The sovereign wealth fund would likely buy a 5-7% stake, in line with its policy of buying less than 10% stakes in financial institutions. The purchase would be worth around €250M ($304M).
• Lehman creditors object to Ch. 11 plan. A group of Lehman Brothers (LEHMQ.PK) creditors, including pension fund Calpers and John Paulson's hedge fund, objected to the investment bank's bankruptcy plan. The group said the current plan will create conflicts among creditors, and treat some large bank creditors better than smaller, non-bank creditors. As a result, they claimed, there could be years of needless lawsuits. The group is asking for a July 14 hearing to consider its objections.
• Citi shares trigger circuit breaker. Citigroup (C) became the second stock to trigger the NYSE's new circuit breakers, after 8,820 of Citi's shares went through at $3.3174 at 1:03:51 p.m. - a 12.7% drop from the previous trade. After the halt, Citi's shares resumed trading normally, and closed -6.75% to $3.73.
• Foreclosures were one-third of Q1 home sales. Foreclosed properties accounted for 31% of the U.S. home sales in Q1, according to a new report by RealtyTrac, and the average price for foreclosed properties was 27% below that of regular sales. "In a normal market, only 1 to 2 percent of home sales are foreclosures," explained Rick Sharga, senior vice president at RealtyTrac, "so this is certainly a significant level."
• SEC settles with fired lawyer. The SEC agreed to pay $755,000 to an enforcement lawyer who claimed he was wrongfully terminated for aggressively pursuing an insider-trading case involving the hedge fund Pequot Capital Management. The lawyer, Gary Aguirre, had been at the agency for 11 months before he was fired. As part of the settlement, which is the equivalent of four years and 10 months’ pay, Aguirre will drop two related claims against the SEC.
The Dow Jones industrial average is down 9.1 percent for the quarter. Disappointing economic reports, including continued high levels of unemployment, and fears of a possible second recession in Europe have spooked investors. That led to a steady sell-off over the past three months.
Worries about the pace of the global economic recovery slammed stocks around the world Tuesday. The S&P 500 tumbled 3.1%, following a sharp drop in Asia and Europe.
Mounting debt across Europe has rocked global stock markets all quarter. Investors are worried that budget cuts needed to control debt will slow Europe's economy to the point that it also eats into growth worldwide.
One of the triggers for the sell off was a report that suggested growth in China would slow in the second half of 2010, which raised worries about the prospect of a global economic slowdown.
"The market really got knocked yesterday, so now we're seeing a bounce-back," said David Jones, chief market strategist at IG Markets. "After the battering markets have taken recently, it looks like we're headed for somewhat of a recovery and quiet trading ahead of the key employment numbers on Friday."
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