Market Outlook
Friday, May 14th, 2010

Friday is a busy day for economic reports. The schedule for today is:-

8:30 Retail Sales

9:15 Industrial Production

9:55 Consumer Sentiment

10:00 Business Inventories

1:40 PM Fed's Evans speaks at Illinois Wesleyan University

However, on the economic front there is only one major company reporting its’ quarterly earnings:

• J.C. Penney Co. Inc. (JCP).

The bears came out fighting yesterday afternoon  to reclaim some territory. It also seems that we could be in for a rough ride again today with more upheaval with overseas turmoil. The early futures indicate that we could be in for another tough opening, with the Dow Jones Industrial Average (DJIA – 10,896.91) futures trading down by about 50 points, and the S&P 500 Index (SPX) also with a deficit of 6 points before opening.

It is interesting to note the market performance on most Friday’s, this year, to be fairly poor, whereas most Monday’s so far for 2010, after investors have had a breather over the weekend, tends to be more bullish.

Overseas Markets

• In Asia, Japan -1.5% to 10463. Hong Kong -1.4% to 20145. China -0.5% to 2697. India -1.6% to 16995.

• In Europe, at midday, London -1.8%. Paris -2.6%. Frankfurt -1.4%.

• Futures: Dow -0.7%. S&P -0.7%. Nasdaq -0.6%.

Other points to consider are:-

• French President, Nicolas Sarkozy, threatened to pull France out of the euro zone unless other members promised to help Greece, according to a report in Spain's El Pais.

• Crude futures are trading down by $1.82 to $77.17 per barrel, due to increased financial concerns.

• Following the report that France threatened to pull out of the euro zone has sent the euro plunging to a 17-month low versus the dollar, helping to boost the U.S. Dollar Index 0.67% to 85.78 in pre-market trading.

• Gold futures are soaring, due to the dollar’s gain, to $18.20 to $1,247.40 an ounce in London.

• Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,501,324 call contracts traded on Thursday compared to 857,077 put contracts. Looking at these figures we now have a change of ratio, compared to Wednesday, where the gap is closing.

Also several companies have announced their quarterly reports. These are:-

NVIDIA Corp. (NVDA) reported a first-quarter profit of $137.6 million, or 23 cents per share, as revenue rose to $1 billion. Analysts had expected the graphics chip company to report earnings of 21 cents per share on revenue of $986.2 million. In electronic trading, NVDA is down more than 6%.

CA Inc. (CA) reported a fourth-quarter profit of $101 million, or 34 cents per share. Revenue rose to $1.1 billion from $1.04 billion a year ago. Analysts estimated a quarterly profit of 36 cents per share on revenue of $1.12 billion. CA has fallen more than 6.5% in electronic trading following the report.

Nordstrom Inc. (JWN) posted a first-quarter profit of $116 million, or 52 cents per share, with same-store sales rising 12% over the same quarter last year. Analysts were looking for a profit of 54 cents a share on sales of $1.99 billion.

Some Interesting news items:-

1. Each day, the National Oceanic and Atmospheric Administration (NOAA) updates the projected course of the oil spill in the Gulf of Mexico. In Thursday's NOAA update, scientists predict that in the next 24 hours, the periphery of the contiguous oil spill mass will begin reaching the outer reaches of Louisiana's coast for the first time, near Venice. Over the next 72 hours, NOAA's projections show the mass of the oil spill continuing to move closer, with heavier concentrations of oil reaching the shoreline.

2. It seems that 2010 may go down as the year of the 3-D television. There are a growing number of 3-D televisions coming onto the market in the U.S. and abroad. No, they aren’t exactly cheap, but then again neither were HDTV’s at first. So even if you have no intention of buying one right now, it’s good to get a sense of what’s out there, and where the market will be heading.

3. Strengthening consumer spending helped push high-end retailer Nordstrom’s (JWN) earnings up 44% in the first quarter. Nordstrom on Thursday reported a profit of $116 million, or 52 cents per share, for the quarter. That's compared with $81 million, or 37 cents per share, in the same quarter a year ago. Revenue rose nearly 17% to $2.09 billion. Earnings failed to meet analysts’ predictions of 55 cents per share. But revenue exceeded expectations of $1.97 billion on stronger sales that began to ramp up late last year.

4. It seems that saving for school expenses, one choice is a 529 savings plan. Taking advantage of one of these state-sponsored plans is a no-brainer. A 529 plan shields your investments from federal income taxes, gives grandparents an easy way to boost their grandkids' college fund, and barely dents your chances for financial aid. And more than half the states sweeten the deal with a state income-tax deduction or credit. Investors have flocked to 529 savings plans. Assets grew from $11 billion in 2002 to $119 billion in 2009, and the average account balance is $12,000 -- about one year's tuition at a public university.

5. The latest in a string of Wall Street inquiries is focused on municipal bonds. The SEC has reportedly opened a preliminary investigation into possible conflicts of interest among firms that sold municipal bonds and then set themselves up to profit if the bonds failed. The probe also seeks to determine whether firms used their own money to bet against the bonds and, if so, whether that fact was properly disclosed to investors.

6. By a 64-35 margin, the Senate approved the creation of a clearinghouse intermediary to select credit rating agencies for financial institutions on a semi-random basis. The Credit Rating Agency Board will be set up by the SEC and composed of both investors and independent regulators, with the goal of ending the practice of "ratings shopping." In a 61-38 vote, lawmakers approved a measure that would require federal regulators to develop their own metrics for measuring credit-worthiness rather than relying exclusively on rating agencies.

7. The Senate unanimously adopted a measure yesterday that would require large financial firms to raise their capital levels as the firms grow larger or employ riskier lending practices. Final approval of the Senate bill is expected next week, and will mark the most significant overhaul of financial regulation since the Great Depression.

8. The U.S. Coast Guard has estimated that 5,000 barrels of oil per day are pouring out of the Gulf of Mexico leak, but scientists and environmentalists believe the actual spillage could be as much as 20 times higher. Analysis of a video of the leak suggests the rate is closer to 70,000 barrels per day, and potentially as high as 100,000 bpd, which would mean this spill is already worse than the Exxon Valdez spill.

9. Following a similar announcement from Spain earlier in the week, Portugal announced new austerity measures, including higher taxes and a wage cut for government employees. However, the eurozone's stability plan still faces challenges: A lack of growth is making it difficult for many countries, particularly Italy, to escape their huge debts; the possibility of rising inflation rates could become a problem; many industry players still doubt that Greece will be able to repay its debt; and, former Fed Chairman Paul Volcker said yesterday that the current fiscal crisis carries the risk of a "potential disintegration of the euro."

10. Australian hospital operator Healthscope announced it has received a $1.6B takeover offer from a group of buyout firms, and has advised shareholders to take no action. Sources said the unnamed consortium consists of private-equity firms Carlyle Group and TPG Capital. The A$5.50/share offer marks the return of major private-equity deals to the Australian market after a two-year hiatus.

11. . Avis Budget Group (CAR) has filed with antitrust regulators for approval of a potential acquisition of Dollar Thrifty (DTG). Avis, which expressed its interest in Dollar Thrifty after Hertz Global (HTZ) made a $41/share offer for DTG, insisted that the antitrust clearance timetable for an Avis purchase would be the same as that of a Hertz purchase.

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