The Trade Balance for July is estimated at -$47.0 Billion versus -$49.9 Billion in June.
Initial Jobless Claims for last week are estimated at 470K versus 472K the prior week.
Continuing Claims are estimated at 4450K versus 4456K prior.
Upcoming Splits
None of note
Other Potential Market Movers
The $13 Billion 30-year Treasury Bond Auction, CSFB Transport Conference and (TXN) Mid-quarter update could also impact trading today.
BOTTOM LINE: Asian indices are mostly higher, boosted by technology and automaker shares in the region. I expect US stocks to open mixed and to rally into the afternoon, finishing modestly higher. The Portfolio is 100% net long heading into the day.
North American Investment Grade CDS Index 105.66 bps -.51%
European Financial Sector CDS Index 122.50 bps +2.70%
Western Europe Sovereign Debt CDS Index 154.66 bps +3.63%
Emerging Market CDS Index 255.53 bps +2.61%
2-Year Swap Spread 19.0 +1 bp
TED Spread 17.0 unch.
Economic Gauges:
3-Month T-Bill Yield .12% unch.
Yield Curve 214.0 +2 bps
China Import Iron Ore Spot $141.80/Metric Tonne -.07%
Citi US Economic Surprise Index -30.30 +3.1 points
10-Year TIPS Spread 1.67% +2 bps
Overseas Futures:
Nikkei Futures: Indicating +111 open in Japan
DAX Futures: Indicating -2 open in Germany
Portfolio:
Higher: On gains in my Tech, Ag, Biotech and Medical long positions
Disclosed Trades: Covered all of my (IWM)/(QQQQ) hedges and some of my (EEM) short
Market Exposure: Moved to 100% Net Long
BOTTOM LINE: Today's overall market action is bullish as the S&P 500 trades near session highs and above its 50-day moving average despite a weaker Beige Book and ongoing eurozone worries. On the positive side, Road&Rail, Education, Biotech, Bank, Disk Drive, Steel, Oil Service and Coal shares are especially strong, rising 1.75%+. (XLF) has outperformed throughout the day. Copper is rising +.56% and Lumber is jumping +4.6%. Moreover, the 10-year yield is rising +6 bps to 2.65%. Weekly retail sales rose +3.0% this week versus a +2.8% gain the prior week. The European Investment Grade CDS Index is dropping -2.35% to 100.91 bps. The Spain sovereign cds is down -2.35% to 234.72 bps. On the negative side, Medical Equipment, Utility and Gold shares are down slightly on the day. The ongoing rises in some key cds indices remain a negative. One of my longs, (AAPL), is beginning to gain upside traction which bodes well for the Nasdaq. I still see substantial upside in the shares from current levels. Another one of my longs, (GMCR), is poised to hit a new record high after announcing a price increase. I still see substantial upside in these shares, as well. I expect US stocks to trade mixed-to-higher into the close from current levels on short-covering, less economic fear, tech sector optimism, bargain-hunting and buyout speculation.
Fed Banks: 'Widespread Signs of a Deceleration' in Economy. The Federal Reserve said the U.S. economy maintained its expansion while showing “widespread signs of a deceleration” in mid-July through the end of August, according to a survey by 12 regional Fed banks. Five regional banks reported “economic growth at a moderate pace” and two pointed to “positive developments or net improvements.” The remaining five banks said conditions were mixed or decelerating. The report underscores the Fed’s view that while the recovery from the worst recession in seven decades has cooled, the economy isn’t relapsing into a contraction.
Anglo Irish Bank to Be Split, One Part to Be Sold or Would Down. Anglo Irish Bank Corp. will be broken in two as Ireland’s government seeks “finality” on the bailout of the nationalized bank and tries to calm investor concern that the cost will continue to mount. Anglo Irish will be split into a so-called good bank, which will retain the lender’s deposits, and an asset recovery bank which will run down its loans over time, the Finance Ministry in Dublin said in a statement today. The central bank will determine by October how much new capital will be needed.
The Baltic Dry Index, a measure of commodity-shipping costs, advanced for an eighth session as strengthening freight rates for iron ore carriers led gains. The gauge rose 2% to 2,975 points, the highest level in 12 weeks, according to the Baltic Exchange.
Paulson's Biggest Hedge Fund Said to Lose 11% in 2010. John Paulson, who became a billionaire by betting against U.S. mortgage markets, lost 11 percent this year in his New York-based firm’s biggest hedge fund, according to a person briefed on the returns.
Copper Futures Rise as Gains in U.S. Equities Boost Demand for Commodities. Copper rose the most in a week as U.S. stocks advanced, boosting demand for commodities. The Standard & Poor’s 500 Index climbed as much as 0.8 percent as improved demand for Portuguese and Polish bonds tempered speculation that Europe’s debt crisis will trigger another recession. Before today, copper jumped 21 percent since July 1 as inventories dropped. The S&P 500 gained 6.3 percent in the same period. LME copper stockpiles dropped for a fourth straight session to 394,500 tons, the lowest level since Nov. 10, according to daily exchange figures. Inventories have slid 21 percent this year, helping to boost the metal to a four-month high of $7,750 a ton on Sept. 3.
U.S. Retail Space Availability to Drop in 2011, CB Richard Says. Space available for lease at U.S. local retail centers will decline next year for the first time since 2005 as consumer spending rises, according to commercial broker CB Richard Ellis Group Inc. The availability rate, which refers to space being actively marketed and ready for tenant construction in a year, will fall to 12.8 percent for neighborhood and community shopping centers at the end of 2011 from a peak of 13.2 percent in the second half of this year, according to a forecast from CBRE Econometric Advisors, a unit of Los Angeles-based CB Richard Ellis.
China 'Tightening' Speculation Follows Property Surge. China’s attempts to cool the real-estate market may be faltering as sales surge, prompting speculation the government may issue more tightening measures. Real-estate stocks tumbled today after a newspaper reported that the government may introduce a second round of measures to cool the market and Citigroup Inc. said extra steps are “very likely.” The government is seeking to limit the risk of asset bubbles after flooding the economy with money to drive a recovery from the financial crisis. “The key drivers of the property bubble are excess liquidity and lack of investment alternatives, which are still largely in place,” said Ken Peng, a Beijing-based economist for Citigroup.
BofA(BAC), JPMorgan(JPM) Can Only Watch as U.S. Bancorp(USB), PNC(PNC) Seek Targets. U.S. Bancorp and PNC Financial Services Group Inc. may lead the biggest boom in bank takeovers since 2007, and this time, the largest lenders can only sit and watch. Bank loans outstanding have dropped 10 percent since October 2008, the deepest contraction in more than 35 years, according to Goldman Sachs Group Inc. That’s left banks with unused lending capacity, idle cash and depressed market values, making laggards ripe for consolidation, according to KBW Inc., Rochdale Securities LLC and CreditSights Inc. Potential targets include KeyCorp(KEY), SunTrust Banks Inc.(STI) and Regions Financial Corp(RF).
Record-Low Rates Should Prompt Debt Sales to Pay for Buybacks, Tilson Says. U.S. companies should use record low interest rates to issue debt and buy back stock to boost per- share earnings, according to hedge-fund manager Whitney Tilson. Those with high credit ratings and enough cash are ideal candidates to sell bonds and cut their dividends to raise money for repurchasing their own equities, said Tilson.
Norfolk Southern(NSC), CSX(CSX) Say Shipping Volumes Rising as Rail Demand Holds Up. Norfolk Southern Corp. and CSX Corp. said shipping volumes have risen more than 10 percent in the current quarter as demand remains strong in most markets. Volume increased 11 percent at CSX and 14 percent at Norfolk Southern in the third quarter through Aug. 20, executives said at the Dahlman Rose & Co. Global Transportation Conference today in New York. “The recovery may be choppy and uneven -- and that may be an understatement -- but it is a recovery,” Norfolk Southern Chief Executive Officer Charles “Wick” Moorman said in a presentation. “We don’t expect anything that looks like the much-discussed double-dip. We don’t see what precipitates it, don’t see it in our carloads and don’t hear it when we talk to our customers.”
Krugman, DeLong's Keynes Model Flawed, Harvard's Ferguson Says: Tom Keene. The economic assumptions of Paul Krugman and Bradford DeLong are based on “flawed” versions of John Maynard Keynes’s model, according to Niall Ferguson, a history professor at Harvard University. “They have a flawed Keynesian model in their minds about what fiscal stimulus can do when you already have a highly indebted economy,” Ferguson said in a radio interview today on “Bloomberg Surveillance” with Tom Keene. “We’ve seen this movie in Japan before where you end up with an explosion of public debt but a flatlining economy, and gradually that debt burden, even at low interest rates, begins to be more of a burden than a source of stimulus.”
Dow May Rise From Election Day to Year-End: Technical Analysis. Investors who bought Dow Jones Industrial Average stocks on the November election day in the middle year of U.S. presidencies since 1918 generated profits through New Year’s Eve 70 percent of the time, according to Janney Montgomery Scott LLC’s Dan Wantrobski. The Dow jumped an average of 5 percent during the two months between the November congressional elections to Dec. 31 in the 16 winning Dow years over the past 23 midterm cycles. The average return for all midterm voting years is 2.3 percent, while the seven losing years had a negative return of 4 percent on average, Wantrobski said.
Euro Snaps Back as Portugal Eases Sovereign Debt Fears. The euro battled back from early losses on Wednesday amid speculation that renewed fears about the European sovereign debt situation have been overblown. Portugal conducted an oversubscribed bond offering this morning, suggesting that demand for its public debt remains steady. Yields rose for the 661 million euro bonds due in 2013 and 378 million euro bonds due in 2021. "There was high demand in the sale, with a high level of participation of a wide base of investors, and a cost compatible with current market conditions," Portugal's Finance Ministry said.
CNET:
Google(GOOG) Launches 'Instant' Search. Google on Wednesday introduced a faster version of its search engine called Google Instant that begins displaying results as soon as users type in queries. The feature, which is being introduced to users in the U.S., most of Europe and Russia can be turned off, however the company says the new interface shaves off 2-5 seconds from user searches since it brings up results nearly as fast as it does for its auto-suggest feature. In fact, it will automatically do a search for the top auto-suggestion before a user has even selected it. Google estimates that if all its users switch over to the instant interface, it will amount to a savings of 11 hours of searching per second.
AppleInsider:
Apple(AAPL) Forecast to Sell 28M iPads in 2011, Chipping Away at PC Sales. Apple's competitively priced iPad is expected to reduce sales of low-end notebook PCs in 2011, when consumers are projected to buy at least 28 million of the touchscreen tablet, one analyst believes.Maynard Um with UBS Investment Research issued a note to investors this week, in which he increased his price target for AAPL stock to $350, up from $340. He said there is no evidence that the iPad is having a negative effect on Mac sales, but it is "adversely affecting the PC industry." "Sales of traditional notebooks appear to be feeling pressure from the iPad, causing a scramble by vendors to launch iPad-like tablets," Um wrote. "We believe that a majority of this impact is occurring on the lower end of PC sales as the iPad is priced close enough to this range that it becomes attractive to consumers looking to make purchases within this segment." He continued: "We are not sold that the iPad is purely cannibalizing PC sales, as the functionality of the iPad cannot yet deliver the functionality of notebook PCs. However, consumers who purchase iPads may be more willing to delay purchases and upgrades of existing PCs." Um sees Apple selling 28 million iPads in 2011, a number he cautioned could be "conservative."
Can You Smell What Obama's Cooking? You may recall Barack Obama claiming that the original stimulus plan didn't need any more tax cuts or "piecemeal" measures. To suggest so was to engage in "politics as usual." And trust me; you don't want to be caught going there. And today? You know what, America? You look as if you're ready for some piecemeal measures and a fake tax cut!
GOP Notches Record Primary Turnout. Democrats are already expected to lose seats in the November midterm elections, but now there's even more bad news for the party that controls Congress and the White House. A study released Tuesday shows Republicans boast a voter turnout record so far this cycle that, compared with Democrats, is unprecedented for a midterm election in the past 80 years. A higher average percentage of Republicans than Democrats turned out for their respective statewide primaries this year for the first time in a midterm election since 1930, according to Curtis Gans, the director of American University's Center for the Study of the American Electorate. The study shows that Republican turnout averaged 10.5 percent in statewide primaries — the highest it has been in a midterm election since 1970. Meanwhile, Democratic turnout was about 8.3 percent in statewide primaries — the lowest percentage on record for an election year in which there was not a presidential contest.
Reuters:
Boeing(BA) Not Ruling Out Merger With Rival. Boeing is "actively" looking at potential acquisition opportunities in response to a changing security environment and will not rule out a merger with another large defense contractor, Boeing's head of defense said on Tuesday. Speaking at the Reuters Aerospace and Defense Summit in Washington, Dennis Muilenburg said Boeing continues to look at high-growth areas such as cybersecurity, intelligence and surveillance and unmanned systems for potential deals and will make targeted acquisitions in those areas.
OPEC Should Seek $100 Oil Price: Libya. OPEC needs a higher oil price of $100 a barrel because the rising costs of imports such as food have eroded OPEC members' income, Libya's top oil official told Reuters on Wednesday.
EADS CEO Says $1.3 Billion M&A Possible. EADS Chief Executive Louis Gallois said EADS is in talks with a few companies in defense, services and security areas for potential deals and could comfortably make an acquisition of around 1 billion euros ($1.3 billion).
