Share This Story
Forex Blog - US Market Update
Today 11:43amUS Market Update
Dow -295 S&P -33 NASDAQ -48
- The picture is not bright this morning despite the European rate cuts. Traders are dumping equities, pushing indices lower on fresh fears of an ever deeper and protracted economic decline. The dark mood was set by CSCO's earnings last night and news that sales for the next year would likely be well below expectations. The weekly employment numbers aren't helping either, despite their not being much higher than estimates. In any case, the number of US workers drawing unemployment benefits has hit 25-year highs. Meanwhile, front-month crude is approaching the $60/bbl level for the first time since March 2007.
- October Same-store sales were painful, as expected. Costco surprised with a sales decline of 1% (analysts had expected a 4.3% increase), marking its first negative q/q sales number in memory. Discount giants Wal-Mart and BJ's are holding up their numbers, reported steady sales gains. Leading apparel names were hard hit, with Gap's sales -16%, Abercrombie & Fitch comps -21%, American Eagle -12% and the Limited -9%. Hot Topic was the standout among apparel firms, reporting 8.4% growth versus expectations of a 3% decline. Every major department store reported major sales declines, including many double-digit declines, with Nordstrom -15.7% and JC Penny -13%. Investors are snapping up HOTT+16%, while WMT+4% and BJ+4% are holding up well in early action. COST and TGT are well off their best levels, around even. Most other retailers are holding up around +1-3%.
- In earnings, Cablevision missed EPS targets and reported sluggish q/q subscriber growth, although it exceeded revenue expectations. Chairman Dolan said the firm would be focusing on its core business for now instead of pursing and strategic opportunities. Rival DIRECTV also reported a hair under analysts' estimates, noting that it saw greater churn and declining net additions y/y. Both CVC-10% and DTV-5% were in the red mid morning. AutoNation is trading well of its worst levels after reporting below expectations for the quarter; the CEO insisted that AN would remain profitable in 2009 even if industry production declines to 12M units. Merger targets Huntsman and Wendy's both reported losses that were well below the Street's positive expectation. Hexion's $28/shr bid for HUN remains somewhat in doubt, while Trian Partners began their tender offer for WEN at $4.15/shr this morning. WEN+6% and HUN+2% are both up on the day. CSCO-2.5% is in negative territory this morning after guiding next-quarter sales down 5-10% y/y yesterday after the close.
- Financial names Wells Fargo and BlackStone are deep in negative territory in early trading. Yesterday after the close WFC-6% said it would offer at least $10B in stock, although this figure only half of the $20B the firm said in mid October it would need to sell in order to offset losses from the Wachovia acquisition. BX-12% reported an big unexpected quarterly loss and a big negative revenue figure thanks to big writedowns on its private equity holdings. A Morgan Stanley analyst cuts his outlook and raised projected writedown amounts for Goldman. The rest of the leading financial names are in negative territory mid morning. Note that yesterday just before the close Oppenheimer's Whitney made cautious comments on US bank performance, saying that she expects banks to seek additional capital within the next nine months. She also speculated that WFC is worth $20/shr and that Citigroup would head for single digits.
- Rate cut fever swept through the currency markets this morning. The BoE made its biggest cut ever, slashing rates by 150bps to 3.00%. The ECB cut for the second time in a month, taking 50 bps off of its key rate, bringing it to 3.25%. Other European central banks jumped in as well, with the Swiss National Bank cutting its Libor target average by 50bps to 2.00%, the Czech Central Bank cutting by 75bps (50bps expected) and the Danish Central Bank cutting by 50bps in a completely unexpected move. Government bond yield curves have seen some substantial steepening both in Europe and the US post the cuts. The USD is mixed against most European currencies following the rate moves, although GBP/USD moved up to 1.5910 after briefly hitting the 1.5720 level in the aftermath of the higher-than-expected cut (traders were expecting a 50 bps by the BoE). EUR/USD continues holding around the 1.28 level following the ECB press conference, off about 100 pips from its opening levels in Asia.
- In its post-decision press conference, the ECB's Jean-Claude Trichet noted that the bank's outlook for price stability is improving and that he expects inflation to keep declining over the coming months. Trichet said the decision was unanimous, noting that members also discussed a larger rate cut, including a 75 bps cut as well as a smaller 25bps ease. As always, Trichet took the opportunity to remind everyone that the ECB never pre-commits when asked about the potential for a December rate cut.
- Despite the equity market softness in the global markets, the carry-related pairs did not exhibit any risk aversion. EUR/JPY at 125.80, off 100 pips from Asia open, while the GBP/JPY cross was up 80 pips at 156.30. EUR/CHF cross was firmer as well by 303 pips at 1.5000. The commodity currencies were only modestly softer despite the drop in crude futures and gold a touch higher by $5 to $745/oz.
- The rash of rate cuts was preceded by more negative news throughout the global economy, including corporate earnings, gloomy economic data and downbeat overall consumer sentiment. Dealers and traders are noting Cisco's lower guidance and Toyota's weaker global sales forecast. The Monster Employment Index fell to 150, down 20% y/y. Russia's October PMI fell to 47.4 from 55.5 in September. The IMF said most G7 economies would contract in 2009, with the exception of Canada. The IMF noted that the financial market crisis was "virulent," while the global outlook was "extremely uncertain."
Copyright Â© 2008 Trade The News. For a free 1 week interactive trial to our audio broadcasts, research on demand, and real-time headlines please apply for a Free Trial Â»
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."