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Forex Blog - US Market Update
US Market Update
DJIA -95 Nasdaq -4.10 S&P 500 -7
- US equity indices opened in the red this morning and fell further in early trading, pushed down by December same-store sales results and yet another round of profit warnings from corporate America. But while there has been plenty of bad news to go around, investors are shrugging off the gloom and pushing equity indices back toward positive territory in mid morning trade. Front-month crude has fallen sharply off the elevated levels of the last several sessions, down more than a buck around $41. In fixed income, the US yield curve was a touch flatter in the session. Note that overnight a Goldman Sachs analyst said he believes there is no bubble in the US Treasury market, disputing this weekend's Barron's cover story.
- December retail sales were difficult this morning, with the data painting a grim picture of US consumer demand. Many apparel names reported double-digit same-store sales declines, with BEBE -20%, AEO -17% and GPS -14%. Sales at discounters COST and WMT slipped in December after several months when they showed strong numbers in contrast with many retailers; COST reported 4% decline, and WMT cut Q4 guidance. The bright spots were Gamestop and Aeropostale, which both reported strong sales gains and even managed to raise their outlook slightly for the coming quarter. Shares of most retailers remain in negative territory this morning, but are coming off their worst levels with indices.
- Schnitzer Steel reported a larger-than-expected Q1 loss this morning thanks to big inventory write downs. The revenues remained strong, however, while management confirmed a big debt reduction. Shares of SCHN lost 4% before the open, and then bounced quickly to +4% in early trading. Cement manufacturer Texas Industries missed earnings and revenue estimates, saying business in its core markets was down markedly, and postponed a plant expansion. TXI is muddling along around -3%. Home retailer Bed Bath and Beyond is also trading down a hair after reporting in line with analysts' yesterday. The outlook for earnings season continues to deteriorate as firms keep slashing guidance. Healthcare leader Cardinal Health cut its 2009 forecast slightly thanks to â€śsoftness in sales.â€ť Packaging manufacturer Bemis said its Q4 EPS would be 25% below its previous guidance. Tech firms Cytec and X-Rite reduce their 2008 forecasts and cut jobs, while software firm Parametric slashed its Q1 guidance nearly in half.
- The volatility in currencies continues as conflicting themes roil markets ahead of Friday's US payroll data. The BoE cut its interest rate by the expected 50bps to 1.50%, marking its lowest rate since the bank was founded back in 1694. The pound rallied against the major pairs in the aftermath, given than some dealers were expecting a more aggressive move from the BoE. GBP/USD surged almost 400 pips from overnight lows to test 1.5370 level while EUR/GBP probed below the 0.89 level before retracing. One Chinese currency analyst noted that GBP/USD below the 1.50 level seemed to be a good value for the "next several years" for the reserve requirements among Far Eastern central banks. The greenback was broadly weaker during the New York morning following the jobless claims data as dealers focused on the increase in continuing claims, which hit their highest level since 1982, rather than the less negative initial claims data. Expectations are for another half million job losses in tomorrow's non-farm payroll data, which would bring 2008 total losses to 2.4M, a six-decade high.
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