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Forex Blog - US Market Update
US Market Update
Dow +39 S&P +5.9 NASDAQ +10.4
- US equity trading has whipsawed back and forth this morning as various crosscurrents keep the overall tone uncertain in early trading. Before the open the November Case Shiller Home Price Index reading came in at yet another all-time low, while all 20 of the regions tracked in the composite index saw home prices decline for the third month in a row. But investors rallied, pushing equity indices up about one percent immediately after the open, until another record low in the January Consumer Confidence data knocked things back into negative territory. Pretty quickly investors shrugged off the confidence data pushing indices back into the black, and trading remains well into positive territory as we head toward the hour of noon in New York. Fourth quarter earnings remain a major story, with American Express helping the Dow and steel names aiding the S&P, while airlines and oil names weigh on the indices. March crude is under pressure trading below $43, off 6% on the day. Gold has hovered right around $900 unable to make much of a move ahead of this afternoons COMEX options expiration followed by tomorrow morning's OTC expiry. Longer-dated Treasuries have seen some buyers step in, really for the first time in more than a week but the two-year yield is a bit higher ahead of this afternoon's record $40B two-year note auction results. The benchmark spread has narrowed slightly to 175 basis points.
- Quarterly reports among major energy names are moving friends and foes alike. Valero blew out earnings estimates (ex a non-cash goodwill impairment) but missed revenue targets. The CEO warned that he sees the sluggish economy as a headwind for demand growth, noting that refiners need to work hard to match production with demand. Selected refining and other oil names are trading off on the news, with SUN-2%, PXD-4%, SII-4% and TSO-5.5%. Shares of VLO were off 6%. Coal name Peabody Energy beat consensus earnings and revenue estimates. Shares of BTU are up 12% in early trading, while ACI, CNX and FCL are all up more than 8%.
- A significant chunk of the steel industry reported fourth-quarter earnings this morning and yesterday after the close. US Steel and Nucor both blew out earnings estimates by wide margins, and also beat revenue expectations, but both firms offer nothing but caution for 2009. US Steel's CEO said the company "expects an operating loss in the first quarter as results continue to reflect the extremely difficult global economic environment." Nucor provided no guidance for Q1 due to a lack of "forward visibility," noting that it expects conditions to remain as challenging as they were in Q4. Steel Dynamics reported a slightly larger loss than expected, for its first quarterly loss in seven years, and guided Q1 way below expectations. STLD saw net shipments down more than 37% in Q4. AK Steel reported a big loss thanks to non-cash pension charges and warned that losses would continue next quarter as well, but forecasted a return to profitability in Q2. Shares of STLD+12%, X+8% and NUE+5% are making gains in early trading, while AKS-4% is off its worst levels.
- Other materials names continue to suffer from the downturn. Dow's CEO warned that a dividend cut is on the table; note that Dow has maintained or increased its dividend every quarter since 1911. Du Pont reported a bigger-than-expected loss, missed revenue targets, guided Q1 below par and slashed its 2009 forecast for the second time in a month. Revenue in nearly all of the firm's major segments fell by double digits y/y, while the CEO warned that most of the firm's businesses are seeing volume declines in Q1 on par with Q4 declines. DOW-1.5%, DD-4.5%
- Delta's 2009 business forecast is encouraging investors head for the emergency exits and dump airline stocks in early trading. Delta missed earnings and revenue targets and warned that its 2009 system and mainline capacity will decline by 6-8%. Shares of DAL fell 24% in early trading before coming off their worst levels, with other major airlines trading down 6-11%.
- In currencies the greenback found its feet following the German IFO data and comments from the ECB's Quaden, who warned the ECB could cut rates below 2%, with EUR/USD consolidating around the 1.32 area for most of the New York morning. Comments throughout the New York morning on the state of the emerging global recession prompted risk aversion, with S&P's chief economist warning that the European recession would last beyond the end of 2009 while Japan would not recovery as much as the US and Europe. January US consumer confidence data didn't help, once again registering an all-time low reading. Analysts showed a yen for JPY commentary, with a Credit Suisse analyst saying the BoJ could intervene around the 87.00 level and a Bank of Tokyo analyst noting that USD/JPY was unlikely to sustain momentum above 90.00. Given these forecasts, it's worth noting that former Japanese Finance Minister Sakakibara, formerly known as Mr Yen, has recently hedged his comments on when intervention might take place in the 80-85 range.
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