Dow -193 S&P -19 NASDAQ -46 ***Economic Data**** - (BZ) Brazil Dec CAGED Formal Job Creation: -415.2K v -300Ke - (SP) Spain Nov Trade Balance: -â‚¬4.9B v -â‚¬3.9B prior - (CA) Canada Dec Consumer Price Index M/M: -0.3% v -0.1%e; Y/Y: 1.3% v 1.6%e - (CA) Canada Dec CPI Core M/M: -0.3% v -0.2%e; Y/Y: 1.5% v 1.7%e - MBA Mortgage Applications w/e Jan 15th: 9.1% v 14.3% prior - (BR) Brazil Current Account: -$6.0B v -$3.6Be; Foreign Investment: $5.1B v $4.1Be - (US) ICSC/GS weekly chain store sales w/e Jan 16th: +2.0% w/w, +2.6% y/y - (RU) Russia Dec Producer Prices M/M: 0.5% v -0.4%e; Y/Y: 13.9% v 13.2%e - (CA) Canada Nov Manufacturing Sales M/M: 0.1% v 0.7%e - (US) Dec Producer Price Index M/M: 0.2% v 0.0%e; PPI Ex Food&Energy M/M: 0.0% v 0.1%e - (US) Dec Housing Starts: 557K v 572Ke; Building Permits: 653K v 580Ke - (BE) Belgium Jan Consumer Confidence: -15.0 v -15.0 prior - (IR) Ireland Nov House prices: -18.5% v -13.9% prior
- Disappointing results out of Bank of America and Morgan Stanley are dragging down indices this morning. US equity markets were already off to a rocky start as a fresh bout of risk aversion rippled through both the Asian and European trading sessions. Traders were specifically fretting over continued rising credit default swap prices for Greek debt, and news Chinese banks were instructed to put the brakes on new lending through the end of the month. The big Democratic loss in Massachusetts initially helped health insurance names trade higher, although the wider market declines have shoved the managed care names back into the red. Hospital stocks are even lower. New York Fed President Dudley warned that unemployment is at punishing levels and said the economy is "far weaker" than the Fed would like to see. March crude is down $2 bucks, to trade with a $77 handle. US Treasury prices have been bid up by flight to safety trades, sending the benchmark 10-year yield below 3.65% to levels not seen in nearly a month. The spread has also narrowed some with the 2-10 year slipping below 2.80 basis points.
- Both Bank of America and Morgan Stanley missed top- and bottom-line expectations in their Q4 reports this morning. BoA reported that it lost $5.2B in Q4, even as the bank repaid its government TARP funds and took a one-time $4B charge for the move. Newly installed CEO Moynihan stated in the release that economic conditions remain fragile and the bank expects high unemployment levels to continue, creating an ongoing drag on consumer spending and growth. On the conference call, executives warned that they have not seen a level of business activity typically expected during a recovery. Note that the bank's provisions for credit losses and net charge-offs both declined materially on a sequential basis. Morgan Stanley's quarterly profit was less than half the expected amount, and total AUM fell by a disturbing amount. Investment banking revenues, which were a big weak point for JP Morgan last week, grew strongly on q/q basis, although fixed income sales and net trading revenue were one third the amount seen last quarter. Shares of MS fell to -3% immediately after the open, spiked back to positive and are presently -1.5% or so. BAC jumped to +1.5% just after the open, before retreating somewhat mid morning.
- Super regional banking names Wells Fargo and US Bancorp outshined their larger brethren in Q4 reports. Wells surprised with a small quarterly profit, versus expectations for a loss. Revenue was also above par. Note that this includes the $0.47/shr charge for repaying the bank's in TARP funds. Executives were more upbeat in the release, noting that while losses remained elevated during the quarter as expected, a more favorable economic outlook and improved credit statistics in several portfolios further increase their confidence that the credit cycle is turning. Shares of WFC are in the red, however. USB was a bit ahead of expectations for the quarter, and managed to cut its provision for credit losses slightly over last quarter. Executives believe USB is nearing an inflection point regarding non-performing assets. Smaller regional names Bank of New York and M&T Bank also beat estimates roundly. Marshall & Ilsley's loss was slightly higher than expected. Investment manager State Street was in line with expectations. USB and BK are both +3%, with MTB is up 2%. STT is up 5.5% or so.
- In other earnings, Dow component IBM beat analysts' expectations and reaffirmed its 2010 earnings target, noting that its backlog is growing and margins only improving. CSX was in line with expectations. On the conference call, CSX executives said they expect long-term price increases to exceed rail inflation and plan to begin hiring in second half of 2010 to help meet 2011 demand. Both names are well into the red despite the largely positive results. IBM is down 3% and CSX is down 7%. Insurance name Progressive offered strong quarterly results. PGR is around even.
- In currencies, the greenback maintained a firm tone thanks to fresh risk aversion from both Asia and European developments. More talks of potential lending curbs in China weighed on equity sentiment, while various European officials continue to stress that Greece had to deal with its problems itself. Peripheral Europe debt continued to widen against 10-year bunds. Brazilian economic data also weighed on equity sentiment after the country's December formal jobs data registered its first monthly decline in one year, at -415K, much worse than the -300K analyst consensus. EUR/USD remained below its key 200-day moving average for the first time since May and tested 1.4115 in the New York session. Technical factors have some dealers seeing a potential retest of the 1.38 pivot area in the pair. JPY saw the bulk of its earlier strength subside during the NY morning against the major pairs. Some dealers noted option expiration as a factor in the weaker yen sentiment ahead of the NY fixing. Softer Canadian inflation data kept the loonie weaker, testing a key technical area against the USD at 1.0490.
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Mon 18 Dec
10:00 EZ- final HICP Tue 19 Dec
09:00 DE- IFO Survey
13:30 US- Housing Starts/Permits
13:30 US- Current Account Wed 20 Dec
15:00 US- Existing Homes Sales
15:30 US- EIA Crude Thu 21 Dec
03:00 JP- BOJ Decision
13:30 CA- CPI & Retail Sales
13:30 US Weely Jobless
13:30 US- GDP Fri 22 Dec
09:30 US- GB- GDP
13:30 US- core PCE Deflator & Presonal Income
15:00 US- New Homes Sales
15:00 US- final University of Michigan
17:00 US- early Closes Mon 25 Dec
00:00 Christmas Holidays
Potential Trading Opportunities
POTENTIAL PRICE RISK: Medium Mon--10:00 GMT-- EZ- final November HICP. flash data are rarely changed.
POTENTIAL PRICE RISK: HIGH- Medium Tue --09:00 GMT-- DE- IFO Survey. Key report but usually not a market-mover
POTENTIAL PRICE RISK: HIGH- Medium- Tue --13:30 GMT-- US- Housing Starts and Permits. Leading indicators of activity
POTENTIAL PRICE RISK: HIGH-Medium- Wed --15:00-- US- Existing Homes Sales. Top Housing statistic
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