U.S. market update

Tuesday, January 17, 2012 11:21:43 AM
 Dow +117 S&P +11 NASDAQ +29
***Economic data***
- (BR) Brazil Nov CNI Capacity Utilization: 81.5 v 81.6%e
- (CA) Canada Nov Int'l Securities Transactions: C$15.0B v C$3.9B prior
- (US) Jan Empire Manufacturing: 13.48 v 11.00e
- (CA) Bank of Canada left its Overnight Rate unchanged at 1.00%; As expected
- (EU) ECB drained €217.0B v. €217.0B targeted in 7-day Term Deposit Tender to offset bond purchases
- (UK) BOE buys £1.7B in 2038-2060 Gilts in reverse auction; Bid-to-cover: 2.43x v 2.02x prior

- Global equity markets continue to demonstrate very little concern about Friday's euro zone sovereign ratings downgrades by S&P and the subsequent one notch downgrade of the EFSF. European markets were up by respectable amounts today, helped along by the strong showing in the January reading in the German ZEW survey. In the US, the initial 2012 regional Fed manufacturing index, the January Empire Manufacturing survey, was much better than expected, with surprising strength in both the new orders and employment components. Treasury prices are little changed with yields consolidating at the lower end of last weeks range.
- Citigroup's Q4 results were even more disappointing than JPMorgan's report on Friday. Both the earnings and revenue totals missed analysts' expectations, while net profits fell 11% y/y. Citi's declining investment banking revenues were a prime suspect, with revenue from the securities and banking division down 10% y/y, before a very favorable DVA adjustment. Excluding the DVA adjustment, the unit's revenues fell 29% y/y. Citigroup saw healthy growth in both loans extended and deposits, indicated that the traditional banking business is doing well. Wells Fargo met expectations across the board, despite sluggish loan growth and a more gradual increase in credit quality. Wells reported its seventh straight quarter of bad loan reserve releases, down to $600M from $800M in Q3. WFC gained as much as 3% in early trading, before giving up gains. Shares of Citi are down 5%, near their lows of the session.
- In other earnings, Check Point Software was in line with expectations. CHKP is up more than 6%. Forest Labs was a bit above target, and tweaked its FY12 outlook slightly higher. FRX is up 2%. Hasbro's preliminary Q4 revenue guidance was a bit soft, while the profit outlook was in line. Refiner Valero offered a look at its Q4 profits that, including a one-time benefit, were in line. However, the firm warned that weak margins in the quarter impacted profits, as has been seen across the sector in guidance statements ahead of earnings season. VLO is up 3%, even as competitors remain more or less flat. Take-Two Software said it would have a net loss in FY12 because of a delay in launching the next installment of Max Payne. On Friday, Walter Energy cut its FY12 metallurgical coal production guidance to 11.5-13M metric tons, from 13-14M prior. Recall that Walter is one of the largest global producers of coal used by steelmakers. The company also cuts its guidance. This morning, utility TECO Energy
- The euro surrendered a good portion of its earlier gains by mid morning. Dealers noted that the move was somewhat technical as the earlier retracement stalled at the 2012 hourly downtrend line from the 1.3075 highs. EUR/USD was at 1.2720 level after testing 1.2800 earlier today.
***Looking Ahead***
- 11:30 (UK) BOE member Posen
- 11:30 (DE) Bundesbank Gov Weidmann
- 11:30 (US) Treasury to sell 3-Month and 6-Month Bills
- 18:00 (IT) Italy PM Monti travels to London to meet with PM Cameron at London School of Economics
- 21:00 World Bank to release new economic growth forecasts
- (CN) EU Barnier travels to Beijing, China
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