TradeTheNews.com US Market Update

Thursday, January 26, 2012 11:20:23 AM

 TradeTheNews.com US Market Update

Dow +33 S&P -1 NASDAQ -3.5
***Economic data***
- (US) Dec Chicago Fed National Activity Index: +0.17 v -0.10e
- (US) Dec Durable Goods Orders: 3.0% v 2.0%e; Durables Ex Transportation: 2.1% v 0.9%e
- (US) Initial Jobless Claims: 377K v 370Ke; Continuing Claims: 3.554M v 3.50Me
- (MX) Mexico Nov Retail Sales: 7.5% v 5.3%e
- (US) Dec Leading Indicators: 0.4% v 0.7%e
- (US) Dec New Home Sales 307K v 321Ke

- The FOMC decision and Chairman Bernanke's comments are on every market participant's mind this morning. With the extended period stretched out even further (now to late 2014), the prospect of more easy money helped send global equity markets higher through yesterday's session and into early US trading this morning. Hopeful news that Greece and its creditors were possibly close to a deal (after weeks of on-again, off-again negotiations) sent European indices even higher. The dollar has softened up somewhat thanks to the Fed, and commodity prices, metals in particular, have surged since yesterday's statement. Gold his climbed back above $1725 rally some $70 since statement. However, the Fed's easy money message has been tempered by its updated economic forecasts, which predict lower US GDP growth and higher unemployment rates over the next three years. PIMCO's Bill Gross called the FOMC's low rate pledge extension the equivalent to QE 2.5 and warned that the Fed may be preparing additional easing to boot. Treasury prices are on much firmer footing once again pressuring the 10-year yield back below 1.95%. The move into 5-year paper has been ever more dramatic, as participants in yesterday's auctions have seen the yield drop almost 15 basis points in less than 24 hours.

- Three major DJIA components reported results this morning: Caterpillar, 3M and AT&T. Caterpillar bulldozed expectations, and offered a very strong outlook for FY12. 3M was more in line with expectations, and reaffirmed its prior outlook. On the conference call, executives warned that the first half of FY12 would be more challenging, with China slowing, Europe contracting and the electronics business under pressure. AT&T only just met consensus estimates, although there were some signs of strength in its business. iPhone activations nearly tripled on a sequential basis, thanks to the iPhone 4S, with accompanying increases in postpaid additions. The company offered vague promises of continued earnings and revenue growth in FY12. Note that Nokia met expectations in the quarter, but also cut its dividend in half. The firm optimistically expects its devices and services net sales to grow faster than the market. NOK and CAT are up 4% and 3%, respectively, MMM is up 1%, while T is down 2%.

- Netflix was a bit hit yesterday after the close, crushing earnings expectations despite somewhat disappointing revenue totals. The firm warned that would see losses throughout FY12, and also continuing attrition in its DVD subscriber base. Nevertheless, total US subscribers continue to grow, on lower churn. Sandisk satisfied investors with in-line results. But like the rest of the memory names, NAND is a trouble spot, and the business will weigh on revenue results all year.

- Defense names Lockheed Martin and Raytheon had high-than-expected profits in their fourth quarters, thanks to stronger profit margins. The backlogs at both firms are stable. On the conference call, Raytheon executives said that growing international sales would help the firm make up for falling sales in the US. In the oil patch, Murphy took a big impairment charge on Congo operations, driving an unexpected loss in the quarter. Murphy said that higher sales prices for crude in the quarter tempered the overall impact of the impairment on total results.

- The greenback is right at session lows against the major pairs, thanks mainly to the Fed comments from Wednesday and renewed optimism for a Greek debt deal with the nation's creditors. IIF Chief Dallara is said to be meeting with Greece PM Papademos later today after the European markets close.

***Looking Ahead***
- 11:00 (US) Jan Kansas City Fed Manufacturing Activity: +2e v -4 prior
- 11:00 (US) Fed to purchase $2.25-2.75B in Notes
- 12:00 (CA) Canada Treasury Board President Clement speaks in Toronto
- 13:00 (US) Treasury to sell $29.0B in 7-Year Notes
- 14:30 (FR) Socialist Presidential Runner Hollande details platform on TV
- 16:00 (KR) South Korea Feb Manufacturing Business Survey: No est v 79 prior; Non-Manufacturing: No est v 79 prior
- 16:00 (KR) South Korea Jan Consumer Confidence: No est v 99 prior
- (US) Republican primary debate in Jacksonville, Florida

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