Slipping, But Still Positive
Futures have slipped off the earlier highs, but
are still up in the pre-market.
Sears
(
S |
Quote |
Chart |
News |
PowerRating) reported a drop in same store
sales of nearly 5%, and could weigh the weak retail sector down even further.
Microsoft
(
MSFT |
Quote |
Chart |
News |
PowerRating) announced a
settlement with the FTC, which could spill over and give a boost to stocks
today.
Thursday’s pre-opening outlook:
INTEREST RATES
OVERNIGHT
CHANGE to
4:15 AM
:BONDS -14 The
bond market should have bounced Wednesday, as the break Tuesday was overdone and
partially misguided. However, the bonds are still within striking distance of
new highs and could react at any time especially if negative news surfaces from
the equity market, or from the economy. The fact that United
Airlines saw July traffic decline by double digits, certainly leaves one
of the leading air carriers in significant trouble.
STOCK
INDICES
OVERNIGHT
CHANGE to 4:15 AM:S&P+750 NIKKEI +34 FTSE +90 The impressive recovery move
overnight temporarily throws off the negative sentiment from Wednesday afternoon
and probably allows the market to rally. Evidently, the Cisco report was enough
to offset the apprehension fostered by reports that United
Airlines July traffic fell by double digits. If the market was in a
bearish posture there could have been significant concerns about one of the big
three airlines possibly going out of business.
FOREIGN EXCHANGE
Dollar: The
wins by default rather than by merit. The fact that the trade is looking down
upon the Euro zone growth pattern and is apparently unconcerned with the poor
statistical performance, simply shows a residual favor for the Dollar.
Apparently the idea that the
will cut
interest rates if it has to, has the markets
convinced that the Dollar is the place to be, in the short term. We suspect that
the Dollar will be able to firm into and through the Friday morning productivity
release. In fact, given the
equity market recovery, the Dollar might be able to rally until the point that
the US Fed either cuts rates or throws water on the idea of a cut. In the near
term, the misfortune of the Euro zone means more than the fortune of the
economy. Near term upside target in the Dollar comes in at 109.25 but the market
probably manages to test the 110 mark early next week.
EURO: For
most of the March through July rally in the Euro, the primary supporting
issue were the troubles in the
not prosperity in the Euro zone. Therefore, the Dollar should see only limited
recovery action off the idea that the Euro zone economic recovery has stalled.
The ECB in its August report warned of excess liquidity and that would seem to
prevent them from cutting rates if the economy really softens. Furthermore, the
ECB only forecasts 3rd quarter growth to be +0.7% to 1.0% and that certainly
comes in under where the
is headed. Near term downside targets in the Euro come in at 96.06 and then
again at 94.89, if the Fed confirms the rumors of a
rate cut.
YEN: The
BOJ maintained their recovery view in their August outlook and that combined
with the interest in the
rate cut provides further liquidation to the Yen. The near term downside target
in the Yen comes in at 82.62 with a lower target of 82.31 if the
actually cuts rates.
GOLD
The
massive rally in gold Wednesday was supposedly sparked by rumors that a large
Canadian gold producer was aggressively buying back short hedge positions. The
fact that gold hedgers have already admitted to be paring hedge books, gives
credence to the rumors Wednesday. However, it might also be the significant
decline in the Dollar Wednesday, the stock market failure or the idea that rates
are about to cut again (with rates already sitting at 40 year lows) that fueled
gold sharply higher.
CRUDE
COMPLEX
OVERNIGHT CHG to
4:15 AM
: CRUDE -6 , HEAT-17, UNGA-29 We think the energy complex fell on ideas that
demand is slackening and because the market failed to rally into the face of
supportive crude inventory draws.
It is also possible that the news that United Airlines saw July traffic decline
by 12.3%.