Wednesday's Brew - Oct 4
Enjoy your fresh morning coffee with our summary of the market outlook for the day and a medley of important information you should find useful today. Before the start of trading Dow Jones Index futures contracts were trading up despite news from WalMart that it was revising its same-store sales figures for September from up 1.8% to up only 1.3%, which is at the low end of its forecasted 1-3% range. S&P 500 Index futures, which had been down remained down slightly while NASDAQ futures indicated slightly higher.
Overseas, Europe's FTSEurofirst 300 Index gained 0.4 percent to 1,398 points, coming within 10 points of the five-year peak reached in May. We speculate European markets benefited from yesterday's record high for the Dow Jones industrial average.
September sales data for the U.S. auto industry were positive overall, but negative for the competitive position of American auto-makers. U.S. sales rose 1.9% year over year, but Toyota continued to gain share from America's biggest two manufacturers. Sales fell 3.1 percent at GM, the world's largest, and 2.3 percent at DaimlerChrysler. However, we saw rare good news from Ford, which posted a gain of 4.3%. Toyota, now the world's second-largest automaker, posted its biggest percentage increase in 17 months, and Asian automakers combined boosted their sales 6.4 percent to reach 39.9 percent of the U.S. market.
The housing market presented the illusion of stability, as the seasonally-adjusted index of total mortgage applications rose 11.9 percent in the week ended Sept. 29 to 633.9, its highest level since January, according to the Mortgage Bankers Association. Early this week, we received news that pending sales of U.S. homes rose 4.3 percent in August, the first increase since May, according to the National Association of Realtors. However, the refinancing share of mortgage activity last week increased to 46.7 percent of all applications, the highest since February 2005, according to the Mortgage Bankers Association. It's clear that with the recent decline of mortgage rates, borrowers with variable rate loans have found opportunity to refinance into fixed rate loans. Though interest rates may not rise further, mortgage bankers are probably not conveying that to their prospective clients.
Oil prices benefited overseas from Kuwait's announcement that it could follow Venezuela and Nigeria's lead to reduce output. However, today at 2:30 PM EDT, inventory data are expected to show a 1.5 million barrel build in distillate stocks, according to a Reuters poll of analysts. Gasoline supplies are expected to rise 700,000 barrels, while crude stockpiles are expected to fall 500,000 barrels. With a slowing economy and a false calm surrounding the situation with Iran, we believe speculative investors have been spooked by momentum and have driven a quick exodus from energy investment. With sanctions being whispered for U.N. discussion next week, Iran will again find the spotlight. We view current weakness in energy commodities, likely aided further by today and tomorrow's inventory data, as worthy of purchase Thursday. We are calling a near-term bottom for this afternoon and would enter energy shares appropriately at that point.
Today, the September ISM non-manufacturing index data will be released. Service industries in the U.S. account for about 90 percent of the economy. We expect the data will indicate the service markets expanded at a slower pace last month, as the housing slump and expensive fuel prices impacted consumers of services. The Institute for Supply Management's index of non- manufacturing businesses is expected to fall to 56, the median estimate in a survey by Bloomberg News, from 57 in August. That is down from a 59.6 average in the first half of the year.
On Tuesday, Kansas City Fed Chief Thomas Hoenig predicted growth would rebound to 2.5 percent to 3 percent in 2007, saying the recent drop-off in home sales was being countered in part by rising non-residential construction. Hoenig reiterated Fed policy was not focused on latest data, but that the Fed would be watching the housing market and energy prices carefully.
Today, Fed Chairman Ben Bernanke makes a lunchtime speech on "Reflections on the Yield Curve and Monetary Policy" at the Economic Club of Washington. New York Fed Chief Timothy Geithner speaks at 12:45 p.m. in Washington about financial crisis in emerging markets. Fed Vice Chairman Donald Kohn discusses the economic outlook at 7:30 p.m. We hope you enjoyed your "Morning Coffee" and we wish you a good day trading. (disclosure)
Overseas, Europe's FTSEurofirst 300 Index gained 0.4 percent to 1,398 points, coming within 10 points of the five-year peak reached in May. We speculate European markets benefited from yesterday's record high for the Dow Jones industrial average.
September sales data for the U.S. auto industry were positive overall, but negative for the competitive position of American auto-makers. U.S. sales rose 1.9% year over year, but Toyota continued to gain share from America's biggest two manufacturers. Sales fell 3.1 percent at GM, the world's largest, and 2.3 percent at DaimlerChrysler. However, we saw rare good news from Ford, which posted a gain of 4.3%. Toyota, now the world's second-largest automaker, posted its biggest percentage increase in 17 months, and Asian automakers combined boosted their sales 6.4 percent to reach 39.9 percent of the U.S. market.
The housing market presented the illusion of stability, as the seasonally-adjusted index of total mortgage applications rose 11.9 percent in the week ended Sept. 29 to 633.9, its highest level since January, according to the Mortgage Bankers Association. Early this week, we received news that pending sales of U.S. homes rose 4.3 percent in August, the first increase since May, according to the National Association of Realtors. However, the refinancing share of mortgage activity last week increased to 46.7 percent of all applications, the highest since February 2005, according to the Mortgage Bankers Association. It's clear that with the recent decline of mortgage rates, borrowers with variable rate loans have found opportunity to refinance into fixed rate loans. Though interest rates may not rise further, mortgage bankers are probably not conveying that to their prospective clients.
Oil prices benefited overseas from Kuwait's announcement that it could follow Venezuela and Nigeria's lead to reduce output. However, today at 2:30 PM EDT, inventory data are expected to show a 1.5 million barrel build in distillate stocks, according to a Reuters poll of analysts. Gasoline supplies are expected to rise 700,000 barrels, while crude stockpiles are expected to fall 500,000 barrels. With a slowing economy and a false calm surrounding the situation with Iran, we believe speculative investors have been spooked by momentum and have driven a quick exodus from energy investment. With sanctions being whispered for U.N. discussion next week, Iran will again find the spotlight. We view current weakness in energy commodities, likely aided further by today and tomorrow's inventory data, as worthy of purchase Thursday. We are calling a near-term bottom for this afternoon and would enter energy shares appropriately at that point.
Today, the September ISM non-manufacturing index data will be released. Service industries in the U.S. account for about 90 percent of the economy. We expect the data will indicate the service markets expanded at a slower pace last month, as the housing slump and expensive fuel prices impacted consumers of services. The Institute for Supply Management's index of non- manufacturing businesses is expected to fall to 56, the median estimate in a survey by Bloomberg News, from 57 in August. That is down from a 59.6 average in the first half of the year.
On Tuesday, Kansas City Fed Chief Thomas Hoenig predicted growth would rebound to 2.5 percent to 3 percent in 2007, saying the recent drop-off in home sales was being countered in part by rising non-residential construction. Hoenig reiterated Fed policy was not focused on latest data, but that the Fed would be watching the housing market and energy prices carefully.
Today, Fed Chairman Ben Bernanke makes a lunchtime speech on "Reflections on the Yield Curve and Monetary Policy" at the Economic Club of Washington. New York Fed Chief Timothy Geithner speaks at 12:45 p.m. in Washington about financial crisis in emerging markets. Fed Vice Chairman Donald Kohn discusses the economic outlook at 7:30 p.m. We hope you enjoyed your "Morning Coffee" and we wish you a good day trading. (disclosure)
posted by The Greek | 8:38 AM
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