Thursday's Brew - Dec 28
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. Equity markets have opened lower this morning, ahead of key housing data and important regional data from the Chicago PMI.
OVERSEAS MARKETS
Euphoria seems to be carrying over in the Hong Kong market, feeding on a slew of IPOs and continued benefits from exporting into the American market. We are stepping out on a limb a bit, but it's possible that the recent agreement of the U.N. Security Council on the Iranian nuclear issue, helped to ease concerns of a clash of views and needs between China and the United States. China is greatly dependent on Iranian oil, and we continue to expect it to avoid disturbing that oil flow. However, the agreement certainly appeased that concern for now. The Hang Seng rose 1.4%, surpassing 20,000 for the first time and closing at 20,001.91. However, mainland Chinese shares were mostly lower Thursday. Japan's NIKKEI 225 was relatively unchanged.
European shares are drifting slightly lower through midday trading. The DJ STOXX 50 and the FTSE 100 indices are both unchanged.
ECONOMIC DATA & ANALYSIS
Thursday continues this week's housing market review, with the release of the federal government's report on November existing home sales. We expect existing homes sales to trend worse than new homes, as we believe home builders have been able to keep new home sales slightly more lively with incentive offers. Bloomberg News' survey shows consensus expectations for 6.19 million sales, versus 6.24 in the last period.
For the whole of the year, the National Association of Realtors forecast 2006 sales to be 8.6% lower than in 2005, and the organization is currently forecasting a sales decline of 1% for 2007. My experience on Wall Street has taught me that a great majority of analysts typically underestimate rate of change, due to a fear of going out on a limb. Regarding the future of housing, much depends on economic growth, interest rates and the action of the Federal Reserve. Still, we would bet on a greater degree of decline than forecast in this case, as pricing remains too high in our view and inventory is still above six months.
The most widely anticipated bit of news today is the Labor Department's report on initial weekly jobless claims. Last week showed 315,000 new claims, which continued a trend below last year's average. The consensus view for this week was 320,000, and the actual result came in at 317,000, better than expected. So, we got a mildly positive measure that is unlikely to impact the market today, in our view.
Later, the Conference Board will release its consumer-confidence index, perhaps an indirect measure of how well holiday season sales may have gone this year. The consensus sees December consumer confidence measuring 102.0, versus 102.9 in November. Finally, the National Association of Purchasing Managers - Chicago Index for December will be reported, with a consensus view for a reading of 50.0, compared to 49.9 in November. A reading above 50 signals an expanding regional business sector, so this particular reading carries significant weight due to the level of consensus expectations seemingly riding the fence. Other recent regional data portends the possibility of a more significant GDP slowdown in the near future, but let's see how the Midwest is fairing today.
COMMODITY MARKETS
Weekly oil and distillate inventory will be reported today, one day late due to the shortened holiday week. Crude oil is up 0.5% this morning, to $60.7, as analysts widely expect inventories to have decreased due to Houston Channel shipping delays. The median view of a group of analysts surveyed by Bloomberg News shows an expectation for a crude oil decline of 2.5 million barrels.
Natural gas is rebounding sharply this morning, up 2.4% to $6.3 /MMBtu, after suffering in recent days on a mild long-term weather outlook. Gasoline is higher by nearly a percentage point as well.
Gold is higher by 0.7%, up for the third day in a row. Gold should continue to benefit from an escalating Iranian conflict. Over the long-term, gold should be a beneficiary of a weakening dollar as well, while emerging markets strengthen. Finally, as stated here in the past, gold, food commodities and water look to benefit from a global community that is forgetting lessons learned from the past. As the greatest generation passes on, humanity grows more and more likely to repeat the past and find itself in war once again.
STOCKS IN THE NEWS
At this time last year, Apple Computer was on top of the world, benefiting from its wildly popular IPod product. Today, its iconic leader, Steve Jobs, finds himself in the middle of a scandalous controversy as it is being alleged that he received 7.5 million options without Board approval. The Financial Times reported that documents may have been falsified after the fact to hide the activity. The loss of a key figure like Jobs would be catastrophic to Apple Computer shares, in our view, and possibly even disruptive to the greater technology sector. AAPL shares are 1.2% lower in early trading. There are no earnings reports scheduled for Thursday. We hope you found value in "Today's Morning Coffee" and we wish you a good day trading. (disclosure)
OVERSEAS MARKETS
Euphoria seems to be carrying over in the Hong Kong market, feeding on a slew of IPOs and continued benefits from exporting into the American market. We are stepping out on a limb a bit, but it's possible that the recent agreement of the U.N. Security Council on the Iranian nuclear issue, helped to ease concerns of a clash of views and needs between China and the United States. China is greatly dependent on Iranian oil, and we continue to expect it to avoid disturbing that oil flow. However, the agreement certainly appeased that concern for now. The Hang Seng rose 1.4%, surpassing 20,000 for the first time and closing at 20,001.91. However, mainland Chinese shares were mostly lower Thursday. Japan's NIKKEI 225 was relatively unchanged.
European shares are drifting slightly lower through midday trading. The DJ STOXX 50 and the FTSE 100 indices are both unchanged.
ECONOMIC DATA & ANALYSIS
Thursday continues this week's housing market review, with the release of the federal government's report on November existing home sales. We expect existing homes sales to trend worse than new homes, as we believe home builders have been able to keep new home sales slightly more lively with incentive offers. Bloomberg News' survey shows consensus expectations for 6.19 million sales, versus 6.24 in the last period.
For the whole of the year, the National Association of Realtors forecast 2006 sales to be 8.6% lower than in 2005, and the organization is currently forecasting a sales decline of 1% for 2007. My experience on Wall Street has taught me that a great majority of analysts typically underestimate rate of change, due to a fear of going out on a limb. Regarding the future of housing, much depends on economic growth, interest rates and the action of the Federal Reserve. Still, we would bet on a greater degree of decline than forecast in this case, as pricing remains too high in our view and inventory is still above six months.
The most widely anticipated bit of news today is the Labor Department's report on initial weekly jobless claims. Last week showed 315,000 new claims, which continued a trend below last year's average. The consensus view for this week was 320,000, and the actual result came in at 317,000, better than expected. So, we got a mildly positive measure that is unlikely to impact the market today, in our view.
Later, the Conference Board will release its consumer-confidence index, perhaps an indirect measure of how well holiday season sales may have gone this year. The consensus sees December consumer confidence measuring 102.0, versus 102.9 in November. Finally, the National Association of Purchasing Managers - Chicago Index for December will be reported, with a consensus view for a reading of 50.0, compared to 49.9 in November. A reading above 50 signals an expanding regional business sector, so this particular reading carries significant weight due to the level of consensus expectations seemingly riding the fence. Other recent regional data portends the possibility of a more significant GDP slowdown in the near future, but let's see how the Midwest is fairing today.
COMMODITY MARKETS
Weekly oil and distillate inventory will be reported today, one day late due to the shortened holiday week. Crude oil is up 0.5% this morning, to $60.7, as analysts widely expect inventories to have decreased due to Houston Channel shipping delays. The median view of a group of analysts surveyed by Bloomberg News shows an expectation for a crude oil decline of 2.5 million barrels.
Natural gas is rebounding sharply this morning, up 2.4% to $6.3 /MMBtu, after suffering in recent days on a mild long-term weather outlook. Gasoline is higher by nearly a percentage point as well.
Gold is higher by 0.7%, up for the third day in a row. Gold should continue to benefit from an escalating Iranian conflict. Over the long-term, gold should be a beneficiary of a weakening dollar as well, while emerging markets strengthen. Finally, as stated here in the past, gold, food commodities and water look to benefit from a global community that is forgetting lessons learned from the past. As the greatest generation passes on, humanity grows more and more likely to repeat the past and find itself in war once again.
STOCKS IN THE NEWS
At this time last year, Apple Computer was on top of the world, benefiting from its wildly popular IPod product. Today, its iconic leader, Steve Jobs, finds himself in the middle of a scandalous controversy as it is being alleged that he received 7.5 million options without Board approval. The Financial Times reported that documents may have been falsified after the fact to hide the activity. The loss of a key figure like Jobs would be catastrophic to Apple Computer shares, in our view, and possibly even disruptive to the greater technology sector. AAPL shares are 1.2% lower in early trading. There are no earnings reports scheduled for Thursday. We hope you found value in "Today's Morning Coffee" and we wish you a good day trading. (disclosure)
posted by The Greek | 8:35 AM
0 Comments:
Post a Comment
<< Home