Morning Market Activity 08-27-10

Morning Greek
Greek Factor: -1

Today's morning market activity is going to be greatly influenced by the revision of Gross Domestic Product (GDP), and also by the Jackson Hole address of Federal Reserve Chairman Benjamin Bernanke. A slew of important speakers are on tap at the Kansas City Fed's confab, including the ECB's Jean-Claude Trichet. Thus, a wild card market factor might surface through the day. Finally, also look for Consumer Confidence data from the University of Michigan/Reuters later this morning. The "Greek Factor" ranges from +3 to -3, and is a subjective measure of The Greek's view of the market impact of individual and aggregate premarket news and the day's scheduled events.

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Morning Market Activity

GDP was revised lower, but the result was ahead of consensus forecasts and the market was well-prepared for the reduction. Fed Chairman Ben Bernanke will attempt to appease market concerns at 10:00 AM in Jackson Hole. So, you would think we might find a Friday rally, and we may. However, I expect that throughout the day, the market will remember that the economic recovery is deteriorating, and will focus on this. Also, I expect confidence in the ability of the Fed to affect the economy is dwindling, and so the potency of Bernanke's sometimes shaky voice will have been diluted. I would look for the market to lose ground into the close today, whichever direction intraday trading may take it.

GDP Revision
Greek Factor: -1

Second quarter gross domestic product (GDP) was revised lower this morning to +1.6%, from its initial reporting of +2.4%. To the reader who is first becoming aware of this news, it may sound cataclysmic for stocks. While it is highly critical to the short to medium-term movement of stocks, this report considers the short short-term impact of the data release. Therefore, and considering that economists had enough advanced warning through the release of other data points, the broader market was geared to receive a revision even lower, to +1.3%. So, if you can believe it, the news today is relatively positive for the open of stocks.

We've assigned a Greek Factor rating of negative one to the data point, simply because of the only nascent digestion of market participants of a lower level of economic activity and even the risk for a second dive into recession. As investors continue to digest this new paradigm, we expect many investors are still liquidating positions. We will cover the GDP report in detail in a later release this morning.

Bernanke's Jackson Hole Address
Greek Factor: +1

Normally, we would anticipate Chairman Bernanke's address, and its design to appease concerns, would offset concerns about the earlier report of GDP, especially given its better than expected result. However, general market sentiment is swaying, and confidence in Bernanke's ability to fix things is dwindling. There is a growing opinion that perhaps the Federal Reserve is about out of bullets, has done all it can, and has been rendered impotent by the greatest recession in generations. For this reason, we have only assigned a positive one factor to Bernanke's address, which comes at 10:00 AM. We will try to cover the speech as well this morning, as it is highly important to investors.

Attending the Jackson Hole summit will be a slew of important global financial market figures. The head of the IMF appeared today in a morning interview on CNBC, as did St. Louis Fed President James Bullard. Bullard was not very reassuring, at least not to my metric of his demeanor. As an analyst, I was pretty good at measuring the effectiveness and aptitude of corporate leaders, economists, strategists and political powers. My feeling from Bullard was that there's little value add in terms of original opinion. His statement that the Fed Chief has support at the Fed, seems to say there's little courage among the Fed Board of Governors and its regional presidents to take personal responsibility and to look toward adding value to Fed decision making. In other words, the weight is squarely on Bernanke.

Consumer Sentiment
Greek Factor: -1*

The Reuters/University of Michigan Consumer Sentiment reading improved slightly in mid-August, to 69.6. Recall that previous readings marked sharp down-slide in confidence, and so the latest improvement should be taken in context. In absolute terms, it still signifies a low level of confidence among America's underemployed consumer base.

The consensus of economists are not going out on a limb for this latest reading, as their forecast sits at 69.6. We expect the measure to slip slightly, as it sort of settles into new paradigm thinking (re economy). Even though the report comes after the market open, I've assigned an anticipatory Greek Factor rating for its release, should it be slightly lower, as I expect.

Corporate Drivers

The day's corporate schedule is light. Hewlett-Packard (NYSE: HPQ) and Dell (Nasdaq: DELL) have traded new offers for 3Par (NYSE: PAR), and the fight is officially on. We're up above $30 now to take control of the firm. Tiffany (NYSE: TIF), Frontline (NYSE: FRO) and Golar LNG Ltd. (Nasdaq: GLNG) report results and host conference calls today. Healthspring (NYSE: HS) will acquire Bravo Health. Boeing (NYSE: BA) is delaying its Dreamliner yet again, to the middle of the first quarter of 2011. Genentech (NYSE: DNA) receives a Refuse to File Letter from the FDA for T-DM1; Immunogen (Nasdaq: IMGN) will host a conference call in this regard.

EPS reports are due from China Eastern Airlines (NYSE: CEA), Computacenter Plc (LSE: CCC.L), Sinopec Shanghai Petrochemical (NYSE: SHI) and others. Thursday's EPS schedule included data from A-Power Energy (Nasdaq: APWR), Aruba Networks (Nasdaq: ARUN), Bebe Stores (Nasdaq: BEBE), Bio-Reference Laboratories (Nasdaq: BRLI), Cellcom Israel (NYSE: CEL), Chunghwa Telecom (NYSE: CHT), Conn's (Nasdaq: CONN), DHT Holdings (NYSE: DHT), Dollar Financial (Nasdaq: DLLR), DRD Gold (Nasdaq: DROOY), Fred's (Nasdaq: FRED), Gerber Scientific (NYSE: GRB), GigaMedia (Nasdaq: GIGM), Immunomedics (Nasdaq: IMMU), International Rectifier (NYSE: IRF), J. Crew (NYSE: JCG), Magma Design Automation (Nasdaq: LAVA), Met-Pro (NYSE: MPR), Mobile Telesystems (NYSE: MBT), Net 1 UEPS (Nasdaq: UEPS), Netezza (NYSE: NZ), Newmarket Technology (Nasdaq: IPVO), Novell (Nasdaq: NOVL), Omnivision (Nasdaq: OVTI), Overland Storage (Nasdaq: OVRL), Patterson Dental (Nasdaq: PDCO), QAD (Nasdaq: QADI), Quanex Building Products (NYSE: NX), Regis (NYSE: RGS), Royal Bank of Canada (NYSE: RY), Ship Finance (NYSE: SFL), Signet Jewelers (NYSE: SIG), Solera (NYSE: SLH), Standex (NYSE: SXI), Tel-Instrument Electronics (AMEX: TIK) and XETA Technologies (Nasdaq: XETA).



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