Stocks in High Gear to Start to the New Year
US stocks are solidly higher in early action as markets in Asia closed to the upside after shrugging off a slowdown in Chinese manufacturing activity, while European equities are nicely higher on some upbeat manufacturing reports across the pond. However, traders are waiting for the release of the ISM Manufacturing Index shortly after the opening bell, which is expected to depict activity in the US expanded for the seventeenth-straight month in December. Treasuries are solidly lower amid the broad-based advance in equities, ahead of the aforementioned national manufacturing report and a separate reading on construction spending. In equity news, Dow member Bank of America announced that it has reached an agreement to buy back bad mortgage loans from Freddie Mac and Fannie Mae.
As of 8:44 a.m. ET, the March S&P 500 Index Globex future is 10 points above fair value, the Nasdaq 100 Index is 23 points above fair value, while the DJIA is 84 points above fair value. Crude oil is $0.61 higher at $91.99 per barrel, and the Bloomberg gold spot price is down $0.73 at $1,420.05 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is up 0.3% at 79.21.
Dow member Bank of America Corp. (BAC $13 1) announced that it has reached an agreement with Government Sponsored Entities (GSEs) Federal Home Loan Mortgage Corp. (FMCC $0.30)-Freddie Mac-and Federal National Mortgage Association (FNMA $0.30)-Fannie Mae-to resolve repurchase claims involving certain residential mortgage loans sold to the GSEs by entities related to BAC's Countrywide Financial Corp. BAC said it expects to take a writedown of about $3 billion in fiscal 4Q 2010 to buy back residential mortgage loans sold to FMCC and FNMA. BAC said through this writedown it believes that it has addressed its remaining exposure to repurchase obligations for residential mortgage loans sold directly to the GSEs.
"These actions resolve substantial legacy issues in the best interest of our shareholders," BAC's President and CEO Brian Moynihan added. Meanwhile, Freddie Mac's CEO said he is pleased to reach the agreement and he believes it is in all parties' best interests, while Fannie Mae said the agreement is a "fair and responsible"
resolution.
National manufacturing activity gauge set to take the stage
Treasuries are solidly lower in morning action as the equity markets are moving higher and ahead of a plethora of economic data this week, with the yield on the two-year note 4 bps higher to 0.63%, the yield on the 10-year note up 10 bps to 3.39%, and the 30-year bond yield advancing 9 bps to 4.43%. The ISM Manufacturing Index will get the ball rolling just after today's opening bell, forecasted to increase to 57.0 in December from 56.6 in November, while the ISM Non-Manufacturing Index, to be released on Wednesday, is anticipated to increase to 55.7 in December from 55.0 in November. A reading of 50 separates expansion from contraction. An underlying theme from December regional reports was large numbers of respondents reporting jumps in input costs, while pricing power remains subdued. The implication is that corporate profits could incur margin pressure. Meanwhile, construction spending will also be released today, anticipated to increase 0.2% month-over-month (m/m) in November after rising by 0.7% in October.
In addition to the employment components of the ISM surveys, jobs data this week includes the ADP Employment Change and initial jobless claims, as well as the most comprehensive reading on jobs in the form of Friday's nonfarm payrolls, expected to grow 140,000 in December after posting a disappointing 39,000 increase in November. The unemployment rate is estimated to fall to 9.7% after increasing in November to 9.8%. As the labor force grows by roughly 150,000 a month and together with people re-entering the workforce after previously leaving discouraged by weak job prospects, recent gains in employment have been insufficient to significantly reduce the unemployment rate.
The slow jobs progress along with the threat of deflation, or falling prices, during the slow growth over the summer were the reasons cited for the Federal Reserve's second round of asset purchases, commonly called quantitative easing, or QE2. While the program was announced at the Fed's November meeting, Fed Chair Bernanke began talking about the possibility back at the end of August, propelling a rise in the stock market and a corresponding "wealth effect," where consumers feel better and begin to spend.
Other releases on this week's US economic calendar include: factory orders, MBA Mortgage Applications, and consumer credit.
Europe nicely higher on data but UK markets did not participate
The equity markets in Europe are solidly higher in afternoon action, with traders digesting some key manufacturing reports in the region, but the UK markets remained closed for a holiday. Moreover, a sharp rise in shares of Porsche Automobil Holding (POAHY $8) are helping the advance across the pond on the heels of last week's announcement that a US court dismissed a lawsuit filed by several US hedge funds, alleging the luxury automaker misled traders in its acquisition of Volkswagen AG (VLKAY $29) shares in 2008. The dismissed lawsuit removed a substantial roadblock facing its agreement to merge with Volkswagen.
Meanwhile, there were some favorable reports on manufacturing activity in Europe, with Italy's PMI Manufacturing gauge increasing to 54.7 in December, from 52.0 in November, and compared to the slight increase to 52.2 that economists were expecting. Also, the euro-zone Manufacturing PMI for December was unexpectedly revised higher than previously reported, as the reading improved from 56.8 in the preliminary report, to 57.1. Other reports were mixed, with France's manufacturing activity being unexpectedly revised higher, while Germany's manufacturing read was surprisingly revised to the downside, although it remained at a level depicting expansion.
France's CAC-40 Index is 2.0% higher, Germany's DAX Index is up 1.3%, and Italy's FTSE MIB Index is advancing 1.9%.
Asia mostly higher but many markets sat out the session
The equity markets in Asia were mostly higher for the first trading session of 2011, with South Korea's Kospi Index advancing 0.9% to a record high, aided by a weekend report that showed the nation's trade surplus expanded more than economists expected. South Korean exports and imports both rose solidly, topping expectations. However, today's action remained light with markets in Japan and Australia closed for holidays, along with some markets in China, as the Shanghai Composite did not trade today. However, the Hong Kong Hang Seng Index moved 1.7% higher despite Friday's release of the China PMI Manufacturing report, which showed activity slowed from 55.2 in November to 53.9, compared to the 55.0 reading that was anticipated. The index remained at a level depicting expansion, with a reading above 50, but this was the first deceleration in manufacturing growth in five months, per Bloomberg. The decline in the index may have soothed some concerns regarding further monetary policy tightening actions by the Chinese government, which deployed a plethora of measures in 2010 to try to control inflation and thwart the formation of asset bubbles. Elsewhere, India's BSE Sensex 30 Index increased 0.3% even after the country's PMI Manufacturing report showed a deceleration in activity in December, but it continued to expand.
US stocks are solidly higher in early action as markets in Asia closed to the upside after shrugging off a slowdown in Chinese manufacturing activity, while European equities are nicely higher on some upbeat manufacturing reports across the pond. However, traders are waiting for the release of the ISM Manufacturing Index shortly after the opening bell, which is expected to depict activity in the US expanded for the seventeenth-straight month in December. Treasuries are solidly lower amid the broad-based advance in equities, ahead of the aforementioned national manufacturing report and a separate reading on construction spending. In equity news, Dow member Bank of America announced that it has reached an agreement to buy back bad mortgage loans from Freddie Mac and Fannie Mae.
As of 8:44 a.m. ET, the March S&P 500 Index Globex future is 10 points above fair value, the Nasdaq 100 Index is 23 points above fair value, while the DJIA is 84 points above fair value. Crude oil is $0.61 higher at $91.99 per barrel, and the Bloomberg gold spot price is down $0.73 at $1,420.05 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is up 0.3% at 79.21.
Dow member Bank of America Corp. (BAC $13 1) announced that it has reached an agreement with Government Sponsored Entities (GSEs) Federal Home Loan Mortgage Corp. (FMCC $0.30)-Freddie Mac-and Federal National Mortgage Association (FNMA $0.30)-Fannie Mae-to resolve repurchase claims involving certain residential mortgage loans sold to the GSEs by entities related to BAC's Countrywide Financial Corp. BAC said it expects to take a writedown of about $3 billion in fiscal 4Q 2010 to buy back residential mortgage loans sold to FMCC and FNMA. BAC said through this writedown it believes that it has addressed its remaining exposure to repurchase obligations for residential mortgage loans sold directly to the GSEs.
"These actions resolve substantial legacy issues in the best interest of our shareholders," BAC's President and CEO Brian Moynihan added. Meanwhile, Freddie Mac's CEO said he is pleased to reach the agreement and he believes it is in all parties' best interests, while Fannie Mae said the agreement is a "fair and responsible"
resolution.
National manufacturing activity gauge set to take the stage
Treasuries are solidly lower in morning action as the equity markets are moving higher and ahead of a plethora of economic data this week, with the yield on the two-year note 4 bps higher to 0.63%, the yield on the 10-year note up 10 bps to 3.39%, and the 30-year bond yield advancing 9 bps to 4.43%. The ISM Manufacturing Index will get the ball rolling just after today's opening bell, forecasted to increase to 57.0 in December from 56.6 in November, while the ISM Non-Manufacturing Index, to be released on Wednesday, is anticipated to increase to 55.7 in December from 55.0 in November. A reading of 50 separates expansion from contraction. An underlying theme from December regional reports was large numbers of respondents reporting jumps in input costs, while pricing power remains subdued. The implication is that corporate profits could incur margin pressure. Meanwhile, construction spending will also be released today, anticipated to increase 0.2% month-over-month (m/m) in November after rising by 0.7% in October.
In addition to the employment components of the ISM surveys, jobs data this week includes the ADP Employment Change and initial jobless claims, as well as the most comprehensive reading on jobs in the form of Friday's nonfarm payrolls, expected to grow 140,000 in December after posting a disappointing 39,000 increase in November. The unemployment rate is estimated to fall to 9.7% after increasing in November to 9.8%. As the labor force grows by roughly 150,000 a month and together with people re-entering the workforce after previously leaving discouraged by weak job prospects, recent gains in employment have been insufficient to significantly reduce the unemployment rate.
The slow jobs progress along with the threat of deflation, or falling prices, during the slow growth over the summer were the reasons cited for the Federal Reserve's second round of asset purchases, commonly called quantitative easing, or QE2. While the program was announced at the Fed's November meeting, Fed Chair Bernanke began talking about the possibility back at the end of August, propelling a rise in the stock market and a corresponding "wealth effect," where consumers feel better and begin to spend.
Other releases on this week's US economic calendar include: factory orders, MBA Mortgage Applications, and consumer credit.
Europe nicely higher on data but UK markets did not participate
The equity markets in Europe are solidly higher in afternoon action, with traders digesting some key manufacturing reports in the region, but the UK markets remained closed for a holiday. Moreover, a sharp rise in shares of Porsche Automobil Holding (POAHY $8) are helping the advance across the pond on the heels of last week's announcement that a US court dismissed a lawsuit filed by several US hedge funds, alleging the luxury automaker misled traders in its acquisition of Volkswagen AG (VLKAY $29) shares in 2008. The dismissed lawsuit removed a substantial roadblock facing its agreement to merge with Volkswagen.
Meanwhile, there were some favorable reports on manufacturing activity in Europe, with Italy's PMI Manufacturing gauge increasing to 54.7 in December, from 52.0 in November, and compared to the slight increase to 52.2 that economists were expecting. Also, the euro-zone Manufacturing PMI for December was unexpectedly revised higher than previously reported, as the reading improved from 56.8 in the preliminary report, to 57.1. Other reports were mixed, with France's manufacturing activity being unexpectedly revised higher, while Germany's manufacturing read was surprisingly revised to the downside, although it remained at a level depicting expansion.
France's CAC-40 Index is 2.0% higher, Germany's DAX Index is up 1.3%, and Italy's FTSE MIB Index is advancing 1.9%.
Asia mostly higher but many markets sat out the session
The equity markets in Asia were mostly higher for the first trading session of 2011, with South Korea's Kospi Index advancing 0.9% to a record high, aided by a weekend report that showed the nation's trade surplus expanded more than economists expected. South Korean exports and imports both rose solidly, topping expectations. However, today's action remained light with markets in Japan and Australia closed for holidays, along with some markets in China, as the Shanghai Composite did not trade today. However, the Hong Kong Hang Seng Index moved 1.7% higher despite Friday's release of the China PMI Manufacturing report, which showed activity slowed from 55.2 in November to 53.9, compared to the 55.0 reading that was anticipated. The index remained at a level depicting expansion, with a reading above 50, but this was the first deceleration in manufacturing growth in five months, per Bloomberg. The decline in the index may have soothed some concerns regarding further monetary policy tightening actions by the Chinese government, which deployed a plethora of measures in 2010 to try to control inflation and thwart the formation of asset bubbles. Elsewhere, India's BSE Sensex 30 Index increased 0.3% even after the country's PMI Manufacturing report showed a deceleration in activity in December, but it continued to expand.
No comments:
Post a Comment