U.S. Market Update

Daily Forex Fundamentals | Written by Trade The News | Aug 20 08 15:46 GMT |

Dow +70 S&P +7 NASDAQ +17.5

The GSEs have taken equity markets for a wild ride this morning. Indices quickly fell into negative territory on headlines indicating that FRE was seeking an immediate meeting with the US Treasury, sparking speculation that the long-heralded government bailout was at hand. FNM's CEO responded in a radio interview saying that the firm has yet to ask the Treasury for any assistance, asserting that it has more capital than ever before, helping stocks and more specifically financials recover sharply by mid-morning. Front-month crude rose more than $2 ahead of the weekly inventory reading that showed crude inventories added a whopping 9M barrels in the latest week. That news is overshadowing a much larger than expected drawdown in gasoline inventories, sending energy futures into the red across the board. Financials have been under pressure from weakness in the GSE's that sent both FNM and FRE below July lows early in the session. LEH approached its 52-week low just after the open, before spiking up +4%, despite the fact that both Goldman and Bernstein have lowered widened their FY08 EPS loss estimates for the firm, to -$9.65 from -$2.10 and to -$4.65 from -$2.24, respectively (consensus estimate is -$3.17). MER, JPM and GS retraced earlier losses, moving into positive territory, while MS-2%. FRE and FNM fell 20% each on the morning's news before regaining some ground. More retail earnings reports came out before the open. Both ROST-1.0% and BJ-9% reported and guided for upcoming quarters mostly in-line with estimates, while BJ increased its share buyback by $200M (8.2% of market cap) and increased its guidance for the year. In other retail news, Goldman cut M and KSS to neutral from buy. Computer giant HPQ+5% came in ahead of estimates and offered in-line guidance, while the CEO said the firm still sees continuing growth in emerging markets but overall calls the sales outlook a "mixed bag." The CFO noted that if the USD stays at current levels, HP may expect some downward pressure in reported revenues. Merrill made positive comments on HPQ, maintaining its buy and raising its FY08 EPS estimate from $3.59 to $3.61, and maintaining their FY09 and FY10 EPS estimates slightly. STP+12% on decent earnings and increases in guidance for the coming quarter and the year, while the CEO said the firm is looking to do a deal with a major utility company in the next six months. Airlines are under pressure after the chief of the International Air Transportation Association said overnight that airlines could have losses of as much as $6.1B in 2008 and that he is bracing for further airline collapses: UAUA-8%, NWA-7%, DAL-5%, CAL-4% and AMR-3%. In other news, PAY+24% after boosting guidance. NVTL-25% after getting slammed with downgrades at Piper Jaffray, Morgan Joseph and Craig-Hallum.

Treasury prices moved higher once again receiving risk aversion bids early in the session. The 10-year yield tested its lowest levels of the summer before rebounding with the bounce in stocks. The 10-year yield remains pinned at 3.8% while the 2-year remains below 2.3%. The USD has rebounded back near its overnight high against the Euro as commodity prices have come off heard led by oil. EUR/USD has slipped back towards the 1.47 figure while Cable remains below 1.86. The greenback has also advanced against the Aussie and Canadian Dollar late in the NY morning, helped again by falling commodity prices.

Trade The News Staff
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