U.S. Market Update

Daily Forex Fundamentals | Written by Trade The News | Oct 27 08 15:40 GMT |

Dow -37 S&P -9.4 NASDAQ -19 In a depressingly familiar scenario, deep declines in Asia and Europe are dragging down US indices in early trading. Fears about global credit markets are re-emerging, especially after Asian money market rates rose overnight. The USD LIBOR fixing rates have found a floor, with neither the overnight nor the three-month making much downward progress at all today. PIMCO's Bill Gross told CNBC that he believes LIBOR rates will loosen this week thanks to the Treasury's commercial paper program. Crude is getting even closer to $60 in early trading, below Friday's close. In other commodities, copper is bouncing ever so slightly after a long period of decline. September new home sales data came in a bit ahead of expectations, providing a nice follow-up to last week's news that sales of existing homes rose more than 5% in September. The data buoyed indices momentarily, although it's hard to forget that new home sales are still down more than 30% y/y. More regional banks are piling into the Treasury's bank recapitalization program under TARP, selling preferred shares and warrants to the government. Reports had circulated that the Treasury would release a full list banks receiving capital infusions, although no such list has been forthcoming so far. Before the open Capital One ($3.55B or 26% of market cap), SunTrust ($3.5B or 12.3% of market cap), KeyCorp ($2.5B or 50% of market cap) and State Street ($2.0B or 17% of market cap) announced that they would join up, among several other smaller regional bank names, including Comerica, City National and Northern Trust. The news helped COF, STI and STT spike up 2-6% in early trading, although all three are headed for negative territory mid morning. Bucking this trend, KEY+8% has remained relatively strong. Reports circulated that the Treasury was also getting further requests for assistance from GM-6%, this time to finance a potential merger with Chrysler. Humana, Lowe's and CNA Financial are hurting after reporting earnings, while Verizon is making strong gains mid morning. VZ+8% reported earnings and revenue figures in line with expectations, while operating metrics for the quarter showed no immediate impact from the economic slowdown. On the conference call, the CFO offered a rare view on the Verizon's long-term earnings outlook, guiding in line with estimates for the 2008 period. Apart from significant EPS impairments for investment losses, HUM-9% met earnings expectations for the quarter despite a bit of a miss on revenue. But investors are dumping the stock after the healthcare giant slashed its FY08 guidance. Traders are punishing L-14% and subsidiary CAN-20% after Lowe's said it would inject $1.25B into CAN, its insurance subsidiary, to shore up operations after massive investment losses. Loew's also said it would buy $1.0B in securities from Boardwalk Pipeline natural gas subsidiary to fund an expansion. This come on top of Loew's fairly huge loss for the quarter. In other equity news, trading in GGP has been volatile after both the CEO and president resigned over personal loan controversies. The company also announced that it is selling its portfolio of Las Vegas real estate and is continuing to evaluate strategic alternatives. GGP was down as much as 6%, but is back up around +4% mid morning. The currency markets saw a retreat of the price action that dominated Asian and European trading earlier. Carry-related pairs retraced initial losses the waves of liquidation from earlier in the session ebb away for the time being. Overall, the currency markets remain highly volatile on a historical basis. French Finance Minister Lagarde said that the G-7 had no plans for yen intervention and added that any intervention would be from the Japanese themselves. Then the ECB's Trichet repeated the standard fare concerning the secondary effects of inflation, also noting that there was a chance the ECB would cut interest rates at its Nov 6th policy meeting. Trichet also insisted that cutting is not a foregone conclusion, reflecting the ECB's "no pre-commitment" policy. The USD is firmer against the EUR and GBP from opening levels seen in Asia, but is mixed against the carry-related pairs. Euro-Stoxx 50 Index -2.2% at 2,280; FTSE 100 Index -0.7% at 3,854; CAC 40 Index -3.25 at 3,091 and DAX Index -1.7% at 4,222. The European yield curve flattened during the course of the NY morning; aided by the rebound in stocks from their opening level lows. Dec Bund flat at 117.08 and Dec Gilts -16 ticks at 112.62. Trade The News Staff Trade The News, Inc. Legal disclaimer and risk disclosure All information provided by Trade The News (a product of Trade The News, Inc. "referred to as TTN hereafter") is for informational purposes only. 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