Welcome to Wednesday’s Morning Coffee Break – U.S. market participants sold Tuesday’s session making it the largest one day drop since August 23 it’s also the last time the Dow Jones index has seen a 1% drop in 6 years. The NASDAQ has not seen this large of loss since June 25.
The tides shift today as traders get ready to start the 3rd session of the week. U.S. equity markets will receive some much needed economic data and provide a focus on something other than the Euro Zone crisis.
At 10:00 a.m. ET traders will get a look at August Wholesale Inventories m/m. Analysts’ are looking for a bump up of 0.5% after July’s 0.7% jump higher.
The Labor Department releases its “JOLTS” survey, a measure of job opportunities and labor turnover, highly skeptical, at 10 a.m. as well.
The Department Energy typically will release its weekly WTI crude oil and gasoline inventories at 10:30 a.m. today but due to the holiday on Monday will be delayed by one day.
The highly anticipated the Federal Reserve releases its latest Beige Book scheduled to be released at 2:00 p.m. will provide market participants a region by region evaluation of the U.S. economy. The Beige Book is expected to be the one data point to swing markets the most.
As traders start out their day – The Dow Jones (DIA, quote) fair value is down by -4.53 to 13403.53, S&P 500 (SPY, quote) fair value is up by 0.57 to 1436.50 and the NASDAQ (QQQ, quote) fair value is coming in at 2735.75 up by 0.33 (as of 8:14 am)
Morning Coffee Break Global Markets Watch
Asia
During the Asian overnight session Japan’s NIKKEI lead the region lower with only China closing out the session in the green. Chinese equities saw their second session in row higher on speculation of additional policy easing. Analysts are now suggesting that emerging markets in Asia have used the resource of raw material commodities boom to their advantage and established a solid manufacturing competitiveness, taking market share away from Latin America manufactures.
Euro Zone
Euro Zone equities continued their losses as the International Monetary Fund (IMF) warned of the impact of the euro-zone debt crisis. Euro Zone banks are in process of some of their biggest losses as the IMF darkens the skies with even more uncertainty of the entire Euro Zone’s future. The latest dark cloud hitting banks come if European governments and its leaders do not solve this debit crisis soon or at least steer the crisis back onto path of solvability the regions banks could be forced to sell 4.5 trillion in assets…Correct Trillions with a “T”
On the other hand U.K. banks were lead higher on eased capital rules today.
Emerging Markets
Principal Financial Group (PFG, quote) announced today it will be buying Chilean pension manager AFP Cuprum. The deal is being reported as a $1.5 billion deal. This is the latest efforts of PFG to expand into emerging markets.
Morning Coffee Break Companies To Watch
Earnings Watch
Chevron (CVX, quote) announced 3rd quarter earnings will be substantially lower than in the prior quarter.
Company Watch
International Paper (IP, quote) is increasing its quarterly dividend by 14% to $0.30 per share
Microsoft (MSFT, quote) CEO Steve Ballmer saw his compensation package lowered by 4% in part because of a drop in Windows revenue.
Best Buy (BBY, quote) James Muehlbauer, chief financial officer is leaving Best Buy his last day will be February 3.
Toyota (TM, quote) has issues another global recall of more than 7.4 million vehicles in order to fix a faulty power window switch.
FedEx (FDX, quote) is looking to reduce costs at its express air freight and services groups add roughly $1.7 billion to the bottom line across 4 years.
True Religion Apparel (TRLG, quote) according to the Wall Street is seeking a buyer.
Futures and Commodities Corner
Crude Oil
WTI crude oil prices remain flat in electronic trading giving back some of the gains in the previous session as the as the U.S. dollar moved higher and U.S. equities moved lower.
Natural gas prices moved higher by 0.65% in early electronic trading ahead of inventory number tomorrow.
Be sure to check out the Daily Energy Report for a compressive look at the global energy markets by Tom Pawlicki.
Equity only readers can gain exposure to WTI Crude Oil through the United States Oil Fund (USO, quote) ETF that seeks to reflect the performance, less expenses, of the spot price of West Texas Intermediate (WTI) light, sweet crude oil. The USO will invest in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum based-fuels that are traded on exchanges. It may also invest in other oil interests such as cash-settled options on oil futures contracts, forward contracts for oil, and OTC transactions that are based on the price of oil.
For natural gas traders can gain exposure through the United States Natural Gas Fund (UNG, quote) ETF that seeks to replicate the performance, net of expenses, of natural gas. The trust will invest in futures contracts on natural gas traded on the NYMEX that is the near month contract to expire.
Gold
Gold prices continue to struggle as money flows continue to move into the U.S. dollar giving it strength. As sentiment accelerates to risk off assets thanks to the IMF traders are seeking out the safety of the U.S. dollar. Recent news out of the Euro Zone has not help to aside fear of global economic health concerns.
Gold remains in a sideways channel and we reiterate our suggest gold setup in yesterday’s Morning Coffee Break.
Equity only readers gain exposure to the gold through the SPDR Gold Shares Trust (GLD, quote) ETF that seeks to replicate the performance, net of expenses, of the price of gold bullion. The GLD trust holds gold, and is expected to issue baskets in exchange for deposits of gold, and to distribute gold in connection with redemption of baskets.
| Crude Oil | $92.41 | +0.02 | +0.02% |
| Gold | $1764.20 | +1.20 | +0.07% |
| Wheat | $868.50 | +4.25 | +0.49% |
| Corn | $741.00 | -1.00 | -0.13% |
| Live Cattle | $126.725 | UNCH | UNCH |
| Lean Hogs | $76.80 | UNCH | UNCH |
| Treasury Bond | 147.5938 | -0.375 | -0.25% |
| 10yr Note | 132.8594 | -0.1875 | -0.14% |
| 2yr Note | 110.2109 | -0.0078 | -0.01% |
| U.S. Dollar Index | 80.035 | -0.035 | -0.04% |
| As of 8:23 a.m. ET |
The Morning Coffee Break Bottom Line
U.S. markets are coming off their worst one day drop in months with the futures suggesting a flat to positive opening. Look for markets to drift higher ahead of the Beige Book and then pick a direction based on the results. Markets are likely to remain jittery as earnings apprehension continues into the start of the 3rd quarter earnings release. Watch the Currency Share Euro Trust(FXE, quote) as shift in direction higher should single shift higher in U.S. markets.
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