Welcome to Thursday’s Morning Coffee Break – As we count down the final two sessions of the week U.S. indexes are on pace for the largest weekly drop since week ending on June 1^st.  Will bulls be able to muster the first daily gain this week for S&P 500 and NASDAQ?Market participants will be looking to see how markets react to yesterday’s Standard and Poor downgrade of Spanish debt, by two levels to BBB- and citing a negative outlook.

U.S. stock futures remain in the green in morning trading with a drop in weekly jobless claims to 339k and another slip in trade deficit data to -44.2B. A report has surfaced that Sprint (S, quote) is in talks to be acquired Softbank.

As traders start out their day – The Dow Jones  (DIA, quote) fair value is up by 41.03 to 13315.00, S&P 500 (SPY, quote) fair value is up by 6.74 to 1433.80 and the NASDAQ (QQQ, quote) fair value is coming in at 2739.00 up by 16.76 (as of 8:39 am)

The Department of Energy will release natural gas and WTI crude oil reports today At 10:30 a.m. the natural gas inventory report will be released and at 11 a.m. the crude oil inventory report will be released.  Crude oil inventories are delayed by one day, due to Monday’s holiday.

Morning Coffee Break Global Markets Watch

Asia

Overnight Asian markets were broadly lower on the session stemming mostly from the credit rating downgrade of Spain and disappointing earnings outlook in the U.S. Market participant risk appetite continues to remain under pressure as U.S. corporations show signs of weak earnings or weak outlook.

A large state Chinese owned shareholder purchased significant shares in the 4 of the top lending banks in China, the action help push Hong Kong stocks up as well.

Market that once benefit from the U.S. FOMC’s QE3 stimulus are beginning to feel the effects wear off as delays and continued uncertainty of a Spanish bailout. U.S. earnings or lack of earnings are also dampening global markets sentiment.

Euro Zone

Standard & Poor's ratings services cut Spain’s credit rating by not 1 but by 2 levels to BBB- after the U.S. session’s close.  The rating agency said that the downgrade could have a "negative impact on the creditworthiness" effect of  Spanish banks such as Banco Bilbao Vizcaya Argentaria SA (BBVA, quote), Banco Santander SA (SAN, quote), Banco Popular Espanol SA(BPESF, quote), Bankia SA (BNKXF, quote) and Bankinter SA (BKNIY, quote).

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

Safeway (SWY, quote) will be announcing quarterly earnings this morning,

Company Watch

Realogy (RLGY, quote) is a real estate firm that priced its initial public offering at $27 per share which is at the top of the expected range today. Realogy owns Century 21 and Coldwell Banker.

Luxury stocks Tiffany (TIF, quote) and Coach (COH, quote) are two stocks watch after Britain’s Burberry report suggest Britain and China demand for luxury items dropped in second quarter.

Wendy’s (WEN, quote) will be tweaking their logo today.  The last change came in 1983 and will be only the 5^th change since the Wendy’s was founded in 1969.

BP (BP, quote) the U.S. Justice Department and BP are reportedly close to reaching a settlement deal over the 2010 Gulf oil spill.  The deal would release BP from additional civil and criminal liabilities. This is key as it will finally define total expenditure surrounding the disaster.

Walt Disney (DIS, quote) is being sued by Stan Lee Media over the rights to Marvel characters like Spider-Man and Iron Man.

Amazon.com (AMZN, quote) was granted FCC approval to sell its Kindle Fire 4G tablet computer. Amazon needed FCC clearance required by all wireless devices in order to sell their device.

Futures and Commodities Corner

Crude Oil

Crude oil prices are higher during electronic trading head of the Department of Energy’s WTI crude oil inventory report. Better than expected jobs claim report also help lift crude prices.

Traders are also monitoring geopolitical tensions in the Middle East, amid fears over a disruption to supplies from the region.

Energy traders will be focusing closely and watching the double weekly supply reports todays.

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 price backed off earlier gains after data showed that jobless claims dropped once again in latest week, suggesting the U.S. labor market is improving.

Gold is typically seen as a safe haven or risks off investments that traders buy during times of economic and financial uncertainty.

The release of positive economic news and/or upbeat headlines are will typically pressure gold prices as the news encourages appetite for risk assets.

One of the other influences on gold is the U.S. dollar as gold is prices in U.S. dollar which typically means gold and the U.S. dollar trade to the inverse of each other. Another word the weaker the U.S. dollar the higher gold is because it takes more dollars to buy the same value in gold.

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	$92.62	+1.37	+1.50%
Gold	$1768.90	+5.70	+0.32%
Wheat	$881.50	+11.75	+1.35%
Corn	$766.25	+29.50	+4.0%
Live Cattle	$126.575	UNCH	UNCH
Lean Hogs	$78.10	UNCH	UNCH
Treasury Bond	148.1562	-0.5625	-0.38%
10yr Note	132.9531	-0.2656	-0.20%
2yr Note	110.2031	-0.0078	-0.01%
U.S. Dollar Index	79.875	-0.14	-0.17%
			As of 9:26 a.m. ET

The Morning Coffee Break Bottom Line

U.S. markets are about to open, my apologies for a late report.  Futures say we will have pop at the open but look out for the close as it will be key.  If we sell off going into the close then the U.S. stock market be getting ready to correct.