morning review - 102110

8/8/2019 Morning Review - 102110

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Nicholas Colas (Chief Market Strategist): 212 448 6095 or [email protected] Clark: 212 448 6085 or [email protected]

Beth Reed: 212 448 6096 or [email protected]

Agriculture and Natural ResourcesFor the most part agricultural conditions were favorable as fall harvest was ahead of its normal pace, and most regions were anticipating above-average yields.Additionally, unfavorable weather conditions overseas boosted demand for US agricultural products.

The energy sector continued to expand, as Cleveland and Kansas City reporting an increase in hiring and capital spending at some energy firms. Outlooks weregenerally positive for the coming months, though low natural gas prices dimmed the outlook for producers in the Cleveland and Dallas regions.

Prices and WagesInput costs rose slightly across the country, but inflation was subdued as such price increases were largely not reflected in the price of end goods and services.However, some respondents in Atlanta, Cleveland and Dallas mentioned plans to raise the prices of final goods to potentially cover rising costs, while many restaurants in

the Kansas City District already implemented slight increases in menu prices.

Wages pressures continued to be mostly nonexistent, and there were widespread reports of anticipated higher employee benefit costs due to healthcare reform.Lastly, in terms of the labor market, no news isnt good news in this case. Employment is glaringly missing from the business sector headlines, a clear departurefrom the norm, as the report basically states that hiring remained limited. Many firms mentioned a reluctance to expand payrolls, while some regions experienced aslowdown in demand for staffing services, and Cleveland reported a decline in new job openings.

The Fed will likely use this report in its next FOMC meeting on November 2-3 as it determines the size of a second round of quantitative easing. $500 billionseems to be the most widely-quoted estimate, and with few Beige Book clues to stray from this general consensus, it looks like the Fed is determined to keep usguessing.


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U.S. EQUITIES

In earnings news, MS (flat on the day) posted net income that was worse than expected due to tighter debt-related credit spreads, though quarterlyrevenue results topped estimates. WFC (+4.3%) beat profit forecasts thanks to its merger with Wachovia and core business growth, while USB (+0.1%)also reported better-than-expected earnings as corporate loan demand rose for the first time in 2 years. Meanwhile, shares of BA added 3.4% on positiveearnings helped in part by a rise in commercial airplane volume, and DAL (+10.9%) swung a profit in the 3rd quarter (boosted by international demand forair travel) after a loss in the year-ago period.

Important Conferences/Corporate Meetings Today:New York Society of Security Analysts Brazil Conference New York, NY

Important Earnings Today (with Estimates) From

Source: Thomson ONE

Three Day (High 1182.00; Low 1155.50):Prior Day SPX (High 1182.94; Low 1166.74; Close 1178.11):

S&P Futures

One Day (High 1180.00; Low 1160.50): ALB: $0.84 ALXN: $0.37 ALGN: $0.18 AMZN: 0.48 AXP: $0.85 T: $0.55 ATHN: $0.08 BIDU: $0.41 BAX: $0.97 BBT: $0.26

BUCY: $1.12 CA: $0.44 CAT: $1.09 CAKE: 0.34 CMG: $1.30 CB: $1.39 CTXS: $0.38 CYN: $0.58 COLM: $1.47 CPWR: $0.10

CBE: $0.84 BCR: $1.40 CY: $0.15 DO: $1.36 LLY: $1.15 EXC: $1.10 FITB: $0.17 FLIR: $0.38 FCX: $2.10 GDI: $0.73

GNTX: $0.24 GR: $1.13 HSY: $0.79 HBAN: $0.06 ESI: $2.73JBLU: $0.19 LTM: $0.57 MCD: $1.24 NFX: $1.05 NUE: $0.11

PENN: $0.33 PM: $1.01 PNC: $1.58 SNDK: $1.00 LUV: $0.25 TRV: $1.44 UPS: $0.87 VFC: $2.11 XRX: $0.21Source: Bloomberg


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FIXED INCOME

Source: Bloomberg

Todays Important Economic Indicators/Events (with Consensus):Jobless Claims (8:30am EST): 455KThomas Hoenig Speaks (9:45am EST)Leading Indicators (10:00am EST): 0.3%Philly Fed Survey (10:00am EST): 1.0EIA Natural Gas Report (10:30am EST)

Source: Bloomberg

Treasuries were little changed Wednesday after the Feds Beige Book painted a somewhat upbeat picture of the economic landscape, thoughunemployment remains high and inflation subdued. Eight of the 12 Federal Reserve Banks reported some form of economic growth, while Philadelphiaand Richmond described mixed conditions, Cleveland held steady, and Atlanta remained slow. Ten-year yields were basically flat on the day, whilethe yield on the long bond fell 2 bps as the Feds regional economic survey failed to quell widespread speculation that the central bank will engage in asecond round of quantitative easing.


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Top Online Social Networking Stories

Latest Popular Digg.com Business NewsSteve Jobs takes shots at Android and BlackBerry - http://www.digitaltrends.com/mobile/steve-jobs-takes-shots-at-android-and-blackberry/Red State vs. Blue State - http://blog.infographicworld.com/2010/10/18/red-vs-blue-state/Calculated RiskAIA: Architecture Billings Index shows expansion, first time since Jan 2008 - http://www.calculatedriskblog.com/2010/10/aia-architecture-billings-index-

shows.htmlMBA: Mortgage Purchase Activity Declines - http://www.calculatedriskblog.com/2010/10/mba-mortgage-purchase-activity-declines.htmlHousing Starts and the Unemployment Rate - http://www.calculatedriskblog.com/2010/10/housing-starts-and-unemployment-rate.htmlForeclosure-Gate: The Investigations and some comments on other issues - http://www.calculatedriskblog.com/2010/10/foreclosure-gate-investigations-

and.html

The Big PictureDarwins Law of Maladaptive Corporate Behavior (or, why bailouts are nearly always a terrible idea) - http://www.ritholtz.com/blog/2010/10/darwins-

corporate-survival/Do Underwater Homeowners Have Zero Cost Option on Home Prices? - http://www.ritholtz.com/blog/2010/10/do-underwater-homeowners-have-zero-cost-

option-on-home-prices/ Hey, Big Spender - http://www.ritholtz.com/blog/2010/10/hey-big-spender/Big Spender, Part II - http://www.ritholtz.com/blog/2010/10/big-spender-part-ii/Robert Reichs BlogThe Perfect Storm - http://robertreich.org/post/1344561814The Feds New Bubble (Masquerading as a Jobs Program) - http://robertreich.org/post/1328014052Bespoke Investment Group

Goldman Sachs Breaks Up - http://www.bespokeinvest.com/thinkbig/2010/10/19/goldman-sachs-gs-breaks-up.htmlZero HedgeDont Bother with Comparisons to the 1970s Theyre Useless - http://www.zerohedge.com/article/guest-post-dont-bother-comparisons-1970s-theyre-

uselessChina Halts Rare Mineral Exports to US and Europe, Prices Set to Surge - http://www.zerohedge.com/article/china-halts-rare-mineral-exports-us-and-

europe-prices-set-surge

The Conscience of a LiberalJust Call Him Bernanke-sama - http://krugman.blogs.nytimes.com/2010/10/18/just-call-him-bernanke-sama/


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morning review - 102110

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