Daily State of the Markets: Seeing What They Want to See?


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September 10, 2010 9:17 AM EDT Send to a Friend
Daily State of the Markets
Friday Morning – September 10, 2010

Good morning. Thursday's session was dominated by two data points: The jobless claims numbers in the U.S. and the fact that Deutsche Bank announced that it was going to raise some money to finance an acquisition. However, it was the interpretations thereof that made the game either interesting or annoying, depending upon your point of view, of course.

Stocks initially romped higher out of the gate on the back of the report on weekly jobless claims, which fell a larger than expected 27K. After flirting with moving back above the all-important 500K level a few weeks back, this data series has since improved a bit - and just in time. However, the timing of the improvement in this area has been under scrutiny and yesterday's report did little to sway the conspiracy theorists. You see, due to the Labor Day holiday, nine states didn't report data. This meant that the government had to make estimates for seven of the nine states (California and Virginia provided their own estimates). And THIS is where the controversy came in.

Those crying foul suggested that the democrats likely fudged the numbers in order to put the economy in a better light. The thinking here is simple; the democrats want the economic outlook to be on the upswing going into the election while the republicans would prefer to see things heading into the tank. And although the estimation of data around holidays is normal and that the revisions from said estimations have proved to be very small in the past, this didn't keep the boys and their shiny computer toys from running sell programs Thursday.

Besides the controversy over the data, there was another item that caused the HFT boys to do their thing yesterday. Apparently, the computers scanning the headlines for key words didn't like Deutsche Bank's (DB) announcement that it was raising some money (9 billion Euros was the rumored amount). Although the company claimed that the money would be used to finance an acquisition, traders immediately leapt to the conclusion that the bank NEEDED to raise money due to a capital shortfall.

This line of thinking instantly put the worries about European banks back on the table and provided traders with another reason to do some selling. So, with data on the jobs picture in question, renewed concerns about the banks, the market bumping into overhead resistance as well as some key technical levels, and the fact that Rosh Hashanah kept the activity on the light side, it wasn't exactly surprising to see the programs take over for a while. And from where I sit anyway, it appeared that the traders running the programs were guilty of seeing what they wanted to see yesterday.

I guess the good news is that despite the best efforts from the HFT crowd, all the major indices did manage to hold onto some gains on the day. And from a macro point of view, it is certainly interesting to note that the yield on 10-year spiked higher yesterday and finished at 2.76%, its highest point since August 10th.

So, was it a good day due to the fact that stocks finished in the green or a bad due because the technical action fell into the "not encouraging" category? Frankly, we'll go with the former, but since traders do appear to be seeing what they want to see these days, we'll keep our opinions out of the mix and let the market provide its message going forward.

Turning to this morning... We dont' have any economic data to reveiw before the bell but we will get a report on Wholesale Inventories at 10:00 am. On the futures front, things are looking up a bit in the early going on the back of some better-than-expected economic data out of France.

Finally, best of luck on this Friday and be sure to enjoy the weekend!

Pre-Game Indicators

Here are the important indicators we review each morning before the opening bell...

  • Major Foreign Markets:
    • Australia: -0.45%
    • Shanghai: +0.26%
    • Hong Kong: +0.43%
    • Japan: +1.55%
    • France: -0.09%
    • Germany: -0.37%
    • London: -0.05%
  • Crude Oil Futures: + $1.41 to $75.66
  • Gold: - $4.10 to $1246.80
  • Dollar: lower against Yen, Euro and Pound
  • 10-Year Bond Yield: Currently trading higher at 2.794%

  • Stocks Futures Ahead of Open in U.S. (relative to fair value):
    • S&P 500: +3.32
    • Dow Jones Industrial Average: +24
    • NASDAQ Composite: +6.30
Wall Street Research Summary

Upgrades:
Allstate (NYSE: ALL) - Citi
Omnicom (NYSE: OMC) - Credit Suisse
Computer Sciencees (NYSE: CSC) - Jefferies
Comerica (NYSE: CMA) - Keefe, Bruyette & Woods
Nokia (NYSE: NOK) - RBC Capital
Salesforce.co (NYSE: CRM) - Target increased at UBS
VMware (NYSE: VMW) - Target and estimates increased at UBS

Downgrades:
The Travelers (NYSE: TRV) - Citi
Owens & Minor (NYSE: OMI) - Credit Suisse
Mechel Steel (NYSE: MTL) - Goldman Sachs
Smithfield Foods (NYSE: SFD) - JPMorgan
Boston Scientific (NYSE: BSX)- Morgan Stanley
Dell (Nasdaq: DELL)- Morgan Stanley
Adobe Systems (Nasdaq: ADBE)- Morgan Stanley
Cisco Systems (Nasdaq: CSCO) - RBC Capital
Intuit (Nasdaq: INTU) - UBS

Long positions in stocks mentioned: VMW

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Credit Suisse, Keefe, Bruyette & Woods, Deutsche Bank, UBS, JPMorgan, Citi, Morgan Stanley, Jefferies & Co, RBC Capital, Standard & Poor's, Crude Oil

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