Ticonderoga Securities Afternoon Note - Strategy and Economics / Afternoon Radar Screen

Ticonderoga Securities Afternoon Note From Analyst John Stoltzfus

Stocks stateside edged higher through the morning into the early afternoon only to pare gains on back of earnings estimate cuts on Morgan Stanley (NYSE: MS) (Neutral-rated) and Goldman Sachs (NYSE: GS) (Buy-rated) by Wall Street analysts today. Stocks turned modestly negative in mid-afternoon only to regain their upside near the last half hour of trading. Eight of the 10 GICs or economic sectors of the S&P 500 showed gains on the day in late afternoon, with a mix of defensives and cyclicals outperforming the underlying benchmark. Small cap stocks outperformed large caps.

Stocks in Europe moved broadly higher in light of the IMF revision of its global growth forecast to 4.6% from 4.2%. Expectations that European bank stress tests would ease investor worries about the health and vulnerability of those institutions also gave stocks a lift today. The Stoxx 600 index advanced 1%, with Europe’s major country bourses all closing higher on the day except for Sweden, which was off 0.7%. Spain’s IBEX and Italy’s MIB index were up 0.93% and 1.15%, respectively. The U.K.’s FTSE 100 and the Netherlands AEX index were the best performers today, up 1.8% and 1.6%, respectively.

Retail Sales: The International Council of Shopping Centers (ICSC) reported same-store sales excluding Wal-Mart (NYSE: WMT) (Not-Rated) increased 3% in June year-over-year. Total store sales were up 5.9% from a year ago. The report was based upon 31 retailers...July sales are expected to rise between 3% and 4% y-o-y.

Bonds: U.S. 10-year Treasury yields stayed above 3% today on back of the modest improvement in initial and continuing claims numbers. In late afternoon, the yield on the 10-year was up 4bps to 3.02%.

Commodities: The price of oil rose on a drop in inventories and on improvement in the jobless numbers this morning. Copper advanced modestly on growth factors, as well. Gold prices were flat with a negative bias as the dollar posted a modest rise and the euro firmed.

Factoids—"Fat Cats"

Moody’s reported that U.S. corporations other than banks held some $1.84 trillion in cash in Q1—a 27% increase over early 2007. According to Bloomberg BusinessWeek magazine, cash as a percentage of total company assets is now at its highest level in 50 years. Expectations among some investors are that at least a portion of corporate cash hoards—if not soon marked for capex or hirings—may well find its way to dividend initiations and raised dividend payouts.

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