What’s the Story

by CC October 2, 2012 9:21 am • Commentary


The FTSE All-World equity index is up 0.1 per cent as US futures point to 0.4 per cent pop for Wall Street later in the day. The FTSE Asia-Pacific index was up 0.2 per cent, although trading was been thinned by holidays in China, Hong Kong and India.

The dollar index, which tends to fall when the mood is more optimistic, is down 0.1 per cent, and copper, which usually moves with a negative correlation to the buck, is adding 0.3 per cent to $3.80 per pound. Gold is up $3 to $1,776 an ounce.

Perceived havens, such as Treasuries, are under pressure, nudging benchmark 10-year yields up 2 basis points to 1.64 per cent.


Spain is expected to request a bailout as early as next weekend, although Germany is urging Spain to wait, according to a Reuters report. Economic woes in the country continued to weigh as the latest jobs figures showed unemployment rose again last month.


Spain’s jobless rate rose by 1.7 percent in September from a month earlier, or by 79,645 people, leaving 4.7 million people out of work, data from the Labor Ministry showed on Tuesday.

This was the second month the jobless figures rose after a respite during the summer tourism season.

Monthly jobless data records the number Spaniards registered as out of work, while the unemployment rate, which hit a record high of 24.6 percent in the second quarter, is an official survey and considered a more reliable gauge of the jobs market.


U.S. bank stocks rose in preopen trading on Tuesday after Credit Suisse upgraded the sector to overweight and said it expects it to report surprisingly strong third-quarter loan growth.

“We take U.S. banks to overweight from benchmark, as we believe loan growth and asset quality — the two key drivers of returns — will surprise on the upside,” the Credit Suisse analysts wrote on Tuesday.


With the Fed on hold with its ZIRP policy indefinitely, more than a few investors are worried about the prospects for inflation down the road.  While the traditional inflation based statistics of the CPI and PPI are often criticized for understating actual price levels, one indicator that investors will want to keep an eye on is the monthly ISM commodity survey where participants are asked which commodities are up and down in price over the last month.

In this month’s survey, manufacturers reported rising prices in eleven commodities and declines in five.  This represents the second straight month where more commodities were rising in price than falling, and keep in mind this data was collected before the most recent round of easing by the Fed.  Over the last three months the average net monthly number of commodities rising in price has been +1.7.  While this represents a four month high, it is still well off the high reading of 9.3 that we saw in April and May.



Kraft Foods, Mondelez International [KFT  532.41  —  UNCH    ]– The split of the former Kraft Foods is now complete, with those shares ending their final trading day at a 10-year high. Starting today, two new stocks take its place: Kraft Foods Group, the spin-off which comprises the old company’s North American grocery business, and Mondelez International, the renamed version of the old Kraft which retains the snack and food brands.

Citigroup [C  32.75        ] – Citi has been upgraded to “outperform” from “market perform” at Keefe, Bruyette & Woods. The firm cites a number of factors, including improved capital levels and earnings visibility, attractive valuation, and in increase in global trade finance market share.

KB Home [KBH  14.25        ], Lennar [LEN  34.65        ] – Citi has upgraded Lennar to “neutral” from “sell,” while downgrading KB Home to “sell” from “neutral.” Citi says it’s difficult to justify a “sell” rating for Lennar given above average growth and margins, while KB Home now holds more risk after showing the best stock performance in the group since June.

Thor Industries [THO  36.32  —  UNCH    ], Winnebago [WGO  12.73        ] – Baird has downgraded both recreational vehicle makers to “neutral” from “outperform” on a valuation basis. The firm says the stocks have approached its price targets as industry fundamentals have improved.

Core Laboratories [CLB  120.63        ] – The company has cut its current-quarter outlook, with the energy services company seeing a drop in North American oil and gas production. It now expects third-quarter earnings of $1.09 to $1.13 per share, down from the prior $1.17 to $1.25.

MetLife [MET  34.33  —  UNCH    ] – MetLife has been granted three more months to submit a capital plan to the U.S. Federal Reserve. The insurance company wanted more time to get regulatory approval for General Electric’s [GE  22.81        ] proposed purchase of MetLife’s banking unit.

PetSmart [PETM  67.56        ] – PetSmart will replace Sunoco [SUN  46.54  —  UNCH    ] in the S&P 500 index [.SPX  1444.49  —  UNCH    ] later this week. Sunoco is being bought by Energy Transfer Partners [ETP  42.20  —  UNCH    ]. Hunting and fishing gear maker Cabela’s [CAB  54.98        ] will replace the pet supplies retailer in the S&P MidCap 400, while Accorda Therapeutics [ACOR  25.55        ] replaces Cabela’s in the S&P SmallCap 600.

Google [GOOG  761.78        ] – Google has surpassed Microsoft [MSFT  29.49        ] to become the second most valuable tech company behind Apple [AAPL  659.39        ] as measured by stock market capitalization.

JPMorgan Chase [JPM  40.97        ] – The bank has been sued by New York State Attorney General Eric Schneiderman in a civil fraud case involving mortgage-backed securities sold by Bear Stearns. The sales in question took place in 2006 and 2007, prior to JPMorgan’s purchase of Bear Stearns in 2008.

Boeing [BA  70.01        ] – Union members have rejected a four-year contract offer, and plan to resume talks today. The two sides are trying to work out a deal that covers 23,000 engineers and technical workers.

Zimmer Holdings [JMH  Unavailable      ()   ] – Zimmer has received a U.S. Food and Drug Administration warning letter concerning manufacturing and testing of artificial hip devices made in Zimmer’s Ponce, Puerto Rico, plant. The letter does not require withdrawal of any products from the market.

Morgan Stanley [MS  16.79        ] – Morgan Stanley Wealth Management could be subject to a talent raid by Bank of America’s [BAC  8.96        ] Merrill Lynch unit, according to an article in The Wall Street Journal this morning. The paper said Merrill considers a large number of brokers ripe for defection, because of a recent tumultuous computer system conversion, the problems with Facebook’s [FB  21.99        ] botched IPO, and other factors.

Zumiez [ZUMZ  27.49        ] – The retailer reported a September same-store sales increase of 5.6 percent. (Read More: Holiday Sales Are Expected to Defy Economic Gloom.)

Travelers [TRV  69.07        ] – The insurance company’s stock has been cut to “buy” from “conviction buy” at Goldman Sachs.