Markets to Open Modestly Higher Ahead of Earnings, Economic Data
October 26, 2009 – The futures are indicating modestly higher openings this morning ahead of another busy week of earnings reports and a full schedule of economic data.
The dollar continues to soften against the euro, with the euro trading at $1.5030. The dollar index last closed at $75.35, still sitting at 14-month lows. We expect the dollar to continue to soften amidst low interest rates and mounting debt. Gold is down $1.80 to $1,054.60. Gold will continue to trade converse to the dollar, so further softness in the dollar will translate into higher gold prices.
Oil prices are down $0.17 to $80.33. Media outlets are attributing a cease-fire from a Nigerian militant group which has been responsible for cutting output as a key reason prices are softening, as well as traders taking profits on recent speculation. OPEC’s president also recently said it may increase production in December if oil remains above $75 a barrel. Meanwhile, Goldman Sachs reiterated its forecast for crude oil to reach $85 a barrel by the end of the year on strong demand for diesel in China.
On the economic front, this is going to be a busy week. Tomorrow we will get Durable Goods Orders for September, the Case-Shiller Home Price Index for August, and Consumer Confidence for October; on Wednesday we will get New Home Sales for September and weekly crude inventories; on Thursday we will get the advanced GDP number for Q3 and weekly jobless claims; and on Friday we will get Personal Income and Spending data for September, PCE Prices for September, the Chicago PMI for October, the University of Michigan revised consumer sentiment report for October and the Employment Cost Index for Q3.
On the corporate front,
· Clean Tech – Pollution Control – Fuel Tech (Nasdaq:FTEK) announced multiple pollution control contracts worth $4.4 million. Deliveries are scheduled to commence during the Q2 of 2010.
· Telecommunications – Verizon (NYSE:VZ) reported a 10% Y/Y increase in revenue to $27.3 billion, and decline in net profit to $1.18 billion, or $0.41 per share, compared with $1.67 billion for the same period last year.
In international markets, GfK market research group said German consumer confidence for November dipped to 4 points from 4.2 points in October. In South Korea, GDP rose 2.9% in Q3, the fastest pace in seven years.
In terms of what we expect in today’s session, stocks will open higher, but the near term (5-day) trend seems to be lower. On the DJIA resistance is overhead at 10,103 and support is 9,920-9,940. On the Nasdaq, the range is 2,188 to the upside and 2,152 to the downside. These are 5-day data points but reveal a clearer short-term framework of what to look for. On the DJIA, the 100-day moving average is at about 9,207, on the Nasdaq it is at 1,978 and on the S&P 500 it is at 994. Keep these levels in mind as downside risk potential to the markets when trading and investing.
Fast Facts
· This week’s Debt Offering - The US Treasury is auctioning $123 billion in notes. This is a record. Strong demand will help buoy the dollar. Weak demand will usher in more weakness. When the dust settles, more debt will ultimately create pressure on the greenback.
