Swing Trading Strategies & Stock Picks Since 2003

U.S. Preview

Overnight U.S. Stock News

• September S&Ps this morning are trading -0.10 points as the financial sector was undercut by JPMorgan's announcement of another $1.5 billion in write downs. However, supportive factors this morning include this morning's $1.06 sell-off in oil prices and the end of Russia's military operations in Georgia. The US stock market yesterday continued last week's rally and closed higher (Dow +0.41%, S&P 500 +0.69%, Nasdaq Composite +1.07%).

• Bullish factors for stock prices yesterday included (1) the continued sell-off in crude oil prices to a 3-1/4 month low which boosted retailers and transportation stocks, (2) the +7.3% rally in GM after the CEO of largest US automaker said the company's struggles with US job cuts, rising retiree heakth-care costs and pension problems are "largely behind us," (3) the rally in airline stocks after a Morgan Stanley analyst said the current decline in oil prices is a "game-changing event" and if oil prices average $115 a barrel in 2009 then the airline industry will be profitable, and (4) the +2.4% gain in Apple after CEO Jobs said software sales for the company's iPhone may hit $360 million a year if users continue to download applications at the present rate and sales may hit $500 million "soon" and the marketplace may eventually be worth $1 billion.

• Bearish factors for stock prices yesterday included (1) the -7.2% drop in Fannie Mae and the -5.1% fall in Freddie Mac after comments from US Treasury Secretary Paulson that there are no plans to inject capital into the mortgage lenders and that the US housing slump will last beyond this year, (2) the -1.6% drop in AIG as the world's largest insurer had its profit estimates cut through 2012 by Goldman Sachs, saying the company may need more capital after posting $25 billion in losses, and (3) the Fed's quarterly Senior Loan Officer Survey which stated that banks tightened credit standards for consumers and businesses even more since its last April survey as defaults and delinquencies on home loans climbed, signaling a continued tightening of credit as banks are still reluctant to lend.

• JPMorgan said is will write down mortgage-backed assets by least another $1.5 billion in the current quarter.

• Goldman Sachs is down -0.8% in European trading this morning after Deutsche Bank cuts its recommendation on Goldman to "hold" from "buy."

• LDK Solar (LDK) rallied 18% in European trading this morning after reporting stronger than expected earnings of $1.29 per share (versus the analyst consensus of 43 cents).

• Zoltek (ZOLT) fell 9% in European trading this morning after reporting disappointing earnings ex-items of 12 cents per share (versus the analyst consensus of 31 cents).

• North American airline stocks may get a boost on this morning's open after JPMorgan upgraded the North American airline sector due to the recent sharp decline in fuel prices. JPMorgan raised Continental Airlines to "overweight" from "underweight" and raised Alaska Air and Delta to "overweight" from "neutral.

• September 10-year T-notes this morning are trading +6.5 ticks on the JPMorgan news and on lower oil prices, which will help the inflation outlook. September T-note prices yesterday moved lower and closed -14 ticks. Bearish factors for T-note prices yesterday included (1) a weakening in the demand for the safety of Treasuries as the S&P 500 Index surged to a 1-1/2 month high, and (2) carryover weakness from European debt prices after hawkish comments from ECB Council member Liebscher that ECB policy makers remain focused on the "worrying" level of inflation. Bullish factors for T-note prices yesterday included (1) the Fed's quarterly Senior Loan Officer Survey that said more banks tightened credit standards for consumers and business borrowers since April as defaults and deliquencies on home loans rose, and (2) a lessening of inflation concerns as crude oil prices fell to a 3-1/4 month low and the CRB index (an index of commodities) declined to a 4-1/4 month low.

• The dollar is trading slightly higher this morning with the dollar/yen up +0.16 yen and the euro/dollar down -0.26 cents. The dollar index yesterday continued last week's sharp rally as the dollar closed at a 5-1/2 month high. Bullish factors for the dollar yesterday included (1) concerns about Russian military intentions with its apparent push into Georgia proper, which undercut the euro, (2) the unexpected declines in Jun French industrial and manufacturing production, (3) Moody's Investors Service's statement that defaults on loans included in European commercial mortgage-backed securities surged 80% in Q2, sparking concern the financial turmoil within the Euro-Zone is deepening, and (4) the rise in the dollar/yen to a 7-1/4 month high as the US stock market continued higher and prompted a resumption in the carry trade which weakened the yen. Bearish factors for the dollar yesterday included (1) comments from ECB Council member Liebscher that ECB policy makers remain focused on the "worrying" level of inflation, and (2) the larger-than-expected increase in Jun German wholesale prices (+9.9% y/y) to its highest level since the data series began in Jan 2000.

• September crude oil prices this morning are trading -$1.06 a barrel and September gasoline is trading -2.00 cents a gallon. September crude oil prices yesterday moved lower and closed -$0.75 a barrel and September gasoline closed -2.08 cents a gallon. September crude oil and gasoline both posted 3-1/4 month lows yesterday. Bearish factors for crude oil prices yesterday included (1) the continued surge in the dollar to a 5-1/2 month high, reducing the appeal of commodities as an inflation hedge, and (2) weakening global demand as the 7% y/y decline in Chinese crude oil imports in July pushed Chinese crude imports to their lowest level in 7 months. A bullish factor for crude oil prices yesterday is the continued armed conflict between Russia and Georgia, which threates alternative export routes for Azerbaijan crude oil after a Turkish pipeline was sabatoged last week by Kurdish militants and cut off crude oil from the Baku-Tbilisi-Ceyhan pipeline. Expectations for tomorrow's DOE inventory report are for a -600,000 bbl decline in crude oil inventories, a -2.0 million bbl drop in gasoline stockpiles, a +1.75 million bbl gain in distillate inventories and a -0.5 decline in the capacity of refiners to 86.5%

Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): TRI-Thomson Reuters (BEST earnings consensus $0.37 per share), AMAT-Applied Materials (0.14), TJX-TJX (0.45), NVDA-Nvidia (0.14), WW-Watson Wyatt (0.80), FOSL-Fossil (0.25), CREE-Cree (0.14), IART-Integra Lifesciences Holdings (0.45), SRX-SRA Internatinal (0.32), BZP-BPZ Resources (0.03), VSE-Verasun Energy (0.02)