U.S. Market Update

Dow -3 S&P +1 NASDAQ -1

US equity indices have seen both positive and negative territory before noontime. Headwinds remain in place, as April housing starts and building permits were both weaker than expected, hitting lows not seen since the series began in 1959. Commentators are making the best of the news, noting that slowing multi-family building starts were the culprits behind the declines, while single-family starts rose slightly on a sequential basis. However, the figures are hardly the sort of green shoots anyone is hoping for. Investors should likely take note of comments from PIMCO's El-Erian, who called slower growth the "new normal." In any case, the flood of debt and equity secondary offerings continues, with companies from across the spectrum rushing to market to raise capital. Front-month NYMEX crude nosed above $60 briefly overnight, before trading off after the open of pit trading in NY. The June contract comes off the board after the close today.

Treasury prices have been trading lower through the morning pushing the US benchmark yield back towards 3.25%. Interbank lending rates continue to come down with the US 3-month LIBOR fixing down at 0.75%.

Stocks of the largest US banks are behaving variably after various press reports that the US will let five or six big banks pay back TARP funds. Bank of America and Citigroup have both made 4-5% gains early on, while most of the rest of the tier-1 financials muddled around in the red before heading higher. Goldman, JP Morgan and American Express are reportedly first in line to repay, according to the FT, followed possibly by Morgan Stanley, State Street and US Bankcorp. At the JP Morgan AGM this morning, CEO Dimon also said that the government would authorize "some" TARP repayments within weeks. Note that yesterday STT priced its equity offering and raised the total deal to $2B from $1.5B (to repay TARP) at $39, and shares of the bank are still trading between $41-42 this morning. The New York Times took a look at the effect of early TARP repayments and warrant repurchases on banks and taxpayers, noting that the government holds warrants in 579 banks that could be worth $5 to $10B, depending on market conditions. On a related note, FASB approved two rules yesterday (FAS 140 and FIN 146) that could force financial firms to bring more off balance sheet assets onto their books.

Investors are digesting another cluster of retail earnings this morning. Home Depot followed up on Lowe's earnings performance from yesterday, beating earnings and revenue estimates by healthy margins, although its full-year forecast was decidedly weaker than Lowe's, with its numbers below analysts' estimates. On the conference call, an HD executive said there has been improvement in comp transactions despite soft February sales. Shares of HD fell before and after the open, to around -6% mid morning, while LOW was down 2%, near yesterday's lows. Discount retailer TJX reported in line and reported mildly positive quarterly same-store sales, while luxury retailer Saks trimmed its quarterly loss to a figure that was much smaller than expected, although its quarterly SSS remain dismal. American Apparel's loss was higher than expected. Shares of SKS+23% are rocking this morning, while APP-19% are not. TJX is up a modest 4%.

In tech, solar names Solarfun and JA Solar continue to be hit hard by the recession, reporting quarterly losses. SOLF's loss was slightly better than expected, while JASO lost three times the expected amount. Both firms expressed nevousness about their outlook, noting that visibility is limited. JASO withdrew its full-year earnings guidance, while JASO said its previously planned capacity expansion is still on hold. Also note that Sprint said it would launch sales of the Palm Pre smartphone on June 6th, at a price of $199 with a two-year contract. Shares of Sprint are around even, while PALM is off its worst levels after losing nearly 10%.

Currency trading hit some turbulence following the euphoric sentiment from the European session. USD and JPY moved off their worst levels, with EUR/USD back below the 1.36 level and USD/JPY back around 96.00 after testing 96.60 overnight. Several officials uttered cautious remarks despite the recent signs of stabilization in the global economy, with the IMF's Berger noted that emerging Europe growth would not return to pre-crisis levels. Commodities took different paths during the New York session, with energy related and basic metals retreating while the precious metals retained its luster. AUD and CAD currencies held on to most of their session gains.

Trade The News Staff
Trade The News, Inc.

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