Market Update

{+++}US Market Update

Dow +92 S&P +14.5 NASDAQ +39.4
– The May Durables reading has restored some confidence this morning, with the leading US indices opening in positive territory and headed sharply higher in mid morning trading. The Commerce Department said demand for manufactured products rose for a second month in a row in May, with the Durables series sustaining the positive growth seen in April. Note that non-defense capital goods orders (ex-aircraft) rose by +4.8%, for the largest rise since September, 2004. The government’s May new home sales data (342K V 360Ke) echoed yesterday’s lower than expected NAR May existing home sales numbers, although latter seems to have blunted housing’s impact today. All eyes are now on the FOMC rate decision later this afternoon, as investors look to see whether the Fed reiterates its commitment to maintain “exceptionally low” rates for an extended period of time.

– US Treasury markets initially saw a burst of selling following May durable goods but prices then recovered. Things generally seem to be on hold ahead of FOMC and the $35B 5-year note auction. The 5-year cash yield remains right around the 2.7% level.

– Gold prices rallied early in the pit trading session on reported short covering. The Aug contract is up 1.4% at $937. Crude prices continue to inch back towards $70 while natural gas heads in the other direction.

– Shares of Oracle are making strong gains, up 7% after a slightly better than expected Q4 earnings report yesterday that was free of any big surprises. Executives pointed to increasing operating margins and market share taken from SAP as proof of the company’s improving outlook. The firm’s earnings guidance for next quarter was in line with estimates, although revenue was a bit below estimates. Casual dining name Darden reported in line with expectations and hiked its quarterly dividend, although a dismal full-year forecast is weighing on the name today, with shares of DRI down 2%. Executives warned the industry’s weakness over the past six months will continue throughout the rest of the company’s fiscal 2010. Monsanto beat bottom-line targets but missed on revenue, and guided toward the lower end of its range for the year. Shares of MON a bit higher today, trading in line with the other major ag stocks. Rite Aid’s loss was a bit less than expected, while it guided a slightly larger loss for the year. Investors initially looking past the company’s quarterly results and sent shares of RAD up nearly 10% in early trading, although the name traded off mid morning. Shares of Supervalu are down nearly 15% after the supermarket chain guided same-store sales -3% for Q1 and said Q1 earnings would be “substantially below” the market consensus of $0.65e.

– In currencies, the greenback entered the New York session on a soft note with reserve management adjustments allegedly behind the weakness; dealers said Eastern European names were “aggressive” Euro buyers. However, the dollar managed to benefit from another alleged round of SNB indirect currency intervention via the Bank for International Settlements (BIS), which sold CHF against both the euro and dollar pairs (the SNB and BIS declined comment on intervention). EUR/CHF shot from 1.5010 to 1.5287 while USD/CHF soared from 1.0665 to 1.0910 within a half-hour period this morning. Dealers are more confident now that the 1.5000 level in EUR/CHF is the clear “line in the sand” for SNB intervention. Last week, the SNB reiterated that it would continue to counter Swiss Franc strength, especially against the euro, to counter deflationary forces in its economy. The intervention had an additional twist (and more market impact), with dealers suspecting USD/CHF intervention this time around, opposed to only EUR/CHF during the initial March 12th intervention as well as suspected April, May and last week’s June moves.

– Across the pond, members of the BoE have testifying in Parliament during the New York morning. The BoE’s King noted that declines in sterling would not fully offset the UK’s weak economic outlook but would help the country be more competitive. King noted budget deficits have gotten “extraordinarily” large and called on the next parliament to do something about them. He cautioned that the Treasury may face challenges funding the deficit “down the road” and added that the MPC has decided against providing a low interest rate commitment as inflation will likely remain below the bank’s 2.0% target. GBP/USD was initial softer as the BoE members spoke but has remained in the middle of the session trading range around 1.6540.Trade The News Market Update System

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