Market Update

{+++}US Market Update

Dow +66 S&P +9.7 NASDAQ +19
– Equity trading has been bumpy this morning as investors hesitantly try to bid up stocks after two weeks of declines. Reaction to the Sept ISM non-manufacturing index at 10amET was initially negative, despite a marginally higher than expected number, as investors concentrated on the big decline in the prices paid component. But as traders take to heart that today’s data is the highest reading in the index since May 2008, with the highest level in the new orders component as well, confidence is returning. Front-month NYMEX crude is well off its overnight highs, down $1.50 to $68.50 or less. Bond prices remain bid into this week’s coupon auctions. The 10-year note yield remains at multi-month lows of 3.18% ahead of this afternoon’s TIPS reopening.

– Some contrasting high-level commentary was out from BoA/Merrill Lynch and Credit Suisse overnight, indicating just how opaque the picture is for markets as they head into Q3 earnings season. Analysts at BoA/Merril believe a correction in S&P500 “appears underway” and that all signs point to a steeper declines, citing technical development and weaking tech, among other factors. Analysts at Credit Suisse updated their global equity strategy, noting that they continue to believe that now is not time to sell equities. Credit Suisse believes that further near-term correction is possible, but sees the S&P500 at 1,100 at end of 2009. HSBC’s CEO was also out with his own troubling read on the macro situation, noting that HSBC would delay expansion of the bank because of fears over another downturn in the economy.

– Early this morning the US Treasury said three more funds have met financing requirements for participation in its PPIP asset purchase program. AllianceBernstein, BlackRock and Wellington Capital Management to be named on Monday as having raised $500M, the minimum amount to participate in the program. Their combined commitment equals $7.7B, including matching funds and debt financing from the government. Recall that last week, Invesco and TCW were approved to participate. The PPIP now has commitments of about $12.25B, out of a $40B targeted by the Treasury (scaled back from original aims of up to $1T). In other finance sector news, the FT wrote that Goldman Sachs stands to make $1B if CIT Group files for Chapter 11 Bankruptcy, given the terms of a rescue package from back in June, 2008. Note also that Wells Fargo is up more than 5% after an upgrade from Goldman Sachs.

– In equity news, RPM International outperformed expectations in its Q1, beating both earnings and revenue targets. Shares of RPM were up 5% on the news, but have sunk into negative territory in mid morning trading. MKS Instruments said it would be profitable next quarter, blowing away analysts’ expectations for a substantial loss. As with plenty of other increased guidance in the tech sector, MKS cited big improvement in semiconductor names. MKSI rose 6% on the news, but is down to +3%. Seattle Genetics discontinued a Phase IIb trial in diffuse large B-Cell Lymphoma based on a determination that the trial would be unlikely to meet its primary endpoint and a recommendation by the Independent Data Monitoring Committee (IDMC) following a pre-specified interim analysis. SGEN is down 15% on the news.

– In currencies, the greenback recovered from the softer tone that was established during a lackluster European morning against the European and commodity-related currencies. The US non-manufacturing ISM release mirrored the European data and also failed to inspire any robust directional moves. Sterling remained pressured during the NY morning as it approached the 1.5900 at one point. Focus now set on the Australian central bank to see whether they are the first G20 member to raise interest rates at its policy meeting ahead of the Asian

Courtesy Trade the News

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