Trader Talk

The New Dow Target

S&P futures up pre-open on two drivers: 1) new lows for the dollar and 2) strong Chinese economic numbers.

1) Several Fed officials yesterday (including Dallas Fed President Fisher last night) talked about either the lack of inflation or implied that monetary policy will remain easy for some time. Predictably, the Dollar Index is hitting new lows, commodities and commodity stocks are again up.

2) These days, we watch Chinese Industrial Production as closely as U.S. Industrial Production...the Chinese October IP was up 16.1 percent (a 19-month high), though a separate statistic showed investment and loan growth had slowed. Japanese Machine Orders were also up over 10 percent.


1) Several technicians wrote to say that 10,330 on the Dow is a good target to shoot for (we closed yesterday at 10,246). That 10,330 level would mark the 50 percent retracement of the previous selloff from the October 2007 high (14,198) through the March 2009 low (6,469).

2) Macy's down 4 percent pre-open, reported a loss for the fourth quarter that was not as great as expected, but fourth quarter guidance of $1.00-$1.05 is below consensus of $1.17, even though comp store guidance was a bit better than expected. Revenues down 4 percent, same store sales down 7.5 percent.

3) UPS CEO Scott Davis told Reuters volumes will turn positive next year as the economy improves, and that he will increase shipping prices as well. Fedex also announced that they would increase prices earlier.

4) Toll Brothers is up 10 percent pre-open after reporting strong preliminary Q4 results. A string of good news: the homebuilder's signed contracts were up 42 percent from last year and even 17 percent above levels from two years ago. Its cancellation rate was also back to "pre-downturn historical averages," coming in at 6.9 percent in the quarter. While the number of home deliveries still fell 20 percent, that was better than the company had previously forecasted.

Despite the good Q4 results, the builder sees further improvement happening "slowly and through choppy waters" as demand continues to be "volatile" due to continued high unemployment and ongoing economic concerns.

5) We knew you were making a lot of money, but...Barrick Gold CFO told Reuters that he sees the

potential for record margins in the fourth quarter, as gold prices hit new peaks and costs are stable or lower.

6) Fast-food chain CKE Restaurants saw its same-store sales decline accelerate as they slumped 5.3 percent in October. Burger price wars and broader economic woes continued to weigh on its operations.

Business at its West coast chain Carl's Jr. was particularly weak, with same-store sales dropping 7.0 percent. Out in the Midwest and Southeast, same-store sales at its Hardee's chain fell a more moderate, but still discouraging, 3.4 percent.

7) Meat producer Tyson is lowered to "neutral" from "overweight" by JPMorgan on a valuation call. Analyst Ken Goldman also cites concerns over rising corn and hog prices and increased supply from competitor Sanderson Farms as reasons for the downgrade.



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