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Morning Notes For July 22nd 2010 at Trader’s Narrative




Morning Notes For July 22nd 2010


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The following is a guest post by a buy-side analyst working in a US asset management firm. The author’s comments are in italics. Please provide feedback in the comments:

  • FITB announces earnings of .16 vs .02 estimates. Stock trading up ~4% in pre-market.
  • AT&T announces earnings of .61 vs estimates of .57. Stock is trading up ~1.5% in pre-market
  • Initial Jobless Claims: Survey 445 Actual 464 Prior 429 Revised 427

initial jobless claims Jul 2010 update2

  • Gallup’s 2010 Confidence in Institutions poll finds Congress ranking dead last out of the 16 institutions rated this year. Also, the 50% of Americans saying they have little or no confidence in Congress is the highest for any institution since Gallup first asked this question in 1973. – Gallup

confidence in congress gallup Jul 2010

  • On July 21, President Barack Obama signed the Dodd-Frank financial reform bill into law, stating that “this reform will help foster innovation, not hamper it,” since “it is designed to make sure that everyone follows the same set of rules, so that firms compete on price and quality, not tricks and traps.” The president also vowed that the bill would be the end of taxpayer-funded bailouts. The Senate approved the financial reform bill with a 60-39 vote on July 15, and the U.S. House of Representatives and the congressional conference committee approved the bill on June 30. – RGE Monitor
  • Amid escalated tensions since the March 2010 sinking of a South Korean warship, the U.S. announced additional sanctions against North Korea, though the specifics were not clear. In a rare joint visit, U.S. Secretary of State Hillary Clinton and Defense Secretary Robert Gates on June 21 visited South Korea and the demilitarized zone along the border with North Korea. Around 8,000 U.S. and South Korean soldiers are scheduled to participate in joint military exercises in the Yellow Sea starting on July 24. China called the planned exercises an unnecessary “provocation,” and the North previously has said it would view them as an act of war. Anxiety over the security situation has spiked before, most recently after North Korea’s 2009 nuclear and short-range missile tests, but this time the situation may be direr because of the failed currency reforms earlier this year and regime instability as the North prepares for a change of leadership. – RGE Monitor
  • Fed Chairman Ben Bernanke reiterated in his semi-annual testimony to Congress that while moderate growth remains the Fed’s main scenario, the risks to growth were seen as weighted to the downside. Bernanke stated that while the economic outlook remains unusually uncertain, “we remain prepared to take further policy actions as needed.” Bernanke stated that the Fed did not believe the double dip was a high probability event. He noted that while moderate growth remains the main scenario, if growth falters, further support from Fed policy could come in the form of additional unconventional policy measures, including changes in the interest rate on reserves; the Fed’s balance sheet, including asset purchases; and language regarding the targeted path of interest rates over time. – RGE Monitor
  • More super-regional bank earnings – STI, HBAN, KEY, BBT, PNC all on the tape already this morning. For the most part, numbers look more like USB/WFC than MI/ZION (i.e. numbers look OK, credit moving in right direction. – JPM
  • Loan demand – overall pretty sluggish based on all the banks we have heard from; however, some (very small) rays of hope – WFC said yesterday that “on the commercial side, for the first time this year, we saw an increase in lending activity and line usage” and Wells also said its mortgage pipeline was up 15% Q/Q. According to BBT - “we have seen a pick up in lending, with $17.5 billion in originations this quarter compared to $15.4 billion in the first quarter”. – JPM
  • Larry Lindsey (former Fed board member) says that the US is on its way towards a deflation trap, something that could become apparent by the end of the year; Lindsey calls on the Fed to ease further…“I would expect by December we will see further quantitative easing” – Reuters
  • Climate change legislation still doesn’t look like it has 60+ supporters in the Senate; the legislation looks “all but dead” until after the mid-terms. - Politico
  • European bank stress tests (this hit earlier during NY trading on Wed) – IMF expresses some skepticism re the European bank stress tests – the IMF calls on the EU to ensure the tests are stringent and credible (and that the process is transparent) – FT
  • Fed Policy May Test Tried & True Recession Predictor – Bloomberg

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