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Morning Notes For October 8th 2010 at Trader’s Narrative

Morning Notes For October 8th 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. I welcome your feedback in the comments:

Change in Nonfarm Payrolls: Survey -5K Actual -95 Prior -54 Revised -57
Change in Private Payrolls: Survey 75K Actual 64 Prior 67 Revised 93
Unemployment Rate: Survey: 9.7% Actual 9.6 Prior 9.6

private payrolls est actual Oct 2010 update
While extremely unlikely, if equities were to rally today on this report, then they truly are bullet proof.

nonfarm payroll long term chart of the day Oct 2010

  • Earnings – AA first Dow component to report earnings (Thurs night); results beat and managemet commentary on the call positive; JPMorgan is upgrading AA to OW this morning. – JPM
  • “We hope this experiment in re-inflating the economy works better this time, but mark us down as skeptical. There is no such thing as free money, and a second round of Quantitative Easing (QE) carries enormous risks for what looks to us like far too little benefit. We’re told the Fed’s own internal models suggest that a purchase of $500 billion in Treasurys would only reduce the 10-year bond by something like 15 basis points. (The 10-year yield is now 2.38%.) This in turn would increase GDP by 0.2% a year and cut the jobless rate by 0.2%. That’s not much bang for a lot of bucks” – WSJ
  • Fed – Bullard remarks on CNBC this morning – he says the Nov 2-3 meeting will be a “tough call” b/c “QE2” is such an extraordinary measure and the economy doesn’t seem to be weakening so much. Bullard says nothing is set in stone ahead of the meeting, although it would take a series of very strong eco numbers to really change opinions.
  • White House will make overtures once the mid-term elections are over. Democrats close to the Administration say the White House wants to make amends and will make its relationship with business a priority after the midterm elections….changes could include Obama’s backing of proposals to cut payroll taxes temporarily, which could save companies billions. Obama may also name corporate execs to his cabinet. – Bloomberg Business Week
  • Larry Summers calls for an increase in infrastructure spending - called it a “short-term and long-term macroeconomic imperative” that the US government increase infrastructure investment – FT
  • Bank failures – FDIC to outline new rules on bank seizures – the FDIC is expected to say that all creditors of large, nonbank financial firms should expect losses in a failure. The rule will make clear that “all equity shareholders and unsecured creditors are at risk for loss and … that their claims will be processed in accordance with the priorities established under the bankruptcy code.” However, the FDIC may add that some short-term creditors could receive additional payments in certain instances. WSJ

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