US Market Update: Markets Flat As Traders Obsess Over Einhorn



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US Market Update: Markets Flat As Traders Obsess Over Einhorn

02.10.2012 19:05 Tuesday
***Economic Data***
- (US) ICSC Chain Store sales w/e Spt 28th w/w: -0.3% v +0.6% prior; y/y: 2.4% v 2.9% prior
- (BR) Brazil Aug Industrial Production M/M: 1.5% v 2.0%e v 0.3% prior; Y/Y: 2.0% v -1.6%e
- (US) Weekly Redbook Retail Sales w/e Sept 29th: 2.3% y/y v 2.0% prior
- (US) Corelogic Aug home price index +4.6% y/y
- (US) Sept ISM New York: 52.9 v 51.4 prior

- US equities are muddling through this morning as static from Europe and the relatively soft September auto sales numbers dampen sentiment. There have not been any strong catalysts for trading through the European session into the US session. Moody's said they would pass judgment on Spain's ratings this month, while German officials repudiated reports that they were pressuring Spain not to request a bailout in the near term. Some other reports said a request for aid could arrive as soon as this weekend. In Greece, negotiators have still not reached a deal on the last €2B chunk of austerity cuts. WTI crude is flat on the session, holding around the same level from where it has been for the last four session. EUR/USD has pushed out to one-week highs above 1.2960.

- September auto sales numbers from Ford and General Motors were not great, with the former's coming in flat and the latter's up a measly 1.5%. On the other hand, Chrysler's September sales were up 12%, the firm's best September since 2007. Both GM and Ford noted that sales of small cars such as the Chevrolet Cruze and the Ford Focus were strong. Despite the data, Greenlight Capital's David Einhorn told attendees at the Value Investing Congress he was long General Motors, saying that GM is much healthier now and shares carry a cheap valuation. GM is up by about 1% this morning, while shares of Ford are in the red.

- Shares of apparel name PVH are up a bit this morning after the firm raised its Q3 outlook and its FY12 guidance. Mosaic is down 4% on a big miss in the firm's Q1 report. Both EPS and revenue came in below analysts' estimates and the company warned of challenging market and weather conditions. In other Einhorn news, share of Herbalife jumped 6% on news that the famous short seller would not be discussing HLF at today's Value Investing Congress. Einhorn reiterated his criticisms of Green Mountain Coffee, initially taking 4% off the shares, although they quickly bounced back and move up to +2%. Einhorn's new short is Chipotle, a firm which he called well run but overvalued.

- This morning the New York Times followed up on press reports from last week regarding talks among Senate leaders to deal with the "fiscal cliff" between the November election and next January. The NYT report indicated that the Senate is aiming to arrive at a comprehensive deficit reduction deal rather than a short-term solution. According to the report, Democrats and Republicans remain far apart on the details, and House GOP members continue to resist any discussion of tax increases. Sources indicate a bipartisan group is building an ambitious three-step process: first senators would come to an agreement on a deficit reduction target - likely to be around $4 trillion over 10 years - to be reached through revenue from an overhaul of the tax code, savings from changes to social programs and cuts to federal programs. Once the framework is approved, lawmakers would vote on expedited instructions to relevant Congressional committees to draft the details over six months to a year.

***Looking Ahead***

- 11:30 (US) Treasury to sell $40B in 4-Week Bills
- 16:00 (NZ) New Zealand PM Key T China business summit
- 16:30 (US) Weekly API Crude Oil Inventories
- 17:00 (US) Sept Total Vehicle Sales: 14.40Me v 14.46M prior; Domestic Vehicle Sales: 11.40Me v 11.54M prior
- 21:00 (CN) China Sept Non-manufacturing PMI: no est v 56.3 prior