January 2, 2009: Morning Call

January 2, 2009: Morning Call

Fair Value: SP500 – 900.16; NDX: 1212.87; DOW – 8731.57

Technical Levels:

SPX: 685, 752-755, 848-852 support/ 899-908, 998-1002 resistance


Events:

04:00: Euro-zone PMI Manufacturing (December Final): 34.5 (weaker at 33.9)
10:00: ISM Manufacturing (December): 35.4; Prices Paid: 20.0


Foreign Market Summary/Key Macro News/Commentary:

The S&P and NASDAQ futures are both trading 4 points above fair value at 7:30 am ET. Asian markets: The majority of Asian markets that were open started off the New Year by advancing in light trading (Hong Kong up 4.5%, South Korea up 3.2%, India up 0.55%, Australia down 0.25%). Optimism that government policies would mitigate regional effects of the global recession reigned. Hong Kong rose on news of the Chinese government’s decision to issue 3G licenses, with gains in China Unicom (762.HK), China Telecom (728.HK), China Mobile (941.HK) and telecom-equipment maker ZTE Corp (168.HK). India is up 3.2% in the first two trading sessions of the year after the Reserve Bank of India cut interest rates to 5.5% from 6.5%, the fourth rate cut in less than three months. India is also set to announce its second stimulus package in the past month. European markets are up 1.6% with Mining, Steel and Financial sectors leading the rally. France, Germany and EuroZone Dec final Manufacturing PMI all came in lower than preliminary estimates. UK Dec Manufacturing PMI 34.9 vs consensus 33.6.

Impact Research Calls/Market Moving News:

Steel industry looks for $1T public investment program to lift demand – NYT: Executives are lobbying for infrastructure projects that would require steel to form a large part of Barack Obama's stimulus plan. Economists in the Obama camp say the proposals will include significant spending drawing on heavy industry. Daniel DiMicco, chairman/CEO of Nucor (NUE), says steelmakers want a "buy America" clause in every provision of the plan.

BAC (14.08): Bank of America (BAC) completes purchase of Merrill Lynch: Recall the deal was anticipated to close by the end of 2008. MER shareholders received 0.8595 shares of BAC for each share of MER.

WFC (29.48): Wells Fargo completes Wachovia merger: Wells Fargo & Co. said it had closed on its purchase of Wachovia, making it the fourth-largest U.S. bank measured by assets.

RIMM (40.58): Orange (FTE.FP) may withdraw Blackberry Bold from market – Guardian: Without revealing sources, the paper says Orange is understood to be considering pulling the device from its lineup because of persistent problems and uncharacteristically high return rates accompanied by complaints on a wide range of issues. The article says the news will be of particular concern to RIMM because of the barrage of criticism the preceding model, the Storm, has received.

Barron's Weekday Trader is positive on coal stocks: Barron's notes that major US coal producers will see their revenues and profits rise in 2009 due to the fact that roughly 85% of US coal being produced next year has already been locked into contracts at prices above 2008 levels. The article also points out that stocks of the six largest companies in the industry have plunged 70-85% over the past six months, versus a decline of roughly 30% for the S&P 500.