Home > Blog > Trader talk > Trader Talk: An Analysis of the Markets this Morning

Good morning,

Markets are called flat this morning. This is what’s happening today:

  • The US securities industry cancelled equity trading on all markets today, moving to protect workers as Hurricane Sandy barrelled toward New York City with 70-mile-per-hour winds and the threat of an 11-foot sea surge. The markets might also be closed tomorrow but this is still not confirmed;
  • China’s government spent more than planned in the first nine months of the year, and revenue gains moderated, leaving little room for public outlays to stoke the economy this quarter without an expansion of the budget;
  • US elections Nov. 6;
  • EU Governments to begin debating E50bln budget;
  • 10-year Italian debt is trading at 4.896%, 10-year Spain is trading at 5.57%, 10-year Portuguese debt is trading at 7.964%;
  • Tomorrow Q312 GDP data out for Spain;
  • Brent is trading at $109.08;
  • Apple closed the session at $604.

Hurricane Sandy

Reuters – U.S. stock and options markets will be closed on Monday, and possibly Tuesday, as regulators, exchanges and brokers worry about the integrity of markets and the safety of employees in the face of Hurricane Sandy. Market participants and regulators decided late on Sunday to shut the market, reversing a plan to keep electronic trading going on Monday. Bond markets will remain open, but will close at noon, a trade group said.

Here is JP Morgan’s view on the markets going into 2013:

  • Asset allocation – Our modal forecasts on the economy and earnings are still edging down, but so are downside risks, such that the probability-weighted means are instead rising. We stay long risk assets, and add longs in euro periphery bonds and shorts in overall bond duration. With event risks moving from China and Europe to the US, we move underweight US equities and overweight USTs vs. Europe, while staying short the dollar;
  • Economics – US 2013 growth is lowered by 0.2% to 1.7% as we raise 2013 fiscal drag to -2%;
  • Fixed Income – Look for the rally in Euro area peripherals to continue;
  • Equities – UW US equities within a global portfolio into 2013;
  • Credit – We lower our YE US HG spread target to 135bp, down from 150bp;
  • Currencies – A Romney win should be dollar bearish, as it boosts risk assets;
  • Commodities – We stay long base metals.

Companies reporting Q312 results today:

  • Burger King Worldwide
  • Life Technologies Corp
  • American Capital Agency Corp
  • Hertz Global Holdings Inc
  • Vertex Pharmaceuticals Inc
  • Allison Transmission Holdings Inc

Stock to watch: Dean Foods (Price $16.74, Price Target $22)

Deutsche Bank: Dean is the leading fluid milk processor in the United States with about a 40% share. Our Buy rating is based on strong execution across all segments, low valuation, and strong growth prospects for WhiteWave-Alpro. Following Dean's IPO of WhiteWave-Alpro (though the company retains 85% ownership), we see the market as undervaluing the core Dean operations (FDD/Morningstar). In addition, recent moderation in dairy input costs should further stabilize the FDD business. While weak industry volumes and excess capacity still give us concern, it appears the bias on fundamentals is positive.

For further information on Dean Foods or other stocks and bonds we offer, contact our offices on 25688688.

Good day and happy trading!

Kristian Camenzuli