Good morning,

Markets are called to open higher this morning. This is what's happening today:

  • Corn may rally to a record $8.50 a bushel as the worst U.S. drought in a generation cuts production in the world’s biggest exporter, driving global stockpiles lower, according to broker Newedge USA LLC;
  • Federal Reserve Chairman Ben Bernanke said policy makers are studying options for further easing that could be deployed in case economic growth remains too feeble to produce a lasting decline in unemployment;
  • 10-year Italian debt is yielding 6.045%, 10-year Spanish debt is yielding 6.827% and 10-year Portuguese debt is yielding 10.446%;
  • Brent is trading at $103.32
  • Apple closed the session at $606.94 and Priceline closed the session at $647.37.


Bernanke cut the growth forecasts for the US economy and said that if the situation worsens further stimulus will take place though he didn't give a timeline of when the Fed will injection money into the economy. The Fed's meeting continues today.

Federal Reserve Chairman Ben Bernanke outlined options to ease policy further in case the flagging economic recovery fails to lower unemployment. Easing tools include further purchases of Treasuries and mortgage-backed securities, and altering the Fed’s language on the outlook for interest rates, Bernanke told the Senate Banking Committee in Washington yesterday. Another option is to use the so-called discount window for direct lending to banks.

Bernanke and his colleagues on the Federal Open Market Committee meet in two weeks to continue debating whether further action is needed to reduce joblessness stuck above 8% since February 2009. Recent economic data shows the recovery is cooling, with consumer retail sales in June falling for a third consecutive month when economists had forecast an increase.


Analysts are cutting European profit forecasts at the fastest rate since 2009 as the region heads for a recession and growth in China slows for a sixth quarter.

Euro Stoxx 50 Index companies will earn 240 euros a share in 2012, 6.8% more than in 2011, according to more than 12,000 estimates compiled by Bloomberg. That compares with a 19% gain predicted at the start of the year. The reduction is the biggest since 2009, when analysts trimmed by 42 percentage points. ASML Holding NV starts the European earnings season with its results today.

While Bloomberg data show analysts lowered projections for 32 members of the Euro Stoxx 50 this month, there may be more cuts to come. Corporations from French dairy producer Danone SA to SKF AB, the world’s largest maker of ball bearings, have reduced their forecasts and strategists at Macquarie Group Ltd. and Morgan Stanley, who base their predictions on the economy rather than individual companies, say earnings will drop as much as 10 percent this year.

The Euro Stoxx 50 has risen 8.8 percent since the start of last month. The gauge is trading at 9.4 times projected earnings, up from 8.3 times on June 1, data compiled by Bloomberg show. The valuation has averaged 10.3 since 2007.

Companies reporting Q212 results today:

  • Stanley Black & Decker
  • Abbott Laboratories
  • BlackRock Inc
  • Honeywell International
  • Bank of New York Mellon
  • Bank of America
  • St Jude Medical
  • eBay
  • Qualcomm (Q312)
  • Yum! Brands
  • American Express

Stock to watch: ITC Holdings (Price $73.55, Price Target $81)

ITC is unique among US utilities from an earnings growth perspective and as the only-publicly traded independent transmission company. Through 2016, we expect the company to deliver EPS growth in the range of 16%, which is 3-4x as fast as the average regulated utility. This high growth rate is supported by ITC's five-year capital plan as well as the ability to finance this plan without relying on new equity issuance. ITC's utility subsidiaries are regulated by the FERC and benefit from favorable formula rate plans incorporating premium returns on equity (ROEs) in the 12-14% range. This compares to the average state-regulated US utility which may struggle to earn its authorized ROE in the low 10% range. We see value at current levels and believe the proposed transaction with ETR is neutral to positive to shareholders. We rate the shares Buy.

For further information on ITC or other stocks and bonds we follow, contact our offices on 25688688.

Good day and happy trading!

Kristian Camenzuli