Black Friday has quickly turned into red Friday on Wall Street, as traders react to news that Dubai World asked creditors for a six-month stay on repayment of $60 billion in debts. As a result, U.S. stock futures on the Dow Jones Industrial Average (DJIA) have plummeted 222 points to 10,220, or about 226 points below fair value. Banking stocks are likely to be heavily targeted, with Standard Chartered Bank and HSBC Holdings (HBC) dropping more than 7% in Asian trading over fears of exposure to Dubai World. Retail may also be in focus, as today marks the biggest shopping day of the year, though the low volume and low volatility following the Thanksgiving holiday may exacerbate any fallout from the Dubai debacle.
Checking in on currencies and commodities, the U.S. Dollar Index is up sharply this morning, adding 0.70% to trade at 75.30 in pre-market activity, as traders flock to the dollar as a shelter from the Dubai fallout. As a result, commodities have pulled back sharply across the board. Specifically, February gold futures have plunged $23.70 to trade at $1,165.10 an ounce, while January crude oil is down 4.77% at $74.25 per barrel.
In equity news, American International Group (AIG) said it resolved all disputes with former Chief Executive Maurice "Hank" Greenberg and ex-Chief Financial Officer Howard Smith. The parties agreed to release each other from all claims, including any claims by Greenberg and Smith against AIG for indemnification of future legal fees and expenses or settlement costs. The parties also agreed to submit the two former executives' claims for past legal fees and expenses, up to $150 million, to an independent third party in order to decide how much of that money AIG is required to pay.
Earnings Preview
There are no additional major earnings reports slated for today. Keep your browser at SchaeffersResearch.com for more earnings news as it breaks.
Economic Calendar
Trading wraps up early today due to the holiday, and there are no economic reports slated for release. Looking ahead to next week, the November Chicago purchasing managers' index (PMI) is slated for release on Monday, while October's construction spending, the Institute for Supply Management's (ISM) manufacturing index for November, October pending home sales, and November's auto sales are on tap.
On Wednesday, the Challenger, Grey, & Christmas job cuts report for November will be joined by the ADP employment report, weekly crude inventories, and the November Fed Beige Book. Thursday offers up weekly initial jobless claims, the revised third-quarter productivity report, and the ISM services index for November. Finally, we round out the week with a bang, as November's nonfarm payrolls, unemployment rate, hourly earnings, and October's factor orders wash over the Street.
Market Statistics
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 984,894 call contracts traded on Wednesday, compared to 606,728 put contracts. The resultant single-session put/call ratio arrived at 0.62, while the 21-day moving average held at 0.63.
**The volume data shown above is from the Nasdaq and NYSE exchanges only. It does not include regional volume activity, which means that other daily volume quotes you see may be higher.**
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Overseas Trading
Overseas trading is in poor shape this morning, as only two of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a loss of 1.69%. In Asia, the various stock markets dropped with some suffering their worst losses in months amid concerns about the potential fallout from Dubai World's debt standstill, with bank and construction stocks leading decliners. The impact was also felt across other asset classes, with gold and oil prices suffering a decline, as did currencies viewed as riskier bets. Financials across the region took a hit amid concerns about banks' potential exposure to Dubai World's debt, and other debt issued in Dubai more generally. Major banks in Australia were down sharply, with National Australia Bank off 4% and Westpac Banking Corp. down 3.8%. In Hong Kong, HSBC fell 7.6% and Standard Chartered slumped 8.6%, with Shinhan Financial down 6.3% in Seoul. Japanese exporter stocks were weaker as the yen gained, with Honda Motor down 3.8%, Sony down 4.4%, and Canon off 2.7%.
European shares rebounded from early lows to trade with mild losses on Friday, as investors started to pick up shares in some companies battered in the previous session. Bank shares were particularly hard-hit on Thursday as investors tried to gauge exposure to Dubai woes but looked to be regaining some equilibrium. HSBC Holdings shares were down 1.5% and Standard Chartered shares lost 1.8%, but many other lenders were higher. Royal Bank of Scotland shares rose 4.4% in London after it announced that it has officially signed a previously announced asset insurance deal with the U.K. government. Airlines and autos saw some gainers on Friday in Europe, with BMW shares up 1.7% and Renault shares up 1.1% in the auto sector. In economic news, French consumer confidence jumped in November, boosted by rising optimism over personal finances and the general economic situation, the statistical agency Insee reported Friday.
The U.S. Dollar Index (DX/Y) plunged 1.05% to an annual low of 74.28 on Wednesday. The dollar fell versus major rivals, allowing the euro vault above the $1.50 mark, as improving investor sentiment was boosted by upbeat U.S. economic data. Also pressuring the dollar was a general lack of concern from the Federal Reserve in regard to the greenback's decline. Against this backdrop, the euro rose to $1.5092, while the dollar slipped to 87.48 yen.
The futures contract on the 30-year bond (US/1 – 122'06) added 21/32 on Wednesday. Treasurys broadly advanced on the session, sending yields lower, after the U.S. government's auction of a record amount of seven-year notes was met with strong demand. Analysts noted that the auction signaled a continued appetite for government debt amid expectations for a sluggish economic recovery. Specifically, the Treasury Department sold a record $32 billion in seven-year notes at a yield of 2.835%.
Commodity Corner
Crude futures muscled higher on Wednesday, with help from the ailing dollar and the government's latest inventory statistics. The Energy Information Administration (EIA) said that domestic oil supplies increased by 1 million barrels in the week ended Nov. 20, falling short of economists' predictions for a rise of 1.4 million barrels. The data also indicated that petroleum demand escalated 1.7% last week, though the figures remain lower year-ago levels. Against this backdrop, January-dated crude oil added $1.94, or 2.6%, to settle at $77.97 per barrel.
Elsewhere in the commodities pits, gold futures rallied to yet another record high on Wednesday, thanks to the weak dollar and speculation that India may purchase more of the malleable metal. According to India's Financial Chronicle, the country's central bank is considering the purchase of 201.3 tons of gold from the International Monetary Fund (IMF). After touching a new all-time high of $1,187.50 an ounce earlier in the session, gold for December delivery settled with a gain of $21.20, or 1.8%, a $1,187 an ounce – marking the contract's ninth consecutive finish in the black.
Unusual Put and Call Activity:
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