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Pre-Market Primer: Ackman Ends JC Penney Crusade; Syrian Conflict Shakes Global Markets


Bonds, oil, and gold are up on uncertainty of Western intervention.

Tensions in Syria rocked global markets today as Western nations move closer to intervening in the Middle Eastern nation.

US Secretary of State John Kerry warned the Syrian regime that it will be held accountable for the recent chemical weapons attacks. Whether a war will actually take place is uncertain.

Uncertainty is also gripping the United States. Yesterday, Treasury Secretary Jack Lew sent a letter to House Speaker John Boehner, warning his party that the US will be unable to pay its bills by mid-October if they don't allow the statutory debt ceiling to rise. This is earlier than previous estimates. Lew said that the Treasury will be left with cash on hand, about $50 billion per day, which is not enough to operate the government.

Political trouble in Italy is also hitting the markets. Silvio Berlusconi's center-right party is threatening to break up the ruling coalition and effectively take down the government if the former Prime Minister is banned from public office after being convicted for tax fraud. Disagreements over a tax on homeowners adds fuel to the fire. Prime Minister Enrico Letta set a deadline for a government meeting on the tax issue for tomorrow.

On a brighter note for Europe, German business confidence rose in July. The Ifo index roes 1.3 points to 107.5, its highest level since April 2012.

The possibility of war drove US bonds, gold, and oil futures higher. Spot gold rose 1.51% to $1,414.20. The 10-year US Treasury bond yield fell 2 basis points to 2.76%. West Texas Intermediate oil rose 1.63% to $107.65/barrel and Brent crude rose 1.41% to $112.29.

Worldwide stocks declined sharply and US stock futures are lower this morning. Dow (INDEXDJX:.DJI) futures were down 0.58% to 14,845 while futures contracts on the S&P 500 (INDEXSP:.INX) fell 0.65% to 1,643.40. Nasdaq (INDEXNASDAQ:.IXIC) futures slipped 0.79% to 3,096.25.

Still to come later this morning is the June Case-Shiller Home Price Index at 9 a.m. Economists expect to see a 1% monthly rise in home prices in the 20 cities that the index tracks. On a yearly basis, prices likely rose 12.2%. An hour later, the Conference Board will publish its Consumer Confidence Index, which is expected to fall 2.3 points in August.

Bill Ackman's Pershing Square has officially unloaded its 18% stake in JC Penney (NYSE:JCP) to Citigroup (NYSE:C). Citigroup later offered shares in the retailer for $12.90, just over half of what Ackman paid for them when he began his campaign to revive the struggling company in 2010. JC Penney shares are down 1.87% in pre-market trading.

Best Buy (NYSE:BBY) shares lost yesterday's gains as founder Richard Schulze will soon sell some of his 20% stake in the big-box electronics store. Schulze says that the decision to sell is purely for personal asset diversification.

Tiffany (NYSE:TIF) added 1.44% this morning after releasing better-than-expected earnings thanks to strong sales in China. The luxury company earned $0.83 per share on $925.9 million in revenue in the second quarter. Earnings beat the consensus estimate by $0.09. A year ago, its profit was $0.72 per share and revenue was $887 million.

Twitter: @vincent_trivett
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