Before the Bell: Risk Higher on Wachovia; POSCO Falls in Asia
POSCO said it would keep the same prices unless it faced a sharp increase in raw material costs.
According to Bloomberg, corporate bond risk rose after Wachovia (WB) posted its first quarterly loss in six years. The cost to protect corporate bonds as shown by credit default swaps on the benchmark Markit CDX North American Investment Grade Index jumped 6.5 basis points to 132.5 in New York after the fourth-largest U.S. bank announced a $393 million loss. The company also said it would cut its dividend by 40% from $0.64 to $0.375 and raise about $7 billion in equity to replenish capital. For more on the Wachovia story, read Minyanville Editor Andrew Jeffery's column Wachovia Latest to Seek Capital.
From the Bull Pen: Bulls looking for financial exposure can look to MasterCard (MA); near-term sell-stops can be set below $220.
From the Bear Cave: Bears can use the Ultrashort Financial ETF (SKF) which tracks twice the inverse of the daily performance of the Dow Jones U.S. Financials Index. Near-term sell-stops can be set below $108.
POSCO Drops on Steel Concerns
POSCO (PKX) was one of the big casualties in Asian trading last night. According to Reuters, the world's fourth-largest steel maker dropped over 6% due in part to margin concerns and worries of faltering steel demand. The company said it planned no further price increases unless it faces a sharp rise in raw material costs. Analysts are concerned that margins will be negatively pressured as the company faces higher input costs while keeping prices unchanged. POSCO, however, maintained its profit forecasts saying earnings would come in at approximately $4.92 bln for the quarter. Professor David Nelson recently mentioned other steel plays in Earnings Key To Stemming Bear Market.
From the Bull Pen: Bulls can look to Nucor (NUE); entry near $65 with sell-stops below the 100 DMA ($61.50).ArcelorMittal (MT) is another option; entry near $80; with sell-stops below $76.
From the Bear Cave: Bears can press the downside in POSCO; buy-stops above Friday's close ($121).
For more ideas, see Minyanville's Spotlight Stocks.
Quick Check Around the World
Asian trading closed with the Hang Seng -3.47%, Nikkei -3.05%, Sensex +0.72%, Taiwan -0.19% and Shanghai -5.62%.
A quick check across the pond finds the CAC -0.27%, DAX -0.94%, FTSE -0.93%
As of 8:40 AM EST, S&P futures are lower -7.3 points to 1328, and Nasdaq futures are down -9.50 points to 1796.
A Look At Commodities
Commodities are higher. Crude oil is up +0.72 to 110.86. Gold is higher +4.40 to 928.00. Silver is lower -0.010 to 17.680 and copper is off -7.00 to 390.45.
The dollar index is lower -0.211 to 71.592.
On the Radar
Advance Retail Sales: 0.2% vs. 0.0% cons.
Retail Sales less Autos: 0.1% vs. 0.1% cons.
10:00 Business Inventories: 0.5% cons.
Click here for the full trading radar.
Good luck and have a great day!
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