Fed Expectations

Daily Market Commentary for June 20, 2011

Expectations are for the Fed to make a formal decision to end the current program of buying $600 billion of Treasury securities on June 30. (read more at Millennium-Traders.Com)
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The International Monetary Fund [IMF] issued a warning that the sovereign debt crisis in the periphery euro zone threatens to overwhelm a favorable outlook for the broader region. The IMF said policymakers are "facing uncomfortable dilemmas," with uncertainty about how the current crisis will end. "With deeply intertwined fiscal and financial problems, failure to undertake decisive action could rapidly spread the tensions to the core of the euro area and result in large global spillovers," the IMF said. Additionally, the IMF reported they are getting all members to 'scale up' the European Financial Stability Facility and a further extension of its potential uses, such as to secondary markets and term funding guarantees 'would send a much-needed signal that member countries' and 'will do whatever it takes to safeguard the stability of the euro area'. IMF urged an end to the debate about 'debt re-profiling or restructuring' and to avoid any impression under the European Stability Mechanism, financial support will be conditional on debt restructuring.

Goldman Sachs Group (NYSE: GS) has been fined by IntercontinentalExchange (NYSE: ICE) GBP25,000 for what it termed as 'disorderly trading'. The fine dates back to Goldman Sachs International's trading activity on the April Brent/WTI spread on Jan 28, when the exchange's monitoring system detected six notable 'price spikes'. The spikes 'were investigated and found to be the result of a limit order and several large market orders placed in quick succession by a GSF trader,' ICE said. The matter was referred to Authorization, Rules and Conduct Committee for ICE and found that 'the behavior of GSF and its client to be a clear case of disorderly trading, in that the distorting price impact of the placement of such large orders in close proximity was not considered'.

The National Credit Union Administration [NCUA] sued JP Morgan Chase & Co. (NYSE: JPM) and Royal Bank of Scotland Group (NYSE: RBS) to recover over $800 million related to the sales of risky bonds. NCUA regulator alleged that the two firms violated securities laws in the sale of 'questionable' securities and made numerous misrepresentations in the offering documents. "These misrepresentations caused the corporate credit unions that bought the notes to believe the risk of loss associated with the investment was minimal, when in fact the risk was substantial," said the NCUA in a statement. The NCUA may bring additional lawsuits to seek damages worth billions of dollars.

Caterpillar (NYSE: CAT) shares were higher by 2% into early afternoon trading, after reporting strong sales to the U.S. Securities and Exchange Commission. CAT said that three-month sales ending in May was up 52% compared with the same period a year ago. Apparently, the increase was mainly driven by sales in Europe, Africa and Middle East which were up 65% and in Latin America, sales surged higher by 60%.

Carpenter Technology (NYSE: CRS) was higher by 9% into mid day, after the company announced a definitive merger agreement with Latrobe Specialty Metals Inc.

Per the Justice Department, Anadarko Petroleum (NYSE: APC), Kerr-McGee and their affiliates will pay more than $17 million to resolve claims that they knowingly underpaid royalties owed on natural gas produced from federal and Indian lands. The settlement resolves claims that Anadarko and Kerr-McGee improperly reported processed gas as unprocessed gas to lower royalty payments as well as several other administrative claims.

Economic data released today: N/A

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