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Economic data has futures edging higher

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This morning's economic data has stock futures edging higher, as November retail sales were slightly better than expected and helped offset a jobless claims number that came in above economist's forecast.

Retail sales rose at the fastest pace in three months in November, rising 0.4%, which was in line with economists forecast. Auto sales fell -0.1%, the second straight monthly decline. The upside to economists forecast came from the ex- autos as sales rose 0.5%, which was better than the 0.2% forecasted by economists. Sales at furniture and hardware stores were strong, while sales at traditional mall-type stores such as department stores and clothing stores fell. Catalog and online retail sales showed gains.

September's retail sales were revised slightly lower, while October's sales were revised higher. October's ex-autos sales rose a revised 0.8%.

Retail sales account for a third of the U.S.'s gross domestic product and continues to show that consumer spending is the main engine of growth in the economy the past two years as capital spending by corporations remains weak.

In a separate report, the Labor Department said jobless claims rose in the most recent week. The four-week moving average for first-time claims rose by 10,000 to 387,250. Claims in the most recent week rose 83,000 to 441,000, likely due to quirks in the seasonal adjustment patterns around the holidays. Economists were looking for the weekly jobless claim to rise by 378,000.

In a separate report, the Commerce Department said the nation's current account deficit fell to $127 billion in the third quarter from a record $127.6 billion in the second quarter.

Foreigners slowed their purchases of U.S. stocks and bonds during the quarter, while Americans reduced their holdings of foreign securities by $18.3 billion.

Foreigners bought $46.6 billion in American securities after an increase of $104.4 billion in the second quarter. Foreigners sold $5.1 billion in Treasuries and increased holdings of equities by $7.4 billion. Foreign direct investment increased $11 billion after falling $2.7 billion.

Also, the Labor Department reported import prices fell 1% in November as petroleum prices fell 10%. Excluding oil, import prices were up 0.1%. Export prices rose 0.1%, the eighth increase in the past nine months, which is potentially good news for U.S. producers.

Shares of Tenet Healthcare (NYSE:THC) $17.30 are trading higher at $17.85 in pre-market action after the recently troubled healthcare services provider announced lat night that its board OK'd the repurchase of up to 30 million shares of the company's common stock. This would represent a buyback of approximately 6.1% of the company's 487.7 million outstanding shares.

Consumer products giant Procter & Gamble (NYSE:PG) $87.46 are gaining $1.14 at $88.60 over the New York ECNs after the company raised its second-quarter profit outlook last night, citing strength in its healthcare unit and developing markets, as its past restructuring begins to gain traction.

The maker of Tide laundry detergent, Pringles chips and Pampers diapers said it sees a percentage rise in earnings per share before one-time items in the high-single digits from a year ago, which is up from its previous forecast for growth in the mid-to- high single digits. The average estimate among analysts had targeted a profit of $1.10 per share, which compares to the year- ago reported earnings of $1.03 per share. Last night's guidance has PG looking for EPS in the $1.11 to $1.12 range for the quarter.

From previous bearish profile near $87 and PG's triple-bottom sell signal, traders can either continue to hold short the stock with previously profiled stop of $90, or move to the sidelines on last night's raised guidance, which would be 1 to 2-cents above consensus estimates.

Conversely, Kimberly-Clark (NYSE:KMB) $46.78 issued a profit warning yesterday for its fiscal fourth quarter, partly due to increased competition for the diaper market from Procter & Gamble (PG).

A STOCK trader holding PG short, might also contemplate the selling of a December $90 put. While I'm writing this Wednesday evening, I'm not certain what the premium would be, but the selling of 1 $90 put (OBLIGATES the seller of the put to buy 100 shares at $90, less the option premium received), might give the trader some time to reassess their holding, while raising their cost basis in the short by the premium received. Then, should the stock trade your stop of $90.25, the put may then be bought back at lower cost than sold, while the trader also closes out the bearish PG short at earlier defined stop. The "best case" scenario is that PG closed at $90.01 next Friday (option expiration) entire put premium is kept, then PG reverses lower with trader still holding short and higher short cost basis in stock.

Oil services company Halliburton (NYSE:HAL) $20.40 are gaining $1.50 in the pre-market after Bloomberg reported that the company agreed to settle their asbestos lawsuits for as much as $4.2 billion, according to the worker's lawyers.

In yesterday's market monitor at OptionInvestor.com we made note that shares of Dow component Honeywell (NYSE:HON) $25.09 saw some upside price action intra-day after Dow Jones reported that it too may be nearing a deal in its asbestos suits.

After being halted for trading in last night's extended hours session, Ballard Power Systems (NASDAQ:BLDP) $14.21 fell to $13.06 when the trading halt was lifted. The company said it had entered into an agreement with underwriters led by RBC Capital Markets and CIBC World Markets for issuance of 7.7 million common shares at a price of $13.02 per common share for total gross proceeds of approximately $100.2 million.

I will make note here for any subscribers holding BLDP short/put, to think about locking in gains on the gap lower. The $13.02 pricing level is right on upward trend and I've noted in recent weeks that a secondary offering in Duke Energy (NYSE:DUK) $19.35 has found formidable support in recent weeks above the $18.35 level where it placed a secondary offering of 52 million shares. While BLDP and DUK are both different companies with what appear to be different problems, the reason for this note regarding the secondary offering is that the investment bankers underwriting these deals have vested interest in keeping the stocks at/near or above the secondary offering prices. The reason for this is that the underwriters can then be better able to solicit similar investment banking deals with other clients and show that they can support larger underwritings and garnish fees for such services.

I would NOT use the above observations as "reason" to trade bullish in any stock where a secondary offering is placed, simply on the belief that there will be "artificial" support provided by the underwriters. However, I might use the observations from past as "reason" for a shorter-term trader to move to the sidelines. Then, if still bearish, look for the stock to DISCOUNT the secondary offering on HEAVY volume, which might hint that those institutional investors that took the deal, "learn" something that threatens there investment and begin dumping the stock at such a rate that the investment banking firm can no longer support the underwriting as supply exceeds the underwriter's risk tolerance and broader market demand.

All of the above and undoubtedly more finds S&P futures (sp02z) trading higher by 4.2 points at 906.40. NASDAQ futures are gaining 15 points at 1,050.50, while Dow futures (dj02z) are up 29 points at 8,599.

Fair value for the S&P 500 today is $0.00. HL Camp & Company has their computers set for program buying at $0.26 and set for program selling at $-2.32. Fair value for the NASDAQ-100 today is $5.00.

Treasuries are seeing modest selling this morning. Per last night's Index Trader's Wrap at OptionInvestor.com, the benchmark 10-year YIELD ($TNX.X) is edging higher with YIELD currently at 4.035%.

Jeff Bailey

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