Morning Call For June 6, 2016

OVERNIGHT MARKETS AND NEWS

Jun E-mini S&Ps (ESM16 +0.14%) are little changed, up +0.06%, as the markets await clues on Fed policy from a speech by Fed Chair Yellen later today, the last scheduled appearance by a Fed member ahead of the Jun 14-15 FOMC meeting. Strength in crude oil and metals prices is lifting energy producers and mining stocks and is giving stocks a lift. European stocks are down -0.10% after German Apr factory orders fell more than expected by the most in 9 months. European stocks were also under pressure and the British pound fell to a 3-week low against the dollar after latest polls showed more Britons favored exiting from the European Union. Asian stocks settled mixed: Japan -0.37%, Hong Kong +0.40%, China -0.16%, Taiwan +0.06%, Australia +0.78%, Singapore +0.78%, South Korea closed for holiday, India -0.24%.

The dollar index (DXY00 +0.13%) is up +0.22%. EUR/USD (^EURUSD) is down -0.28%. USD/JPY (^USDJPY) is up +0.60%.

Sep T-note prices (ZNU16 -0.12%) are down -4 ticks.

The latest ITV poll shows Britons favor leaving the European Union by 45% to 41%, which is fueling concern that the June 23 referendum could throw global markets into turmoil and undermine confidence in the EU. The IMF and OECD have warned of dire fallout if Britain votes to leave the EU, and Chicago Fed President Evans said the referendum is undermining confidence in the economic outlook at a time when the international economy is already losing momentum.

German Apr factory orders fell -2.0% m/m and -0.5% y/y, weaker than expectations of 0.5% m/m and +0.6% y/y with the -2.0% decrease the largest monthly decline in 9 months.

U.S. STOCK PREVIEW

Key U.S. news today includes: (1) Fed Chair Janet Yellen speaks at a World Affairs Council of Philadelphia luncheon event, (2) USDA weekly grain export inspections, and (3) USDA Weekly Crop Progress.

There is one of the Russell 1000 companies that reports earnings today: Thor Industries (consensus $1.43).

U.S. IPO's scheduled to price today: none.

Equity conferences this week include: BB&T Automotive Aftermarket Conference on Mon, RBC Capital Markets Energy and Power Executive Conference on Mon, Stifel WasteExpo Investor Summit on Mon, Goldman Sachs Lodging, Gaming Restaurant & Leisure Conference on Mon-Tue, RBC Global Energy & Power Executive Conference on Mon-Tue, Stifel Technology, Internet & Media Investor Conference on Mon-Tue, American Society of Clinical Oncology Annual Meeting on Mon-Thu, Bank of America Merrill Lynch Global Telecom & Media Conference on Tue, Goldman Sachs European Financials Conference on Tue, NAREIT REITWeek Investor Forum on Tue-Wed, Stephens Spring Investment Conference on Tue-Wed, Goldman Sachs Global Health Care Conference on Tue-Thu, Jefferies Global Health Care Conference on Tue-Thu, Baird Global Consumer, Technology and Services Conference on Tue-Thu, BioTechnology Industry Organization International Convention on Wed, Deutsche Bank Global Industrials and Materials Summit on Wed-Thu, Sandler O'Neill Global Exchange and Brokerage Conference on Wed-Thu, Gabelli & Company Movie & Entertainment Conference on Thu, Susquehanna Financial Group Energy and Industrials Conference on Thu.

OVERNIGHT U.S. STOCK MOVERS

Wal-mart (WMT -0.11%) was upgraded to 'Buy' from 'Hold' at Jeffries with a 12-month price target of $82.

Harley-Davidson (HOG -0.78%) was downgraded to 'Neutral' from 'Buy' at Goldman Sachs.

Autohome (ATHM +0.93%) was rated a new 'Buy' at Brean Capital with a 12-month price target of $31.

Sturm Ruger & Co. (RGR -4.83%) was downgraded to 'Hold' from 'Buy' at BB&T Capital Markets.

Barracuda Networks (CUDA -0.23%) was downgraded to 'Market Underperform' from 'Market Perform' at JMP Securities.

Jazz Pharmaceuticals (JAZZ -2.08%) was rated a new 'Buy' at Goldman Sachs with a price target of $196.

Tyson Foods (TSN +0.97%) and Pilgrim's Pride (PPC +0.24%) were both downgraded to 'Market Perform' from 'Outperform' at BMO Capital Markets.

Synopsys (SNPS -0.71%) was rated a new 'Outperform' at RBC Capital Markets with a 12-month price target of $64.

American Equity Investment (AEL -3.29%) was upgraded to 'Overweight' from 'Neutral' at JPMorgan Chase.

Sempra Energy (SRE +2.56%) was downgraded to 'Neutral' and off the 'Conviction List' at Goldman Sachs.

MARKET COMMENTS

June E-mini S&Ps (ESM16 +0.14%) this morning are up +1.25 points (+0.06%). Friday's closes: S&P 500 -0.29%, Dow Jones -0.18%, Nasdaq -0.48%. The S&P 500 on Friday closed lower on concerns about the U.S. economy after the very weak +38,000 increase in U.S. May non-farm payrolls, less than expectations of +160,000 and the smallest increase in 5-1/2 years. In other weak economic data, the U.S. May ISM non-manufacturing index fell by-2.8 points to 52.9, weaker than expectations of -0.4 to 55.3 and the slowest pace of expansion in 2-1/4 years. Stocks found some support from reduced fears of Fed tightening after the weak payroll report and from the +1.9% rise in U.S. Apr factory orders, right on expectations and the biggest increase in 6 months.

September 10-year T-note prices (ZNU16 -0.12%) this morning are down -4 ticks. Friday's closes: TYU6 +1-3/32 points, FVU6 +21.75. Sep T-notes on Friday rallied to a 1-month high and closed higher on the weaker-than-expected U.S. May payroll report, which eliminated the chance of a rate hike at the upcoming June 14-15 FOMC meeting and substantially reduced the chances for a rate hike at the following meeting in July. T-notes were also boosted by the bigger-than-expected -2.8 point decline in the May ISM non-manufacturing index and by reduced inflation expectations after the 10-year T-note breakeven inflation rate fell to a 1-1/2 month low.

The dollar index (DXY00 +0.13%) this morning is up +0.208 (+0.22%). EUR/USD (^EURUSD) is down -0.0032 (-0.28%). USD/JPY (^USDJPY) is up +0.64 (+0.60%). Friday's closes: Dollar Index -1.535 (-1.61%), EUR/USD +0.0216 (+1.94%), USD/JPY -2.34 (-2.15%). The dollar index on Friday tumbled to a 3-week low on the reduced likelihood of a Fed rate hike after the very weak payroll report of +38,000. The dollar also saw weakness with the fall in USD/JPY to a 1-month low as stock weakness boosted the safe-haven demand for the yen.

July WTI crude oil (CLN16 +1.13%) this morning is up +51 cents (+1.05%). July gasoline (RBN16 +0.17%) is up +0.0013 (+0.08%). Friday's closes: CLN6 -0.55 (-1.12%), RBN6 -0.0271 (-1.66%). July crude and gasoline on Friday closed lower on economic concerns after U.S. May non-farm payrolls posted their smallest increase in 5-1/2 years. Crude oil also saw some continued weakness after OPEC on Thursday was unable to agree on a new production ceiling. Crude oil prices received some underlying support from the sharp -1.61% sell-off in the dollar index.