U.S. Preview
- The European DJ Stoxx 50 this morning is trading sharply lower by -1.82% on the spate of poor earnings news released by US companies late yesterday and this morning. In Europe, Ericsson reported lower earnings and Vodaphone reduced revenue guidance, adding to the bad news late yesterday from American Express and Apple. Japan's Nikkei index today closed +2.98% after yesterday's holiday, but most of the other Asia-Pacific stocks today closed lower: Hong Kong -0.02%, China -0.22%, Taiwan -0.28%, Australia -0.12%, Singapore -0.98%, South Korea -0.12%, Bombay +1.84%.
- Richmond Fed index – Today’s July Richmond Fed manufacturing index is expected to show a small upward rebound of +3 points to -9, regaining a third of the sharp 9-point decline seen in June to –12. The June level of –12 was a 5-year low. The Richmond Fed index has been mostly below the zero mark in the past 9 months, indicating that the Richmond-area manufacturing sector is in a recession. In US manufacturing data released thus far for July, the Philadelphia Fed index rose 2.1 points to –15, and the NY Empire index rose 1.7 point to –8.0. The market is currently expecting the July ISM manufacturing index, scheduled to be released on July 1, to fall –1.0 point to 49.2, returning to recessionary territory below 50 after a brief 1-month excursion above 50 to 50.2.
- House price index – Today’s May house price index from the Office of Housing Enterprise Oversight (OFHEO), which is the agency that supervises Fannie Mae and Freddie Mac, is expected to show another sharp decline of –0.8% m/m, adding to the –0.8% m/m decline seen in April. OFHEO’s house price index is down only –4.6% year-on-year, which is less than the year-on-year declines seen in the US median existing home sales price series from the National Association of Realtors (-6.3% y/y) and the S&P/Case-Schiller home price index (–15.3% y/y). In any case, US home prices are likely to continue to fall because of the huge supply of unsold homes that are on the market. The supply of existing homes on the market is currently at 10.4 months, which is just below the 23-year high of 10.7 months seen in May 2003. The supply of new homes on the market is currently at 10.9 months, which is just below the 28-year high of 11.4 months posted in March.
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Overnight U.S. Stock News
- September S&Ps this morning are trading lower by -12.80 points after American Express late yesterday reported weaker-than-expected earnings and Apple issued disappointing guidance. The US stock market yesterday closed slightly lower (Dow -0.25%, S&P 500 -0.05%, Nasdaq Composite -0.14%).
- Bearish factors for stock prices yesterday included (1) yesterday's $2.16 rally in crude oil prices which hurt retailers in particular, (2) weakness in the pharma sector after Vytorin, a cholesterol drug, was linked to cancer in a study and caused a sharp sell-off in its marketers Merck (-6.2%) and Schering-Plough (-12%),
- Bullish factors for stock prices yesterday included (1) a +3.9% rally in Bank of America after the bank reported earnings of 72 cents, which was significantly better than the analyst consensus of 54 cents, (2) M&A activity with Roche Holding buying the 44% of Genentch that it didn't already own at a 8.8% premium to last Friday's close, and (3) a +5.8% gain in AIG after a recommendation upgrade to "buy" from "neutral" from analysts at Bank of America.
- American Express after yesterday's close plunged by 11% after reporting Q2 EPS from continuing operations of 56 cents, which was far below the analyst consensus of 82 cents. In addition, American Express withdrew its 2008 earnings guidance due to uncertainty about the situation in the second half of the year. American Express reported that uncollectible debt in its credit card unit rose to 5.3% of loans from the year-earlier level of 2.9%.
- Capital One and Discover both sold off by about 6% late yesterday after the AMEX news on concern about rising credit card defaults.
- Apple is sharply lower by 11% in European trading this morning after the company issued Q4 guidance of $1.00 per share for EPS and $7.8 billion for sales, which was well below the analyst consensus of $1.24 for EPS and $8.3 billion for sales. In addition, in response to a question about the health of CEO Steve Jobs, Apple's CFO on yesterday's analyst conference call would only say that Steve Jobs was not planning on leaving Apple but that his health is a private matter.
- SanDisk fell sharply by 12% after yesterday's close after reporting a Q2 EPS loss ex-items of 10 cents, versus the analyst consensus for a 12 cent profit.
- Texas Instruments plunge 12% after yesterday's close after it reported Q2 EPS of 44 cents and a 2.1% decline in sales to $3.35 billion, which was slightly below the analyst consensus of $3.39 billion.
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Today's U.S. Market Focus
- September 10-year T-notes this morning are trading +12 ticks on the weakness in S&Ps and on concern about credit card companies after yesterday's news from American Express. Sep T-note prices yesterday posted a new 3-week low but then recovered on the weak stock market to close +5 ticks. Bullish factors for T-note prices yesterday included (1) the rise in oil prices which caused renewed concern about US consumers' health, and (2) some short-covering after last week's sell-off. Bearish factors yesterday included (1) positive earnings news from Bank of America which somewhat reduced concern about the money center banks, and (2) supply overhang ahead of this week's heavy auction schedule (20-year TIPS today, 2-year T-notes tomorrow, 5-year T-notes on Thursday).
- The dollar/yen is down -0.22 yen this morning and the euro/dollar is little changed. The dollar index yesterday closed slightly lower on higher oil prices and the lower US stock market, which fueled concern about US consumers and undercut US interest rate differentials.
- August crude oil prices this morning are trading -8 cents and August gasoline is trading +0.44 cents a gallon. The market is not panicking about Tropical Storm Dolly which is expected to hit the coast tomorrow near the Texas-Mexico border and miss key US oil rigs and on-shore refineries. Dolly currently has sustained winds of 60 mph and the U.S. National Hurricane Center expects Dolly to strengthen to a hurricane before making landfall. August crude oil prices yesterday closed +$2.16 and August gasoline closed +4.62 cents. Bullish factors included (1) the evacuation of oil rigs in the Gulf of Mexico as Tropical Storm Dolly headed into the Gulf of Mexico towards Texas, (2) the lack of an initial positive response from Iran in negotiations including the US over the weekend, and (3) some short-covering after last week's steep sell-off. The main bullish factor was the market consensus for a decline in crude oil inventories in Wednesday's weekly DOE report. The market consensus for Wednesday's weekly DOE report is for a -600,000 bbl decline in crude oil inventories, a +200,00 rise in gasoline inventories, and a +2.35 million bbl rise in distillates, and an unchanged refinery operating rate of 89.5%.
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Today's U.S. Earnings Reports
Earnings reports (confirmed releases for companies with market caps above $10.0 bln listed by mkt cap): CAT-Caterpillar (BEST earnings consensus $1.54 per share), UPS (.85), HAL-Haliburton (0.68), FCX-Freeport-McMoran, LMT-Lockheed Martin (1.88), DD-DuPont (1.07), YHOO-Yahoo (0.16), XTO-XTO Energy (1.04), UNH-UnitedHealth (0.64), Wachovia (-0.69), BHI-Baker Hughes (1.24), NSC-Norfolk Southern (1.05), BIIB-Biogen Idec (0.84), WU-Western Union (0.31), CME-CME Group (3.85), PCAR-Paccar (0.83), PCP-Precision Castpt (1.93), VMW-VMware (na), BRCM-Broadcom (0.35), OMC-Omnicom (0.96), STI-Suntrust Banks (0.66), BXP-Boston Properties (0.60), ISRG-Intuitive Surgical (1.17), FRX-Forest Labs (0.80), JEC-Jacobs Engineering (0.82), DGX-Quest Diagnostic (0.78), WM-Wamu Inc (-1.02)
| Tuesday 7/22/2008 | |
|---|---|
| United States | |
| 0745 ET | ICSC (Int’l Council of Shopping Centers) weekly retailer sales, previous +0.2% w/w and +2.2% weekly y/y. |
| 0810 ET | Treasury Secretary Henry Paulson delivers a speech on the U.S. economy and financial markets. |
| 0830 ET | Philadelphia Fed President Charles Plosser speaks on the U.S. economy in Pennsylvania. |
| 0855 ET | Redbook weekly retailer sales, previous +1.2% month-to-date m/m and +2.7% month-to-date y/y. |
| 1000 ET | Jul Richmond Fed manufacturing index expected +3 to -9, Jun –9 to –12. |
| 1000 ET | May house price index expected –0.8% m/m, Apr –0.8% m/m. |
| 1130 ET | Weekly 4-week T-Bill auction. |
| 1300 ET | Treasury auctions $6 billion 20-year TIPS. |
| 1700 ET | ABC U.S. weekly consumer confidence, previous unchanged at -41. |
| Canada | |
| 0830 ET | May Canadian retail sales expected +0.5% and +0.6% less autos, Apr +0.6% and +1.1% less autos. |
| Euro-Zone | |
| n/a | EU foreign ministers meet in Brussels. |
Morning Quote Board
Morning Quotes (ET) Last Chg %chg Updated US Stock Futures S&P (Globex) (U8) 1248.80 -12.80 -1.01% 06:52:08 DJIA (CBOT) (U8) 11349 -116 -1.01% 06:51:30 European Stocks Europe DJ Stoxx 50 2799.04 -51.90 -1.82% 06:47:00 London UK FTSE Index 5306.90 -97.40 -1.80% 06:47:01 German Dax Index 6354.31 -70.53 -1.10% 06:47:09 French CAC 40 Index 4276.80 -50.34 -1.16% 06:47:00 Asian-Pacific Stocks Japan Nikkei Index 13185 381 2.98% 03:00:16 Hong Kong Hang Seng 22527 -5 -0.02% 04:10:45 China CSI 300 Index 2905 -6 -0.22% 03:01:00 Taiwan TAIEX Index 7066 -20 -0.28% 01:46:01 Australian S&P 200 5005.6 -6.2 -0.12% 02:47:03 Singapore Str. Times 2890.66 -28.55 -0.98% 05:10:06 South Korea KOSPI 200 199.77 -0.23 -0.12% 02:01:16 Bombay Sensex 30 14104 254.16 1.84% 06:28:12 Karachi KSE-100 10785 411 3.96% 04:15:16 US Interest Rates 10yr T-notes (CBT)(U8) 114.045 0.120 0.33% 06:52:11 Cash 10yr T-note Price 98.260 0.050 0.16% 07:02:02 Cash 10yr T-note Yield 4.022 -0.020 -0.48% 07:01 5yr T-note (CBT)(U8) 110.260 0.100 0.28% 06:51:50 Cash 5yr T-note Price 100.060 0.045 0.14% 07:01:32 Cash 5yr T-note Yield 3.333 -0.031 -0.93% 07:01 30-yr T-bond (CBT)(U8) 114.29 0.11 0.30% 06:52:10 Cash 30yr T-bond Price 96.040 0.025 0.08% 07:02:02 Cash 30yr T-bond Yield 4.616 -0.005 -0.11% 07:01 Eurodollars (CME)(U8) 97.085 0.010 0.01% 06:51:56 Eurodollars (CME)(Z8) 96.845 0.025 0.03% 06:51:08 Asian & European Rates 10-yr JGBs (TSE) (U8) 135.70 -0.86 -0.63% 02:00:00 EuroyenTibor(SGX)(U8) 99.145 0.000 0.00% 05:40:36 Bunds (Eurex) (U8) 110.46 0.26 0.24% 06:47:05 Euribor (Eurex) (U8) 94.95 0.02 0.02% 06:23:30 UK Gilts (Liffe) (U8) 105.70 0.36 0.34% 06:46:54 Short Stlg (Liffe) (U8) 94.11 0.02 0.02% 06:44:30 Forex US Dollar/Japanese Yen 106.22 -0.22 -0.21% 07:02:12 EuroFX / US Dollar 1.5920 -0.0002 -0.02% 07:02:11 SwissFranc/US Dollar 1.0159 -0.0018 -0.18% 07:02:10 British Pound (per USD) 2.0054 0.0021 0.21% 07:02:12 Canadian Dlr (perUSD) 1.0011 0.0012 0.12% 07:02:07 Yen (Globex) (U8) 0.9432 0.0034 0.34% 06:52:12 Euro FX (Globex) (U8) 1.5868 0.0021 0.13% 06:52:09 SwissFranc (Globex)(U8) 0.9838 0.004 0.41% 06:52:08 British Pound(Glbx)(U8) 1.9955 0.0051 0.26% 06:52:02 Canadian$ (Globex)(U8) 0.9975 -0.0007 -0.07% 06:52:09 Commodities Gold (Comex) (Q8) 973.5 9.8 1.02% 06:31:54 Copper (Comex) (U8) 371.9 3.8 1.03% 06:25:08 Crude Oil (Nymex) (Q8) 130.96 -0.08 -0.06% 06:30:53 Gasoline (Nymex) (Q8) 322.15 0.44 0.14% 06:26:04 Heating Oil(Nymex)(Q8) 374.78 -0.01 0.00% 06:28:20 NaturalGas(Nymex)(Q8) 10.4 -0.11 -1.05% 06:31:42
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