Tuesday, July 23rd, 2013
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OVERNIGHT MARKETS AND NEWS
Sep E-mini S&Ps (ESU13 +0.19%) are trading mildly higher by +0.22% with support from a +0.51% rally in European stocks and increased optimism that China's government provide stimulus if the Chinese economy starts slipping. Asian stocks closed higher across the board: Japan Nikkei index +0.82%, Hong Kong +2.33, China CSI 300 index +2.89%, Taiwan +1.35%, Australia +0.30%, Singapore +0.60%, South Korea +1.42%, India +0.71%, Turkey +0.96%. Commodity prices are down by -0.29% this morning due to the slightly higher trade in the dollar index. Sep WTI crude (CLU13 -0.60%) is down -0.78%, Sep gasoline (RBU13 -0.51%) is down -0.56%, Sep natural gas (NGU13 +0.05%) is up +0.49%, Aug gold (GCQ13 -0.60%) is down -0.63%, Sep copper (HGU13 -0.33%) is down -0.28%, and agriculture prices are mixed. The dollar index (DXY00 +0.15%) is up +0.13%, EUR/USD (^EURUSD) is down -0.09%, and USD/JPY (^USDJPY) is up +0.31%. Sep 10-year T-note prices (ZNU13 -0.23%) are down 7.5 ticks.Chinese Premier Li Keqiang said that 7% is the "bottom line" GDP growth rate that the Chinese government will tolerate, according to a report by Beijing News. Chinese Q2 GDP was recently reported at +7.5% and the consensus is for growth near that level through the remainder of this year and into next year. However, the markets have been afraid that the government may not take action even if GDP growth starts to fade below 7.0% since the government is currently focused on trying to curb strong home prices and the shadow banking system. Finance Minister Lou Jiwei caused a stir on July 11 when he said that GDP growth as low as 6.5% might be tolerable in the future although he later adjusted his remarks to say that China can achieve this year's target growth rate of 7.5%.
President Obama on Wednesday will deliver a speech on the economy and jobs at Knox College in Galesburg, IL. Mr. Obama in a series of speeches starting tomorrow will attempt to shift Washington's focus back to jobs and trying to put pressure on Republicans to compromise on a debt ceiling hike later this year. Washington must also approve a budget for the new fiscal year that starts on Oct 1 and address $109 billion in new automatic, across-the-board spending cuts that start October 1. Mr. Obama last night said that his remarks on Wednesday will contain some proposals that are new.
French July business confidence rose to a 15-month high of 95 from 93 in June, which was slightly stronger than market expectations for a 1 point increase to 94. French Q2 GDP rose by +0.2% q/q after falling in Q4 and Q1.
U.S. STOCK PREVIEW
Today’s May FHFA house price index is expected to show an increase of +0.8% m/m, adding to the +0.7% m/m increase seen in April. Today’s July Richmond Fed manufacturing index is expected to show a +1 point increase to 9, adding to the sharp +10 point increase to 8 seen in June. The Treasury today will kick off this week's $99 billion T-note package by selling $35 billion in 2-year T-notes. There are 35 of the S&P 500 companies that report earnings today with notable reports including UPS (consensus $1.13), AT&T (0.68), Apple (7.30), and Discover (1.15). Conferences this week include: Bio/Pharma Forcasting and Modeling on Tuesday, Fortune Brainstorm TECH 2013 on Tuesday, China Venture Capital & Private Equity Forum on Wed/Thu.Sep E-mini S&Ps (ESU13 +0.19%) this morning are up +3.75 points (+0.22%) on the +0.51% rally in the Euro Stoxx 50 index and on increased hopes that Chinese officials will take action if necessary to support their economy. The S&P 500 index on Monday closed mildly higher on positive political news in Japan and Portugal and on expectations for continued decent earnings, although stocks were undercut by the weaker-than-expected U.S. June existing home sales report of -1.2% to 5.08 million units (versus expectations for an increase to 5.26 million units). Closes: S&P 500 +0.20%, Dow Jones +0.01%, Nasdaq 100 +0.34%.
OVERNIGHT U.S. STOCK MOVERS
- There are 11 of the S&P 500 companies that have reported earnings this morning. Above-consensus reports include Air Products (APD +0.92%) ($1.36 vs $1.385), Du Pont (DD +0.05%) (1.28 vs 1.27), Travelers (TRV +0.91%) (2.13 vs 1.59), United Technologies (UTX -0.36%) (1.70 vs 1.58), Sigma-Aldrich (SIAL -0.57%) (1.05 vs 1.035), Forest Labs (FRX -0.02%) (0.28 vs 0.08), and Lockheed Martin (LMT +0.09%) (2.64 vs 2.20). Below-consensus reports include Altria (MO -0.73%) (0.62 vs 0.629), Regions Financial (RF +1.86%) (0.20 vs 0.21), Waters Corp (WAT +0.64%) (1.08 vs 1.21), and Pentair (PNR -0.51%) (0.85 vs 0.90).
- Texas Instruments (TXN +0.43%) rallied 2.6% in after-hours trading after reporting Q2 EPS with items of 58 cents, well above the consensus of 41 cents.
- CapitalSource (CSE +1.44%) rallied 12% in after-hours trading after the announcement that PacWest (PACW +0.50%) will buy the company for $2.3 billion. PacWest shares rallied slightly by 0.3% following the announcement.
- Netflix (NFLX -0.99%) fell 4% in after-hours trading on disappointing earnings news.
MARKET COMMENTS
Sep 10-year T-notes (ZNU13 -0.23%) this morning are down 7.5 ticks on increased optimism about the global economy after China's premier promised action if the Chinese economy starts sliding. Sep 10-year T-note prices on Monday closed little changed as the market found support from the weaker-than-expected U.S. existing home sales report (-1.2%) but was undercut by reduced safe-haven demand with the slightly higher close in the S&P 500 index and with reduced Eurozone debt crisis concerns with the sharp drop in Portugal’s bond yield. Closes: TYU3 +0.5, FVU3 -1.The dollar index (DXY00 +0.15%) this morning is up +0.11 points (+0.13%) on some short-covering after yesterday's losses. EUR/USD (^EURUSD) is down -$0.0012 (-0.09%) and USD/JPY (^USDJPY) is up +0.31 yen (+0.31%). The dollar index closed moderately lower on reduced safe-haven demand and on technical weakness with the decisive new 1-month low. EUR/USD saw support from the sharp -41 bp drop in Portugal’s 10-year bond yield and reduced Eurozone debt crisis concerns about Portugal’s president affirmed the current government and ruled out early elections. USD/JPY fell sharply by -0.97% as the yen was supported by Prime Minister Abe’s decisive victory in the upper house of parliament, which was a vote of confidence by the Japanese public for Mr. Abe’s aggressive stimulus program. Closes: Dollar index -0.39 (-0.47%), EUR/USD +0.0043 (+0.33%), USD/JPY -0.98 (-0.97%).
Sep WTI crude oil (CLU13 -0.60%) this morning is down -0.83 (-0.78%) and Sep gasoline (RBU13 -0.51%) is down -0.0168 (-0.56%). Sep crude oil and gasoline prices on Monday closed with fairly sharp losses mainly due to long liquidation pressure after the sharp 3-week rally. Gasoline prices were also pressure by expectations for a continued increase in gasoline inventories as recent refinery outages are fixed. Closes: CLU3 -0.93 (-0.86%), RBU3 -0.0399 (-1.30%).
GLOBAL EVENT CALENDAR07/23/2013
| US | 0900 ET | May FHFA house price purchase only index expected +0.8% m/m, Apr +0.7% m/m. |
| 1000 ET | July Richmond Fed manufacturing index expected +1 to 9, Jun +10 to 8. | |
| 1300 ET | Treasury auctions $35 billion 2-year T-notes. | |
| 1630 ET | API weekly U.S. oil statistics. | |
| EUR | 1000 ET | Eurozone July consumer confidence expected +0.5 to -18.3, Jun -18.8. |
| JPN | 1950 ET | Japan Jun merchandise trade balance expected -150.0 billion yen, May -996.4 billion yen. Jun exports expected +10.0% y/y, May +10.1% y/y. Jun imports expected +13.6% y/y, May +10.1% y/y. |
| CHI | 2145 ET | China July HSBC flash manufacturing PMI expected +0.3 to 48.5, Jun -1.0 to 48.2. |
U.S. STOCK CALENDAR07/23/2013
| Company Name | Symbol | Time | Event Description | Period | EPS Est (US$) |
|---|---|---|---|---|---|
| Pentair Ltd | PNR US | Bef-mkt | Q2 2013 Earnings Release | Q2 2013 | 0.9 |
| Air Products & Chemicals Inc | APD US | Bef-mkt | Q3 2013 Earnings Release | Q3 2013 | 1.358 |
| Valero Energy Corp | VLO US | Bef-mkt | Q2 2013 Earnings Release | Q2 2013 | 1.026 |
| Lockheed Martin Corp | LMT US | Bef-mkt | Q2 2013 Earnings Release | Q2 2013 | 2.203 |
| Regions Financial Corp | RF US | Bef-mkt | Q2 2013 Earnings Release | Q2 2013 | 0.211 |
| Ryder System Inc | R US | Bef-mkt | Q2 2013 Earnings Release | Q2 2013 | 1.229 |
| Travelers Cos Inc/The | TRV US | Bef-mkt | Q2 2013 Earnings Release | Q2 2013 | 1.596 |
| EI du Pont de Nemours & Co | DD US | Bef-mkt | Q2 2013 Earnings Release | Q2 2013 | 1.272 |
| United Technologies Corp | UTX US | Bef-mkt | Q2 2013 Earnings Release | Q2 2013 | 1.576 |
| Waters Corp | WAT US | Bef-mkt | Q2 2013 Earnings Release | Q2 2013 | 1.214 |
| Freeport-McMoRan Copper & Gold Inc | FCX US | Bef-mkt | Q2 2013 Earnings Release | Q2 2013 | 0.45 |
| Peabody Energy Corp | BTU US | Bef-mkt | Q2 2013 Earnings Release | Q2 2013 | -0.05 |
| PACCAR Inc | PCAR US | Bef-mkt | Q2 2013 Earnings Release | Q2 2013 | 0.745 |
| Sigma-Aldrich Corp | SIAL US | Bef-mkt | Q2 2013 Earnings Release | Q2 2013 | 1.035 |
| Forest Laboratories Inc | FRX US | Bef-mkt | Q1 2014 Earnings Release | Q1 2014 | 0.079 |
| Altria Group Inc | MO US | 7:00 | Q2 2013 Earnings Release | Q2 2013 | 0.629 |
| United Parcel Service Inc | UPS US | 7:45 | Q2 2013 Earnings Release | Q2 2013 | 1.13 |
| Illinois Tool Works Inc | ITW US | 8:00 | Q2 2013 Earnings Release | Q2 2013 | 1.095 |
| Avery Dennison Corp | AVY US | 8:30 | Q2 2013 Earnings Release | Q2 2013 | 0.703 |
| Waters Corp | WAT US | 8:30 | Q2 2013 Earnings Call | Q2 2013 | |
| United Parcel Service Inc | UPS US | 8:30 | Q2 2013 Earnings Call | Q2 2013 | |
| Pentair Ltd | PNR US | 9:00 | Q2 2013 Earnings Call | Q2 2013 | |
| Altria Group Inc | MO US | 9:00 | Q2 2013 Earnings Call | Q2 2013 | |
| Travelers Cos Inc/The | TRV US | 9:00 | Q2 2013 Earnings Call | Q2 2013 | |
| EI du Pont de Nemours & Co | DD US | 9:00 | Q2 2013 Earnings Call | Q2 2013 | |
| United Technologies Corp | UTX US | 9:00 | Q2 2013 Earnings Call | Q2 2013 | |
| Air Products & Chemicals Inc | APD US | 10:00 | Q3 2013 Earnings Call | Q3 2013 | |
| Freeport-McMoRan Copper & Gold Inc | FCX US | 10:00 | Q2 2013 Earnings Call | Q2 2013 | |
| Illinois Tool Works Inc | ITW US | 10:00 | Q2 2013 Earnings Call | Q2 2013 | |
| Legg Mason Inc | LM US | 10:00 | Annual General Meeting | Y 2013 | |
| Forest Laboratories Inc | FRX US | 10:00 | Q1 2014 Earnings Call | Q1 2014 | |
| Valero Energy Corp | VLO US | 11:00 | Q2 2013 Earnings Call | Q2 2013 | |
| Lockheed Martin Corp | LMT US | 11:00 | Q2 2013 Earnings Call | Q2 2013 | |
| Regions Financial Corp | RF US | 11:00 | Q2 2013 Earnings Call | Q2 2013 | |
| Ryder System Inc | R US | 11:00 | Q2 2013 Earnings Call | Q2 2013 | |
| Peabody Energy Corp | BTU US | 11:00 | Q2 2013 Earnings Call | Q2 2013 | |
| Sigma-Aldrich Corp | SIAL US | 11:00 | Q2 2013 Earnings Call | Q2 2013 | |
| Avery Dennison Corp | AVY US | 12:00 | Q2 2013 Earnings Call | Q2 2013 | |
| PACCAR Inc | PCAR US | 12:00 | Q2 2013 Earnings Call | Q2 2013 | |
| Robert Half International Inc | RHI US | 16:00 | Q2 2013 Earnings Release | Q2 2013 | 0.433 |
| Total System Services Inc | TSS US | 16:00 | Q2 2013 Earnings Release | Q2 2013 | 0.331 |
| Altera Corp | ALTR US | 16:15 | Q2 2013 Earnings Release | Q2 2013 | 0.308 |
| Norfolk Southern Corp | NSC US | 16:30 | Q2 2013 Earnings Call | Q2 2013 | |
| AT&T Inc | T US | 16:30 | Q2 2013 Earnings Call | Q2 2013 | |
| Altera Corp | ALTR US | 16:45 | Q2 2013 Earnings Call | Q2 2013 | |
| Broadcom Corp | BRCM US | 16:45 | Q2 2013 Earnings Call | Q2 2013 | |
| CR Bard Inc | BCR US | 17:00 | Q2 2013 Earnings Call | Q2 2013 | |
| Robert Half International Inc | RHI US | 17:00 | Q2 2013 Earnings Call | Q2 2013 | |
| Total System Services Inc | TSS US | 17:00 | Q2 2013 Earnings Call | Q2 2013 | |
| Electronic Arts Inc | EA US | 17:00 | Q1 2014 Earnings Call | C2 2014 | |
| Apple Inc | AAPL US | 17:00 | Q3 2013 Earnings Call | Q3 2013 | |
| Juniper Networks Inc | JNPR US | 17:00 | Q2 2013 Earnings Call | Q2 2013 | |
| International Game Technology | IGT US | 17:00 | Q3 2013 Earnings Call | Q3 2013 | |
| Discover Financial Services | DFS US | 17:00 | Q2 2013 Earnings Call | Q2 2013 | |
| Broadcom Corp | BRCM US | Aft-mkt | Q2 2013 Earnings Release | Q2 2013 | 0.694 |
| Norfolk Southern Corp | NSC US | Aft-mkt | Q2 2013 Earnings Release | Q2 2013 | 1.494 |
| CR Bard Inc | BCR US | Aft-mkt | Q2 2013 Earnings Release | Q2 2013 | 1.38 |
| AT&T Inc | T US | Aft-mkt | Q2 2013 Earnings Release | Q2 2013 | 0.683 |
| ACE Ltd | ACE US | Aft-mkt | Q2 2013 Earnings Release | Q2 2013 | 1.941 |
| Nabors Industries Ltd | NBR US | Aft-mkt | Q2 2013 Earnings Release | Q2 2013 | 0.088 |
| FMC Technologies Inc | FTI US | Aft-mkt | Q2 2013 Earnings Release | Q2 2013 | 0.471 |
| Electronic Arts Inc | EA US | Aft-mkt | Q1 2014 Earnings Release | Q1 2014 | -0.595 |
| Apple Inc | AAPL US | Aft-mkt | Q3 2013 Earnings Release | Q3 2013 | 7.305 |
| Juniper Networks Inc | JNPR US | Aft-mkt | Q2 2013 Earnings Release | Q2 2013 | 0.251 |
| International Game Technology | IGT US | Aft-mkt | Q3 2013 Earnings Release | Q3 2013 | 0.309 |
| Discover Financial Services | DFS US | Aft-mkt | Q2 2013 Earnings Release | Q2 2013 | 1.153 |
| Linear Technology Corp | LLTC US | Aft-mkt | Q4 2013 Earnings Release | Q4 2013 | 0.419 |
| Public Service Enterprise Group Inc | PEG US | Investor Meeting - Day 2 | Y 2013 | ||
| AbbVie Inc | ABBV US | FDA Adcomm, Humira, axial spondyloarthritis |
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