OVERNIGHT MARKETS AND NEWS
March E-mini S&Ps (ESH13 +0.51%) this morning are up +0.48% on support from a +2.43% rally in Japanese stocks sparked by reports that Japanese Prime Minister Abe will choose former Finance Ministry official Kuroda as the new BOJ chief, who favors additional easing this year. European stocks are sharply higher by +2.28% this morning. The markets have been able to shake off Sunday night's news of an unexpectedly weak Chinese HSBC flash manufacturing PMI report, uncertainty ahead of today's results of the Italian election, and the impending U.S. sequester on Friday. Commodity prices are sharply higher today by +0.85% on a weaker dollar index. April crude oil (CLJ13 +1.12%) is up +1.19%, April gasoline (RBJ13 +1.42%) is up +1.23%, April gold (GCJ13 +1.18%) is up +1.28%, March copper (HGH13 +0.76%) is up +0.89%, and agricultural prices are higher nearly across the board. The dollar index (DXY00 -0.43%) is down -0.33% this morning on reduced safe-haven demand with the sharp rally in Japanese and European stocks. EUR/USD (^EURUSD) is up +0.57% and USD/JPY (^USDJPY) is up +0.42%. March 10-year T-note prices (ZNH13 -0.05%) are down 1.5 ticks.China's Feb HSBC flash manufacturing PMI on Sunday night fell by 1.9 points to 50.4, which was much weaker than market expectations for a small -0.2 point decline to 52.2.
Japanese Prime Minister Abe is reportedly leaning towards choosing Haruhiko Kuroda as the new Bank of Japan chief, a former official in Japan's Finance Ministry who has said he favors further easing this year and who favored implementing an inflation target more than 10 years ago as a means to fight deflation.
Nicos Anastasiades wow a resounding victory in the Cyprus election and he vowed to resume talks quickly with the Eurozone and IMF to complete the country's bailout.
The markets are awaiting the outcome of the 2-day Italian election that concludes today. The markets are afraid of a muddled election result that will result in a weak government that may backslide on Italy's fiscal consolidation and economic reforms. The markets are hoping for a coalition government of front-runner Bersani and incumbent Mario Monti and the exclusion from the government of ex-comic Grillo and former PM Berlusconi.
U.S. STOCK PREVIEW
The U.S. stock market today will react to today's Italian election results and any progress ahead of Friday's impending sequester spending cuts. The Treasury today will sell $35 billion in 2-year T-notes to kick off this week's $99 billion T-note package. U.S. Q4 earnings season is winding down but there are still 44 of the S&P 500 companies that are scheduled to report this week. Notable reports this week include Lowe’s on Monday; Home Depot and Macy’s on Tuesday; Target, TJX, JC Penney and Limited Brands on Wednesday; and Kohl’s, Best Buy, Salesforce.com and GAP on Thursday. Q4 earnings season has been better than expected with 70% of the 438 SPX companies that have reported thus far delivering better-than-expected earnings, according to Thomson I/B/E/S. The market is now expecting Q4 earnings growth for the S&P 500 companies of +6.0% y/y, better than expectations of +2.9% as of January 1. Looking ahead, the market is expecting earnings growth of +1.5% in Q1, +6.4% in Q2, +10.1% in Q3, and +13.1% in Q4.
March E-mini S&Ps (ESH13 +0.51%) this morning are up +7.25 points (+0.48%) on sharp rallies in Japanese and European stocks and have been able to shake off the bad news of a decline in the Chinese flash manufacturing PMI. The S&P 500 index on Friday closed moderately higher on some short-covering after the sharp losses on Wednesday and Thursday and on some optimism about the stronger-than-expected German IFO confidence report. Closes: S&P 500 +0.88%, Dow Jones +0.86%, Nasdaq +0.95%. The German IFO business climate index rose by +3.1 points to a 10-month high of 107.4 from a revised 104.3, which was stronger than market expectations for an increase to only 104.9. The expectations index rose sharply by +4.0 points to 104.6 from a revised 100.6 in Jan, which was stronger than market expectations for a report of 101.4.
OVERNIGHT U.S. STOCK MOVERS
- BP (BP +2.55%) may be offered a $16 billion settlement deal by the Department of Justice and Gulf Coast states ahead of the beginning of trial on the 2010 Deepwater Horizon disaster, according to WSJ.
- Cooper Tire (CTB +1.20%) reported Q4 EPS of $1.15, far above the consensus of 85 cents.
- Barnes & Noble ({=BKS) is reportedly evaluating the sale of its retail business.
- LG will buy webOS from HP (HPQ +12.28%), according to a report from CNet.
- CME Group (CME +1.20%) has approched Deutsche Boerse about merger discussions, according to a report by Bloomberg.
- Cummins (CMI +0.23%) was upgraded to a Conviction Buy from Buy at Goldman Sachs.
- Lowe's (LOW unch) reported Q4 EPS of 26 cents, above the consensus of 23 cents.
- Yum! Brands (YUM +0.61%) is cutting is supply chain in China, according to WSJ.
MARKET COMMENTS
March 10-year T-notes (ZNH13 -0.05%) this morning are down -1.5 ticks on reduced safe-haven demand and supply overhang ahead of this week's $99 billion T-note package that begins today with the sale of $35 billion in 2-year T-notes. March 10-year T-note prices on Friday closed mildly higher on continued safe-haven support after last week’s sharp drop in stocks and doubts about the economy heading into Friday’s likely sequester. Closes: TYH3 +3.5, FVH3 +2.The dollar index (DXY00 -0.43%) this morning is down -0.27 points (-0.33%) on reduced safe-haven demand with the sharp rally in Japanese and European stocks. EUR/USD (^EURUSD) is up +0.0075 (+0.57%). USD/JPY (^USDJPY) is up +0.39 (+0.42%) with the yen showing weakness on reports that Japanese Prime Minister Abe will choose a new BOJ chief that favors easing further this year. The dollar index on Friday edged to a new 5-1/2 month high but then fell back to close little changed. The yen closed lower going into Japanese Prime Minister Abe’s decision on a new BOJ chief. Closes: Dollar index +0.02 (+0.03%), EUR/USD +0.0004 (+0.03%), USD/JPY +0.31 (+0.33%).
April WTI crude oil (CLJ13 +1.12%) this morning is up +1.11 (+1.19%) and April gasoline (RBJ13 +1.42%) is up +0.0402 (+1.23%). Crude oil and gasoline prices closed mixed with crude oil seeing continued heavy long liquidation pressure while gasoline saw some short-covering after the sharp sell-off on Wednesday and Thursday. Closes: CLJ3 +0.29 (+0.31%), RBJ3 +0.0318 (+0.98%).
GLOBAL EVENT CALENDAR02/25/2013
| US | 0830 ET | Chicago Fed Jan national activity index, Dec 0.02. |
| 1030 ET | Feb Dallas Fed manufacturing index expected 3.0, Jan 5.5. | |
| 1100 ET | USDA weekly grain export inspections. | |
| 1300 ET | Treasury auction of $35 billion in 2-year T-notes. | |
| 1900 ET | Atlanta Fed President Dennis Lockhart speaks on the economic outlook at the University of Tennessee Issues Committee. | |
| n/a | 2-day APEC finance minister and central bank deputies meeting begins. | |
| UK | 0430 ET | U.K. Jan BBA loans for home purchases, Dec 33,636. |
U.S. STOCK CALENDAR02/25/2013
| Company Name | Symbol | Time | Event Description | Period | EPS Est (US$) |
|---|---|---|---|---|---|
| CommonWealth REIT | CWH US | Bef-mkt | Q4 2012 Earnings Release | Q4 2012 | 0.856 |
| General Cable Corp | BGC US | Bef-mkt | Q4 2012 Earnings Release | Q4 2012 | 0.244 |
| FirstEnergy Corp | FE US | Bef-mkt | Q4 2012 Earnings Release | Q4 2012 | 0.794 |
| Kosmos Energy Ltd | KOS US | Bef-mkt | Q4 2012 Earnings Release | Q4 2012 | 0.061 |
| Hertz Global Holdings Inc | HTZ US | Bef-mkt | Q4 2012 Earnings Release | Q4 2012 | 0.313 |
| Allied Nevada Gold Corp | ANV US | Bef-mkt | Q4 2012 Earnings Release | Q4 2012 | 0.188 |
| Donaldson Co Inc | DCI US | 7:00 | Q2 2013 Earnings Release | Q2 2013 | 0.376 |
| Lowe's Cos Inc | LOW US | 7:00 | Q4 2013 Earnings Release | Q4 2013 | 0.232 |
| Ariad Pharmaceuticals Inc | ARIA US | 7:35 | Q4 2012 Earnings Release | Q4 2012 | -0.353 |
| B/E Aerospace Inc | BEAV US | 8:30 | Investor Meeting | Y 2013 | |
| Ariad Pharmaceuticals Inc | ARIA US | 8:30 | Q4 2012 Earnings Call | Q4 2012 | |
| Lowe's Cos Inc | LOW US | 9:00 | Q4 2013 Earnings Call | Q4 2013 | |
| Allied Nevada Gold Corp | ANV US | 9:00 | Q4 2012 Earnings Call | Q4 2012 | |
| Donaldson Co Inc | DCI US | 10:00 | Q2 2013 Earnings Call | Q2 2013 | |
| CommonWealth REIT | CWH US | 10:00 | Q4 2012 Earnings Call | Q4 2012 | |
| Greif Inc | GEF US | 10:00 | Annual General Meeting | ||
| General Cable Corp | BGC US | 10:00 | Q4 2012 Earnings Call | Q4 2012 | |
| Hertz Global Holdings Inc | HTZ US | 10:00 | Q4 2012 Earnings Call | Q4 2012 | |
| Aqua America Inc | WTR US | 11:00 | Q4 2012 Earnings Call | Q4 2012 | |
| Kosmos Energy Ltd | KOS US | 11:00 | Q4 2012 Earnings Call | Q4 2012 | |
| FirstEnergy Corp | FE US | 13:00 | Q4 2012 Earnings Call | Q4 2012 | |
| Darden Restaurants Inc | DRI US | 14:00 | Analyst & Investor Day - Day 1 | Y 2013 | |
| URS Corp | URS US | 17:00 | Q4 2012 Earnings Call | Q4 2012 | |
| Autodesk Inc | ADSK US | 17:00 | Q4 2013 Earnings Call | Q4 2013 | |
| ONEOK Inc | OKE US | Aft-mkt | Q4 2012 Earnings Release | Q4 2012 | 0.45 |
| URS Corp | URS US | Aft-mkt | Q4 2012 Earnings Release | Q4 2012 | 0.971 |
| Autodesk Inc | ADSK US | Aft-mkt | Q4 2013 Earnings Release | Q4 2013 | 0.493 |
| Health Care REIT Inc | HCN US | Aft-mkt | Q4 2012 Earnings Release | Q4 2012 | 0.841 |
| Cypress Semiconductor Corp | CY US | ITC Due to Release Findings in Cypress Semiconductor vs. GSI Technology Case | |||
| Aqua America Inc | WTR US | Q4 2012 Earnings Release | Q4 2012 | 0.275 | |
| Stratasys Ltd | SSYS US | Extraordinary Shareholders Meeting | Y 2013 |
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