OVERNIGHT MARKETS AND NEWS
March E-mini S&Ps (ESH13 -0.50%) this morning are down -0.38% on weaker-than-expected Chinese and UK manufacturing PMI reports, the climb in the Eurozone unemployment rate to a new record high of 11.9%, and the U.S. automatic spending cuts that go into effect today. European stocks are down sharply by -1.29%. Asian stocks closed mixed today with Japan up +0.41%, Hong Kong down -0.61%, and China down -0.17%. Commodity prices are showing a fairly sharp loss on average of -0.52%. April crude oil (CLJ13 -1.30%) is down -0.97%, April gasoline (RBJ13 -0.91%) is down -1.14%, April gold (GCJ13 -0.44%) is down -0.70%, May copper (HGK13 -1.78%) is sharply lower by -1.71%, grains and softs are lower, and livestock is higher. The dollar index (DXY00 +0.40%) is up +0.40% on increased safe-haven demand with the sell-off in U.S. and European stocks. EUR/USD (^EURUSD) is down -0.40% and USD/JPY (^USDJPY) is up +0.29%. June 10-year T-notes (ZNM13 +0.21%) are up 8 ticks.President Obama today will meet at the White House with top Congressional leaders but the $85 billion in sequestration will go into effect today with no serious negotiations for an alternative. The big issue now is the continuing spending resolution that must be passed by March 27 to keep the government operating through the end of the fiscal year.
The Chinese government today raised down-payment requirements and raised mortgage rates for second-home mortgages in cities with "excessively fast" price gains to slow property price increases.
Chicago Fed President Evans last night speaking in Des Moines, Iowa said, We need to be careful not to undermine our own policies and remove accommodation prematurely, as the Japanese did." He said, "There remain plenty of headwinds and downside risks that can impede our progress."
Japan's Jan jobless rate of 4.2% was in line with market expectations and was down from a revised 4.3% in Dec (prelim 4.2%). The Jan job-to-applicant ratio rose to 0.85 from a revised 0.83 in Dec.
Japan's Jan national CPI fell to -0.3% y/y from -0.1% y/y in Dec was showed deeper deflation than market expectations of -0.2% y/y. The Feb Tokyo CPI fell to -0.9% y/y from a revised -0.5% y/y in Jan. The deeper deflation rates will provide a stronger basis for the new BOJ chief Kuroda to pursue the expanded asset purchase program that he is widely expected to adopt.
China's Feb HSBC manufacturing PMI fell by -1.9 points to 50.4 from the 2-year high of 52.3 posted in January, which was weaker than market expectations of 50.6. Meanwhile, the Feb manufacturing PMI reported by the National Bureau of Statstics fell by -0.3 points to 50.1 from 50.4 in Jan and was weaker than market expectations for a +0.1 point rise to 50.5.
Japan's Feb vehicle sales fell by -12.2% y/y, improving a bit from -12.9% y/y in Jan.
The UK Feb nationwide house price report of +0.2% m/m and unchanged y/y was roughly in line with market expectations.
The German Jan retail sales report of +3.1% m/m and +2.4% y/y was substantially better than market expectations of +0.9% m/m and -1.7% y/y. Dec was revised to -2.1% m/m and -3.7% y/y from -1.7% m/m and -4.7% y/y.
The UK Feb PMI manufacturing index fell by -2.6 points to 47.9 from a revised 50.5 in Jan and was -3.1 points weaker than market expectations for an increase to 51.0.
The German final-Feb manufacturing PMI was revised higher by +0.2 points to 50.3 from 50.1 in early-Feb, which was 0.2 points better than market expectations for an unrevised report of 50.1. The Eurozone final-Feb manufacturing PMI was revised +0.1 point higher to 47.9 from 47.8 in early-Feb.
The Eurozone Feb CPI report of +1.8% y/y eased from +2.0% in Jan and was weaker than market expectations of +1.9%.
The Eurozone Jan unemployment rate rose by +0.1 point to 11.9% from a revised 11.8% in Dec (prelim 11.7%) and showed a weaker labor market than market expectations for a report of 11.8%. The Feb unemployment rate of 11.9% was a record high for the series that has a history back to 1995. The number of unemployed persons rose by 201,000 to 18.998 million persons. The Jan youth unemployment rate rose to a record 24.2%, which was bad enough except that Spain's youth unemployment rate rose to an unfathomable 55.5%.
U.S. STOCK PREVIEW
The markets today will be closely watching a meeting at the White House between President Obama and Congressional leaders although no progress is expected to be made to avert the sequester that begins today. Today’s Feb ISM manufacturing index is expected to show a decline of -0.6 to 52.5, reversing the +2.9 point increase to 53.1 seen in January. Feb total vehicle sales are expected to dip to 15.10 mln from 15.23 mln in January as consumer spending takes at least a mild hit from the fiscal cliff deal. Today’s final-Feb U.S. consumer confidence index from the University of Michigan is expected to be unrevised from the early-Feb report of 76.3. Today’s Jan PCE deflator is expected to ease to a 3-1/4 year low of +1.2% y/y from +1.3% y/y in December. Meanwhile, the Jan core PCE deflator, which is the Fed’s preferred inflation measure, is expected to ease to +1.3% y/y from the 1-1/2 year low of +1.4% y/y seen in December. Three of the S&P 500 companies are scheduled to release earnings today: Pepco Holdings (consensus $0.20), Best Buy (1.55), and Berkshire Hathaway ($1793.24).
March E-mini S&Ps (ESH13 -0.50%) this morning are down -5.75 points (-0.38%) on today's sequestration and on generally weak global economic data released today. The S&P 500 index on Thursday traded higher into early afternoon, but erased its advance and tumbled into the close after the Senate rejected a pair of partisan proposals to replace sequestration that begins Friday. Other negative factors included the weaker-than-expected Q4 U.S. GDP (+0.1% versus expectations of +0.6%) and the IMF's statement that it will cut its GDP forecast for the U.S. because of sequestration. Supportive factors included (1) carry-over strength from a rally in European stocks after ECB President Draghi said the ECB is "far" from considering a liquidity exit, (2) the larger-than-expected decline in weekly U.S. jobless claims (-22,000 versus expectations of -2,000) and (3) the unexpected increase in the Feb Chicago purchasing managers index to its best level in 11 months (+1.2 to 56.8 versus expectations of -1.6 to 54.0). Closes: S&P 500 -0.09%, Dow Jones -0.15%, Nasdaq -0.10%.
OVERNIGHT U.S. STOCK MOVERS
- Groupon (GRPN -24.25%) rallied 4% in after-hours trading after it announced CEO Andrew Mason will be stepping down.
- Atlantic Power (AT -3.39%) reported a Q4 EPS loss of -50 cents, greater than consensus for a -3 cent loss.
- Northern Oil and Gas (NOG -1.79%) reported Q4 adjusted EPS of 34 cents, better than consensus of 27 cents.
- Boeing (BA -0.59%) will eliminate hundreds of workers at its South Carolina Dreamliner factory over the course of this year, according to Dow Jones.
- Westar Energy (WR -0.29%) reported Q4 non-GAAP EPS of 36 cents, better than consensus of 20 cents and increased the dividend by 1 cent to 34 cents per share payable to shareholders of record as of March 11.
- Cempra (CEMP -0.61%) reported a Q4 EPS loss of -26 cents, smaller than consensus of a -32 cent loss.
- Dresser-Rand (DRC +0.65%) reported Q4 EPS of $1.05, weaker than consensus of $1.10.
- Flowers Foods (FLO -0.49%) won its bid for Hostess bread assets with a $360 million bid. The agreement includes, in addition to the brands, 20 bakeries, 38 depots and other assets.
- McDermott (MDR -1.78%) reported Q4 EPS of 17 cents, weaker than consensus of 23 cents.
- Salesforce.com (CRM +1.37%) rallied 4% in after-hours trading after the company reported Q4 adjusted EPS of 51 cents, better than consensus of 40 cents.
- Gap (GPS +1.26%) rose +2.5% in after-hours trading after it reported Q4 EPS of 73 cents, higher than consensus of 71 cents, and said it will raise its annual dividend by 20% per share from 50 cents in fiscal year 2012 to 60 cents in fiscal year 2013.
MARKET COMMENTS
June 10-year T-notes (ZNM13 +0.21%) this morning are up 8 ticks on increased safe-haven demand with the sell-off in stocks. June 10-year T-note prices on Thursday closed higher after U.S. GDP grew less than expected in Q4 along with increased safe-haven demand for Treasuries on concern the automatic spending cuts that begin Friday from sequestration will slow growth in the U.S. economy. Closes: TYM3 +3.5, FVM3 +2.0.The dollar index (DXY00 +0.40%) this morning is up +0.33 points (+0.40%) on increased safe-haven demand with the sell-off in stocks and with today's beginning of sequestration. EUR/USD (^EURUSD) is down -0.0052 (-0.40%) on weak European economic data. USD/JPY (^USDJPY) is up +0.27 (+0.29%) as today's Japan CPI data will provide an even stronger justification for new BOJ chief Kuroda to expand the BOJ's asset purchase plan. The dollar index on Thursday jumped to a 6-month high and closed higher after EUR/USD retreated when ECB President Draghi signaled that the ECB has no intention of tightening monetary policy anytime soon. Closes: Dollar index +0.38 (+0.47%), EUR/USD -0.0081 (-0.61%), USD/JPY +0.32 (+0.34%).
April WTI crude oil (CLJ13 -1.30%) this morning is down -0.89 (-0.97%) and April gasoline (RBJ13 -0.91%) is down -0.0354 (-1.14%) on weak global economic data and today's U.S. sequestration. Crude oil and gasoline on Thursday closed mixed. April gasoline posted a 1-month low but rebounded higher after the Phillips 66 Wood River refinery in Roxana, Illinois and the Exxon Mobil Joliet, Illinois, refinery that supply the Midwest with gasoline, reported issues with production units that may limit their gasoline output. Other bullish factors included the bigger-than-expected decline in weekly U.S. jobless claims (-22,000 versus expectations of -2,000) and the Feb Chicago purchasing managers index which unexpectedly expanded to its best level in 11-months (+1.2 to 56.8), and suggests stronger fuel consumption. Bearish factors included (1) the rally in the dollar index to a 6-month high, (2) weaker-than-expected U.S. Q4 GDP (+0.1% q/q annualized versus expectations of +0.6%), and (3) concern that the U.S. economy and energy demand will slow once sequestration begins on Friday. Closes: CLJ3 -0.71 (-0.77%), RBJ3 +0.0054 (+0.17%).
GLOBAL EVENT CALENDAR03/01/2013
| US | 0830 ET | Jan personal income expected -2.4% m/m, Dec +2.6% m/m. Jan personal spending expected +0.2%, Dec +0.2% m/m. |
| 0830 ET | Jan PCE deflator expected +0.1% m/m and +1.2% y/y, Dec unch m/m and +1.3% y/y. Jan core PCE deflator expected +0.2% m/m and +1.3% y/y, Dec unch m/m and +1.4% y/y. | |
| 0955 ET | Final-Feb U.S. consumer confidence (University of Michigan) expected unch at 76.3, early-Feb +2.5 to 76.3. | |
| 1000 ET | Jan construction spending expected +0.4%, Dec +0.9% m/m. | |
| 1000 ET | Feb ISM manufacturing index expected -0.6 to 52.5, Jan +2.9 to 53.1. Feb ISM prices-paid sub-index expected +0.8 to 57.3, Jan +1.0 to 56.5. | |
| 1700 ET | Feb total vehicle sales expected 15.10 mln, Jan 15.23 mln. Feb domestic vehicle sales expected 12.00 mln, Jan 12.08 mln. | |
| 2200 ET | Fed Chairman Ben Bernanke speaks on low long-term interest rates. | |
| n/a | Sequester of $85 billion in automatic spending cuts begin for March-September. | |
| JPN | 0000 ET | Japan Feb vehicle sales, Jan -12.9% y/y |
| GER | 0200 ET | German Jan retail sales expected +0.9% m/m and -1.7% y/y, Dec -1.7% m/m and -4.7% y/y. |
| 0355 ET | German final-Feb manufacturing PMI expected unrevised at 50.1. | |
| EUR | 0400 ET | Eurozone final-Feb manufacturing PMI expected unrevised at 47.8. |
| 0500 ET | Eurozone Feb CPI estimate expected +1.9% y/y, Jan +2.0% y/y. | |
| 0500 ET | Eurozone Jan unemployment rate expected +0.1 to 11.8, Dec 11.7%. | |
| UK | 0200 ET | U.K. Feb nationwide house prices expected +0.2% m/m and -0.2% y/y, Jan +0.5% m/m and unch y/y. |
| 0430 ET | U.K. Feb PMI manufacturing expected +0.2 to 51.0, Jan 50.8. | |
| 0430 ET | U.K. Jan net consumer credit expected +0.2 bln pounds, Dec +0.6 bln pounds. Jan net lending on dwellings expected +0.8 bln pounds, Dec +1.0 bln pounds. | |
| 0430 ET | U.K. Jan mortgage approvals expected 56,500, Dec 55,800. | |
| 0430 ET | U.K. Jan M4 money supply, Dec +0.7% m/m and -1.0% y/y. |
U.S. STOCK CALENDAR03/01/2013
| Company Name | Symbol | Time | Event Description | Period | EPS Est (US$) |
|---|---|---|---|---|---|
| Hospitality Properties Trust | HPT US | Bef-mkt | Q4 2012 Earnings Release | Q4 2012 | 0.771 |
| Golar LNG Ltd | GOL NO | Bef-mkt | Y 2012 Earnings Release | Y 2012 | 1.667 |
| Pepco Holdings Inc | POM US | Bef-mkt | Q4 2012 Earnings Release | Q4 2012 | 0.202 |
| Exelis Inc | XLS US | 7:00 | Q4 2012 Earnings Release | Q4 2012 | 0.457 |
| Best Buy Co Inc | BBY US | 8:00 | Q4 2013 Earnings Release | Q4 2013 | 1.551 |
| Eaton Corp PLC | ETN US | 8:00 | Analyst Conference | Y 2013 | |
| Public Service Enterprise Group Inc | PEG US | 8:00 | Analyst Conference | Y 2013 | |
| Best Buy Co Inc | BBY US | 9:00 | Q4 2013 Earnings Call | Q4 2013 | |
| Great Plains Energy Inc | GXP US | 9:00 | Q4 2012 Earnings Call | Q4 2012 | |
| Universal Health Services Inc | UHS US | 9:00 | Q4 2012 Earnings Call | Q4 2012 | |
| Integrys Energy Group Inc | TEG US | 9:00 | Q4 2012 Earnings Call | Q4 2012 | |
| Popular Inc | BPOP US | 9:00 | Investor Day | 2012 | |
| Popular Inc | BPOP US | 9:00 | Investor Day | Y 2013 | |
| Dresser-Rand Group Inc | DRC US | 9:00 | Q4 2012 Earnings Call | Q4 2012 | |
| SandRidge Energy Inc | SD US | 9:00 | Q4 2012 Earnings Call | Q4 2012 | |
| Ford Motor Co | F US | 9:30 | February 2013 Sales and Revenue Release | 2013 | |
| Ford Motor Co | F US | 10:00 | February 2013 Sales and Revenue Call | 2013 | |
| McDermott International Inc | MDR US | 10:00 | Q4 2012 Earnings Call | Q4 2012 | |
| Westar Energy Inc | WR US | 10:00 | Q4 2012 Earnings Call | Q4 2012 | |
| Hospitality Properties Trust | HPT US | 10:00 | Q4 2012 Earnings Call | Q4 2012 | |
| Pepco Holdings Inc | POM US | 10:00 | Q4 2012 Earnings Call | Q4 2012 | |
| Exelis Inc | XLS US | 10:00 | Q4 2012 Earnings Call | Q4 2012 | |
| General Motors Co | GM US | 11:00 | February 2013 Sales and Revenue Call | 2013 | |
| Berkshire Hathaway Inc | BRK/A US | 16:00 | Q4 2012 Earnings Release | Q4 2012 | 1793.24 |
| General Motors Co | GM US | February 2013 Sales and Revenue Release | 2013 |
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