Thursday, August 21, 2014

BARCHART MORNING CALL

OVERNIGHT MARKETS AND NEWS
September E-mini S&Ps (ESU14 +0.15%) this morning are up +0.18% at a record high and European stocks are up +0.72% at a 2-1/2 week high on economic optimism along with signs of increased M&A activity. AstraZeneca Plc, the UK's second-largest drug maker, rose over 2% after people familiar with the matter said Pfizer executives would prefer to buy AstraZeneca rather than a different pharmaceutical company. Manufacturing activity in the Eurozone and China grew at a slower pace than expected as rising political tensions threaten global economic growth. The Eurozone Aug Markit manufacturing PMI fell -1.0 to a 13-month low of 50.8 and bolstered the outlook for the ECB to expand stimulus. Asian stocks closed mixed: Japan +0.85%, Hong Kong -0.66%, China -0.50%, Taiwan -0.37%, Australia +0.08%, Singapore +0.01%, South Korea -1.60%, India +0.17%. Japan's Nikkei Stock Index rose to a 2-1/2 week high as exporters rallied on improved earnings prospects after the yen fell to a 4-1/2 month low against the dollar. Commodity prices are mixed. Oct crude oil (CLV14 -0.75%) is down -0.68% at a fresh 7-1/4 month low on demand concerns after Chinese and Eurozone manufacturing activity slowed more than expected. Oct gasoline (RBV14 -0.45%) is down -0.33%. Dec gold (GCZ14 -1.07%) is down -0.99% at a 2-month low as the dollar index surged to an 11-1/2 month high after the minutes of the Jul 29-30 FOMC meeting raised the possibility the Fed may hike interest rates sooner than anticipated. Sep copper (HGU14 -0.68%) is down -0.79%. Agriculture and livestock prices are mixed with Oct hogs down -1.19% at a fresh 6-1/4 month low. The dollar index (DXY00 +0.02%) is up +0.02% at an 11-1/2 month high on the heels of the hawkish minutes of the Jul 29-30 FOMC meeting. EUR/USD (^EURUSD) is up +0.05% as it recovers from an 11-1/4 month low. USD/JPY (^USDJPY) is up +0.05% at a 4-1/2 month high as the rally in stocks undercuts the safe-haven demand for the yen. Sep T-note prices (ZNU14 -0.07%) are down -2 ticks at a 1-week low.
The Eurozone Aug Markit manufacturing PMI fell -1.0 to 50.8, a bigger drop than expectations of -0.5 to 51.3 and the slowest pace of expansion in 13 months. The Aug Markit composite PMI slipped -1.0 to 52.8, a bigger drop than expectations of -0.4 to 53.4 and matched June's level as the slowest pace of expansion in 8 months.
The German Aug Markit/BME manufacturing PMI fell -0.4 to 52.0, a smaller decline than expectations of -0.9 to 51.5. The Aug Markit services PMI fell -0.3 to 56.4, a smaller decline than expectations of -0.8 to 55.5.
The China Aug HSBC flash manufacturing PMI fell -1.4 to 50.3, a larger decline than expectations of -0.2 to 51.5.
UK retail sales data were mixed with Jul retail sales ex autos up +0.5% m/m and +3.4% y/y, close to expectations of +0.4% m/m and +3.5% y/y, while Jul retail sales including autos rose +0.1% m/m and +2.6% y/y, weaker than expectations of +0.4% m/m and +3.1% y/y.
UK Jul public sector net borrowing fell -1.1 billion pounds, a smaller decline than expectations of -1.7 billion pounds.
The Japan Aug Markit/JMMA manufacturing PMI rose +1.9 to 52.4, stronger than expectations of +1.0 to 51.5 and the fastest pace of expansion in 5 months.
U.S. STOCK PREVIEW
The market is expecting today’s weekly initial unemployment claims report to show a decline of -8,000 to 303,000, reversing about one-half of last week’s rather large +21,000 increase to 311,000. The market is looking for today’s July existing home sales report to show a decline of -0.5% to 5.02 million, giving back some of the +2.6% increase to 5.04 million seen in June. The market is expecting today’s Aug Philadelphia Fed manufacturing index to show a -4.4 point decline to 19.5, reversing most of the +6.1 point increase to a 3-1/2 year high of 23.9 seen in July. The market consensus is that today’s July U.S. leading indicators index will show a strong increase of +0.6%, adding to the +0.3% increase seen in June.
There are thirteen S&P 500 companies that reports earnings today: Hormel Foods (consensus $0.48), Patterson Cos. (0.50), Sears Holdings (-2.58), Toro (0.83), The Gap (0.69), Ross Stores (1.08), Nordson (1.13), Intuit (0.07), Brocade (0.19), salesforce.com (0.12), GameStop (0.18), Dollar Tree (0.64) and Marvell Technology (0.28). Equity conferences this week include: Enercom, Inc Oil & Gas Conference on Mon-Thu.
OVERNIGHT U.S. STOCK MOVERS
Hormel Foods ({=HRL reported Q3 EPS of 51 cents, higher than consensus of 48 cents.
Patterson Cos. (PDCO +0.10%) reported Q1 EPS of 50 cents, right on expectations.
Dollar Tree (DLTR +0.53%) reported Q2 EPS of 61 cents, weaker than consensus of 64 cents.
Sears Holdings (SHLD +1.27%) reported a Q2 EPS loss of -$5.39, a much wider loss than consensus of -$2.63.
Bon-Ton Stores (BONT -1.20%) reported a Q2 EPS loss of -$1.86, a larger loss than consensus of -$1.54.
Madison Square Garden (MSG +3.44%) was downgraded to 'Hold' from 'Buy' at Stifel.
Baird raised its price target on Lowe's (LOW +1.57%) to $60 from $57 and kept its 'Outperform' rating on the stock.
Sally Beauty (SBH +0.98%) rose nearly 2% in after-hours trading after the company authorized a new $1.0 billion share repurchase program.
American Eagle (AEO +11.99%) was upgraded to 'Buy' from 'Neutral' at SunTrust.
L Brands (LB -0.38%) reported Q2 EPS of 63 cents, better than consensus of 62 cents.
CACI (CACI +0.23%) reported Q4 EPS of $1.49, stronger than consensus of $1.43.
Synopsys (SNPS +0.51%) reported Q3 EPS of 65 cents, higher than consensus of 60 cents.
Hewlett-Packard (HPQ -1.01%) reported Q3 adjusted EPS of 89 cents, right on consensus, although Q3 revenue of $27.6 billion was better than consensus of $27.01 billion.
MARKET COMMENTS
Sep E-mini S&Ps (ESU14 +0.15%) this morning are up +3.50 points (+0.18%) at a new record high. The S&P 500 index on Wednesday rose to a 3-week high and settled higher: S&P 500 +0.25%, Dow Jones +0.35%, Nasdaq +0.01%. Bullish factors for stocks included (1) signs of strength in the global economy after Japan Jul exports rose +3.9% y/y, slightly better than expectations of +3.8% y/y, and (2) speculation that Fed Chair Yellen will reiterate at Friday's annual Fed conference in Jackson Hole, Wyoming that the Fed intends to keep interest rates at record lows even as economic growth show signs of accelerating. Stocks came off of their best levels after the minutes of the Jul 29-30 FOMC meeting raised the possibility that monetary stimulus may end sooner than anticipated.
Sep 10-year T-notes (ZNU14 -0.07%) this morning are down -2 ticks at a 1-week low. Sep 10-year T-note futures prices on Wednesday closed lower on reduced safe-haven demand after the S&P 500 rallied to a 3-week high and after the minutes of the Jul 29-30 FOMC meeting raised the possibility the Fed may hike interest rates sooner than expected. Closes: TYU4 -9.5, FVU4 -8.2.
The dollar index (DXY00 +0.02%) this morning is up +0.014 (+0.02%) at a fresh 11-1/2 month high. EUR/USD (^EURUSD) is up +0.0006 (+0.05%) and USD/JPY (^USDJPY) is up +0.05 (+0.05%) at a 4-1/2 month high. The dollar index on Wednesday posted an 11-1/4 month high and closed higher. Bullish factors included (1) the hawkish minutes of the Jul 29-30 FOMC meeting that showed policy makers may raise interest rates sooner than anticipated, and (2) weakness in EUR/USD which fell to an 11-1/4 month low on deflation concerns after German Jul PPI fell -0.1% m/m and -0.8% y/y, a faster pace of decline than expectations of unch m/m and -0.7% y/y. Closes: Dollar index +0.343 (+0.42%), EUR/USD -0.00609 (-0.46%), USD/JPY +0.84 (+0.82%).
Oct WTI crude oil (CLV14 -0.75%) this morning is down -64 cents (-0.66%) at a 7-1/4 month low and Oct gasoline (RBV14 -0.45%) is down -0.0086 (-0.33%). Oct crude and gasoline prices on Wednesday closed higher: CLV4 +0.59 (+0.64%), RBV4 +0.0154 (+0.60%). Bullish factors for crude prices included (1) the -4.474 million bbl decline in weekly EIA crude inventories, more than expectations of -1.15 million bbl, and (2) the unexpected +1.8 point increase in the weekly refinery utilization rate, more than expectations of a -0.4 decline. Gains were limited after the dollar index posted an 11-1/4 month high and after crude supplies at Cushing, OK, the delivery point of WTI futures, rose +1.75 million bbl.
GLOBAL EVENT CALENDAR08/21/2014
US0830 ETWeekly initial unemployment claims expected -8,000 to 303,000, previous +21,000 to 311,000. Weekly continuing claims expected -24,000 to 2.520 million, previous +25,000 to 2.544 million.
0830 ETUSDA weekly Export Sales.
0945 ETPreliminary Aug Markit manufacturing PMI expected -0.1 to 55.7, Jul -1.5 to 55.8.
1000 ETJul existing home sales expected -0.5% to 5.02 million, Jun +2.6% to 5.04 million.
1000 ETJul leading indicators expected +0.6%, Jun +0.3%.
1000 ETAug Philadelphia Fed manufacturing index expected -4.4 to 19.5, Jul +6.1 to 23.9.
1100 ETTreasury announces amount of 2-year T-notes (previous $29 billion), 2-year floating-rate notes (previous $15 billion), 5-year T-notes (previous $35 billion) and 7-year T-notes (previous $29 billion) to be auctioned Aug 26-28.
n/aThe Kansas City Feds annual 2-day symposium begins in Jackson Hole, Wyoming. This years topic: Re-Evaluating Labor Market Dynamics.
GER0330 ETGerman Aug Markit /BME manufacturing PMI expected -0.9 to 51.5, Jul 52.4. Aug Markit services PMI expected -1.2 to 55.5, Jul 56.7.
EUR0400 ETEurozone Aug Markit composite PMI expected -0.4 to 53.4, Jul 53.8.
1000 ETEurozone Aug consumer confidence expected -0.7 to -9.1, Jul -0.9 to -8.4.
UK0430 ETUK Jul retail sales ex autos expected +0.4% m/m and +3.5% y/y, Jun -0.1% m/m and +4.0% y/y. Jul retail sales including autos expected +0.4% m/m and +3.1% y/y, Jun +0.1% m/m and +3.6% y/y.
0430 ETUK Jul public sector net borrowing expected -1.7 billion pounds, Jun +9.5 billion pounds.
U.S. STOCK CALENDAR08/21/2014
Company NameTickerTimeEvent DescriptionPeriodEstimate
Hormel Foods CorpHRL USBef-mktQ3 2014 Earnings ReleaseQ3 20140.483
Patterson Cos IncPDCO USBef-mktQ1 2015 Earnings ReleaseQ1 20150.496
Sears Holdings CorpSHLD USBef-mktQ2 2015 Earnings ReleaseQ2 2015-2.58
Toro Co/TheTTC US8:30Q3 2014 Earnings ReleaseQ3 20140.828
Monsanto CoMON US8:30Whistle Stop Tour - Day 2Y 2014
Hormel Foods CorpHRL US9:00Q3 2014 Earnings CallQ3 2014
L Brands IncLB US9:00Q2 2015 Earnings CallC2 2015
L Brands IncLB US9:00Q2 2015 Earnings CallQ2 2015
Dollar Tree IncDLTR US9:00Q2 2015 Earnings CallC2 2015
Dollar Tree IncDLTR US9:00Q2 2015 Earnings CallQ2 2015
Principal Financial Group IncPFG US9:00Roadshow - Mid-AtlanticY 2014
Patterson Cos IncPDCO US10:00Q1 2015 Earnings CallQ1 2015
Alere IncALR US10:00Annual General MeetingY 2014
Toro Co/TheTTC US11:00Q3 2014 Earnings CallQ3 2014
Medtronic IncMDT US11:30Annual General MeetingY 2014
Gap Inc/TheGPS US16:00Q2 2015 Earnings ReleaseQ2 20150.687
Ross Stores IncROST US16:00Q2 2015 Earnings ReleaseQ2 20151.082
Ross Stores IncROST US16:15Q2 2015 Earnings CallQ2 2015
Intuit IncINTU US16:30Q4 2014 Earnings CallQ4 2014
Marvell Technology Group LtdMRVL US16:45Q2 2015 Earnings CallQ2 2015
Gap Inc/TheGPS US17:00Q2 2015 Earnings CallQ2 2015
salesforce.com incCRM US17:00Q2 2015 Earnings CallQ2 2015
GameStop CorpGME US17:00Q2 2015 Earnings CallQ2 2015
Nordson CorpNDSN USAft-mktQ3 2014 Earnings ReleaseQ3 20141.132
Intuit IncINTU USAft-mktQ4 2014 Earnings ReleaseQ4 20140.072
Brocade Communications Systems IncBRCD USAft-mktQ3 2014 Earnings ReleaseQ3 20140.191
salesforce.com incCRM USAft-mktQ2 2015 Earnings ReleaseQ2 20150.119
GameStop CorpGME USAft-mktQ2 2015 Earnings ReleaseQ2 20150.183
Brocade Communications Systems IncBRCD US17:30Q3 2014 Earnings CallQ3 2014
Humana IncHUM USInvestor MeetingY 2014
Dollar Tree IncDLTR USQ2 2015 Earnings ReleaseQ2 20150.636
Marvell Technology Group LtdMRVL USQ2 2015 Earnings ReleaseQ2 20150.281
Sears Holdings CorpSHLD USQ2 2015 Earnings CallQ2 2015
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