Covering everything you need to know today on Wall Street, this report includes international factors, U.S. economic drivers, commodities and corporate activity. The SPDR S&P 500 (SPY), SPDR Dow Jones Industrials (DIA) and the PowerShares QQQ (QQQ) should keep in the green Friday if the market follows its macroeconomic drivers. News out of Europe was as bad as expected, but Angela Merkel added a hint of hope with positive commentary about the ECB and Greece. Meanwhile, the two data points reported in the U.S. today each offered better-than-expected results that do not point to recession.
Euro-region exports recovered in June, rising 2.4%, after only edging up 0.4% in May. The weakening euro played its role in the gain. However, weakening Europe, with the eurozone contracting 0.2% in Q2, also played a role in the region's imports drying up. The data is therefore not good news for trading today, though as bad as expected.
Still, chatter that German Chancellor Merkel supports ECB Chief Mario Draghi's recent announcement to back to euro adds lift. She supports ECB purchases of troubled euro area bonds, which is a lot easier for the Germans to digest than the issuance of common area bonds. Another report seemed to show Merkel softening with regard to Greece, and considering an extension of its timeline for repayment. Greece will also be seeking more funding next week though. Still, on net, the news from Europe offered support for the areas stocks Friday, with the iShares S&P Europe 350 (IEV) likely to follow the moves of the major indexes today.
EURO STOXX 50: +0.4%
S&P/ASX 200: +0.9%
FTSE 100: +0.1%
Hang Seng: +0.8%
Shanghai Shenzhen CSI 300: -0.3%
CAC 40: Unch.
Nikkei 225: +0.8%
U.S. Economic Drivers
Leading Economic Indicators were reported this morning. The report for July follows June's decline of 0.3% in the LEI, which led us to pen, "A Recession Signal Flashes Red". The Leading Economic Indicators Index is exactly what it sounds like, a forward looking predictor of the economy. So, when it has a negative change, it's important. Economists were not forecasting a negative result for July though, with the range of views extending from no change to an increase of 0.4%. The consensus view was for a rise of 0.2%. So, the 0.4% positive result reported today for July offers an "all clear" signal for investors.
The Reuters/University of Michigan Consumer Sentiment Index improved in mid-August, rising to 73.6. At the close of July, it had deteriorated to a mark of 72.3, down from 73.2 in June. This latest result broke the last two months trend of deterioration. The measure of current conditions improved in August by 5 points, though expectations for the next six months declined by a point. The result beat economists' expectations for a mark of 72.0. The news is a positive for stocks Friday, but given the uncertainty depicted by the expectations index, it's a soft positive.
Last evening, Minneapolis Fed Bank President Narayana Kocherlakota said he believes the FOMC has gone too far by pledging to keep rates near zero through 2014. The statement was part of a speech repeated last evening, after its initial presentation the day before. Thus, the news is old and should not play a role for stocks Friday.
WTI Crude Oil futures are down fractionally, as Mideast tension balances against soft European data. Brent crude futures are lower by 1.6%. The iPath S&P GSCI Crude Oil TR Index ETN (OIL) is higher by 0.65% this morning. Spot gold is about unchanged today at $1614.90 per troy ounce, given soft catalysts.
U.S. Corporate Drivers
The Gap (GPS) reported results last evening and is up more than 2% in early trade. The Gap reported its Q2 profits rose 29%, beating Wall Street's view by a penny. The company then raised its full-year EPS guidance to $1.95 to $2.00 a share, from $1.78 to $1.83.
Foot Locker (FL) earned an adjusted $0.38 a share in its fiscal second quarter, beating Wall Street's expectation for just $0.33. The shares are higher by about 4% in early going Friday as a result. Foot Locker said demand for new and exciting sneakers and better inventory management helped it get there.
AnnTaylor Stores (ANN) shares were up 15% or so Friday morning as the company beat estimates and raised its guidance to boot. The operator of its mainstay AnnTaylor store earned $0.63 per share against analyst expectations for $0.51. The company said same-store sales surged 4.7%, above analysts' views for 4%.
Aeropostale (ARO) shares were down more than 6% Friday after it reported lower same-store sales and lowered its outlook short of analysts' views. The company broke even this quarter, meeting guided lower analysts' views. However, it cut its Q3 guidance to $0.25 to $0.30 cents, under Wall Street's consensus expectation for $0.38.
Brocade Communications (BRCD) shares are higher by more than 2% this morning after it announced its CEO would be resigning and as its adjusted earnings per share at $0.14 beat views for $0.12. Expanding demand for its switches and software on corporate server and data storage needs are driving revenue gains.
Marvell Technology (MRVL) shares are down double-digits Friday, after the company reported adjusted EPS lower than its prior year and two cents short of analysts' expectations. The company attributed its performance to macroeconomic factors and its impact on storage and mobile end markets.
Molycorp (MCP) is down 10% after being cut to hold from buy by Dahlman Rose. The downgrade followed announcements by the company to raise new capital through dilutive securities offerings. A heavy short interest in MCP is celebrating today as a result.
Vivus (VVUS) shares are down 6% today after being cut to underperform from hold by Jefferies, which indicated that physicians may prescribe a combination of generic drugs over Vivus' newly approved weight-loss drug.
The corporate earnings schedule also keys on Casual Male (CMRG), Central European Distribution (CEDC), ChipMOS Technologies (IMOS), Globus Maritime (GLBS), Golar LNG (GMLP), Gold Reserve (GRZ), Hibbett Sports (HIBB), J.M. Smucker (SJM), Kirkland's (KIRK), StealthGas (GASS), Synergy Pharmaceuticals (SGYP), Universal Insurance (UVE), Universal Security Instruments (UUU), Village Bank (VBFC) and a few more.