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Barchart Morning Call 10/23

|Includes:ACE, AFL, ALTR, AME, AMGN, AVGO, BCR, BXP, CHRW, COH, DD, FB, FTI, GILD, HOG, ITW, JNPR, NSC, PLD, RAI, RF, SIAL, UPS, United Technologies Corporation (UTX), VMED, VMW, XRX

Barchart Morning Call

BC - Tue Oct 23, 7:00AM CDT

Overnight Developments

  • Dec E-mini S&Ps are trading sharply lower by -1.07% on general concern about weaker earnings. European stocks are down -1.35% on another batch of weak European earnings reports today. Asian stocks today closed mixed with Japanese stocks little changed and Chinese stocks down -1.26%. Commodity prices are down -0.72% with Dec crude oil down -1.12%, Dec gold down -0.94%, Dec copper down -1.17%, and agriculture prices trading lower across the board. The dollar index is up +0.23% on increased safe-haven demand while EUR/USD is down -0.42%. USD/JPY is down -0.11% after yesterday's surge. Dec 10-year T-notes are up 5 ticks.
  • Spain's Q3 GDP fell -1.2% (qtr-qtr annualized), matching the -1.2% decline seen in Q2 and representing the fifth consecutive quarter of negative growth. However, the report of -1.2% was much better than expectations of -2.8%.
  • Spain today successfully sold 3.53 billion euros of bills, exceeding the target amount.
  • Moody's cut credit ratings on Catalonia and four other Spanish regions, but left the ratings of the other regions unchanged. Moody's last week gave EUR/USD a boost by leaving the Spanish central government rating unchanged at Baa3, the lowest investment grade rating.
  • The Hong Kong Monetary Authority today intervened in the FX market by selling $855 million of Hong Kong dollars, adding to the $603 million of intervention seen last Friday. The Authority is being forced to sell Hong Kong dollars in exchange for U.S. dollars in order to prevent its currency from strengthening beyond the HK$7.75 limit of its HK$7.75 to 7.85 target band. The intervention seen since last Friday is the first since 2009. The Fed's QE3 program is helping to depress the dollar while boosting currencies in a variety of countries. The intervention to suppress the Hong Kong dollar could turn out to be inflationary for Hong Kong.
  • Japan's Oct small business confidence index fell to 43.7 from 45.1 in September, providing another negative economic data point for Japan. Market Comments
    • Dec E-mini S&Ps this morning are sharply lower by -15.25 points (-1.07%) on concern about weak Q3 earnings. The Euro Stoxx 50 index is sharply lower by -1.35% this morning on another batch of weak earnings reports. The S&P 500 index on Monday closed little changed: S&P 500 +0.04%, Dow Jones +0.02%, Nasdaq 100 +0.61%. Stocks continued to run into weakness on worries about additional poor Q3 earnings reports after last week's batch of disappointing results. The sharp 10.3% y/y drop in Japanese exports was also a negative factor in highlighting the poor export prospects at present for global companies. On the bullish side, the markets were encouraged by outcome of Sunday's Spanish regional elections, which boosted the chances that Spanish Prime Minister Rajoy will soon accept a bailout. U.S. tech stocks received a boost on Monday from a rally in Apple.
    • Dec 10-year T-notes this morning are up 5 ticks on some increased safe-haven demand with today's sell-off in global stock markets. Dec 10-year T-note prices on Monday settled lower: TYZ2 -9, FVZ2 -4. Bearish factors included the stabilization in U.S. stocks after last Friday's sharp sell-off and supply overhang ahead of this week's $99 billion Treasury coupon package. The Treasury today will sell $35 billion in 2-year T-notes.
    • The dollar index this morning is mildly higher by +0.18 points (+0.23%) on increased safe-haven demand. EUR/USD is down -0.0055 (-0.42%) on today's sharp sell-off in European stocks and on Moody's downgrade of five Spanish regions. USD/JPY is down -0.09 (-0.11%). The dollar index on Monday closed little changed: Dollar index +0.03 (+0.04%), EUR/USD +0.0036 (+0.28%), USD/JPY +0.62 (+0.78%). EUR/USD closed mildly higher on Monday on the favorable election results for Spanish Prime Minister Rajoy, which may boost the chances that Mr. Rajoy will soon request the bailout that the markets would like to see. The markets were also encouraged by Ms. Merkel's comments that Ireland is a "special case" regarding its banking bailout, which meant that the door may still be open for some assistance by the ESM for Ireland's massive bailout that covered all bank creditors at the insistence of ECB and Eurozone officials. USD/JPY rallied sharply on the 10.3% y/y drop in Japanese exports, which was bearish for Japan's economic prospects. USD/JPY also received a boost from technical buying with the breakout to a new 3-month high.
    • Nov WTI crude oil prices this morning are down -0.99 (-1.12%) and Nov gasoline is down -0.0248 (-0.94%) on lower global stocks and worries about weak global fuel demand. Nov crude oil and gasoline prices on Monday closed lower: CLX2 -1.32 (-1.47%), RBX2 -0.0488 (-1.81%). Bearish factors included (1) the sharp 10.3% y/y drop in Japanese exports, which was another indicator of weak economic growth in Asia, and (2) news that TransCanada restarted the Keystone pipeline (590,000 bpd) that has been down since last Wednesday due to the need to inspect a possible problem. The Keystone pipeline brings crude oil from Canada down to Illinois and on to Cushing, Oklahoma. However, the Keystone pipeline will not reach its full capacity until November. The market consensus for Wednesday's weekly DOE report is for a 1.8 million barrel rise in crude oil inventories, a 500,000 barrel rise in gasoline inventories, a 1.5 million barrel drop in distillate inventories, and a 0.5 point rise in the refinery utilization rate to 87.9%. The Keystone pipeline shut-down that began last Wednesday should not affect tomorrow's DOE report.
    • For the complete subscription version of this daily report (plus a 13-page big-picture weekly report), along with the earliest possible delivery in the morning, please visit Today's U.S. Earnings Reports

      Earnings reports (ranked by market cap): UTX-United Technology (Consensus:$1.19), UPS-United Parcel (1.06), AMGN-Amgen (1.47), MMM-3M (1.65), GILD-Gilead Sciences (0.94), FB-Facebook (0.11), DD-DuPont (0.47), VMW-VMWare (0.63), ITW-Illinois Tool (1.06), ACE-ACE Ltd (1.83), RAI-Reynolds America (0.79), AFL-Aflac (1.66), NSC-Norfolk Southern (1.23), BRCM-Broadcom (0.77), BXP-Boston Properties (0.33), PLD-Prologis (0.01), COH-Coach (0.75), ALTR-Altera (0.46), FTI-FMC Technologies (0.57), RF-Regions Financial (0.21), HOG-Harley Davidson (0.59), CHRW-CH Robinson (0.73), JNPR-Juniper Networks (0.17), XRX-Xerox (0.25), VMED-Virgin Media (0.41), SIAL-Sigma-Aldrich (0.94), BCR-CR Bard (1.63), AME-Ametek (0.46).

      Global Financial Calendar

      Tuesday 10/23/12
      United States
      0745 ET ICSC (Int'l Council of Shopping Centers) weekly retailer sales.
      0855 ET Redbook weekly retailer sales.
      0900 ET Former Fed Chairman Alan Greenspan speaks at SIFMA meeting in NY.
      1000 ET Oct Richmond Fed manufacturing index expected +1 to 5.0, Sep +13.0 to 4.0.
      1130 ET Weekly 4-week T-bill auction.
      n/a 2-day FOMC meeting begins.
      1300 ET Treasury auction of $35 billion in 2-year T-notes.
      1630 ET API weekly U.S. oil statistics.
      1000 ET Eurozone Oct consumer confidence index expected unch at -25.9, Sep -25.9.
      2145 ET China Oct HSBC flash manufacturing PMI, Sep 47.9. provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.