Tuesday, July 22nd, 2014
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OVERNIGHT MARKETS AND NEWS
Sep E-mini S&Ps (ESU14 +0.32%) this morning are up +0.29% on a +1% recovery in the Euro Stoxx 50 index and a +1.8% recovery in Russian stocks. Asian stocks today closed higher across the board: Japan +0.84%, Hong Kong +1.69%, China +1.22%, Taiwan +0.62%, Australia +0.06%, Singapore +0.08%, South Korea +0.52%, India +1.21%, Turkey +0.67%. The dollar index (DXY00 +0.20%) is moderately higher by +0.22%. EUR/USD (^EURUSD) is down -0.30% and USD/JPY (^USDJPY) is up +0.16%. Sep T-note prices (ZNU14 -0.14%) are down -3.5 ticks on reduced safe-haven demand with today's rally in global stocks.
Commodity prices are slightly lower by -0.02% this morning. Sep WTI crude oil (CLU14 +0.26%) is up +0.24% and Sep gasoline (RBU14 +0.76%) is up +0.78%. Aug gold (GCQ14 -0.57%) is down -0.57% and Sep silver (SIU14 -0.68%) is down -0.60% on reduced safe-haven demand, while Sep copper (HGU14 +0.72%) is up +0.41%. Grain prices are higher today after yesterday's losses. Livestock is mixed while softs are mostly lower.
EU foreign ministers will meet today in Brussels and will try to agree on new sanctions for Russia in response to last week's downing of the Malaysian Air passenger plane. France is under pressure to cancel the contract to sell a second helicopter carrier ship to Russia as part of a possible EU arms embargo against Russia. However, the EU may only expand the current 72-person blacklist rather than launch any industry-wide sanctions.
The Russian Micex stock index this morning is up +1.8%, recovering for the first day after six consecutive sessions of losses totaling -7.7%. Russian credit default swap prices today fell -4.5 bp to 215.5 bp but are still up sharply from 166 bp on July 9.
Japan's May all-industry activity index rose by +0.6% m/m, which was in line with market expectations although April was revised lower to -4.6% from -4.3%.
Japan's final-May leading index CI was revised lower by -0.9 points to 104.8 from 105.7. However, the coincident index was revised higher by +0.2 points to 111.3 from 111.1.
Japan's June convenience store sales weakened to -1.9% y/y from -0.8% in May.
UK June public finances (PSNCR) rose to 11.8 billion pounds from a revised 8.4 billion pounds in May. The June public sector net borrowing level fell to 9.5 billion pounds from a revised 11.9 billion pounds in May.
The UK July Business Optimism index fell by -14 points to 19 from 33 in June and was substantially weaker than market expectations for a 3-point decline to 30.
U.S. STOCK PREVIEW
Today's June CPI report is expected to be unchanged from May on a year-on-year basis at +2.1% y/y, while the core CPI is expected to be unchanged at +2.0% y/y. Today's June existing home sales report is expected to show a +2.0% increase to 4.99 million, adding to the +4.9% increase to 4.89 million seen in May. Today's May FHFA house price index is expected to show a small +0.2% m/m increase following April's report of unchanged. Today's July Richmond Fed manufacturing index is expected to show a +2 point increase to 5, regaining some ground after the -4 point decline to 3 seen in June.
There are 36 of the S&P 500 companies that report earnings today with notable reports including: Microsoft (consensus $0.60), Apple (1.23), McDonalds (1.44), Coca-Cola (0.63), Comcast (0.72), Verizon (0.90), and Discover Financial Services (1.29). Equity conferences during the remainder of this week include: RSA Asia Pacific & Japan Conference on Mon-Tue, GPO & Institutional Sales Strategy on Tue, and Wells Fargo Small Cell Symposium on Thu.
Sep E-mini S&Ps this morning are up +0.29% on higher global stocks with the Euro Stoxx 50 index up +0.99%, Russian stocks up +1.8%, and a broad rally in Asian stocks. The U.S. stock market on Monday closed mildly lower as the market became more concerned that the U.S. might launch sector-wide sanctions against Russia for the downing of the Malaysian passenger plane last week with a missile launcher provided by Russia. Closes: S&P 500 -0.23%, Dow Jones -0.28%, Nasdaq -0.17%.
OVERNIGHT U.S. STOCK MOVERS
- There are 17 of the S&P 500 companies that have reported earnings this morning and 12 of those companies beat earnings. Notable companies that beat earnings this morning are: Du Pont (DD -0.02%) (1.17 vs 1.168), Verizon (VZ -0.10%) (0.91 vs 0.90), United Technologies (UTX -0.52%) 1.84 vs 1.70), Comcast (CMCSA -1.32%) (0.75 vs 0.72), Harley-Davidson (HOG -0.33%) (1.62 vs 1.46), Ingersoll-Rand (IR -0.56%) (1.13 vs 1.10), State Street (STT -0.21%) (1.39 vs 1.26), Lockheed Martin (LMT +0.30%) (2.76 vs 2.66), and Coca-Cola (KO -0.07%) (0.64 vs 0.63). Companies with disappointing earnings included Rockwell Collins (COL +0.83%) (1.15 vs 1.17), Kimberly-Clark (KMB -0.87%) (1.49 vs 1.497), Travelers (TRV -0.08%) (1.93 vs 2.07), and Altria (MO -0.38%) (0.65 vs 0.656).
- Amazon (AMZN +0.31%) is down -1.5% this morning after a downgrade to Neutral from Buy by Citigroup.
- CIT Group (CIT +0.48%) will acquire OneWest Bank for $3.4 billion in cash and stock.
- Herbalife (HLF -11.21%) volatility is high ahead of today's presentation by Bill Ackman, again arguing the company is a fraudulent pyramid scheme.
- Valspar (VAL -0.50%) was upgraded to a Conviction Buy from Neutral by Goldman.
- Texas Instruments (TXN +0.72%) late yesterday reported Q2 EPS of 62 cents, above the consensus of 59 cents.
- Netflix (NFLX +1.75%) rallied slightly late yesterday after reporting Q2 EPS of $1.15, close to the consensus.
- Chipotle (CMG -0.42%) rallied 10% in after-hours trading after its earnings report.
- Johnson & Johnson (JNJ -0.52%) rallied 1% in after-hours trading yesterday after announcing a $5 billion share repurchase program.
- Rambus (RMBS +0.73%) fell more than 3% in after-hours trading yesterday after releasing earnings.
- Crocs (CROX -0.13%) late yesterday reported Q2 EPS of 36 cents, above the consensus of 31 cents.
MARKET COMMENTS
Sep 10-year T-notes this morning are down -3.5 ticks due to reduced safe-haven demand with higher global stocks. Sep 10-year T-note futures prices on Monday closed slightly lower on some long liquidation pressure after last week's rally. Closes: TYU4 -0.5, FVU4 -3.
The dollar index this morning is moderately higher by +0.18 points (+0.22%), while EUR/USD is down -0.0040 (-0.30%) and USD/JPY is up +0.16 (+0.16%). The dollar index on Monday closed little changed but continued to see some underlying support from the increasing pressure for more sanctions on Russia. EUR/USD saw a little short-covering after posting a new 5-1/4 month low last Friday. Closes: Dollar index +0.04 (+0.04%), EUR/USD unch, USD/JPY +0.06 (+0.06%).
Sep WTI crude oil this morning is up +0.25 (+0.24%) and Sep gasoline is up +0.0223 (+0.78%) with support from the global rally in stocks. Aug crude and gasoline prices on Monday closed higher: CLQ4 +1.46 (+1.42%), RBQ4 +0.0311 (+1.09%). Bullish factors included optimism about crude oil demand after last week's EIA report showed a sharp increase in the refinery utilization rate to 93.8%, which is +3.1 points above the 5-year seasonal average. Oct Brent crude oil prices closed -0.16% after last Friday's agreement on extending the Iranian nuclear talks by another four months, which will allow Iran to continue exporting oil at current levels and keeps military action off the table for another four months.
GLOBAL EVENT CALENDAR07/22/2014
| US | 0830 ET | Jun CPI expected +0.3% m/m and +2.1% y/y, May +0.4% m/m and +2.1% y/y. Jun CPI ex food & energy expected +0.2% m/m and +2.0% y/y, May +0.3% m/m and +2.0% y/y. |
| 0900 ET | May FHFA house price index expected +0.2% m/m, Apr unch m/m. | |
| 1000 ET | Jul Richmond Fed manufacturing index expected +2 to 5, Jun -4 to 3. | |
| 1000 ET | Jun existing home sales expected +2.0% to 4.99 million, May +4.9% to 4.89 million. | |
| 1500 ET | USDA Jun Cold Storage. | |
| JPN | 0030 ET | Japan May all-industry activity index expected +0.6% m/m, Apr -4.3% m/m. |
| 0100 ET | Revised Japan May leading index CI, previous 105.7. Revised May coincident index, previous 111.1. | |
| UK | 0430 ET | UK Jun public sector net borrowing expected +9,7 billion pounds, May +11.5 billion pounds. |
| 0600 ET | UK Jul CBI trends total orders expected -3 to 8, Jun 11. Jul CBI trends selling prices expected +1 to 4, Jun 3. | |
| 0600 ET | UK Jul CBI business optimism expected -3 to 30, Jun 33. |
U.S. STOCK CALENDAR07/22/2014
| Company Name | Ticker | Time | Event Description | Period | Estimate |
|---|---|---|---|---|---|
| Mead Johnson Nutrition Co | MJN US | Bef-mkt | Q2 2014 Earnings Release | Q2 2014 | 0.892 |
| Lockheed Martin Corp | LMT US | Bef-mkt | Q2 2014 Earnings Release | Q2 2014 | 2.658 |
| Coca-Cola Co/The | KO US | Bef-mkt | Q2 2014 Earnings Release | Q2 2014 | 0.633 |
| Travelers Cos Inc/The | TRV US | Bef-mkt | Q2 2014 Earnings Release | Q2 2014 | 2.077 |
| EI du Pont de Nemours & Co | DD US | Bef-mkt | Q2 2014 Earnings Release | Q2 2014 | 1.168 |
| United Technologies Corp | UTX US | Bef-mkt | Q2 2014 Earnings Release | Q2 2014 | 1.746 |
| Gannett Co Inc | GCI US | Bef-mkt | Q2 2014 Earnings Release | Q2 2014 | 0.635 |
| Comcast Corp | CMCSA US | Bef-mkt | Q2 2014 Earnings Release | Q2 2014 | 0.722 |
| Harley-Davidson Inc | HOG US | Bef-mkt | Q2 2014 Earnings Release | Q2 2014 | 1.458 |
| State Street Corp | STT US | Bef-mkt | Q2 2014 Earnings Release | Q2 2014 | 1.258 |
| Kimberly-Clark Corp | KMB US | Bef-mkt | Q2 2014 Earnings Release | Q2 2014 | 1.497 |
| McDonald's Corp | MCD US | Bef-mkt | Q2 2014 Earnings Release | Q2 2014 | 1.438 |
| Verizon Communications Inc | VZ US | 6:30 | Q2 2014 Earnings Release | Q2 2014 | 0.897 |
| Altria Group Inc | MO US | 7:00 | Q2 2014 Earnings Release | Q2 2014 | 0.656 |
| Ingersoll-Rand PLC | IR US | 7:00 | Q2 2014 Earnings Release | Q2 2014 | 1.094 |
| Verizon Communications Inc | VZ US | 7:30 | Q2 2014 Earnings Call | Q2 2014 | |
| Rockwell Collins Inc | COL US | 7:30 | Q3 2014 Earnings Release | Q3 2014 | 1.173 |
| Omnicom Group Inc | OMC US | 8:30 | Q2 2014 Earnings Call | Q2 2014 | |
| Allegheny Technologies Inc | ATI US | 8:30 | Q2 2014 Earnings Call | Q2 2014 | |
| Waters Corp | WAT US | 8:30 | Q2 2014 Earnings Call | Q2 2014 | |
| Comcast Corp | CMCSA US | 8:30 | Q2 2014 Earnings Call | Q2 2014 | |
| Mead Johnson Nutrition Co | MJN US | 9:00 | Q2 2014 Earnings Call | Q2 2014 | |
| Altria Group Inc | MO US | 9:00 | Q2 2014 Earnings Call | Q2 2014 | |
| Travelers Cos Inc/The | TRV US | 9:00 | Q2 2014 Earnings Call | Q2 2014 | |
| EI du Pont de Nemours & Co | DD US | 9:00 | Q2 2014 Earnings Call | Q2 2014 | |
| United Technologies Corp | UTX US | 9:00 | Q2 2014 Earnings Call | Q2 2014 | |
| Harley-Davidson Inc | HOG US | 9:00 | Q2 2014 Earnings Call | Q2 2014 | |
| Coca-Cola Co/The | KO US | 9:30 | Q2 2014 Earnings Call | Q2 2014 | |
| State Street Corp | STT US | 9:30 | Q2 2014 Earnings Call | Q2 2014 | |
| Rockwell Collins Inc | COL US | 10:00 | Q3 2014 Earnings Call | Q3 2014 | |
| Gannett Co Inc | GCI US | 10:00 | Q2 2014 Earnings Call | Q2 2014 | |
| Ingersoll-Rand PLC | IR US | 10:00 | Q2 2014 Earnings Call | Q2 2014 | |
| Kimberly-Clark Corp | KMB US | 10:00 | Q2 2014 Earnings Call | Q2 2014 | |
| Lockheed Martin Corp | LMT US | 11:00 | Q2 2014 Earnings Call | Q2 2014 | |
| Regions Financial Corp | RF US | 11:00 | Q2 2014 Earnings Call | Q2 2014 | |
| Peabody Energy Corp | BTU US | 11:00 | Q2 2014 Earnings Call | Q2 2014 | |
| McDonald's Corp | MCD US | 11:00 | Q2 2014 Earnings Call | Q2 2014 | |
| Prologis Inc | PLD US | 12:00 | Q2 2014 Earnings Call | Q2 2014 | |
| Robert Half International Inc | RHI US | 16:00 | Q2 2014 Earnings Release | Q2 2014 | 0.521 |
| Total System Services Inc | TSS US | 16:00 | Q2 2014 Earnings Release | Q2 2014 | 0.446 |
| Intuitive Surgical Inc | ISRG US | 16:30 | Q2 2014 Earnings Call | Q2 2014 | |
| Broadcom Corp | BRCM US | 16:45 | Q2 2014 Earnings Call | Q2 2014 | |
| Total System Services Inc | TSS US | 17:00 | Q2 2014 Earnings Call | Q2 2014 | |
| Electronic Arts Inc | EA US | 17:00 | Q1 2015 Earnings Call | Q1 2015 | |
| Apple Inc | AAPL US | 17:00 | Q3 2014 Earnings Call | Q3 2014 | |
| Juniper Networks Inc | JNPR US | 17:00 | Q2 2014 Earnings Call | Q2 2014 | |
| Xilinx Inc | XLNX US | 17:00 | Q1 2015 Earnings Call | Q1 2015 | |
| Discover Financial Services | DFS US | 17:00 | Q2 2014 Earnings Call | Q2 2014 | |
| Broadcom Corp | BRCM US | Aft-mkt | Q2 2014 Earnings Release | Q2 2014 | 0.613 |
| ACE Ltd | ACE US | Aft-mkt | Q2 2014 Earnings Release | Q2 2014 | 2.228 |
| Nabors Industries Ltd | NBR US | Aft-mkt | Q2 2014 Earnings Release | Q2 2014 | 0.231 |
| FMC Technologies Inc | FTI US | Aft-mkt | Q2 2014 Earnings Release | Q2 2014 | 0.629 |
| Electronic Arts Inc | EA US | Aft-mkt | Q1 2015 Earnings Release | Q1 2015 | -0.036 |
| Apple Inc | AAPL US | Aft-mkt | Q3 2014 Earnings Release | Q3 2014 | 1.233 |
| Juniper Networks Inc | JNPR US | Aft-mkt | Q2 2014 Earnings Release | Q2 2014 | 0.378 |
| Microsoft Corp | MSFT US | Aft-mkt | Q4 2014 Earnings Release | Q4 2014 | 0.604 |
| Discover Financial Services | DFS US | Aft-mkt | Q2 2014 Earnings Release | Q2 2014 | 1.293 |
| Linear Technology Corp | LLTC US | Aft-mkt | Q4 2014 Earnings Release | Q4 2014 | 0.561 |
| Microsoft Corp | MSFT US | 17:30 | Q4 2014 Earnings Call | Q4 2014 | |
| Omnicom Group Inc | OMC US | Q2 2014 Earnings Release | Q2 2014 | 1.161 | |
| Allegheny Technologies Inc | ATI US | Q2 2014 Earnings Release | Q2 2014 | 0.006 | |
| Regions Financial Corp | RF US | Q2 2014 Earnings Release | Q2 2014 | 0.211 | |
| Prologis Inc | PLD US | Q2 2014 Earnings Release | Q2 2014 | 0.459 | |
| Intuitive Surgical Inc | ISRG US | Q2 2014 Earnings Release | Q2 2014 | 2.824 | |
| Waters Corp | WAT US | Q2 2014 Earnings Release | Q2 2014 | 1.211 | |
| Peabody Energy Corp | BTU US | Q2 2014 Earnings Release | Q2 2014 | -0.289 | |
| Xilinx Inc | XLNX US | Q1 2015 Earnings Release | Q1 2015 | 0.612 |