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BARCHART MORNING CALL 8/28

|Includes:AAP, ANF, AVGO, BF.B, BP, COTY, Dollar General Corporation (DG), EFX, GEF, GES, GPC, IRM, ORLY, PLL, SIG, SPLK, UHAL, VEEV, WSM

BARCHART MORNING CALL

Thursday, August 28th, 2014

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OVERNIGHT MARKETS AND NEWS

September E-mini S&Ps (ESU14 -0.24%) this morning are down -0.36% and European stocks are down -1,14% as the crisis in Ukraine escalates after the Ukrainian government said that a counteroffensive being waged by separatists in the eastern part of the country amounts to a Russian invasion. Ukrainian Prime Minister Yatsenyuk issued a plea for international help in defending against Russia's army and that sanctions by the U.S. and the EU aren't working. Russia's Micex Stock Index tumbled nearly 2% and the ruble fell to a 6-month low against the dollar after the U.S. State Department said that "these incursions indicate a Russian-directed counteroffensive is likely underway in Donetsk and Luhansk." A larger-than-expected decline in Eurozone Aug economic confidence to an 8-month low is another negative for European stocks. Asian stocks closed mostly lower: Japan -0.48%, Hong Kong -0.71%, China -0.70%, Taiwan -0.08%, Australia -0.47%, Singapore -0.34%, South Korea +0.12%, India +0.29%. Commodity prices are mixed. Oct crude oil (CLV14 +0.04%) is down -0.12%. Oct gasoline (RBV14 +0.23%) is up +0.07%. Dec gold (GCZ14 +0.84%) is up +0.91% at a 1-week high as escalation of the Ukraine crisis fuels safe-haven buying of gold. Sep copper (HGU14 -0.41%) is down -0.61%. Agriculture and livestock prices are mixed. The dollar index (DXY00 +0.04%) is up +0.10%. EUR/USD (^EURUSD) is down -0.14%. USD/JPY (^USDJPY) is down -0.24%. Sep T-note prices (ZNU14 +0.16%) are up +9 ticks at a 1-week high on carry-over support from a rally in European government bond markets as the 10-year German bund yield fell to a record low 0.866%.

Eurozone Aug economic confidence slipped -1.5 to 100.6, a larger decline than expectations of -0.7 to 101.5 and the weakest in 8 months. The Aug business climate indicator fell -0.1 to 0.16, a smaller drop than expectations of -0.07 to 0.10, but still the lowest in 10 months.

Eurozone Jul M3 money supply rose +1.8% y/y and +1.5% 3-mo avg, higher than expectations of +1.5% y/y and +1.3% 3-mo avg.

German Aug unemployment unexpectedly rose +2,000, more than expectations of a -5,000 decline. The Aug unemployment rate remained unch at 6.7%, right on expectations.

UK Aug CBI reported sales rose +16 to 37, a larger increase than expectations of +6 to 27 and matched Feb's level as the highest in 2 years.

China Jul industrial profits slowed to an increase of +13.5% y/y from the +17.9% y/y pace in Jun.

U.S. STOCK PREVIEW

Today's weekly initial unemployment claims report is expected to show a small +2,000 increase to 300,000 following last week's decline of -14,000 to 298,000. Meanwhile, continuing claims are expected to show an increase of +10,000 to 2.510 million after last week's decline of -49,000 to 2.500 million. Today's Q2 GDP report is expected to be revised slightly lower to +3.9% from the last estimate of +4.0%. Today's July pending home sales report is expected to show an increase of +0.5% m/m, reversing about one-half of the -1.1% decline seen in June. The Treasury today will wrap up this week's $106 billion T-note package by selling $29 billion of 7-year T-notes.

There are 8 of the Russell 1000 companies that reports earnings today: Abercrombie (consensus $0.11), Coty (0.05), Pall Corp (1.06), Signet Jewelers (0.98), Dollar General (0.83), Splunk (-0.02), Avago Technologies (1.05), Veeva Systems (0.07). Equity conferences during the remainder of this week include: ONS 2014 Conference on Mon-Thu, and MIT Sloan Latin America-China Conference on Fri.

OVERNIGHT U.S. STOCK MOVERS

Dollar General (DG +0.28%) reported Q2 EPS of 83 cents, right on consensus, although Q2 revenue of $4.72 billion was below consensus of $4.77 billion.

Pall Corp. (PLL -0.48%) reported Q4 EPS of $1.14, better than consensus of $1.06.

Signet Jewelers (SIG -0.36%) reported Q2 organic EPS of $1.00, better than consensus of 98 cents.

British Petroleum (BP +0.37%) was downgraded to 'Underweight' from 'Equal Weight' at Morgan Stanley.

Brown Forman (BF) was downgraded to 'Hold' from 'Buy' at Deutsche Bank.

Visa (V +0.18%) was downgraded to 'Market Perform' from 'Outperform' at Raymond James.

Genuine Parts (GPC -0.02%) was downgraded to 'Neutral' from 'Buy' at SunTrust.

Advance Auto Parts (AAP +1.01%) was initiated with a 'Buy' at SunTrust with a price target of $181 and O'Reilly Automotive (ORLY +0.23%) was also initiated with a 'Buy' at SunTrust with a price target of $193.

Williams-Sonoma (WSM +0.05%) slid 10% in after-hours trading after it reported Q2 EPS of 53 cents, right on consensus, although Q2 revenue of $1.04 billion was below consensus of $1.05 billion. The company then lowered guidance on fiscal 2014 EPS to $3.07-$3.17, below consensus of $3.20.

Guess (GES -0.74%) fell 8% in after-hours trading after it reported Q2 EPS of 26 cents, weaker than consensus of 29 cents, and then lowered guidance on fiscal 2015 EPS to $1.05-$1.20, well below consensus of $1.46.

MARKET COMMENTS

Sep E-mini S&Ps (ESU14 -0.24%) this morning are down -7.25 points (-0.36%). The S&P 500 index Dow on Wednesday closed little changed: S&P 500 unch, Dow Jones +0.09%, Nasdaq +0.04%. Stocks found support on (1) optimism about the U.S. economic outlook that lifted the S&P 500 to a record high Tuesday, and (2) an easing of tensions in Ukraine after Russian President Putin met Ukraine President Poroshenko in Belarus and said that "Russia, for its part, will do everything for this peace process." Valuation concerns limited gains in equities with stocks in the S&P 500 trading at 18 times reported earnings, the highest in 4 years.

Sep 10-year T-notes (ZNU14 +0.16%) this morning are up +9 ticks at a 1-week high. Sep 10-year T-note futures prices on Wednesday closed higher. Bullish factors included (1) carry-over support from a rally in European government bonds after 10-year bond yields in Germany, France, Italy, Finland and Spain all dropped to record lows, and (2) weakness in stocks that boosted safe-haven demand for T-notes. Closes: TYU4 +6.50, FVU4 +3.75.

The dollar index (DXY00 +0.04%) this morning is up +0.084 (+0.10%). EUR/USD (^EURUSD) is down -0.0018 (-0.14%) and USD/JPY (^USDJPY) is down -0.25 (-0.24%). The dollar index on Wednesday fell back from an 11-1/2 month high and closed lower. EUR/USD rebounded from a 11-1/2 month low and closed higher after (1) a Reuters report that unidentified ECB sources said the ECB is unlikely to add stimulus at next week's meeting unless Eurozone August inflation data raises the risk of deflation, and (2) German Finance Minister Schaeuble's comment that ECB President Draghi's comments advocating support for Eurozone fiscal policy were "over-interpreted." Closes: Dollar index -0.222 (-0.27%), EUR/USD +0.00259 (+0.20%), USD/JPY -0.186 (-0.18%).

Oct WTI crude oil (CLV14 +0.04%) this morning is down -11 cents (-0.12%) and Oct gasoline (RBV14 +0.23%) is up +0.0019 (+0.07%). Oct crude and gasoline prices on Wednesday settled mixed: CLV4 +0.02 (+0.02%), RBV4 -0.0154 (-0.59%). Bearish factors included (1) the +508,000 bbl increase in crude supplies at Cushing, OK, the delivery point for WTI futures, the fourth consecutive increase, and (2) the +0.6% increase in U.S. crude production in the week ended Aug 22 to a 27-3/4 year high of 8.631 million bpd. Supportive factors included (1) a weaker dollar, and (2) the -2.07 million bbl decline in weekly EIA crude inventories to a 7-month low of 360.5 million bbl, a bigger draw than expectations of -950,000 bbl.

GLOBAL EVENT CALENDAR08/28/2014

US 0830 ET Weekly initial unemployment claims expected +2,000 to 300,000, previous -14,000 to 298,000. Weekly continuing claims expected +10,000 to 2.510 million, previous -49,000 to 2.500 million.
  0830 ET Q2 GDP revision expected +3.9% vs prelim +4.0%. Q2 GDP personal consumption expected revised to +2.4% from +2.5%. Q2 GDP Price index expected unrevised at +2.0%. Q2 core PCE expected unrevised at +2.0%.
  0830 ET USDA weekly Export Sales.
  1000 ET Jul pending home sales expected +0.5% m/m and -3.9% y/y, Jun -1.1% m/m and -4.5% y/y.
  1100 ET Aug Kansas City Fed manufacturing activity expected -2 to 7, Jul +3 to 9.
  1300 ET Treasury auctions $29 billion 7-year T-notes.
GER 0355 ET German Aug unemployment change expected -5,000, Jul -12,000. Aug unemployment rate expected unch at 6.7%, Jul 6.7%.
  0800 ET German Aug CPI (EU harmonized) expected unch m/m and +0.8% y/y, Jul +0.3% m/m and +0.8% y/y.
EUR 0400 ET Eurozone Jul M3 money supply expected +1.5% y/y and +1.3% 3-m avg, Jun +1.5% y/y and +1.1% 3-mo avg.
  0500 ET Eurozone Aug economic confidence expected -0.7 to 101.5, Jul 102.2. Aug business climate indicator expected -0.07 to 0.10, Jul 0.17.
  0500 ET Revised Eurozone Aug consumer confidence, previous -1.6 to -10.0.
UK 0430 ET UK Aug Lloyds business barometer, Jul 52.
  0600 ET UK Aug CBI reported sales expected +6 to 27, Jul 21.
  1901 ET UK Aug Hometrack weighted overall average housing prices, Jul +0.1% m/m and +5.8% y/y.
  1905 ET UK Aug GfK consumer confidence expected +1 to -1, Jul -2.
JPN 1930 ET Japan Jul jobless rate expected unch at 3.7%. Jul job-to-applicant ratio expected unch at 1.10.
  1930 ET Japan Jul overall household spending expected -2.9% y/y, Jun -3.0% y/y.
  1930 ET Japan Jul national CPI expected +3.4% y/y, Jun +3.6% y/y. Jul national CPI ex-fresh food expected +3.3% y/y, Jun +3.3% y/y. Jul national CPI ex food & energy expected +2.3% y/y, Jun +2.3% y/y.
  1930 ET Japan Aug Tokyo CPI expected +2.7% y/y, Jul +2.8% y/y. Aug Tokyo CPI ex-fresh food expected +2.7% y/y, Jul +2.8% y/y. Aug Tokyo CPI ex food & energy expected +2.1% y/y, Jul +2.1% y/y.
  1950 ET Japan Jul retail sales expected +0.3% m/m and -0.2% y/y, Jun +0.5% m/m and -0.6% y/y.
  1950 ET Japan Jul industrial production expected +1.0% m/m and -0.1% y/y, Jun -3.4% m/m and +3.1% y/y.
Click to enlarge

U.S. STOCK CALENDAR08/28/2014

Company Name Ticker Time Event Description Period Estimate
Iron Mountain Inc IRM US 0:30 Investor Meeting Y 2014  
Coty Inc COTY US 6:30 Q4 2014 Earnings Release Q4 2014 0.051
Pall Corp PLL US 7:00 Q4 2014 Earnings Release Q4 2014 1.058
Signet Jewelers Ltd SIG US 7:00 Q2 2015 Earnings Release Q2 2015 0.981
Dollar General Corp DG US 7:00 Q2 2015 Earnings Release Q2 2015 0.831
Abercrombie & Fitch Co ANF US 7:30 Q2 2015 Earnings Release Q2 2015 0.113
Pall Corp PLL US 8:30 Q4 2014 Earnings Call Q4 2014  
Signet Jewelers Ltd SIG US 8:30 Q2 2015 Earnings Call Q2 2015  
Abercrombie & Fitch Co ANF US 8:30 Q2 2015 Earnings Call Q2 2015  
Coty Inc COTY US 9:30 Q4 2014 Earnings Call Q4 2014  
Greif Inc GEF US 10:00 Q3 2014 Earnings Call Q3 2014  
Dollar General Corp DG US 10:00 Q2 2015 Earnings Call Q2 2015  
AMERCO UHAL US 12:00 Annual General Meeting    
AMERCO UHAL US 14:00 Analyst and Investor meeting Y 2014  
Splunk Inc SPLK US 16:02 Q2 2015 Earnings Release Q2 2015 -0.024
Avago Technologies Ltd AVGO US 16:05 Q3 2014 Earnings Release Q3 2014 1.05
Splunk Inc SPLK US 16:30 Q2 2015 Earnings Call Q2 2015  
Veeva Systems Inc VEEV US 16:30 Q2 2015 Earnings Call Q2 2015  
Avago Technologies Ltd AVGO US 17:00 Q3 2014 Earnings Call Q3 2014  
Veeva Systems Inc VEEV US Aft-mkt Q2 2015 Earnings Release Q2 2015 0.07
Equifax Inc EFX US   Investor Meeting - Zurich Y 2014  
Equifax Inc EFX US   Investors Meeting - Geneva Y 2014
Click to enlarge
Stocks: DG, PLL, SIG, BP, BF.B, GPC, AAP, ORLY, WSM, GES, IRM, COTY, ANF, GEF, UHAL, SPLK, AVGO, VEEV, EFX