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Brachart Morning Call 7/17


Barchart Morning Call

BC - 1 hr 21 mins ago

Overnight Developments

  • Sep E-mini S&Ps are trading mildly higher by +0.35% and European stocks are up +0.42% as the markets are hoping for any hints of further stimulus measures by Fed Chairman Bernanke in his testimony today. The European stock market was able to shake off today's generally negative Eurozone and German ZEW sentiment reports. Commodity prices are mixed with crude oil up +0.15%, gold up +0.09%, copper up +0.14%, and agricultural prices trading mostly lower. The dollar index is little changed while EUR/USD is slightly higher by +0.10%. Sep 10-year T-notes are down 3 ticks.
  • Asian stocks today closed higher across the board: Japan +0.35%, Hong Kong +1.75%, China +0.60%, Taiwan +0.52%, Australia +0.87%, Singapore +0.54%, South Korea +0.33%, India +0.01%, Turkey +0.01%.
  • Goldman Sachs this morning reported Q2 earnings at $1.78 per share, substantially higher than the consensus of $1.18.
  • China will boost its railway infrastructure investment by 9% to 448.3 billion yuan ($70.3 billion) this year, up from the previous plan of 411.3 billion. Spending was only 148.7 billion yuan in the first half of 2012, meaning investment needs to roughly double in the second half to meet the full-year target. The Chinese government reported today that foreign direct investment in June fell -6.9% y/y, which was a disappointing sign that foreign businesses have reduced their investment in Chinese assets. The markets are hoping that the Chinese government after Wednesday's State Council meeting may announce additional stimulus measures.
  • Spain today successfully auctioned 2.6 billion euros of 1-year bills at an average yield of 3.918%, which was substantially lower than 5.074% at the last auction in June. The bid cover ratio of 2.23 was higher than the June auction of 2.16.
  • The German July ZEW current situation index fell sharply to 21.1 from 33.2 in June and was weaker than market expectations of 30.0. The July index of investor and analyst expectations fell to -19.6 from -16.9 in June but was a bit stronger than market expectations for a dip to -20.0. The index measures expectations for economic conditions in six months. For the Eurozone as a whole, the ZEW July index of investor and analyst expectations fell to -22.3 from -20.1 in June.
  • The UK June CPI eased to +2.4% y/y from +2.8% in May and was weaker than market expectations while the June core CPI eased to +2.1% from +2.2%. The lower CPI figures give the Bank of England more cover as it restarted its quantitative easing program at its meeting at the beginning of July. Market Comments
    • Sep E-mini S&Ps this morning are trading +4.75 (+0.35%) as the market hopes that Fed Chairman Bernanke at his testimony today before the Senate Banking Committee will hint at further stimulus measures. The market is also looking ahead to a raft of earnings reports today. Stocks on Monday closed mildly lower: S&P 500 -0.23%, Dow Jones -0.39%, Nasdaq 100 -0.31%. Bearish factors included (1) the weaker-than-expected U.S. June retail sales report of -0.5%, (2) the IMF's cut in its global economic forecast to +3.9% from its April forecast of +4.1%, (3) the delay until September in a preliminary ruling by the German Federal Constitutional Court on the ESM bailout facility, and (3) China Premier Wen Jiabao's comment on Sunday said that "It should be clearly understood that the momentum for a stable rebound in the economy has not yet been established." Supportive factors included (1) the July NY Empire manufacturing index of +5.10 points to 7.39, which was stronger than market expectations for a rise to 4.00, and (2) Citigroup's +0.6% rally on a better-than-expected Q2 earnings report.
    • Sep 10-year T-notes this morning are down 3 ticks on the mildly higher trade in U.S. and European stocks. Sep 10-year T-note prices on Monday closed mildly higher: TYU2 +8.5, FVU2 +6. T-note prices rallied on increased safe-haven demand with the sell-off in stocks and the delay in the ESM bailout fund.
    • The dollar index this morning is little changed at -0.01 at 83.088. EUR/USD is up +0.0012 (+0.10%) and USD/JPY is up +0.18 (+0.23%). The dollar index on Monday closed moderately lower: Dollar index -0.21 (-0.26%), EUR/USD +0.0024 (+0.20%), USD/JPY -0.31 (-0.39%). The dollar index fell on Monday on long liquidation pressure after the 2-week rally, shaking off the bullish factors of the sell-off in stocks and the delay in the ESM. The German Federal Constitutional Court announced that it will not issue even a preliminary ruling on the constitutionality of the ESM and the fiscal pact until September. That will leave the Eurozone limping along with only its temporary EFSF bailout facility until at least September.
    • Aug WTI crude oil prices this morning are up +0.13 (+0.15%) on the higher trade in U.S. and European stocks, hopes for stimulus hints from Fed Chairman Bernanke today, and expectations for a decline in oil inventories in Wednesday's weekly DOE report. Aug gasoline this morning is up up +0.0201 (+0.70%). Crude oil and gasoline prices on Monday rallied fairly sharply: CLQ2 +1.33 (+1.153%), RBQ2 +0.0386 (+1.37%). Aug gasoline prices on Monday posted a new 2-month high and led crude oil prices higher. Bullish factors included (1) technical buying, (2) news that a U.S. Navy vessel near the Strait of Hormuz fired on a fishing vessel that approached at high speed and refused to stop, (3) tightening sanctions on Iran, and (4) expectations for a sustained draw-down in U.S. crude oil inventories with U.S. refineries operating in high gear. The market consensus for Wednesday's DOE report is for a 750,000 barrel decline in crude oil inventories, a 1.1 million barrel increase in gasoline inventories, a 1 million barrel increase in distillate inventories, and a 0.4 point increase in the refinery utilization rate to a new 5-year high of 93.1% of capacity from 92.7% in last week's 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): JNJ-Johnson & Johnson (Consensus $1.29), KO-Coca-Cola (1.19), INTC-Intel (0.54), GS-Goldman Sachs (1.18), CSX-CSX Corp (0.47), MOS-Mosaic (1.15), STT-State Street (0.97), YHOO-Yahoo (0.23), SCHW-Schwab (0.18), OMC-Omnicom (1.01), HST-Host Hotels (0.13), MAT-Mattel (0.21), MTB-M&T Bank (1.69), FIS-Fidelity National (0.60), WYNN-Wynn Resorts (1.51), FRX-Forest Labs (0.26), AMTD-TD Ameritrade (0.26), KSU-Kansas City Southern (0.83), CMA-Comerica (0.62), ALB-Albemarle (1.22), EDU-New Oriental (0.14), CZZ-Cosan (0.13), URI-United Rentals (0.50), Equity Lifestyle (0.21).

      Global Financial Calendar

      Tuesday 7/17/12
      United States
      0745 ET ICSC (Int'l Council of Shopping Centers) weekly retailer sales.
      0830 ET June CPI expected unchanged m/m and +1.6% y/y, May -0.3% m/m and +1.7% y/y. June core CPI expected +0.2% m/m and +2.2% y/y, May +0.2% m/m and +2.3% y/y.
      0855 ET Redbook weekly retailer sales.
      0915 ET June industrial production expected +0.3% m/m, May -0.1% m/m. June manufacturing production, May -0.4% m/m. June capacity utilization expected +0.2 to 79.2%, May -0.2 to 79.0%.
      1000 ET Fed Chairman Bernanke delivers semi-annual monetary policy report to Senate Banking Committee.
      1000 ET July NAHB housing market index expected +1 to 30, June +1 to 29.
      1315 ET Fed's Pianalto speaks on U.S. economy in Erie, PA.
      1130 ET Weekly 4-week T-bill auction.
      1630 ET API weekly U.S. oil statistics.
      0900 ET Bank of Canada announces outcome of policy meeting with policy rate expected unchanged at 1.0%.
      0200 ET EU27 June new car registrations, May -8.7%.
      0500 ET ZEW July economic sentiment index, June -20.1.
      0500 ET German July ZEW current situation index expected 30.0, June 33.2. July ZEW economic sentiment index expected -20, June -16.9.
      United Kingdom
      0430 ET UK May ONS house price index, April +1.4% y/y.
      0430 ET UK June CPI expected -0.1% m/m and +2.8% y/y, May -0.1% m/m and +2.8% y/y. June core CPI expected +2.5% y/y, May +2.2% y/y.
      0430 ET June RPI expected unch m/m and +3.0% y/y, May unch m/m and +3.1% y/y. June RPI ex mortgage interest payments expected +3.1% y/y, May +3.1% y/y.
      2130 ET China June property prices.
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