U.S. national debt to fall in Q2. In what certainly seems like an unlikely turn of events, the U.S. government will retire $35B in bonds, notes, and bills during the second quarter, as spending cuts and higher tax receipts allow the Treasury to defy projections which showed net debt outstanding rising by over $100B during the three month period. If the national debt does indeed fall, it will be the first quarterly reduction since 2007. The respite will of course be short-lived, as the Treasury plans to borrow $223B from July through September, WSJ said.
In Japan, spending soars and unemployment falls. Abenomics got a vote of confidence from Japanese consumers in March as household spending jumped the most in nine years, while the jobless rate in Japan fell to a four year low. Spending rose 5.2% Y/Y, obliterating estimates of a 1.8% increase, as the wealth effect created by soaring stock prices fueled demand for cars and home repairs. The unemployment rate came in at 4.1% for March, better than the 4.3% rate forecast by economists.
Top Stock News
Pfizer posts narrow EPS miss. Pfizer (PFE) reported Q1 earnings of $0.54 per share on revenue of $13.5B, missing analysts' expectations of $0.55 on sales of $14.1B. The company's CFO Frank D'Amelio said the results were emblematic of the company's "consistent financial performance, strong cash flows [and] prudent capital allocation decisions." Shares of PFE fell 3% in premarket trading.
BP tops estimates. BP (BP) said Q1 earnings came in at $4.2B, beating analysts' expectations by nearly $1B. Q1 included a full three months of production from the Skarv North Sea field and from its Angola PSVM facility, both of which came on line at the end of last year. Lower unplanned downtime at refining plants helped lower costs and also contributed to the earnings surprise.
UBS easily tops view. UBS nearly doubled analysts' estimates when it turned in a profit of $1B for Q1, a performance CEO Sergio Ermotti said he was "very pleased" with. The firm's investment banking operation logged a pretax profit of 977M Swiss francs (a 92% increase) as a strong performance out of equity capital markets services made up for relative weakness in the firm's advisory and debt capital markets units. The biggest capital inflows came from Asia Pacific (+€5.5B) and emerging markets (+€4.9B); gross margin in both regions rose to 89 bps from 74 and to 95 bps from 92 respectively. "If you're not in developing markets or Asia you're not going to see growth," one analyst said.
Anheuser-Busch InBev's results hurt by slowdown in Brazil. Anheuser-Busch Inbev (BUD) reported Q1 EBITDA of $3.43B, missing expectations of $3.57B as an 8.2% volume decline in Brazil hurt results. High food inflation and a slowdown in the growth of disposable income dented Brazilian consumers' wallets during the quarter and BUD "expect[s] those factors to continue to put pressure on volumes in the short term" but says it will "remain focused on what [it] can impact and influence" in order to mitigate volume declines. On the bright side, sales in China rose 16% as the company gained market share.
Herbalife delivers but Q2 guidance is weak. Herbalife (HLF) logged its 17th straight earnings beat Monday evening and boosted its full-year outlook. Shares were little changed after hours however, as the company guided below the Street's estimates for both Q2 revenue growth and EPS, projecting $1.14-1.18 per share on sales growth of 11-13%. Analysts were looking for $1.26 and 14%, respectively. HLF also said its quarterly results took a $0.07 hit on the cost of defending its business model against high profile criticism.
Comps growth saves Buffalo Wild Wings. Buffalo Wild Wings (BWLD) said same-store sales reversed course late in the quarter helping the company report Q1 comps growth of 1.4% and 2.2% at company-owned and franchised restaurants respectively. Better still, same-store sales jumped 5.2% in April, news that, when combined with BWLD's revenue beat, largely overshadowed a $0.12 bottom line miss.
Best Buy sells Carphone stake. Best Buy (BBY) will sell its ill-fated 50% stake in Carphone Warehouse back to Carphone for $775M — BBY will take a non-cash charge of $200M for the sale in Q1. Amid ambitious (and poorly timed) expansion plans, BBY paid $2.15B in June 2008 to expand its Carphone stake from 3% to 50%, but its plans to roll out big box stores in Europe were aborted in 2011. Best Buy, which still operates stores in Mexico, Canada and China, says the move "does not signal any similar action in our other international businesses."
Top Economic & Other News
Japanese industrial output comes up short but PMI improves. Japanese industrial production rose a minuscule 0.2% in March, missing analysts' expectations of a 0.4% gain and underscoring the risk of a global economic slowdown foretold by weaker than expected GDP reports out of the U.S. and China. However, the country's manufacturing PMI rose to 51.1 in April from 50.4 in March, led by strong performance from investment goods producers as solid net gains in output and new orders were recorded. Yen depreciation helped in new export sales but also led to the sharpest rise of input costs in 19 months.
Euro-area jobless rate at 12.1%. Euro-area unemployment hit a record 12.1% in March according to the EU's statistics office. Although the figure was in line with expectations, it underscores the currency bloc's continuing economic woes and shows a recovery from the protracted debt crisis may still be some ways off. The news adds to speculation that the ECB will cut rates this week.
In Southeast Asia, bubble worries grow. Economists are increasingly concerned about excessive credit growth in Southeast Asia. Following several IMF warnings, calls are getting louder for central banks in the region to rein in accommodative policies. "If central banks don't normalize fast … we could get an over extension of the credit cycle," HSBC's chief economist for the region told CNBC. Echoing the point, Credit Suisse's head of India and SE Asia economics said "authorities in the Philippines, Thailand, and Malaysia are in significant danger" of keeping policies "too loose, for too long," as relatively low inflation seems to have lulled policy makers to sleep.
In Asia, Japan -0.17% to 13860. Hong Kong +0.7% to 22737. China: Closed. India +0.6% to 19504.
In Europe, at midday, London -0.11%. Paris -0.34%. Frankfurt +0.42%.
Futures at 7:00: Dow -0.03%. S&P -0.13%. Nasdaq -0.01%. Crude -0.37% to $94.20. Gold +0.31% to $1472.00.
Today's economic calendar:
FOMC meeting begins
8:30 ICSC Retail Store Sales
8:30 Employment Cost Index
8:55 Redbook Chain Store Sales
9:00 S&P Case-Shiller Home Price Index
9:45 Chicago PMI
10:00 Consumer Confidence
10:00 State Street Investor Confidence Index
3:00 PM USDA Ag. Prices
Notable earnings before today's open: ABFS, AET, AGCO, AMED, ARCO, AVP, BEN, BP, CIE, CMI, CNH, COCO, CRIS, CYNO, DBD, DDD, DPZ, ECL, EPD, ESV, EXAS, FCH, FIS, FLWS, GAS, GOV, HCLP, HCP, HEP, HNR, HOT, HRS, HUN, HW, IVZ, KLIC, LM, MCGC, MHP, MLM, MNTA, MPC, MPLX, MSO, MTG, MTOR, MWV, NEE, NI, NYX, ODP, OSK, PBI, PEG, PES, PFE, ROC, SAVE, SIRI, TFX, THC, TRI, TRW, UBS, UDR, VLO, VSH, WEC, X, XYL, ZTS
Notable earnings after today's close: ACAS, AFFX, AJG, AMRS, APU, OTC:ATLS, AUY, AVB, BCOV, BGC, BLMN, BXP, CAVM, CLD, CRAY, DDR, DENN, DGI, DWA, EEP, EIX, ELGX, ELLI, ENTR, EQR, EZPW, FEIC, FIRE, FISV, FLEX, FMC, FTNT, GDOT, GEVO, GNW, HCBK, HT, HTCH, IACI, INT, JIVE, JLL, JMBA, LEAP, MDU, MERU, OTC:MRGE, MSPD, MTW, MWA, MX, NANO, NCR, NUVA, OKE, OKS, PRAA, PRXL, QCOR, QEP, REXX, RGC, RPXC, SGI, SHOR, SIMG, SKT, SM, SONS, STR, SWI, TE, TRMB, TRN, UGI, ULTI, UNTD, UNXL, VNR, VRSK, VRTX, WNC, WRI, WU, XCO
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