- Global stocks are trading mixed with the European Euro Stoxx 50 index up +0.20% and March S&Ps down -1.50 points. European and US stocks are fluctuating on either side of unchanged ahead of reports on US consumer prices and jobless claims later this morning. The dollar is little changed and commodities are mixed with cotton continuing its parabolic rise to over $2.00 a pound, while copper slumped to a 2-week low after LME copper inventories surged to a 6-month high. Strong earnings results continue to boost the stock market with 72% of the 378 companies in the S&P 500 that have reported earnings since Jan 10 have beaten estimates, while in Europe 57% have beaten forecasts. The yield on Spanish bonds rose and the gap between Spanish and German 10-year borrowing costs widened after Spain sold 3.5 billion euros of bonds, less than the 4 billion targeted by Spain's debt office. Demand for the 10-year debt fell to 1.54 from a bid-to-cover ratio of 1.67 at a previous auction in Dec.
- The Asian stock markets today closed mixed with Japan up +0.26%, Hong Kong +0.63%, China -0.08%, Taiwan -0.33%, Australia +0.17%, Singapore -0.38%, South Korea -0.51%, India +1.13%. Japan's Nikkei 225 Stock Index advanced to a 9-1/4 month high and China's Shanghai Stock Index climbed to a 3-month high after the Jan 25-26 FOMC minutes showed policy makers raised their projections for US economic growth this year, which should translate into strong demand for Asian goods. Foreign direct investment in China surged +23.4% y/y in Jan, stronger than expectations of +17.2% y/y, which adds to record inflows last year that are complicating Chinese government efforts to reduce excess liquidity and reign in inflation.
- March S&Ps this morning are trading down -1.50 points. The US stock market yesterday pushed higher on increased M&A activity, robust earnings and a sharp increase in US housing starts: Dow +0.50%, S&P 500 +0.63%, Nasdaq Composite +0.76%. The Dow and S&P 500 posted fresh 2-1/2 year highs and the Nasdaq advanced to a 10-year high. Bullish factors included (1) increased M&A activity after Sanofi-Aventis SA agreed to buy Genzyme for $20.1 billion and Nelson Pertz offered to acquire Family Dollar Stores for $7.6 billion, (2) strength in homebuilders after Jan US housing starts increased more than expected and climbed to a 4-month high (+14.6% to 596,000 versus expectations of +2.1% to 540,000), (3) the minutes of the Jan 25-26 FOMC meeting in which the Fed raised its US growth projections for this year to 3.4% to 3.9%, compared with a Nov forecast of 3.0% to 3.6%, saying household spending picked up and recent economic data showed a "stronger tenor," and (4) continued strong earnings results with 73% of the 371 companies in the S&P 500 that have reported results since Jan 10 beating estimates.
- Bearish factors for stocks included (1) increased inflation concerns after the larger-than-expected increase in Jan core PPI (+0.5% m/m and +1.6% y/y versus expectations of +0.2% m/m and +1.2% y/y) as the +1.6% y/y gain matches a 16-month high, (2) concern the US housing market will struggle to recover after MBA mortgage applications declined to a 2-year low in the week ended Feb 11, (3) the unexpected decline in Jan industrial production (-0.1% versus expectations of +0.5%), and (4) geo-political concerns after Israel's foreign minister called Iran's plans to sail 2 gunboats through the Suez Canal a "provocation."
- Williams Cos. (NYSE:WMB) climbed 8.1% in European trading after the fourth-largest US pipeline operator by market value said it will sell as much as 20% of its oil and natural-gas exploration unit in an IPO.
- March 10-year T-notes this morning are trading up +3.5 ticks . T-note prices yesterday fluctuated on either side of unchanged as stronger-than-expected housing starts offset increased safe-haven demand from an escalation in Middle East tensions: TYH11 +0.5, FVH11 +2.2, EDM11 unchanged. Bearish factors included (1) the larger-than-expected increase in Jan core PPI (+0.5% m/m and +1.6% y/y versus expectations of +0.2% m/m and +1.2% y/y) as the +1.6% y/y gain matches a 16-month high, (2) the larger-than-expected increase on Jan US housing starts that climbed to a 4-month high (+14.6% to 596,000 versus expectations of +2.1% to 540,000), and (3) the minutes of the Jan 25-26 FOMC meeting in which the Fed raised its US growth projections for this year to 3.4% to 3.9%, compared with a Nov forecast of 3.0% to 3.6%, saying household spending picked up and recent economic data showed a "stronger tenor." Bullish factors included (1) the unexpected decline in Jan industrial production (-0.1% versus expectations of +0.5%), (2) the decline in MBA mortgage applications to a 2-year low, which may keep the US housing market depressed, (3) increased safe-haven demand for Treasuries after Israel's foreign minister called Iran's plans to sail 2 gunboats through the Suez Canal a "provocation," and (4) the Fed's purchase of $1.89 billion of Treasuries as part of its QE2 asset-purchase program.
- The dollar index this morning is trading little changed with the dollar/yen -0.07 yen and the euro/dollar -0.12 cents. The dollar index yesterday weakened on reduced safe-haven demand for the dollar as global stock markets rallied on optimism the global economic recovery can continue: Dollar Index -0.350, USDJPY -0.096, EURUSD +0.00816. Bearish factors for the dollar included (1) reduced safe-haven demand for the dollar after the S&P 500 climbed to a 2-1/2 year high, (2) comments from an unnamed German government official that the G-20 will discuss ways of diversifying global currency reserves when they meet this weekend in Paris, which may lead to reduced demand for dollars or a reduction in the dollar's status as the world's reserve currency. Bullish factors included (1) stronger-than-expected US economic data on Jan housing starts and Jan producer prices, and (2) data from the IMF that shows Greek and Irish banks have issued at least 70 billion euros ($95 billion) of bonds to create the collateral required to get cash from the ECB, which is a form of quantitative easing and euro negative as the banks are basically issuing unsecured loans to themselves.
- March crude oil prices this morning are trading down -28 cents a barrel and March gasoline is -0.72 of a cent per gallon. Crude oil and gasoline prices yesterday moved higher on rising Middle East tensions and on lower than expected increases in weekly crude supplies: CLH11 +$0.67, RBH11 +5.59. Bullish factors included (1) the weaker dollar, which boosts investment demand for commodities, (2) the lower-than-expected increases in weekly crude and gasoline supplies (crude +860,000 bbl versus expectations of +2.0 million bbl and gasoline +205,000 bbl versus expectations of +1.65 million bbl, (3) the larger-than-expected draw in weekly distillate supplies (-3.10 million bbl versus expectations of -400,000 bbl) and (4) rising tensions in the Middle East after civil unrest spread to Libya, the holder of Africa's largest oil reserves and after Israeli Foreign Minister Lieberman said 2 Iranian gunboats are planning to move through the Suez Canal to Syria, which spurred concern that oil shipments may be disrupted. Bearish factors included (1) the prediction from energy researcher JBC Energy GmbH that the narrowing spread between premium fuels such as naphtha and cheaper heavy fuel oil may signal a slowdown in the world economy, and (2) despite the smaller-than-expected increase in weekly gasoline supplies, US gasoline supplies now stand at 241.1 million bbl, a nearly 21-year high and a sign of slack demand.
Earnings reports (confirmed releases, sorted by mkt cap) APA-Apache (BEST earnings consensus $2.44), EPD-Enterprise Products Partners LP (0.42), DUK-Duke Energy (0.23), PCG-PG&E Corp. (0.72), WM-Waste Management (0.55), WMB-Williams Companies (0.28), INTU-Intuit (0.32), WPZ-Williams Partners LP (0.72), ECL-Ecolab (0.61), CF-CF Industries Holdings (2.65), JWN-Nordstrom (1.00), VTR-Ventas (0.41), VMED-Virgin Media (-0.07), H-Hyatt Hotels (0.06), DPS-Dr Pepper Snapple Group (0.64), SJM-JM Smucker (1.26), TRW-TRW Automotive Holdings (1.24).
Global Financial Calendar
|0830 ET||Weekly initial unemployment claims expected +17,000 to 400,000, previous -36,000 to 383,000. Weekly continuing claims expected +7,000 to 3.895 million, previous -47,000 to 3.888 million.|
|0830 ET||Jan CPI expected +0.3% m/m and +1.6% y/y, Dec +0.5% m/m and +1.5% y/y. Jan CPI ex food & energy expected +0.1% m/m and +0.9% y/y, Dec +0.1% m/m and +0.8% y/y.|
|0830 ET||USDA weekly export sales.|
|0945 ET||Bloomberg weekly consumer comfort index (formerly ABC U.S. weekly consumer confidence), previous -5 to 46.|
|1000 ET||Fed Chairman Ben Bernanke testifies with FDIC Chairman Sheila Bair, SEC Chairman Mary Schapiro and CFTC Chairman Gary Gensler on ?Oversight of Dodd-Frank Implementation: A Progress report by the Regulators at the Half-Year Mark.?|
|1000 ET||Jan leading indicators expected +0.3%, Dec +1.0%.|
|1000 ET||Feb Philadelphia Fed manufacturing index expected +1.7 to 21.0, Jan ?1.5 to 19.3.|
|1100 ET||Treasury announces amounts of 2-year T-notes (previous $35 billion), 5-year T-notes (previous $35 billion) and 7-year T-notes (previous $29 billion) to be auctioned Feb 22-24.|
|1200 ET||Atlanta Fed President Dennis Lockhart will participate in a World Affairs Council of Atlanta discussion of ?Ireland and the U.S.: Roads to Recovery.?|
|1230 ET||Chicago Fed President Charles Evans speaks at the Rockford Chamber of Commerce Economic Forecast Luncheon.|
|1300 ET||Treasury auctions $9 billion 30-year TIPS.|
|1630 ET||Weekly money supply report and Fed balance sheet.|
|0000 ET||Revised Dec Japan coincident index CI, previous 103.1. Revised Dec leading index CI, previous 101.4.|
|0500 ET||Dec Euro-Zone construction output, Nov ?0.9% m/m and ?6.8% y/y.|
|1000 ET||Feb Euro-Zone consumer confidence expected +0.2 to ?11.0, Jan ?0.2 to ?11.2.|
|0830 ET||Dec Canada wholesale sales, Nov +1.2% m/m.|
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Jim Van Meerten is a professional investor with over 40 year experience in investing in stocks, mutual funds and ETFs. He shares his knowledge on Barchart in his daily blogs -- Barchart Portfolio Blogs.