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Barchart Morning Call 4/29

 

Barchart Morning Call Fri, 29 Apr 2011 07:00:00 -0500Overnight Developments
  • Global stocks are mixed with the European Euro Stoxx 50 up +0.12% and June S&Ps up +1.00 point. The dollar and Treasuries are slightly lower, while gold is stronger and trading just below yesterday's all-time high. Strong company earnings results are supporting European stocks with Yara up 3.8% after the world's largest publicly traded nitrogen-fertilizer maker reported Q1 net income of 2.89 billion kroner ($550 million), which beat analysts' estimates of 2.39 billion kroner, while SSAB jumped 6.5% after the world's largest supplier of high-tensile steel reported Q1 net income of 390 million kroner, well ahead of analysts' estimates of 154 million kroner. Undercutting stock prices is the unexpected decline in Mar German retail sales which fell -2.1% m/m, its biggest decline in 14 months, and weaker than expectations of a +0.2% m/m gain. Also, the Apr Euro-Zone economic confidence slipped -1.1 to a 5-month low of 106.2 as soaring energy prices threaten to undermine growth. The euro rose to just under a 16-1/2 month high against the dollar after the Apr Euro-Zone CPI estimate quickened to +2.8% y/y, higher than expected and its fastest pace in 2-1/2 years.
  • The Asian stock markets today closed mostly lower with Japan closed for holiday, Hong Kong -0.36%, China +0.98%, Taiwan -0.36%, Australia -1.02%, Singapore -0.16%, South Korea -0.60%, India -0.81%. Factory output slowed in South Korea after Mar Korea industrial production rose +8.7% y/y, its slowest pace in 6 months and weaker than expectations of a +11% y/y increase. Samsung Electronics closed down 1.8% and led South Korean stocks lower after the world's biggest maker of televisions and flat screens reported Q1 net income of 2.78 trillion won ($2.6 billion), below analysts' estimates of 2.8 trillion won. The company said that it expects the "adverse" business environment to continue in Q2 as "global demand is not 100% clear" due to uncertainty about the global recovery and a possible impact from the earthquake in Japan. The Chinese yuan strengthened to a 17-year high of 6.4892, supported by speculation the PBOC will allow the currency to appreciate to help tame the fastest rate of inflation in China in more than 2 years.
Overnight U.S. Stock News
  • June S&Ps this morning are trading up +1.00 point. The US stock market yesterday closed higher as better-than-expected earnings results offset concerns of slowing economic growth: Dow Jones +0.57%, S&P 500 +0.36%, Nasdaq Composite +0.09%. The Dow and S&P 500 posted 2-3/4 year highs. Bullish factors included (1) the larger-than-expected increase in Mar US pending home sales (+5.1% m/m versus expectations of +1.5% m/m), (2) strong company earnings results as 77% of the 269 companies in the S&P 500 that reported earnings results since Apr 11 have beaten analysts' estimates, (3) strength in energy and raw-material producers after crude rose to a 2-1/2 year high and gold climbed to a record high, and (4) the decline in the 10-year T-note yield to a 1-month low of 3.295%.
  • Bearish factors for stocks included (1) the weaker-than-expected Q1 US GDP (+1.8% annualized versus expectations of +2.0% annualized), (2) the unexpected jump in weekly initial US unemployment claims to a 3-month high (+25,000 to 429,000 versus expectations of -8,000 to 395,000), and (3) weakness in technology stocks led by the slide in Akamai Technologies which fell after its sales forecasts missed analysts' projections.
  • Research in Motion (RIMM) tumbled 11% in European trading after the company late yesterday cut its Q2 EPS to a range of $1.30 to $1.37 a share, below last month's forecast of profit of $1.47 to $1.55 a share.
Today's Market Focus
  • June 10-year T-notes this morning are down -1 tick. T-note prices yesterday rose to a 1-1/4 month high on weaker than expected US economic data but pared some of their gains late in the session after the Treasury's 7-year T-note auction was met with weak demand: TYM11 +17, FVM11 +12.5, EDU11 +1.5. The 10-year T-note yield fell to a 1-month low of 3.295%. Bullish factors included (1) the weaker-than-expected Q1 US GDP (+1.8% annualized versus expectations of +2.0% annualized), (2) the unexpected jump in weekly initial US unemployment claims to a 3-month high (+25,000 to 429,000 versus expectations of -8,000 to 395,000), and (3) the action by the Fed to purchase $6.678 billion of Treasuries as part of its QE2 asset-purchase program. Bearish factors included (1) the larger-than-expected increase in the Q1 core PCE deflator which rose at the fastest pace in 15 months (+1.5% q/q annualized versus expectations of +1.4% q/q annualized), (2) the larger-than-expected increase in Mar US pending home sales (+5.1% m/m versus expectations of +1.5% m/m), (3) weak demand for the Treasury's $29 billion 7-year T-note auction that produced a bid-to-cover ratio of 2.63, weaker than the 12-auction average of 2.88 and the lowest in 5 months, and (4) reduced safe-haven demand for Treasuries after the S&P 500 rose to a 2-3/4 year high.
  • The dollar index this morning is lower with the dollar/yen -0.19 yen and the euro/dollar +0.39 cents. The dollar index yesterday fell to a 2-3/4 year low and closed lower after weak US economic data undercut the dollar while the fall in Apr German unemployment to a 19-year low boosted the euro: Dollar Index -0.398, USDJPY -0.619, EURUSD +0.00345. Bearish factors included (1) weaker-than-expected US economic data that included slower-than-expected growth in Q1 US GDP and weekly initial jobless claims that rose to a 3-month high, and (2) strength in the euro which climbed to a 16-1/2 month high against the dollar after Apr German unemployment fell -37,000 to 2.97 million, a 19-year low along with supportive interest rate differentials for the euro as the 3-month Euribor rate rose to a 2-year high of 1.375%. Bullish factors included (1) the action by the BOJ to cut its growth estimate for the year ending Mar 2012 to 0.6% from a Jan prediction of 1.6%, which is yen negative, and (2) the unexpected decline in Mar French consumer spending, which is euro bearish.
  • June crude oil prices this morning are trading down -23 cents a barrel and June gasoline is -1.21 cents per gallon. Crude oil and gasoline prices yesterday fluctuated between gains and losses and finished higher as the plunge in the dollar offset weaker-than-expected economic data: CLM11 +$0.10, RBM11 +1.14. Jun crude posted a 2-1/2 year high, while Jun gasoline posted a contract high and nearest-futures May gasoline climbed to a 2-3/4 year high. Bullish factors included (1) the slide in the dollar index to a 2-3/4 year low, which boosts investment demand in commodities, (2) the decline in Apr German unemployment to a 19-year low, which shows economic strength that my lead to increased fuel demand, and (3) the rally in the S&P 500 to a 2-3/4 year high, which bolsters confidence in the economic outlook and energy demand. Bearish factors included (1) the unexpected increase in weekly US jobless claims to a 3-month high, which shows weakness in the US labor market that may curtail fuel demand, (2) the weaker than expected Q1 US GDP, which shows slower-than-expected energy consumption, and (3) the action by the BOJ to cut its GDP growth forecast for Japan this year, which signals reduced energy consumption and demand.
Today's U.S. Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap) CVX-Chevron (BEST earnings consensus $3.02), MRK-Merck (0.84), CAT-Caterpillar (1.31), SPG-Simon Property Group (0.54), NEE-NextEra Energy (0.95), AON-AON Corp. (0.80), WY-Wyerhaeuser (0.09), ETR-Entergy (1.33), VFC-VF Corp. (1.62), ITT-ITT Corp. (0.93), CPN-Calpine (-0.13), REGN-Regeneron Pharmaceuticals (-0.32), NWL-Newell Rubbermaid (0.28), FLIR-FLIR Systems (0.35), PBI-Pitney Bowes (0.53), LEA-Lear (1.15), CVH-Coventry Health Care (0.52).

Global Financial Calendar

Friday 4/29/11
United States
0830 ET Q1 employment cost index expected +0.5%, Q4 +0.4%.
0830 ET Mar personal spending expected +0.5%, Feb +0.7%. Mar personal income expected +0.4%, Feb +0.3%. Mar PCE deflator expected +1.9%, Feb +1.6% y/y. Mar PCE core deflator expected +0.1% m/m and +0.9% y/y, Feb +0.2% m/m and +0.9% y/y.
0840 ET St. Louis Fed President James Bullard delivers opening remarks at the 2011 Federal Reserve Community Affairs Research Conference in Arlington, VA.
0945 ET Apr Chicago purchasing managers index expected -2.4 to 68.2, Mar –0.6 to 70.6.
0955 ET Final Apr U.S. University of Michigan consumer confidence expected +0.4 to 70.0, previous +2.1 to 69.6.
1230 ET Fed Chairman Ben Bernanke speaks at the Fed’s Community Affairs Research Conference in Arlington, VA.
Germany
0200 ET Mar German retail sales expected +0.2% m/m and +1.5% y/y, Feb -0.4% m/m and +1.1% y/y.
France
0245 ET Mar French producer prices expected +0.7% m/m and +6.4% y/y, Feb +0.8% m/m and +6.3% y/y.
Euro-Zone
0400 ET Mar Euro-Zone M3 money supply expected +1.9% 3-mo avg and +2.2% y/y, Feb +1.7% 3-mo avg and +2.0% y/y.
0500 ET Apr Euro-Zone CPI estimate expected +2.7% y/y, Mar +2.6% y/y.
0500 ET Apr Euro-Zone economic confidence expected -0.3 to 107.0, Mar -0.6 to 107.3.
0500 ET Mar Euro-Zone unemployment rate expected unchanged at 9.9%, Feb -0.1 to 9.9%.
Canada
0830 ET Feb Canada GDP expected unchanged m/ma and +3.1% y/y, Jan +0.5% m/m and +3.3% y/y.
Japan
n/a Japanese markets closed for Showa Day.

 

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