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Barchart Morning Call 5/19

Barchart Morning Call - 31 mins ago
Overnight Developments
  • Global stocks are mixed with the European Euro Stoxx 50 up +0.97% and June S&Ps up +4.50 points. The dollar and Treasuries are weaker while the British pound rallied when UK retail sales rose more than expected. Apr UK retail sales with auto fuel rose +1.1% m/m and +2.8% y/y, stronger than expectations of +0.8% m/m and +2.5% y/y as warm weather and the extra bank holiday for the royal wedding boosted consumer spending. The euro strengthened against the dollar after Goldman Sachs cut its 3-month dollar forecast to $1.45 per euro from $1.40, saying "With unemployment still high, fiscal consolidation looming and continued weakness in the real estate sector, the growth outlook remains less compelling in the US than in may other regions or countries." Stock prices received a boost after Citigroup revised up its global per-share earnings forecast for this year to +18% from a Sep forecast of +12%, citing stronger revenue growth and sustained margins. Increased M&A activity also lifted US and European stocks as Takeda Pharmaceutical agreed to buy Nycomed for 9.6 billion euros ($13.7 billion) and Toshiba offered $2.3 billion for Switzerland's Landis+Gyr AG.
  • The Asian stock markets today closed mixed with Japan down -0.43%, Hong Kong +0.66%, China -0.60%, Taiwan -0.58%, Australia +1.34%, Singapore +1.00%, South Korea -1.88%, India +0.31%. Japanese stocks closed lower after the economy shrank more than expected in Q1 as the Mar 11 earthquake and tsunami disrupted production and prompted consumers to cut back spending. Q1 Japan GDP was revised down to a contraction of -0.9% q/q and -3.7% annualized from the originally reported -0.5% q/q and -2.0% annualized, which sent Japan into its third recession within the last decade. The yen weakened to a 3-week low against the dollar on speculation the BOJ and the government will continue to provide record stimulus measures to Japan's economy. China's Shanghai Stock Index closed lower, led by declines in property developers and power producers, on concern the PBOC will boost borrowing costs and higher coal prices will hurt power producers' corporate earnings. China's National Business Daily reported that inflation may exceed 6% in June or July due to a lower comparison base last year.
Overnight U.S. Stock News
  • June S&Ps this morning are trading up +4.50 points. The US stock market yesterday finished higher after Dell reported robust quarterly earnings results and as energy and raw-material producers gained after commodities rallied: Dow Jones +0.65%, S&P 500 +0.88%, Nasdaq Composite +1.14%. Bullish factors for stocks included (1) a rally in technology stocks after Dell, the world's second-largest computer maker, reported better-than-expected earnings results, (2) strength in energy and raw-material producers as commodities climbed on signs of increased demand, (3) overall strong company earnings results as over two thirds of the 446 companies in the S&P 500 that have reported earnings since Apr 11 have topped analysts' estimates, and (4) the minutes of the Apr 26-27 FOMC meeting in which policy makers said that they have begun to coalesce on a strategy to reverse record monetary stimulus but that talks over an exit strategy don't mean that tightening "would necessarily begin soon."
  • Bearish factors included (1) the warning from Treasury Secretary Geithner who said budget deficits threaten to erode the US economy and security and that they can't be reduced with "magical thinking," (2) comments from ECB Executive Board member Stark who said a Greek debt restructuring "would create a catastrophe" because it would damage the banking system, and (3) hawkish comments from St. Louis Fed President Bullard who said "I still think it is reasonable" to expect Fed tightening by the end of the year.
  • PetSmart (NASDAQ:PETM) rose 4.5% in pre-market trading after it reported Q1 profit of 61 cents a share, better than expectations of 55 cents.
  • Intel (NASDAQ:INTC) slipped 2.2% in European trading after Goldman Sachs cut its recommendation on the stock to "sell" from "neutral," citing excess supply and increased competition from tablet computers.
Today's Market Focus
  • June 10-year T-notes this morning are down -6.5 ticks. T-note prices yesterday trended lower the entire day as the stock market rallied and after hawkish comments from St. Louis Fed President Bullard and the FOMC meeting minutes prompted long liquidation in Treasuries: TYM11 -13, FVM11 -8.5, EDU11 -2.0. Bearish factors included (1) reduced safe-haven demand for Treasuries as the stock market rallied, (2) hawkish comments from St. Louis Fed President Bullard who said "I still think is reasonable" to expect Fed tightening by the end of the year, and (3) the Apr 26-27 FOMC meeting minutes in which policy makers discussed a process for withdrawing record stimulus. Bullish factors included (1) the action by the Fed to purchase $1.81 billion of Treasuries as part of its QE2 asset-purchase program, and (2) the prediction from Nomura that the 10-year T-note yield may fall to 2.90% in the next few weeks will as equities and commodities decline as the end of QE2 looms next month.
  • The dollar index this morning is weaker with the dollar/yen +0.20 yen and the euro/dollar +0.16 cents. The dollar index yesterday rebounded from early losses and finished higher after the Apr-26-27 FOMC meeting minutes revealed that Fed members began to coalesce on a strategy to begin removing record stimulus: Dollar Index +0.076, USDJPY +0.261, EURUSD +0.00125. Bullish factors included (1) the Apr-26-27 FOMC meeting minutes in which Fed members discussed exit strategies from record stimulus measures, (2) weakness in the British pound which fell to a 1-1/4 month low against the dollar after minutes from the BOE monetary policy meeting earlier this month showed policy makers voted 6-3 to keep interest rates on hold, (3) dollar supportive comments from St. Louis Fed President Bullard who said "I still think is reasonable" to expect Fed tightening by the end of the year, and (4) the -0.3% decline in Mar Euro-Zone construction output which fell for a second month and is euro negative. Bearish factors included (1) the rally in the stock market, which reduced the safe-haven demand for the dollar, and (2) euro supportive comments from EU Economic and Monetary Affairs Commissioner Rehn who said the base of the European economic expansion is "broadening from exports to domestic demand and thus the recovery is becoming more solid and self-sustaining."
  • June crude oil prices this morning are trading up +34 cents a barrel and June gasoline is +0.63 of a cent per gallon. Crude oil and gasoline prices yesterday rallied sharply after an unexpected decline in weekly crude and distillate inventories and an increase in US gasoline demand: CLM11 +$3.19, RBM11 +3.62. Bullish factors included (1) the unexpected decline in weekly DOE crude inventories (-15,000 bbl versus expectations of +1.7 million bbl), (2) the unexpected decline in weekly DOE distillate supplies which fell to a 2-year low (-1.16 million bbl to 143.1 million bbl versus expectations of +500,000 bbl), (3) the smaller-than-expected climb in weekly gasoline inventories (+119,000 bbl versus expectations of +1.0 million bbl), (4) the +2.5% increase in weekly US gasoline demand to 9.05 million barrels a day, the first gain in 3 weeks, and (5) the prediction from that China's fuel supplies may tighten as its largest refineries shut about 7% of their capacity in Q3 for scheduled maintenance. Bearish factors included (1) the stronger dollar, which reduces investment demand in commodities, and (2) the larger than expected increase in the US refinery utilization rate which climbed to its highest level in 1-1/2 months and bodes well for increased production of gasoline and distillate supplies in the weeks ahead (+1.5 to 83.2% versus expectations of +0.4 to 82.1%).
Today's U.S. Earnings Reports

Earnings reports (confirmed releases, sorted by mkt cap) (BEST earnings consensus $0.27), INTU-Intuit (2.28), GPS-The Gap (0.39), ADSK-Autodesk (0.37), ROST-Ross Stores (1.48), SHLD-Sears Holdings (-1.12), DLTR-Dollar Tree (0.75), MPEL-Melco Crown Entertainment Ltd (0.05), WSM-Williams-Sonoma (0.28), GME-GameStop (0.54), NDSN-Nordson (0.88), FL-Foot Locker (0.44), ARUN-Aruba Networks (0.15), BRCD-Brocade Communication Systems (0.10), TDW-Tidewater (0.51), FLO-Flowers Foods (0.46), TTC-Toro (1.61).

Global Financial Calendar

Thursday 5/19/11
United States
0830 ET Weekly initial unemployment claims expected -14,000 to 420,000, previous -44,000 to 434,000. Weekly continuing claims expected -31,000 to 3.725 million, previous +5,000 to 3.756 million.
1000 ET Apr existing home sales expected +2.0% to 5.20 million , Mar +3.7% to 5.10 million.
1000 ET Apr leading indicators expected +0.1%, Mar +0.4%.
1000 ET May Philadelphia Fed manufacturing index expected +1.5 to 20.0, Apr -24.9 to 18.5.
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 May 24-26.
1200 ET New York Fed President William Dudley speaks at an event in Middletown, NY.
1300 ET Treasury auctions $11 billion 10-year TIPS.
1330 ET Dallas Fed President Richard Fisher speaks on ?Federal Reserve Functions and Economic Update? at a community forum in McAllen TX.
1340 ET Chicago Fed President Charles Evans speaks at the 2010 Global Corporate Treasurers Forum in Chicago.
1630 ET Weekly money supply report and Fed balance sheet.
0030 ET Revised Mar Japan industrial production, previous -15.3% m/m and -12.9% y/y.
0030 ET Mar Japan capacity utilization, Feb +2.9% m/m.
United Kingdom
0430 ET Apr UK retail sales with auto fuel expected +0.8% m/m and +2.5% y/y, Mar +0.2% m/m and +1.3% y/y.
0430 ET Apr UK retail sales ex auto fuel expected +0.8% m/m and +2.2% y/y, Mar +0.2% m/m and +0.9% y/y.
0600 ET May UK CBI trends total orders expected -9, Apr -11.
0900 ET ECB President Jean-Claude Trichet and Executive Board member Gertrude Tumpel-Gugerell speak in Frankfurt at a colloquium on ?European integration and stability.? provides Financial Quotes, Charts and Technical Analysis for Stock and Commodity Traders.