U.S. Market Update – 7/30/10
Friday, July 30th, 2010Economic Data
- (PO) Portugal Jun Industrial Production M/M: -0.5% v +1.2% prior; Y/Y: 3.4% v 3.4% prior
- (PO) Portugal Jun Retail Sales M/M: 1.1% v -1.0% prior; Y/Y: -1.6% v 0.8% prior
- (SA) South Africa Jun Trade Balance (ZAR): 5.6B -1.6Be; Budget balance: 8.9B v 4.6Be
- (BE) Belgium Jun Unemployment Rate: 8.6% v 8.6% prior
- (CA) Canada May Gross Domestic Product M/M: 0.1% v 0.2%e
- (US) Q2 Advanced GDP Q/Q Annualized: 2.4% v 2.6%e; Personal Consumption: 1.6% v 2.4%e
- (US) Q2 Advanced GDP Price Index: 1.8% v 1.1%e; Core PCE Q/Q: 1.1% v 1.0%e
- (US) Q2 Preliminary Employment Cost Index: 0.5%e v 0.6% prior
- (CL) Chile Jun Unemployment Rate: 8.5% v 8.9%e
- (BE) Belgium Q2 Preliminary GDP Q/Q: 0.7% v 0.0% prior; Y/Y: % v 1.6% prior
- (US) July Chicago Purchasing Manager: 62.3 v 56.0e
- (US) July Final University of Michigan Confidence: 67.8 v 67.0e
- (US) July NAPM-Milwaukee: 66.0 v 57.0
US equity indices opened lower this morning in the wake of the first reading of Q2 US GDP. The data lagged expectations somewhat, and the big upwards revision of the final Q1 reading to 3.7 from 2.7% prior made today’s data look even more disappointing. The final reading of July U of Michigan confidence, which is at its lowest level since late 2009, further weakened sentiment. Nevertheless, investors pushed US equity indices back to positive territory in mid morning trading after the relatively strong July Chicago Purchasing Managers Index rose to its highest level since April 2010. Front month crude is in the middle of its range for the session, around $77.60. Copper is hitting fresh multi-month highs, above $3.30 for the first time since late April. December gold is gaining slightly, to trade around $1,177 as desks eye $1180 as key level. The long bond yield has slipped back to 4% while the 10-year moved back towards 3.9% as demand remains firm.
Earnings from Chevron echoed yesterday’s quarterly report from Exxon: earnings better than expected (and more than double year-ago levels) but revenue a bit below consensus. Like the rest of the industry, refining profit margins rose on returning demand for gasoline and diesel fuel. These factors certainly aided Sunoco even more, as the downstream name crushed earnings and revenue targets. Sunoco said its refining business was profitable for the first time since the first quarter of 2009. Shares of coal miner Arch Coal are up 3% after the firm reported a much better-than-expected profit. The CEO warned that while coal markets have improved considerably since this time last year, they still remain well below the levels of the bull market of 2008.
Quarterly reports from MetLife are usually a staid affair. Not this quarter, as the insurance giant crushed consensus expectations in its Q2 report, coming in well ahead of the Street. Earnings were driven by unusually strong margins in the group life and individual life businesses. Smaller insurance name Genworth Financial is down sharply after the firm missed revenue targets. Shares of health insurance name Coventry slipped in early trading despite a strong quarterly report, although CVH is back around even mid morning. KLA
IT sales and marketing firm Ingram Micro beat expectations in its Q2 report, although it said revenue in Q3 would be flat sequentially. Note that the firm’s European revenues declined notably from the prior quarter. Semi name Tencor met revenue expectations and beat profit targets. First Solar had strong Q2 results and increased its outlook for the full year. The company said revenues rose on increased production volumes and systems revenue, partially offset by declining prices and lower euro FX rates.
In other earnings, sin stocks Wynn Resorts and Fortune Brands both beat expectations. Fortune also raised its full-year outlook. Coinstar, parent of the popular RedBox movie rental service, exceeded earnings but missed revenue targets. The firm’s guidance for Q3 was underwhelming. Results from autoparts manufacturers American Axle and Borg Warner were ahead of expectations. Axle said it expects favorable sales and production conditions for automakers to continue throughout the second half of 2010, a sentiment echoed by Borg.
The USD started the NY morning on a softer tone as concerns over the growth outlook weighed upon sentiment. The GDP data and personal consumption did fail to meet expectations as some of the whisper numbers suggested and the US Treasury two-year note yield decline to fresh record lows below 0.55%. Benchmark revisions painted a bleaker picture of the great recession as the US economy shrank 4.1% from Q4 2007 to Q2 2009 versus the prior calculation of a 3.7% drop. Household spending fell 1.2% in 2009, twice as much as previously projected and the biggest decline since 1942. The JPY maintained a firm tone on risk aversion flows and tested below the 86.00 at one point. Better data out of the Chicago PMI and Michigan Confidence helped to sooth equity market jitters and took USD/JPY back above the 86.60 level.
Looking Ahead
- 12:00 (CO) Colombia Jun Unemployment Rate: 12.8%e v 12.8% prior
- 15:00 (AR) Jun Construction Activity Y/Y: No est v 11.8% prior
- 15:30 (MX) Mexico Jun Budget Balance (YTD): No est v -3.8B prior
Written by Trade the News
