Earnings Season Takes Off

Economic Data

- (US) MBA Mortgage Applications w/e Apr 17th: +2/3% v -2.3% prior
- (TR) Turkey Central Bank (CBRT) left key rates unchanged
- (US) Feb FHFA House Price Index M/M: 0.7% v 0.5%e
- (BR) Brazil Mar Current Account Balance: -$5.74B v -$4.9Be; Foreign Direct Investment (FDI): $4.26B v $3.7Be
- (US) Mar Existing Home Sales: 5.19M v 5.03Me
- (EU) Euro Zone Apr Advance Consumer Confidence: -4.6 v -2.5e
- (US) DOE Crude: +5.32M v +3.0Me; Gasoline: -2.14M v -1.0Me; Distillate: +0.40M v 1.0Me

US and European indices have seen choppy trading this morning as traders digest a torrent of major earnings. Note that sovereign yields are moving noticeably higher this morning with the 10-year bund up six bps and the US benchmark up five basis points as many begin to bet that the deflation scare is coming to an end. As of writing, DJIA is up 0.18%, the S&P500 is up 0.20% and the Nasdaq is up 0.12%.

March existing home sales bounced higher, improving on the flattish February numbers that had been impacted by the harsh winter weather. Sales of previously owned homes climbed to the highest level since September 2013, up 13.5% y/y and beating expectations. In other home builder news, DR Horton met expectations in its second quarter report and offered slightly improved FY guidance. Traders were evidently hoping for more and shares of DHI are off more than 5%, while other homebuilders are down a few percent.

WTI crude had declined to $56 after spending most of the prior week in a $57-58.50 range in the wake of the last DoE inventory data. Last week's report saw the first miss in crude inventory build in some time, but this morning's DoE report and yesterday's API data saw a return to surprisingly large builds. Brent had dropped below $62 but has recovered some losses, to trade around $62.80 today. Note also that the Saudi's claim to have suspended their bombing campaign in Yemen, but press reports suggest that sorties are still being flown today.

In earnings, McDonalds disclosed grim first-quarter results: revenue declined 11% y/y and guest traffic was down in all major segments. However shares are up 4.2% after the firm said it would discloses a major turnaround plan soon and said it closed another 220 locations worldwide in the quarter, on top of a 350 already announced closings. Fellow fast-food name YUM! Brands is up 5.3% despite lower profits and continuing drag in China, as the firm tweaked its FY outlook slightly higher. Coke is up a mere 1% on a solid quarterly report. Shares of high-flyer Chipotle are down 5% after its pork shortage bit into earnings.

Yahoo had recouped its immediate losses from the post-market session yesterday, but is down 1.6% as of writing as analysts pile on with negative commentary on its weak first quarter performance. Boeing is down 2.2% after revenue missed and the backlog shrank. Abbott Labs is up 2% after modestly topping expectations in its first quarter, while Amgen has given up all its earlier 2.5% gains despite good its strong showing in the first quarter.

Perrigo's board has rejected Mylan's initial $205/shr offer (and its implicit defense against a Teva takeover), claiming it undervalues the company. CNBC's Faber reported that Mylan is expected to return with a better offer and is "far from done" in its pursuit of the company. Shares of PRGO were up 4% on the news, while TEVA dropped as much as 2.5%.

Financial press reported on two big new products to launch soon from Google and Tesla. According to reports, Google will be launching its wireless phone service in the US very shortly. Google will use the wireless networks of other companies - Sprint and T-Mobile - to provide bandwidth, and then offer it under a new pricing scheme in which users will be credited for the data they do not use. Next week, Tesla will unveil a new line of electric batteries for use in homes and businesses. The batteries have already been installed in nearly a dozen Wal-Mart stores as part of a test program.

Looking Ahead

- 17:00 (CO) Colombia Feb Trade Balance: -$1.4Be v -$1.8B prior; Total Imports: $4.8Be v $4.9B prior
- 19:00 (KR) South Korea Q1 Preliminary GDP Q/Q: 0.6%e v 0.3% prior; Y/Y: 2.3%e v 2.7% prior
- 21:35 (JP) Japan Apr Preliminary Manufacturing PMI: 50.7e v 50.3 prior
- 21:45 (CN) China Apr Preliminary HSBC Manufacturing PMI: 49.6e v 49.6 prelim