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U.S Market Update

Thu, Jul 23 2009, 15:19 GMT

TradeTheNews.com

- Unbridled enthusiasm is sending the major US equity indices through the roof this morning, with the DJIA breaking above 9,000 within the first hour of trade. Solid quarterly results from Dow components and a positive housing report from the National Association of Realtors is fueling this morning's rally. The June existing home sales number was in line with expectations, but the m/m growth trend in overall sales and median prices, coupled with a faint decline in inventory are all good news for housing. The NAR also emphasized that the share of distressed properties in sales is "declining measurably," further indicating a trend toward normalization. Front-month NYMEX crude fell below $65 before the opening bell, but has shot up above $66 along with the equity rally. Treasury prices are declining as investors' risk appetite rebounds with every tick higher in stocks. The 10-year yield is back above 3.6% while the long bond is testing 4.5%.

- Dow components McDonalds, 3M and AT&T reported solid second-quarter results this morning. 3M was the standout, soundly beating top- and bottom-line expectations and boosting its forecast for FY09. 3M's CEO said he expects the US economy has bottomed out, although he also warned the company is not seeing any improvement in demand yet. McDonalds and AT&T both modestly exceeded analysts' estimates and reported healthy gains in major business metrics. Economic bellwether UPS reported in line with the Street, but missed a bit on its guidance for next quarter. On the conference call, UPS executives said that while they are seeing economic stabilization, there have been no signs that growth is returning, noting that the Q3 business environment would remain similar to that in Q2.

- Tech names Qualcomm, eBay and EMC all modestly exceeded expectations. Chipmaker Qualcomm's Q4 results were positive, much better than AMD's disastrous quarter but hardly the blowout quarter seen out of Intel. Qualcomm also raised its FY09 revenue outlook. Online retailer eBay also met consensus estimates and guided slightly above par for next quarter. EMC said the Data Domain merger would boost profits in 2010. Sandisk roared back to profitability, crushing estimates for a $0.16 loss and nearly doubling its margins.
 
- Ford's Q2 results showed that the automaker is firmly on the highway to stability, with executives insisting the firm would "achieve or exceed" its 2009 financial targets. Even Ford Motor Credit managed to turn a proft. After taking account of its debt reductions, the company was in the black to the tune of $2.3B, although its manufacturing operations are not profitable yet.

- Mid-cap steel makers Nucor and Reliance Steel did not have a good second quarter. Reliance racked up an unexpected quarterly loss and fell $200M short on the top line, making for the company's first net loss since becoming a public company in 1994. Nucor's loss was slightly smaller than expected. Nucor executives are concerned that the marginal uptick in orders is not representative of an increase in "real" demand but more a result of both inventory adjustments and concern over rising prices. Reliance's CEO said he believes the worst is over but still does not anticipate any meaningful improvement in demand for the balance of the year.

- In other earnings, tobacco names Phillip Morris and Reynolds American both beat earnings expectations and raised their FY09 forecasts modestly. Fertilizer company Mosaic was solidly in line with the Street, while competitor Potash Corp. slipped a bit. Mosaic said customer confidence is returning, pipeline inventories have been drawn down and soil nutrients need to be replenished, pointing to recovering crop nutrient markets in 2010. Potash cut its 2009 forecast and limited its qualitative comments to the standard line that buyers have been extremely cautious thanks to the crisis.

- In currency trading, the dollar maintained a soft footing early in the New York session as price action followed in the wake of US earnings. In addition, the euro's inability to take out the recent high of 1.4277 was seen as a good reason to lighten up positions and take profits. EUR/USD briefly tested below the 1.4200 level but headed higher as the Dow Jones tested 9,000. The JPY was broadly weaker against the major pairs ahead of tomorrow's Japanese investment trust launch. USD/JPY probed toward the 95 neighborhood, up over 130 pips, while the EUR/JPY and GBP/JPY pairs were well over two big figures firmer in the session. JPY weakness was initially attributed to rumors that the Japanese MoF might have told some large Japanese accounts that it is safe to buy USD/JPY around the 93 area. AUD/USD struggled to stay above the 0.82 area as chatter circulated that the Australian Central bank (RBA) might conduct more reserve management activity.
 

Published on  Thu, Jul 23 2009, 15:19 GMT