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U.S Market Update

Wed, Jul 29 2009, 15:44 GMT

TradeTheNews.com

- US equity indices are soft again through the first part of today's session, looking much like the previous four days, with a few weak earnings reports putting pressure on trade. PIMCO's El-Erian reiterated his view before the open that the stock market has gotten ahead of reality on underlying growth and earnings. The Commerce Department's June Durable Goods data was mixed, with the index turning negative again after last month's growth and the ex-transport figure sustaining May's slightly positive trend.

- Commodity markets are all under pressure from a resurgent Greenback.  Weekly DOE crude inventories swelled an unexpected 5M barrels confirming similar data from API yesterday. August NYMEX crude futures have slid more than 5% headed toward the $63 figure, while spot gold and other metals are also dropping noticeably too.  Grain futures are lower across the board as well led by wheat which trades at its lowest level in months.

- Treasury markets are anxiously awaiting this afternoon's $39B 5-year note auction.  Though yesterday's 2-year results were strong on a historical basis, traders did pick up on an appreciable decline from the metrics seen in June.  Prices are rebounding in today's session helped by the consternation in other asset classes.  The long bond yield remains pegged near 4.5% while the benchmark is holding 3.6%.  The benchmark spread has narrowed back towards 250 basis points.

- Sprint continues to hemorrhage monthly wireless subscribers, partially driving an unexpectedly large quarterly loss in Q2. The company lost a total of 1M of these post-paid customers over last quarter, a figure the company said was only partially offset by its pre-paid business. The Palm Pre smartphone is also helping; executives said the Pre helped blunt the assault from Apple's iPhone juggernaut. The other big (but not unexpected) tech news was the official confirmation of a Yahoo/Microsoft search deal, with a ten-year term. The announcement has been expected for a week now, and the only really surprising part of the deal was the lack of any cash component, with the arrangement essentially a search-for-advertising swap. Note that electrical components names Arrow and Tyco Electronics both beat earnings expectations and offered strong guidance for next quarter. Tyco's CEO said demand for consumer products is showing signs of improvement and inventory reductions appear to be substantially over.
 
- Earnings at integrated oil major ConocoPhillips were in line, although its profit was down a shocking 76% on a y/y basis dud to declining revenue margins and revenue was a big miss. Net income from E&P was $725M, about 82% lower than a year ago. Second-tier energy name Hess saw its profit fall even further, down 89% y/y, although it did much better than the Street had expected. Like COP, revenue was well short of expectations.

- Time Warner and Time Warner Cable both had strong quarterly results, with earnings comfortably ahead of the consensus view in the quarter. Both companies also reaffirmed their full-year earnings forecasts. A Time Warner Cable executive warned that the firm has not seen much change in the dismal advertising environment, although a Time Warner, Inc. exec did note that some stability has returned to advertising markets. Online media name IAC Interactive missed bottom-line expectations by a wide margin, but managed to return to profitability after last quarter's loss. Revenue at IACI was better than expected.

- Multiple healthcare names reported results yesterday and today. Benefits manager Medco was in line with expectations across the board; managed care names WellPoint and WellCare beat earnings expectations, and WellCare guided earning well ahead of target for the year; specialty pharmaceutical name Hospira beat top- and bottom-line estimates and guided slightly higher for 2009. Auto rental names Hertz and Penske both crushed earnings estimates. Hertz also raised its full-year forecast. Penske cited cost reduction estimates for its solid quarterly performance.

- In currencies, the dollar and yen have broken from their usual relationship with equity price movements. Overall the late drop in the Chinese equity markets before the New York session made many players wonder whether the July equity rally is sustainable, particularly as the traditional August vacation period commences. The USD was stronger against the major currency pairs as both energy and metals maintained a soft tone in the session. Month-end profit taking appearing to be the overriding sentiment. Germany's July CPI registered its first negative annual reading since reunification back in 1990; ECB officials have expected to experience a brief period of negative inflation in Germany and across the Euro Zone in general. EUR/USD is hovering near session lows of 1.4085 with dealers noting of some Euro sell stops lurking below the 1.4050 area. The 30-day mvg avg currently at 1.4047 level. USD/CAD consolidated under Tuesday's 1.0905 highs, but dealers are noting of some significant USD buy stops building above the 1.0930 area. AUD/USD also consolidated around the 0.8200 area.
 

Published on  Wed, Jul 29 2009, 15:44 GMT