More Earnings Misses Weigh on DJIA

Economic data

- (TR) Turkey Central Bank (CBRT) kept key rates unchanged, as expected
- (BR) Brazil Jun Unemployment Rate: 6.9% v 6.9%e
- (US) Jun Chicago Fed National Activity Index: +0.08 v -0.05e
- (US) Initial Jobless Claims: 255K v 278Ke; Continuing Claims: 2.207M v 2.23Me
- (CA) Canada May Retail Sales M/M: 1.0% v 0.6%e; Retail Sales Ex Auto M/M: 0.9% v 0.8%e
- (ZA) South Africa Central Bank (SARB) raised Interest Rate by 25bps to 6.00% (as expected)
- (EU) Euro Zone July Advance Consumer Confidence: -7.1 v -5.8e
- (US) Jun Leading Index: 0.6% v 0.3%e
- (US) Weekly EIA Natural Gas Inventories +61 bcf v +68 to +72 bcf expected

US equity indices are looking heavy for a third consecutive session. A few big earnings disappointments are not helping, but the overall tone out of earnings is hard negative. The dollar continues to soften, with EUR/USD testing above 1.1000. The DJIA is down 0.34%, the S&P500 is off 0.15% and the Nasdaq is flat.

Weekly initial jobless claims fell sharply to their lowest level since 1973 and widely undershot expectations. Analysts said not to read too much into the claims numbers, given they are strongly distorted by summer factory retooling shutdowns and school vacations, rather than any fundamental shifts in labor market conditions.

General Motors disclosed very strong profit growth in its second quarter, with EPS blowing out expectations thanks to impressive margin growth. Shares were up more than 8% in the premarket, but are down to about +5% presently. Caterpillar is off its worst levels, down 2%, after disclosing moderate y/y declines in both revenue and earnings, even as both met expectations. Caterpillar warned that many of the key industries it serves remain weak, and the firm is not seeing sustained signs of improvement.

Credit card names American Express and Discover Financial remain down about 2.5% a piece this morning after earnings out yesterday evening. While EPS was better, revenue fell about 4% y/y and missed expectations. FX continues to be a big headache for the firm. Discover's earnings fell 7% y/y thanks to a big jump in expenses and a decline in its payment network utilization. Shares of MA are in the red in sympathy, however Visa remains in the green.

McDonalds saw its seventh straight quarterly sales decline, with global and US comps both in the red in the firm's second quarter. Micky D's continues to blame heavy competitive pressures for its quarterly woes. Shares of MCD are unchanged on the session.

Airlines United and Southwest have both seen impressive gains this morning after largely in-line quarterly results. United saw very good y/y profit growth, although revenue was down slightly y/y. Shares of UAL were down about 15% on the year heading into the report and are up 3% or so on the session. Southwest saw good y/y gains in profits and revenue. Shares of LUV were up nearly 10% in the first minutes of cash trading, but are back around +5.5% as of writing.

Lilly and Bristol-Meyers both crushed EPS and revenue expectations, and raised FY guidance in second-quarter reports. For Lilly, the downward pressure of generics and FX were offset by a significant surge from its animal health business. BMY's saw a 7% y/y rise in revenues including FX. Without currency, revenues would have been up a stellar 16% y/y. BMY is down 1% while LLY is flat.

There have been reports out since last night that Anthem will announce a deal to acquire Cigna very soon, in a $48 billion deal valued at around $188/shr. CNBC's Faber said the companies boards are meeting today, and that the deal will be about 50/50 cash and stock. The massive deal would be the fourth largest this year, would remake the entire US healthcare market and would likely receive extensive anti-trust scrutiny. In other deal news, Nikkei will acquire the Financial Times from Pearson for about $1.3 billion.

Looking Ahead

- 13:00 (US) Treasury to sell $15B in 10-Year TIPS
- 17:00 (KR) South Korea July Consumer Confidence: No est v 99 prior
- 18:45 (NZ) New Zealand Jun Trade Balance (NZD): 100Me v 350M prior; Exports: 4.1Be v 4.4B prior; Imports: 4.0Be v 4.0B prior
- 21:00 (PH) Philippines May Trade Balance: -$100Me v -$301M prior; Imports Y/Y: -6.7%e v -12.8% prior
- 21:35 (JP) Japan July Preliminary PMI Manufacturing: 50.5e v 50.1 prior
- 21:45 (CN) China Caixin July Preliminary PMI Manufacturing: 49.7e v 49.4 prior
- 22:05 (NZ) New Zealand to sell NZD200M in 3% 2020 Bonds