Strong US Earnings Distract from Chinese Worries

Economic Data

- (ES) Spain Jun YTD Budget Balance: -€23.5B v -€23.3B prior
- (IE) Ireland Jun Retail Sales Volume M/M: -3.9% v -1.5% prior; Y/Y: 5.4 % v 8.4% prior
- (BR) Brazil July FGV Construction Costs M/M: 0.7% v 0.7%e
- (US) Goldman Economist Chain Store Sales w/e July 25th w/w: -0.2%; y/y: +2.2%
- (CA) Canada Jun Industrial Product Price M/M: 0.5% v 0.4%e; Raw Materials Price Index M/M: 0.0% v 1.0%e
- (US) Weekly Redbook Sales w/e July 25th: 1.0% y/y, July MTD m/m: +0.1%; July MTD y/y: +1.2%
- (US) May S&P/ CaseShiller 20 City M/M: -0.18% v +0.30%e; Y/Y: 4.94% v 5.60%e; House Price Index: 179.03 v 180.34e
- (US) July Preliminary Markit Services PMI: 55.2 v 55.0e; Composite PMI: 55.2 v 54.6 prior
- (US) July Consumer Confidence Index: 90.9 v 100.0e
- (US) July Richmond Fed Manufacturing Index: 13 v 7e

More Chinese government support stabilized the Shanghai Composite in trading earlier today, but before Beijing stepped in it was looking like another very ugly day. European equities closed with solid gains and US indices are being lifted higher by a handful of very strong earnings reports. As of writing, the DJIA is up 0.58%, the S&P500 is up 0.55% and the Nasdaq is gaining 0.35%.

Consumer confidence was rattled by the Chinese slump and the Greek crisis in July, as seen in the confidence reading out this morning. July consumer confidence fell to the lowest level since last September. Current conditions was still looking relatively healthy at 107.4, but the outlook for next six months dropped sharply to 79.9 this month from 92.8 in June.

The S&P/Case-Shiller home price data showed price growth settling at more steady levels, but the most telling parts of the report reflect demand still strongly outpacing supply. In earnings, homebuilder DH Horton continues to see double-digit growth in orders and backlog, with earnings and profits looking strong. DHI is up 1.7%, while rival HOV is up more than 4%.

Shares of Ford are up 2% after the firm widely beat expectations in its second quarter report, echoing results from GM last week. Profits were up more than 10% y/y and EPS beat estimates. Results were driven by record performance in North America and China, while Europe was looking a bit better. UPS is up 4.5% on strong EPS in its second quarter, although revenue was down slightly and missed expectations. DuPont is in the red on a less-than-stellar performance, with revenue dragging. DuPont also cut its FY outlook. Shares of DD had lost 6% but are just below unchanged as of writing.

Pfizer's earnings fell about 10% in the second quarter, although the firm still managed to top EPS estimates. Revenue was down about 7% y/y, but up 1% ex FX translation. Shares of PFE were off nearly 2% in the first minutes of trade, but positive conference call comments have taken them back to unchanged. In regards to the ongoing pharma merger scene, Pfizer said it was actively evaluating potential deals. Merck is up 1.5% after beating expectations and raising its FY guidance.

Looking Ahead

- 13:00 (US) Treasury to sell $26.0B in 2-Year Notes
- 16:30 (US) Weekly API Oil Inventories
- 19:50 (JP) Japan Jun Retail Sales M/M: -0.9%e v +1.7% prior; Y/Y: 1.0%e v 3.0% prior; Large Retailers' Sales: 1.4%e v 5.3% prior
- 23:00 (CN) China to sell 3-Year Bonds