Daily Market Reports | Jul 20 2012
By Greg Peel
The Dow rose 34 points or 0.3% while the S&P gained 0.3% to 1373 and the Nasdaq added 0.8%.
One need only look at the Nasdaq move last night, and Wednesday night's similar outperformance, to see the story of US earnings in the second week of the season. Tech stocks dominate the Nasdaq (Apple is around 20%) and form an influential sector within the S&P 500. The big names (not including Apple, yet) are also included in the Dow. Following on from a solid result from Intel (Dow) on Wednesday, last night IBM (Dow) also posted a healthy beat.
After the bell, and thus to be reflected in tonight's index moves, both Google and Microsoft (Dow) posted winners and their shares are up in the after-market.
Bearing in mind that expectations were sharply downgraded leading into the season, this week's positive tech sector results, along with generally positive results from some of the big consumer staple names, have provided relief for Wall Street rather than any great feeling of excitement. In many cases companies have posted profit reductions or actual losses, so “beats” have been more of a “less bad” result than a “good” result compared to forecasts. The big banks have certainly fallen into the “less bad” category, but while JP Morgan (Dow), Citigroup, Wells Fargo and Goldman Sachs have seen positive responses and Bank of America's (Dow) earnings were middling, last night Morgan Stanley broke the run with a solid miss.
The beleaguered former investment bank has had a tough time of it lately, seeing its share price punished over the Faceplant IPO scandal. Last night's result added to the pain. But MS has its own unique problems and the general score card for the big banks this season has been “okay”. There's still a way to go, and we're yet to roll out some of the big industrial names. Tonight we'll see finger-in-every-pie economic bellwether General Electric (Dow) report.
It was not a great night for US economic data. The housing market, it would seem, is struggling through a “two steps forward, one step back” recovery, having seen a solid housing starts number earlier in the week only to be followed by a 5.4% fall in May existing home sales last night. The Philadelphia Fed manufacturing index improved, but only to minus 12.9 from minus 16.6 in June. It's the third consecutive contraction number for this zero-neutral index. The Conference Board leading economic index for June also fell 0.3%.
Over in Europe, the German parliament voted in favour of extending E100bn to prop up Spain's struggling banks. Now that Merkel is enjoying more favourable support, the vote was as expected, while an opposite outcome would have been disastrous. Europe thus stumbles, no doubt, towards the next crisis.
The combination of the German vote and the weaker US data saw the euro rise and dollar index fall last night, down 0.1% to 82.88. The dollar fall appeared to awaken a somnolent base metals market just a little, with gains of 1-2% resulting. However, there were also other factors to consider which have been bubbling under the surface of late.
There was a bombing in a Bulgarian beach resort last night that is popular with Israelis. Israel has blamed Iran. The Syrian crisis also now appears to have taken a turn for the worse, with three senior government officials killed in a suicide bombing. Syria is not a major oil exporter, but its closest ally is Iran, so rising tensions in the region generally are enough to send oil prices further northward. Brent was up US$2.64 to US$107.80/bbl last night and West Texas lifted US$2.36 to US$92.93/bbl.
Geopolitical tensions were also cited for gold's US$8.10 gain to US$1581.60/oz. Meanwhile, the world' safe haven currency of choice was up yet another 0.6% to US$1.0427.
All in all it was a stumble-along day for Wall Street, with nothing much to inspire strong buying and no great reason to sell. Short-side players are wary of being caught out by QE3, while on the long-side there's nothing really to inspire bullishness.
The SPI Overnight rose 4 points.
With no major production reports out today nor data of note, we should see a quiet Friday locally. Next week, however, we'll begin to see the first trickle of results in our own, six-monthly earnings season, as well as more production reports from the miners.
In the US, the closely watched GE result will be the highlight.
All overnight and intraday prices, average prices, currency conversions and charts for stock indices, currencies, commodities, bonds, VIX and more available in the FNArena Cockpit. Click here.
All paying members at FNArena are being reminded they can set an email alert specifically for The Overnight Report. Go to Portfolio and Alerts in the Cockpit and tick the box in front of The Overnight Report. You will receive an email alert every time a new Overnight Report has been published on the website.
