Futures are ~70bps lower this morning on European weakness stemming from the widening of Greek credit default swaps to record levels, a slate of earnings disappointments in the U.S. (at least relative to the unpublished “whisper numbers”), negative Fitch commentary on Japan, and concern ahead of President Obama’s NYC speech on financial reform later today. Additionally, U.S. March Producer Prices (month-over-month) indicated some inflationary pressure, and came in at +0.7% vs. the +0.5% estimate and the prior -0.6%. Year-over-year PPI was in-line at +6%, which is slightly higher than the prior +4.4% reading. Further, Initial Jobless Claims offered little in the way of good news – claims for the week ending April 17th were 456k vs. the 450k estimate, and Continuing Claims were 4.646M vs. the 4.6M estimate. Regarding
, here’s this morning’s news courtesy of Bloomberg: Greece
April 22 (Bloomberg) -- Greek bond yields surged to the highest since 1998 as the country’s worsening budget outlook put pressure on the government to accept a European Union bailout and ignore street protests against its austerity measures.
’s benchmark 10-year bond yield rose to 8.564 percent, more than twice the rate on bunds. As a civil servant strike closed hospitals and shut the 2,500-year-old Parthenon temple, the EU said today that Greece ’s deficit in 2009 was worse than previously forecast. EU officials lifted their estimate to 13.6 percent of gross domestic product from 12.7 percent and said it could top 14 percent. Greece
Prime Minister George Papandreou is under fire from voters who say his budget cuts have gone too far and from investors who argue that further action is needed to reduce a deficit that is four times bigger than European Union rules allow. As Greek lawmakers meet EU and International Monetary Fund officials to negotiate loan conditions, the premium investors demand to hold Greek debt over German bonds reached 522 basis points.
Ireland’s 2009 deficit is actually more (14.3% of GDP) than ’s (13.6% of GDP) as market pundits consider the other dominos to fall in the euro-area. Weakness in Europe has led to something of a “flight to quality” in the USD, and subsequent USD strength can weigh on Greece equities. U.S.
In earnings news, the latest batch of results has featured headline better-than-expected earnings from Pepsico (PEP; flat premkt), Qualcom (QCOM; -7%), eBay (EBAY; -7%), Starbucks (SBUX; +1.5%), BB&T (BBT; -4%), and Fifth Third (FITB; -1%), yet most are trading lower after falling short of the whisper number, or true earnings expectations. Nokia (NOK; -14%) is one of the few to have come short of the headline consensus, while Dow component Verizon (VZ; -2%) had in-line results. In M&A news, CenturyLink (CTL) is buying Qwest (Q) in a $10B stock swap deal.
In addition to the “stern talking to” expected out of Obama today, note that Senators Dodd and Shelby of the Banking Committee have also agreed on a bipartisan financial reform bill that will be presented to the Senate today. Of course, all of this is set against yesterday’s Pew Research Survey results indicating that confidence in government is at an all-time low:
Opinions about elected officials are particularly poor. In a follow-up survey in early April, just 25% expressed a favorable opinion of Congress, which was virtually unchanged from March (26%), prior to passage of the health care reform bill. This is the lowest favorable rating for Congress in a quarter century of
surveys. Over the last year, favorable opinions of Congress have declined by half – from 50% to 25%. (http://people-press.org/report/606/trust-in-government) Pew Research Center
(Click HERE for historical chart)
BofAMLCO ups CHRW. CLSA ups NBR. CSFB ups BA. HSBC ups AA. JEFF ups CMG. MSCO ups GILD. OPCO ups CMG. BofAMLCO cuts AMGN. CITI cuts BZH. OPCO cuts STI. RBCM cuts KEY. BARD ups PII. UBSS cuts HOV, ARRY, ELN. ACF beats by 18c. ALGN beats by 7c. CCMP misses by 3c. CMG beats by 24c. CTXS reports in-line earnings. EBAY beats by 1c. GHL lower on earnings. MEE beats by 11c. MKSI beats by 14c. NFLX beats by 5c. NOK misses. QCOM beats by 2c and guides in-line. SBUX beats by 4c. SLM higher on earnings. SNDK beats by 36c. MO earnings miss.
S&P 500 PreMarket 8:30am (last/% change prior close/volume):
BAXTER INTL INC 51.75 -12.21% 1448572
QUESTAR CORP 51.00 +11.21% 25372
EBAY INC 24.28 -7.65% 1551098
QUALCOMM INC 39.66 -6.97% 3110479
SANDISK CORP 39.40 +4.82% 156330
BB&T CORP 33.54 -4.47% 41065
QWEST COMMUNICAT 5.47 +4.39% 56020180
TEREX CORP 25.00 -4.25% 3070
TERADYNE INC 12.67 +4.02% 89870
CITRIX SYSTEMS 47.92 -3.83% 72415
GEN GROWTH PROP 15.90 +3.11% 100
AMERISOURCEBERGE 31.25 +2.93% 25200
PHILIP MORRIS 50.48 -2.9 % 41936
SLM CORP 13.49 +2.82% 68970
JANUS CAPITAL GR 14.75 -2.77% 1900
SPRINT NEXTEL CO 4.21 +2.68% 998622
PNC FINANCIAL SE 67.01 +2.62% 43289
HERSHEY CO/THE 46.01 +2.61% 23058
ROWAN COMPANIES 30.95 -2.43% 4735
MOTOROLA INC 7.17 -2.32% 47362
MASSEY ENERGY CO 42.80 -2.26% 15989
PACTIV CORP 25.00 -2.19% 6100
CIENA CORP 17.39 -2.03% 2123
XL CAPITAL LTD-A 19.49 -2.01% 700
Today’s Trivia: Today is Earth Day, a day “designed to inspire awareness and appreciation for the Earth's environment.” So how long has Earth Day been around?
Yesterday's Answer: April 21st is “San Jacinto Day” in
Texas to mark the date that Texas won independence from Mexico by defeating General Santa Anna at San Jacinto.
Equity markets bounced around today as investors remained pensive about embracing the rebound of the past couple of sessions. Investors are cautious to pay up and establish new high prices knowing the Administration has taken the gloves of in waging the financial reform battle. The Administration’s standard approach is to knock you down three or four times, so that when they finally offer you a hand to get up, you find yourself saying thank you. The result was the selloff in the S&P 500 today in the half hour leading up to the President’s television interview today. Tomorrow is the President’s big visit to Wall Street to discuss Financial Regulatory reform.
It will be interesting to see the environment and how the speech is received. Today, the NY State Comptroller Thomas Dinapoli put out a press release titled, “DiNapoli: State Could Run Short of Cash, Releases Final Closing Numbers for Last State Fiscal Year, Warns of Cash Crunch.” The only reason the state finished the 2009-2010 fiscal year with a positive balance was it postponed payments into the new fiscal year. The release notes “The state Division of the Budget projects the General Fund will end the months of May, June, July and August with a negative balance. This is unprecedented in
’s history, indicating growing fiscal stress and historically low cash flow levels.” The Comptroller’s annual data was the primary spark for the Wall Street bonus outrage over the past 18 months. Politicians throughout the country, including many high profile ones in New York , used the data to take a populist approach and bash Wall Street for political gain. New York
Mike O’Rourke, CMT
Chief Market Strategist