Daily State of the Markets
Wednesday Morning – July 27, 2011
Good morning. Perhaps the most interesting aspect to the current market isn’t necessarily the three-ring circus that is currently playing in Washington or the never ending stream of difficulties across the pond. No, the thing that strikes me the most regarding the action in the stock market is the refusal of traders to embrace the dark side of the debate at the present time.
Think about it. During the Credit Crisis (to which the current debt/deficit debate is being compared by the press and some in Washington) each and every headline was met with a hysterical response in the indices. And just a little over a month ago in early June, traders responded to just about all comments and changes in body language from the leaders of the EU, ECB, and Greek government. In short, the programs were clearly set to sell first and ask questions later.
And while the markets have seen a fair amount of red numbers over the past two days, the hysteria one might expect just isn’t there. The massive sell programs aren’t there. And from where I sit, the fear just isn’t there. As of this writing, the S&P 500 stands a mere -2.3% from its bull market peak. And after two days of “reaction” and “discounting” to the mess the politicians are making in Washington, the market is off just -1.57% from the high for the month. Thus, it would be very hard to argue that the bears are making the most of their opportunities here.
If you had told me two weeks ago that the folks in Washington would have been within a whisker of a deal, but then blew it up, that public deadlines had been set and then missed, and that with six days to go before the current deadline-that-really-isn’t-a-deadline arrives all four parties involved were still fighting amongst themselves, well, I would have expected to see some serious damage in the stock market. I might have expected to see the S&P at the middle of its range (say 1300ish) or worse yet, near the bottom of the range as traders prepped for the worst.
However, it is clear that traders are not preparing for the worst right now. It would appear that everyone, everywhere (including yours truly) expects a deal to get done. Everybody appears to understand that politics in the U.S. is messy and that debates are played out, not behind closed doors, but out in the open for everyone to see (whether they want to or not). The foreign press is having a field day with the daily show put on in Washington with headlines calling the tea party “nutters” and the republicans “reckless.”
Perhaps Winston Churchill said it best about the way the U.S. conducts its political debates: “You can trust the Americans. In the end they will do the right thing, after they have eliminated all other possibilities.”
So, while we are nowhere near a deal on this fine Wednesday morning and August 2nd seems like a lifetime away to anyone waiting for a resolution, those of us in the glass-is-half-full camp will continue to marvel that this market continues to avoid the dark side – for now, anyway.
Turning to this morning… The focus on Washington is keeping the attention off of Europe, where yields in Spain and Italy continue to rise (Fitch also reports that Italy may need additional austerity measures). This might explain the recent sag in the futures and the red numbers in Europe.
On the Economic front… Orders for long-lasting goods fell in June. The Commerce Department reported that Durable Goods orders declined by -2.1% during the month, which was below the consensus expectations for an increase of +2.1%. When you strip out the volatile orders for transportation, orders rose by +0.1%, which was below the consensus for +0.3%. The May reading was revised lower to +0.6% from +0.7%.
Thought for the day… Learn to trust in an idea whose time has come…
Here are the Pre-Market indicators we review each morning before the opening bell…
- Major Foreign Markets: Australia: -0.73% Shanghai: +0.76% Hong Kong: -0.13% Japan: -0.50% France: -0.83% Germany: -0.50% London: -0.48%
- Australia: -0.73%
- Shanghai: +0.76%
- Hong Kong: -0.13%
- Japan: -0.50%
- France: -0.83%
- Germany: -0.50%
- London: -0.48%
- Crude Oil Futures: -$0.87 to $98.72
- Gold: +$5.70 to $1622.50
- Dollar: higher against the Yen, Euro and Pound
- 10-Year Bond Yield: Currently trading at 2.964%
- Stocks Futures Ahead of Open in U.S. (relative to fair value): S&P 500: -6.29 Dow Jones Industrial Average: +30 NASDAQ Composite: -12.40
- S&P 500: -6.29
- Dow Jones Industrial Average: +30
- NASDAQ Composite: -12.40
Wall Street Research Summary
- Hawaiian Airlines (HA) – BofA/Merrill
- Total System (TSS) – Barclays
- Salix Pharmaceuticals (SLXP) – Citadel
- Range Resources (RRC) – Citi
- AK Steel (AKS) – CRT Capital
- Starbucks (SBUX) – Janney
- Wabtec (WAB) – Morgan Keegan
- Mednax (MD) – Morgan Keegan
- Ensco PLC (ESV) – Morgan Stanley
- Dollar Tree (DLTR) – Piper Jaffray
- PetSmart (PETM) – Piper Jaffray
- Tractor Supply (TSCO) – Piper Jaffray
- Norfolk Southern (NSC) – Wells Fargo
- Lender Processing (LPS) – Barclays
- STMicroelectronics (STM) – Deutsche Bank
- Juniper Networks (JNPR) – Goldman Sachs, Oppenheimer, Piper, ThinkEquity, William Blair
- Patriot Coal (PCX) – Goldman Sachs
- Vishay (VSH) – Longbow Research
- Rosetta Resources (ROSE) – Susquehanna
Earnings Yesterday’s Earnings After The Bell
Estimate ACE Limited ACE $2.01 $1.66 Arthur J. Gallagher AJG $0.42 $0.42 AMAG Pharmaceuticals AMAG ($0.92) ($1.06) Amazon.com AMZN $0.41 * $0.39 Buffalo Wild Wings BWLD $0.58 $0.59 Cabot Corp CBT $1.05 $0.89 Chemed CHE $1.09 $1.08 C.H. Robinson CHRW $0.67 $0.69 DreamWorks Animation DWA $0.40 $0.41 Callaway Golf ELY ($0.01) ($0.02) Endurance Specialty ENH $0.48 ($0.11) Electronic Arts ERTS ($0.37) ($0.40) Fiserv FISV $1.13 $1.08 FormFactor FORM ($0.16) ($0.30) Gilead Sciences GILD $1.00 $0.99 Genco Shipping & Trading GNK $0.29 $0.23 International Game Technology IGT $0.26 $0.22 Illumina ILMN $0.38 $0.36 Jones Lang LaSalle JLL $1.12 $1.10 Juniper Networks JNPR $0.31 $0.33 Linear Technology LLTC $0.68 $0.55 Las Vegas Sands LVS $0.54 $0.44 Manitowoc MTW $0.16 $0.16 Nabors Industries NBR $0.23 $0.24 Norfolk Southern NSC $1.38 $1.29 Panera Bread PNRA $1.18 $1.17 RF Micro Devices RFMD $0.08 $0.08 SL Green Realty SLG $1.10 $1.06 Tempur-Pedic TPX $0.76 $0.67 Trinity Industries TRN $0.37 $0.38
Earnings Before The Bell
Estimate Acxiom ACXM $0.13 $0.13 Aetna AET $1.35 $1.07 AutoNation AN $0.49 $0.46 Arrow Electronics ARW $1.36 $1.36 Allegheny Technologies ATI $0.70 $0.72 Boeing BA $1.25 $0.96 Bemis BMS $0.51 $0.50 Boyd Gaming BYD $0.01 $0.02 Canadian Pacific CP $0.75 $0.81 Delta Air Lines DAL $0.43 $0.49 Diebold DBD $0.44 * $0.31 Dow Chemical DOW $0.85 $0.79 Dr Pepper Snapple DPS $0.77 $0.76 Energizer ENR $1.37 * $1.25 Exelon EXC $1.05 $0.95 General Dynamics GD $1.79 $1.72 Corning GLW $0.48 $0.47 Hess Corporation HES $1.78 * $1.95 InterActiveCorp IACI $0.62 $0.38 Iconix Brand Group ICON $0.43 $0.43 LPL Financial LPLA $0.52 $0.50 Level 3 LVLT -$0.11 ($0.09) Moody’s MCO $0.79 $0.58 Mylan MYL $0.52 $0.45 Nasdaq OMX Group NDAQ $0.62 $0.60 Northrop Grumman NOC $1.81 $1.68 PF Chang’s PFCB $0.40 $0.55 Praxair PX $1.38 $1.38 Ryder System R $0.92 $0.77 Southern Company SO $0.71 $0.64 Teva Pharmaceutical TEVA $1.10 $1.08 Thermo Fisher Scientific TMO $0.99 $0.98 Tupperware TUP $1.25 $1.17 WellPoint Health WLP $1.83 $1.80 Wyndham Worldwide WYN $0.64 $0.56 Zimmer Holdings ZMH $1.21 $1.19
* Report includes items that make comparisons to the consensus estimate questionable
Long positions in stocks mentioned: ESV, PETM
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