Dave Lutz of Stifel, Nicolaus passes along the topics he’s talking about with traders.
Futures are up 30bp, on highs of the session – despite fresh turmoil in Europe. DAX is higher, and EU Bank are in the green despite Portugal’s courts rejecting some of the austerity measures. Portugal spreads are FLAT to bunds, highlighting the lack of concern and continued demand for yield in wake of the BOJ. China’s composite was off small after a 2 day holiday, but Japan’s Nikkei jumped 2.8% to a near five-year high.
Despite the Portugal headlines, EU spreads are all tighter, with Italy and Spain in 5-7bp. The US 10YY is unchanged for the session, and bond bulls are excited yields have broken below 8M support on Friday. The Dollar is slightly weaker, a natural tailwind for commodities – we have Copper and Oil jumping over 1%, while Oil is basically unchanged. The yen has slipped to a near four-year low, and the “Carry Trade” is breaking higher as A$ well bid on headlines indicating direct Yuan trade with China. Miners were well bid in Aussie.
Earnings season officially kicks off today, with AA after the bell, JPM and WFC Friday. I read that Since 2000 Alcoa has had 53 earnings releases. Of those 53 earnings releases the S&P 500 has moved the same direction as Alcoa’s stock price reaction 34 times or just under 65% of the time. The real significance comes when AA stock has a positive reaction to earnings – 75% of AA’s positive earnings reactions were followed by a higher move in the S&P 500 over the next 10 trading days.