Stocks bend but don’t break, tons of earnings to react to, oil recovery continues
Sometimes things come better late than never. I had originally planned to use the title above for my Asia Pacific note yesterday afternoon but that plan was stymied by the late day selloff in US indices.
Overnight, however, trading conditions have improved for the most part. Despite the downward momentum coming out of the US, stocks in Hong Kong and Australia moved higher overnight and another selloff in China was once again contained to mainland indices. This morning, US stock index futures are essentially flat, refusing to follow European markets lower while crude oil is climbing again.
Between the dovish FOMC statements yesterday, the huge increases in US oil inventories, mixed earnings, soft guidance, and ongoing market turmoil in mainland China, bears have every reason to grab markets by the throat and drive them even further into the ground. Yet they can’t, indicating that the bears are near exhaustion and that the big selloff earlier this month has already priced in weaker expectations for 2016.
This leaves many markets, particularly stocks, in transition with dominance starting to pass over to the bulls who remain tentative at this stage. Because of this, the bumpy bottoming process we have been seeing may continue for a while, creating significant intraday swings that provide opportunities for shorter-term trading strategies.
There have been a ton of earnings reports out overnight with strong reports out of Facebook, corporate tech companies like Qualcomm and Citrix, homebuilders like Pulte and automakers Ford and Harley-Davidson. Even Caterpillar wasn’t too bad considering the big cutbacks in spending on mining and energy equipment. One theme running through this is strong spending on big ticket items like cars and houses. Because of this, at the broader level, today’s US durable goods report could get attention from traders looking for confirmation.
In Canada Potash takes centre stage and could get crushed today following a triple whammy of an earnings miss, very weak guidance and a big dividend cut. Ouch! Methanex’s earnings were soft as well. Between these reports, crude oil rising, gold pulling back a bit, we could see a day of mixed trading on the TSX.
In currrency trading this morning, USD is down slightly while NZD has taken a large hit on their dovish central bank statements. On the oil rally CAD is holding steady as the loonie digests recent gains while RUB is staging a catch-up rally. GBP is strengthening with UK GDP coming in as expected. JPY is down slightly with the street still at odds over what may come out of tonight’s Bank of Japan meeting.
Facebook $0.79 vs street $0.68, sales $5.84B vs street $5.37B, mobile ads $4.51B vs street $4.09B, expects continued sales growth and investment in 2016, forecast capex $4.0-$4.5B above street $3.3B
Caterpillar $0.74 vs street $0.69, guides 2016 sales $40-44B around street $43.2B, guides 2016 EPS to $3.50 in line including $0.50 in expected restructuring costs.
Potash Corp $0.24 vs street $0.30, guides next Q to $0.10-$0.20 below street $0.29, guides next year to $0.90-$1.20 below street $1.33, 34% dividend cut
Pulte Group $0.57 vs street $0.49, sales $2.06B above street $1.86B
Ford $0.58 vs street $0.50, sales $37.9B above street $36.6B
Harley Davidson $0.22 vs street $0.20
Citrix Systems $1.34 vs street $1.19, guides next Q $0.91-$0.93 above street $0.90, guides next year to $4.65-$4.75 well above street $4.46
Qualcomm $0.97 vs street $0.90, guides next Q $0.90-$1.00 below street $1.02
SanDisk $1.26 vs street $0.89, sales $1.54B vs street $.145B
Lam Research $1.57 vs street $1.42
Texas Instruments $0.71 vs street $0.69, guides next Q to $0.57-$0.67 around street $0.64
eBay $0.50 as expected, guides next Q to $0.43-$0.45 below street $0.48
Methanex $0.16 vs street $0.17
Significant announcements released overnight include:
US interest rate and FOMC statement 0.50% upper bound no change expected
NZ interest rate and RBNZ statement 2.50% no change expected
NZ trade balance ($53M) vs street ($131M)
Japan retail sales (1.1%) vs street 0.2%
Australia export prices (5.4%) vs street (3.9%)
Singapore unemployment rate 1.9% vs street 2.0%
Spain retail sales 2.2% vs street 3.0%
Spain unemployment rate 20.9% vs street 21.2%
Sweden unemployment rate 6.7% vs street 6.4%
Sweden trade balance SEK 4.7B vs street SEK 0.0B
Sweden retail sales 3.4% vs street 4.6%
UK Q4 GDP 1.9%as expected vs previous 2.1%
UK CBI sales 16 vs street 18
Upcoming significant announcements include:
1:00 pm GMT Germany consumer prices street 0.4%
8:30 am EST US jobless claims street 281K
8:30 am EST US durable goods orders street (0.7%)
8:30 am EST US durables ex transport street (0.1%)
10:00 am EST US pending home sales street 4.8%
10:30 am EST US natural gas storage street (208 BCF)
11:00 am EST US Kansas City Fed street (10)