Yesterday, I complained about how markets were having trouble moving on good news and indicated last night that today could be a make for break day for indices
. Companies for the most part have kept up their end reporting another series of stellar reports led by Apple, Facebook and Caterpillar. The most significant miss was UPS which can clearly be blamed on weather disruptions and is not a surprise considering that competitor FedEx missed badly in its last report too.
Strong earnings out of the tech sector have given the NASDAQ enough of a boost to finally retake 3,600 and start a new upswing. Stock markets around the world except for the Nikkei have also been trading higher today. Australia`s S&P/ASX leads the charge into new territory boosted by an accelerating Chinese leading indicator and another removal of emergency liquidity that suggest an improving economy in China, Australia’s biggest customer. The rally of a resource-weighted index like the ASX also bodes well for Canada’s S&P/TSX index.
The US economy also continues to accelerate with durable goods orders beating expectations, especially the key excluding transportation number, more than offsetting soft jobless claims. This further increases expectations that the Fed will continue tapering QE at its meeting next week.
In currency markets today, we are seeing clear inflows back into USD on capital rotating into US stocks (particularly big tech names) and tapering expectations. Capital also continues to move back into risk markets with SEK and CAD leading the charge despite dovish minutes out of Sweden’s Riksbank. On the other hand, defensives have been knocked down today with gold, JPY and CHF all drifting downward again. The one major surprise has been NZD which has fallen despite another RBNZ interest rate hike which suggests traders have been taking profits against the news.
We could see more action through the day particularly in Newmont Mining with reports circulating overnight of a revised proposal from Barrick Gold. It’s possible that we may see developments in this story today with Newmont scheduled to report earnings after the close tonight. It’s common for deals to be announced around the time of quarterly reports as we saw with Zimmer holdings this morning. A number of other major companies are set to report later today including MicroSoft, Amazon, Starbucks, Visa and many others.
There has been more activity on the takeover front overnight
Apparently, Barrick Gold has changed the terms of its merger proposal to Newmont Mining which could keep that pot boiling today.
Health care mergers continue moving from pharmaceuticals to medical devices with Zimmer holdings agreeing to purchase Biomet in a $13.3B deal. Zimmer announced EPS of $1.50 vs street $1.47 guided next Q to $1.40-$1.49 vs street $1.56
It has been a huge evening and morning for earnings news, highlights include:
Apple $11.62 vs street $10.19, sales $45.6B vs street $43.6B, iPhone shipments beat street, iPad falls short, next Q sales guidance $36-38B vs street $38B, raised buyback program to $90B from $60B, announces 7 for 1 stock split, raises dividend by 8%
Facebook $0.34 vs street $0.24, sales $2.50B beats street $2.36B, mobile advertising $1.34B vs street $1.22B, CFO to retire later this year
Qualcomm $1.31 vs street $1.22, sales $6.37B vs street $6.49B, raises FY guidance to $5.05 to $5.25 from $5.00 to $5.20
Citrix $0.64 vs street $0.59, sales $750M vs street $732M, next Q guidance $0.57 -$0.59 vs street $0.67 sales guidance $765-775M vs street $785M
Texas Instruments $0.42 vs street $0.41, next Q guidance $0.55-$0.63 vs street $0.52
Lam Research $1.26 vs street $1.16
Potash Corp $0.40 vs street $0.35, guides next Q to $0.40-$0.45 below street $0.49.
Caterpillar $1.44 vs street $1.21, raised FY guidance to $5.55 from $5.30
General Motors $0.06 vs street $0.03, April sales tracking higher than March
3M $1.79 vs street $1.80
Verizon $0.84 vs street $0.86
UPS $0.98 vs street $1.08
Aetna $1.98 vs street $1.53, raised FY guidance to $6.35-$6.55 from $6.25
DR Horton $0.38 vs street $0.34
PulteGroup $0.19 vs street $0.20
Eli Lilly $0.70 vs street $0.71
Raytheon $1.87 vs street $1.76
Economic reports released overnight and this morning include:
The Peoples Bank of China removed liquidity from the financial system for the second time this week. This time it was CNY 85B. .
Minutes from Sweden`s last Riksbank meeting indicated members lowered the rate path forecast due to lower inflation and two members advocated for an immediate 25bps but to 0.50%.
NZ interest rate 0.25% increase to 3.00% as expected
Turkey interest rate 10.00% no change as expected
US durable goods orders 2.6% vs street 2.0%
US durables ex transportation 2.0% vs street 0.6%
US jobless claims 329K vs street 315K
Germany IFO business climate 111.2 vs street 110.4
Germany IFO current assessment 115.3 vs street 115.6
Germany IFO expectations 107.3 vs street 105.8
UK CBI sales 30 vs street 17
South Korea GDP 3.9% vs street 3.8%
China leading indicator 1.2% vs previous 0.9%
Economic reports due later today include:
10:30 am EDT US natural gas street 41 BCF