Morning Report: August 1, 2011

Dollar

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Ahead of the Bell: Dow futures are trading up 154 points and S&P futures are trading up 15 points after President Obama announced a deal has been reached with lawmakers on the debt ceiling debate and urged Congress to vote for the proposal. The framework of the deal reached will cut about $2.4 trillion in spending and avoid a default. However, the agreement could face strong opposition from some members of Congress and the threat of a possible downgrade still looms. Resource-related stocks will be in focus today, including gold, silver, and copper.

  • On the economic calendar today, the Institute for Supply Management will release its manufacturing report for August after the market opens. According to Briefing.com economists forecast a reading of 54, down from June's reading of 55.3. The Commerce Department will also release its June construction spending after the market opens. Companies reporting earnings today include Humana, Allstate, and Loews Corp. The dollar is down against other major currencies.  Crude oil is currently trading at about $96 a barrel.   
  • Last week, another 180 S&P 500 companies reported earnings and thus far 73% have beaten estimates. The equity markets were down on the debt ceiling and budget negotiations, for the week, the Dow lost 4.2%, the S&P 500 declined 3.9%, and the Nasdaq fell 3.6%. Consumer confidence came in higher than economist had forecasted. However, the new housing data was disappointing. The Department of Labor reported jobless claims data decreased to its lowest level since April and below the 400K mark, while 2Q GDP data was very disappointing, coming in at 1.3% vs. an estimate of 1.8%, and June GDP data was revised from 1.9 to 0.4. Moody’s announced it is putting Spain on a watch list for a possible downgrade as the second bailout package for Greece did not do enough to convince markets the regions debt crisis has been quelled.  
  • The week ahead, earnings season continues with another 107 S&P 500 companies due to report results this week. The economic calendar is full of reports including motor vehicle sales, personal income and outlays, factory orders, ISM Non-Mfg Index, jobless claims, employment situation, and consumer credit. Traders will focus on the jobs report on Friday, and according to a consensus of analysts polled by Briefing.com the economy is expected to have created 78K jobs in July. Economists are not expecting the jobs report to be great as the employment data in May and June were very disappointing, with June's nonfarm payrolls coming in at 18K for the month. Investors will also be watching the weekly jobless claims, monthly chain store sales, and consumer credit. The European sovereign debt crisis continues to drag on as investors fear it could be spreading to other member nations including Spain and Italy. Expectation is the budget/debt deal will pass today in Washington.
  • On CNBC today, Bob Doll, Vice Chairman, Director and Chief Investment Officer of Global Equities at BlackRock Advisors, and Tobias Levkovich, Chief US Equity Strategist at Citigroup, talked about the framework of the debt deal reached between President Obama and Congress. Doll said the framework removes the negative for now, however confidence is still low and economic growth continues to be very slow. While bank loans are improving a little, we still need to debate tax increases.  Doll pointed out the European sovereign debt crisis is still not resolved and the unemployment situation is terrible. Doll questioned how long investors will be patient with lower GDP and strong earnings report. Levkovich said we have very supportive credit situations right now and he expects to see good CNI loan improvements. Levkovich said investors have forgotten about the earnings challenges in the late 1970s and 1980s as they have become accustomed to the earnings cycles from the mid-1980’s until present, where earnings were strong and reported for longer cycles.    
  • Cowboys & Aliens and The Smurfs tied for the top movies at the box office this past weekend.
  • Happy Monday, have a nice day and wonderful week. 

Friday’s Close

DJIA down 96.87 pts/-0.79%/12,143.24

S&P down 8.39 pts/-0.65%/1,292.28

Nasdaq down 9.87 pts/-0.36/2,756.38

Monday’s Futures

Dow Futures up 154.00 pts/+1.37%

S&P Futures up 15.50 pts/+1.33%

Nasdaq Fut up 28.50 pts/+1.21%

Overseas Markets

FTSE +1.48%

CAC 40 +0.76%

NIKKEI 225 +1.34%

HANG SENG +0.99%

Overseas:  World stock markets were up today. European and Asian markets were up after President Obama and Congress announced they have reached a tentative deal for raising the debt ceiling.      

Economic Reports:  Today ISM Mfg Index and Construction Spending.  Later in the week, Motor Vehicle Sales, Personal Income and Outlays, ADP Employment Report, Factory Orders, ISM Non-Mfg Index,  Jobless Claims,  Employment Situation, and Consumer Credit.

Top Headlines:    

  • HSBC (HBC) announced it is selling 195 branches in upstate New York to First Niagara for $1billion in cash. First Niagara would have to raise capital to support the deal.
  • Reports indicates Genworth Financial Inc. (GNW) is considering a possible split of the company's mortgage-insurance operations from its life-insurance and wealth-management businesses. 
  • ArcelorMittal and Peabody Energy (BTU) announced they have submitted an all cash offer for Australia’s Macarthur Coal for A$4.7 billion ($5.2 billion) or A$15.66 per share to shareholders.

Commodities/Currency:

Gold:up $16.10 to $1,617.85

Oil:down $0.91 to $96.96

EUR/USD 1.4442 +0.0039

USD/JPY 77.1850  +0.4700

GBP/USD 1.6435 +0.0002

Volatility Index (VIX): As of the close of business Friday, July 29, the VIX is down 0.04 at 17.52

Companies Reporting Quarterly Earnings:     

Humana (HUM): Q2 EPS of $2.50 beats by $0.45. Revenue of $9.28B (+8% Y/Y) misses by $40M.

Allstate (ALL): Q2 EPS of -$1.19 beats by $0.36. Revenue of $8.1B (+5.6% Y/Y) beats by $1.5B.

Loews Corp (L): Q2 EPS of $0.62 misses by $0.22. Revenue of $3.55B (+1.6% Y/Y).

CNA Financial (CNA): Q2 EPS of $0.47 misses by $0.02.

NV Energy (NVE): Q2 EPS of $0.05 misses by $0.11. Revenue of $674M (-13.8% Y/Y) misses by $86M.

Today’s Opening and Closing Bells:

Van Toffler, President, MTV Networks Music & Logo Group and Stephen Friedman, President of MTV will ring the opening bell.

The Pep Boys --Manny, Moe & Jack Celebrate Their 90th Anniversary President and CEO Mike Odell will ring the closing bell.

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