Morning Report: July 18, 2011

Ahead of the Bell: Dow futures are trading down 79 points and S&P futures are trading down 8 points after efforts by President Obama and Congress failed to reach an agreement over the weekend on the budget negotiations and raising the debt limit. Traders are concerned with the government’s inability to agree on a comprehensive plan to address these issues and this will continue to keep investors on the sidelines.  The Treasury Department has said August 2 is the deadline for the U.S. to begin defaulting on its debt obligations.  The European banking stress test on the regions financial institutions was unsuccessful in convincing investors the banking system was in good standing.

  • On the economic calendar today, no reports are due. Companies reporting earnings today include Halliburton, Wynn Resorts, and IBM. The dollar is down against the major currencies.  Crude oil is currently trading at about $96 a barrel.  Gold is currently trading at a record high at about $1,602.

  • Last week, 2Q earnings season began on a positive note after Google reported better than expected results.  Other companies that beat second quarter earnings included JPMorgan and Citigroup.  For the week, the markets were  down with the Dow falling 1.4%, S&P 500 declined 2%, and Nasdaq dropped 2.5%. The U.S. trade deficit widened further than forecasted by almost $7 billion from the last reading.  Jobless claims, retail sales, and PPI data all came in better than expected.  Fears over the Euro zone sovereign debt crisis spread to Italy, Spain, and other EU countries.  The Euro zone fears spooked the markets last Monday and sent investors scurrying for safer assets including precious metals, gold and crude oil which traded higher for the week.  European banks passed the latest round of stress test, including Spanish and Irish banks.  China reported better than expected 2Q growth figures as the economy grew at 9.5% between April and June.  Federal Reserve Chairman Bernanke, testifying before Congress, said the agency stands ready to introduce more stimulus if economic growth slows down further.  However, the Chairman said no Fed action is imminent on a possible further quantitative easing. Rating agencies Moody’s and Standard & Poor’s warned on lowering the credit rating for the U.S. if an agreement is not achieved on the debt ceiling negotiations.                    

  • The week ahead, 2Q earnings season gets into full swing with some 14 Dow companies and 113 S&P 500 reporting earnings this week, dominated by tech companies.  Companies reporting earnings this week include Bank of America, GE, Apple, McDonalds, American Express, Intel, and Caterpillar.  According to analysts appearing on CNBC, 77% of companies are expected to meet or beat 2Q earnings estimates.  This week, the economic calendar is light, investors will get reports on jobless claims, Philadelphia Fed, and leading indicators.  However, the most important data for the week will be housing reports from the National Association of Home Builders survey, a report on housing starts, and existing home sales.  The Obama Administration and Congress continue to negotiate on the debt ceiling and budget. European leaders will be meeting later this week trying to resolve their differences over how to involve the private sector in its bailout.

  • On CNBC today, Senator Pat Toomey of Pennsylvania, talked about the budget negotiations, the looming debt ceiling vote, and Dodd-Frank.  Toomey said he wants the negotiations done and over with.  Toomey also said he is afraid there will not be any real spending cuts and he is very worried as the discussions approach the deadline.  Raising taxes is not the issue as it will confirm us as a meritocracy for the foreseeable future.  Toomey wants to see some concessions from social security and Medicare and he is not in favor of raising taxes.  On Dodd-Frank, Toomey said he is very concerned with what he sees in the law and believes it is a job killer.

  • The Final Harry Potter was the top movie at the box office this past weekend. Happy Monday, have a nice day.  

Friday’s Close

DJIA up 42.61 pts/+0.34%/12,479.73

S&P up 7.27 pts/+0.56%/1,316.14

Nasdaq up 27.13 pts/+0.98/2,789.80


Monday’s Futures

Dow Futures down 79.00 pts/-0.60%

S&P Futures down 8.50 pts/-0.65%

Nasdaq Fut down 15.75 pts/-0.63%


Overseas Markets

FTSE -1.01%

CAC 40 -1.23%

NIKKEI 225 +0.39%

HANG SENG -0.32%


Overseas:  World stock markets were down today.  European markets were down on investors perception of weakness in the financial system.  Asian markets were lower and Japan was closed for a holiday.    


Economic Reports:  None for today, Housing Starts, Existing Home Sales, Jobless Claims, Philadelphia Fed Survey, and Leading Indicators.


Top Headlines:    


  • President Obama plans on announcing Richard Cordray, the former attorney general of Ohio to head up the new Consumer Financial Protection Agency. Cordray will take over from interim head of the agency Elizabeth Warren. 

  • News Corp (NWS) continues to trade down after the head of the Wall Street Journal resigned and the CEO of New of the World unit was arrested amid the phone hacking scandal.

  • CNBC reports Moody's Corporation (MCO) is suggesting the United States should eliminate its statutory limit on government debt to reduce uncertainty among bond holders as the U.S. is one of the few countries where Congress sets a ceiling on government debt.

  • Reports indicate Pharmaceutical Product Development Inc., (PPDI) provider of services to biotechnology and medical device companies is exploring a possible sale of the firm.

  • Hertz Global Holdings Inc. (HTZ) announced it is acquiring Donlen Corp. for $250 million and assuming $680 million in debt. 


Gold:up $8.10 to $1,602.85
Oil:down $0.32 to $96.57

EUR/USD 1.4040 -0.0118
USD/JPY 79.0650  -0.0450
GBP/USD 1.6067 -0.0069


Volatility Index (VIX): As of the close of business Friday, July 15, the VIX is down 1.22 at 19.58

Companies Reporting Quarterly Earnings:     

Check Point Software (CHKP): Q2 EPS of $0.68 beats by $0.02. Revenue of $300.6M (+15.1% Y/Y).

Halliburton (HAL): Q2 EPS of $0.81 beats by $0.08. Revenue of $5.3B (+35.3% Y/Y).

Today’s Opening and Closing Bells:

ETF Securities visits the NYSE to highlight two of their precious metals products, ETFS Physical Asian Gold Shares (NYSE-Listed: AGOL), and the ETFS Physical White Metals Basket Shares (NYSE-Listed: WITE). Both products are unique and global firsts. In honor of the occasion, Ms Kok Li Peng, Charge D'Affaires and Deputy Permanent Representative of the Permanent Mission of Singapore and William Rhind, Managing Director of ETF Securities, will ring the opening bell.    


Kraft Foods Inc. (KFT) visits the NYSE to celebrate the 75th anniversary of the Oscar Mayer brand’s Wienermobile vehicle and the 10th anniversary of Kraft Foods Inc. listing on the NYSE. The Oscar Mayer brand will also be serving Oscar Mayer Selects Beef Franks from its special edition Wienermobile Food Truck from 11:00 a.m. – 1:00 p.m. in front of NYSE.  In honor of the occasion, Senior Vice President of Marketing Oscar Mayer®, Jane Hilk will ring the closing bell.