Morning Report: July 20, 2011

Ahead of the Bell: Dow futures are trading up 65 points and S&P futures are trading up 7 points after Apple reported stronger than forecasted fiscal third quarter earnings results. The company reported record revenues as a result of higher iPhones sales in Asia. Traders are encouraged by signs of a compromise between Congress and President Obama. A group of six senators proposed a plan on the budget and debt ceiling negotiations that is acceptable to the President. Reports indicate the EU is considering using emergency credit lines to fund Greece's bailout and prevent the crisis from spreading to other countries in the region.

  • On the economic calendar today, the National Association of Realtors will release its existing home sales data for June after the opening. Companies reporting earnings today include Apple, Yahoo, United Technologies, BlackRock, Altria, and American Express. The dollar is up against the Japanese yen and down against the euro and the British pound. Crude oil is currently trading at about $98 a barrel. 
  • Yesterday, the equity markets were up sharply following better than anticipated housing starts in June, higher corporate earnings and an announcement by President Obama praising a group of 6 senators for proposing a deal for the debt ceiling.
  • On CNBC today, Mohamed El-Erian, CEO and co-CIO of PIMCO, talked about the markets and the European debt crisis.  El-Erian said we are in a stage of uncertainty between good companies and macro economics. He believes yesterday’s market shows that if micro and macro economics are aligned then a lot of positives will be unleashed in this market. On the micro front, El-Erian believes multinational companies are very healthy and that companies are trading at great discounts and investors can take advantage of this market. On the macro front, he believes we need a clearer economic vision and for Europe to stabilize. Getting the macro factors to settle will allow investors to focus on the micro issues.  El-Erian went on to say 1 to 3 PIIGS countries will have to restructure, if it turns out that the ECB can’t find the funding for bailouts.     
  • Also, on CNBC today, Thomas Horton, AMR President, talked about the largest aircraft order in history. Horton said this order will transforming the company’s fleet, making it younger and improving cost structure. AMR ordered 460 aircraft to be split between Boeing and Airbus with an option for additional 465 aircrafts. On why Boeing did not get the bigger offer, Horton said both offers were competitive and the financing from Boeing and Airbus allowed the company to get the deal done. Horton pointed out the company’s needs were so great that no one single manufacturer would be able to produce these aircraft on a timely basis. Horton commented that higher oil prices have really hit the company hard. (AMR reported Q2 EPS of ($0.85) and revenues of $6.11B this morning. Both numbers were below the Street’s expectations.)    
  • Happy Wednesday, have a nice day.

Tuesday’s Close

DJIA up 202.26 pts/+1.63%/12,587.42

S&P up 21.29 pts/+1.63%/1,326.73

Nasdaq up 61.41 pts/+2.22/2,826.52

Wednesday’s Futures

Dow Futures up 65.00 pts/+0.52%

S&P Futures up 7.50 pts/+0.65%

Nasdaq Fut up 22.50 pts/+0.94%

Overseas Markets

FTSE +1.14%

CAC 40 +1.70%

NIKKEI 225 +1.17%

HANG SENG +0.46%

Overseas:  World stock markets were up today. European markets were up on optimism the EU will finalize a plan to bail out Greece. Asian markets were up on strong corporate earnings.    

Economic Reports:  Existing Home Sales expected to be 4.90M at 10:00 a.m.

Top Headlines:

  • Ecolab Inc. (ECL) announced it is acquiring Nalco Holding Company (NLC) for approximately $8 billion.  Nalco holders will have the option to receive either 0.7005 shares of Ecolab common stock or $38.80 per Nalco share in cash.
  • CNBC reports Carl Icahn is raising his bid for Clorox Company  (CLX) to $80 per share from $76.50. 
  • AMAG Pharmaceuticals, Inc. (AMAG) announced it is acquiring Allos Therapeutics, Inc. (ALTH)  in an all-stock merger for about $686 million. Allos holders will receive 0.1282 shares of AMAG common stock.
  • Energy Transfer Equity (ETE) announced it is increasing its offer for Southern Union Company (SUG) to about $9.4 billion including $5.7 billion in debt or $44.25 per share. 
  • MBA report mortgage applications were up 15.5% versus down 5.1% last week. The thirty-year fixed mortgage rate decreased to 4.54% from 4.55%.

Commodities/Currency:

Gold:down $1.10 to $1,587.85

Oil:up $1.32 to $98.77

EUR/USD 1.4224 +0.0069

USD/JPY 78.8350  -0.3300

GBP/USD 1.6134 +0.0009

Volatility Index (VIX): As of the close of business Tuesday, July 19, the VIX is up 1.75 at 19.20

Companies Reporting Quarterly Earnings:     

United Technologies (UTX): Q2 EPS of $1.45 beats by $0.04. Revenue of $15.1B (+9.2% Y/Y). Sees Fy'11 EPS of $5.35-5.45, revenue of $58B.

AMR (AMR): Q2 EPS of -$0.85 misses by $0.12. Revenue of $6.1B (+7.8% Y/Y).

U.S. Bancorp (USB): Q2 EPS of $0.60 beats by $0.06. Revenue of $4.69B (+3.8% Y/Y).

Quest Diagnostics (DGX): Q2 EPS of $1.12 in-line. Revenue of $1.9B (+1.5% Y/Y).

Altria (MO): Q2 EPS of $0.53 in-line. Revenue of $4B (-7.8% Y/Y). Sees FY'11 EPS of $1.70-1.76.

Johnson Controls (JCI): FQ3 EPS of $0.56 beats by $0.03. Revenue of $10.4B (+21.4% Y/Y).

PNC Finl Svcs (PNC): Q2 EPS of $1.67 beats by $0.20. Revenue of $3.6B (-7.9% Y/Y).

Textron (TXT): Q2 EPS of $0.29 beats by $0.05. Revenue of $2.7B (+0.7% Y/Y). Sees FY'11 EPS of $1.00-1.15.

Today’s Opening and Closing Bells:

Cover-All Technologies, Inc. Visits the NYSE to Celebrate their Listing on NYSE-Amex John W. Roblin, Chairman & CEO of Cover-All Technologies, will ring the opening bell.

Operation HOPE to Kick-Off HOPE New York Financial Literacy Forum, The Rebirth of America, Post Economic Crisis will ring the closing bell.