Morning Report: July 19, 2011

Ahead of the Bell: Dow futures are trading up 79 points and S&P futures are trading up 8 points after IBM reported better than expected second quarter results at the close yesterday and raised its guidance for the remainder of 2011. Investors will focus on a Euro zone summit to be held on Thursday. Traders are hoping EU finance ministers will agree on how private investors will participate in the second round of Greek bailout and avoid the debt crisis from spreading to Italy and Spain. The equity market seems to be anticipating the debt ceiling will be raised and the U.S. will avoid a default on its obligations.

  • On the economic calendar today, the Commerce Department will release housing starts and building permits for the month of June. Kansas City Fed President Thomas Hoenig will be speaking on monetary policy and agriculture.  Companies reporting earnings today include Coca-Cola, Johnson & Johnson, Bank of America, and Goldman Sachs. The dollar is down against the major currencies. Crude oil is currently trading at about $96 a barrel. 
  • Yesterday, stocks fell sharply amid concerns EU finance ministers are no closer to solving the debt crises in Europe. Investors were worried the regions debt crisis will spread to Italy and Spain.
  • On CNBC today, James Paulsen, Wells Capital Management, talked about the European crisis and what he sees for the remainder of the year. Paulsen said he is worried that the crisis has turned political. This is an economic crisis which seems to be spreading to Italy and Spain and he is hoping the ECB turns more aggressively towards fighting it as an economic crisis. Paulsen does not understand the ECB strategy with the implementation of fiscal austerity and monetary tightening at the same time. Paulsen pointed out if you take Europe out of the picture, the recovery looks better led by  the emerging world. Paulsen went on to say he is encouraged with  rising liquidity and he is expecting the second half of 2011 to show improvements. He says we are experiencing a better than expected earnings season that is unfortunately getting lost in the European crisis. Paulsen also commented that the equity market is selling at a significant discount and that confidence is playing a huge role in this recovery. When consumer confidence is restored investors will return to the capital markets.
  • Happy Tuesday, have a nice day. 

Monday’s Close

DJIA down 94.57 pts/-0.76%/12,385.16

S&P down 10.70 pts/-0.81%/1,305.44

Nasdaq down 24.67 pts/-0.89/2,765.11

Tuesday’s Futures

Dow Futures up 79.00 pts/+0.60%

S&P Futures up 8.50 pts/+0.65%

Nasdaq Fut up 17.75 pts/+0.63%

Overseas Markets

FTSE +0.52%

CAC 40 +1.28%

NIKKEI 225 -0.85%

HANG SENG +0.45%

Overseas:  World stock markets were up today. European markets are up on better than expected corporate earnings results.  Asian markets were lower on the continuing Euro debt crisis.    

Economic Reports:  Housing Starts is expected to be 0.560 M at 8:30 a.m.

Top Headlines:

  • Reports indicate American International Group (AIG) is considering spinning off its International Lease Finance Corp later this year. Bankers have approached A.I.G. about a possible spinoff of the unit.
  • Clorox Co (CLX) announced it is rejecting an offer from investor Carl Icahn as it was too low, the offer values Clorox at more than $10 billion.
  • Bloomberg reports CVC Capital Partners is near an agreement to buy ConvergEx Inc., a trading-software company partly owned by Bank of NY Mellon (BK) for about $1.9 billion.
  • CNBC reports News Corp (NWS) is considering COO Chase Carey to succeed Rupert Murdoch amid the phone hacking scandal at the company's News of the World unit.
  • Reports indicate the mortgage industry employees are still signing documents they haven't read and using fake signatures after promising to stop the illegal practices that led to a halt of home foreclosures.

Commodities/Currency:

Gold:up $2.10 to $1,605.85

Oil:up $0.87 to $96.77

EUR/USD 1.4173 +0.0069

USD/JPY 78.9350  -0.1200

GBP/USD 1.6111 +0.0062

Volatility Index (VIX): As of the close of business Monday, July 18, the VIX is up 1.39 at 20.92

Companies Reporting Quarterly Earnings:

Bank of America (BAC): Q2 EPS of $0.33 beats by $0.03. Revenue of $13.48B (-50.2% Y/Y).

Goldman Sachs (GS):  Q2 EPS $1.85 vs. consensus $2.27 Reports Q2 revenue $7.28B vs. consensus $8.14B.

Wells Fargo reports Q2 EPS 70c vs. consensus 69c Reports Q2 revenue $20.4B vs. consensus $20.46B.

Coca-Cola (KO): Q2 EPS of $1.17 beats by $0.01. Revenue of $12.7B (+47% Y/Y).hnson & Johnson (JNJ): Q2 EPS of $1.28 beats by $0.04. Revenue of $16.6B (+8.3% Y/Y). Maintains FY'11 EPS guidance of $4.90-5.00.

State Street (STT): Q2 EPS of $0.96 misses by $0.01. Revenue of $2.49B (+8% Y/Y).

KeyCorp (KEY): Q2 EPS of $0.26 beats by $0.06. Revenue of $1.02B (-8.2% Y/Y).

Bank of New York Mellon (BK): Q2 EPS of $0.59 beats by $0.03. Revenue of $3.85B (+15.2% Y/Y).

Johnson & Johnson (JNJ): Q2 EPS of $1.28 beats by $0.04. Revenue of $16.6B (+8.3% Y/Y). Maintains FY'11 EPS guidance of $4.90-5.00.

UnitedHealth (UNH): Q2 EPS of $1.16 beats by $0.18. Revenue of $25.2B (+8.5% Y/Y). Raises FY'11 outlook to EPS of $4.15-4.25, revenue of $101B.

Comerica (CMA): Q2 EPS of $0.53 in-line.

Harley-Davidson (HOG): Q2 EPS of $0.81 beats by $0.10. Revenue of $1.34B (+18% Y/Y). Raises motorcycles shipment FY'11 guidance to 228K-235K.

Omnicom Group (OMC): Q2 EPS of $0.96 beats by $0.05. Revenue of $3.49B (+14.7% Y/Y).

Today’s Opening and Closing Bells:

SuccessFactors, Inc. (SFSF) to celebrate the company’s cross-listing of its common stock on NYSE & NYSE Euronext & (NYX) markets following its transfer from Nasdaq.  Founder and CEO of  Lars Dalgaard  will ring the opening bell.  

Accenture Celebrates 10th Anniversary of NYSE Listing Chairman William D. Green and CEO Pierre Nanterme will ring the closing bell.