Dow breaks the 22’000 mark

The German DAX was able to profit from the great reports released by the Labor Department. The reports were a catalyst for a weaker EURUSD which fueled investments in the German Index. 2 hours before close the DAX is up 0,75% at the 12247 points mark. The German Index was able to make a 100 point jump thanks to the big jump in Daimler. Daimler was able to increase sales of cars by 12,1 in July.

As per recent sessions, the chief influences were second-quarter earnings. And as before, the profit tide was strong and supportive, although there were some outliers among the companies issuing their releases, including MetLife, Inc., the giant insurer. That stock fell back some 3% after posting results on Wednesday. Overall, though, the reporting season has been a good one, with some three-quarters of the companies in the S&P 500 exceeding their bottom-line consensus views. That is helping to counter the choppy economic news we have been seeing on occasion. On this count, the Institute for Supply Management reported that its non-manufacturing survey had slowed down in July, registering a well-below consensus expansion rate of 53.9. Expectations had been for a tally of 57.0. In June, this survey had come in at 57.4. Breaking this report down, we see that July’s results were headlined by slower rates of growth in new orders, employment, supplier deliveries, backlogs, and exports. One category, pricing, rose strongly in July, however, as it had in the companion manufacturing survey released on Tuesday. Still, this report, disappointing as it was, didn’t shake Wall Street, as the initial pause in the Dow’s rally was brief. So, as we moved into late morning, that composite strengthened a bit further, although the other indexes remained under water. As we moved into the first part of the afternoon, the market steadied, but the Dow again started to move in and out of the black. The other indexes retained their losses, as selective profit taking persisted. As before, most of the 10 leading equity sectors were lower, but just marginally so, while losing issues held a modest lead over gaining stocks on both the Big Board and the NASDAQ. Things changed little as we moved into and through the latter stages of the afternoon, as most investors’ eyes were focused on the just-released Labor Department report on non-farm payrolls and the unemployment rate (see below). That posting can be a game changer if there is a major departure from expectations. That said, the Dow did firm somewhat for a time, before weakening again into the close. So, when the final tallies were in, we saw that this index had set another record high, while rising a modest 10 points on the day. Losses were spread across the other large and small composites, however.

Royal Bank of Scotland swung to a profit in the second quarter as the taxpayer-owned lender reduced charges for past misdeeds. RBS, bailed out by the British government during the 2008 financial crisis, said Friday that net income totaled 680 million pounds ($894 million) after a loss of 1.08 billion pounds in the same period last year .Adjusted operating profit, which excludes litigation and restructuring costs, more than doubled to 1.69 billion pounds as RBS increased lending, cut spending and reduced the amount of money it set aside for bad loans. “We see the first six months of this year as proof of the investment case for this bank: our path to sustainable profitability is becoming clearer and closer and we have resolved some of the most significant issues this bank faced,” CEO Ross McEwan said in a statement. RBS also said its NatWest Markets unit has carried out contingency planning for Britain’s looming departure from the European Union by ensuring that the bank’s license ithe Netherlands is valid. Depending on the outcome of Britain’s negotiations with the EU, the bank may need a beachhead in Europe to continue operations on the continent.

As to the employment report, the Labor Department has reported that the nation had added 209,000 positions in July; expectations had been for a gain of 180,000. At the same time, the unemployment rate came in at 4.3%; the consensus had been for a 4.3% rate. In June, the jobless rate had been 4.4%. This ties the low rate since the recession in 2007-2009. Also, job gains for May were reduced from 152,000 to 145,000; for June, though, they were revised up from 222,000 to 231,000. Importantly, and the best feature of this report was the fact that average hourly wages rose by nine cents, or above expectations in July.

This report, while better than forecast, still wasn’t strong enough, with a labor-force participation rate of 62.9%, to push the Federal Reserve to be more aggressive in raising interest rates. At most, we see just one additional interest rate increase this year, with that uptick unlikely to come before December. As for the stock market reaction, the U.S. equity futures, up modestly before the report was released, strengthened a little further in the moments following the issuance. Treasuries, though, weakened, with yields rising somewhat on the better-than-expected data.

 

Tesla losses smaller than expected

After a big earnings-flood the German Index started by opening with a loss at 12140 points. The DAX documented a downwards movement and nearly fell under the 12100 points mark and was able to recover in the afternoon. 1 hour before close the Dax is trading at 12145 points cumulating a loss of 0,28%. The big winner of the day is Commerzbank which is up 2%.

Following another record-breaking performance on Tuesday, and an after-the-close earnings beat by Apple that day, it was widely expected that the equity market would start the middle session of this five-day span with formidable gains. And, indeed, that is just what transpired, as the Dow Jones Industrial Average broke through the psychologically important 22,000 barrier during the first minutes of trading yesterday morning. Not surprisingly, the early charge was led by a nine-point gain in the shares of Apple. But this is just one stock, and when that increase was not followed by a broader rally, the market wilted. In fact, as we passed the first hour of trading, the S&P 500, the NASDAQ, the S&P Mid-Cap 400, and the small-cap Russell 2000 all had moved into the red, with the Dow, the lone remaining winner. But even that upturn had eased notably from an early 70-point plus advance to one of fewer than 30 points. Profit taking was the main culprit, it would seem, as the economic and political tidings were rather sparse and not unwelcome. The stock market then stayed range bound for several hours during the middle of the day, with the Dow generally holding to about a 40-point advance, while the other indexes remained under water. The Dow, heavily influenced by Apple stock, which remained some 5% higher on the day, continued to hold above the 22,000 mark. Apple shares were heavily influenced both by the latest quarterly results and also the upcoming iPhone cycle 8, which is expected to begin this fall. Meanwhile, it took just 107 days for the Dow to go from 21,000 to 22,000. The biggest contributor to this additional surge has been Boeing, the aerospace and defense giant. In other news, private U.S. companies added 178,000 jobs last month, a tad below the consensus forecast of 185,000 jobs. Returning to the stock market, the Dow strayed modestly above 22,000 as the afternoon progressed. The recent batch of economic reports, albeit stronger, in the main, seem insufficiently formidable to encourage the Federal Reserve to more aggressively step on the monetary brakes. The pending jobs and non-manufacturing issuances would seem to fall into that category. Current thoughts on the Fed suggest that the bank will next raise interest rates in December, making it three such increases this year. We now would expect a similar level of tightening in 2018, assuming economic growth does not slacken. The Dow held its ground into the close, while the NASDAQ, once down more than 40 points, came all the way back, even going into the black briefly in the final hour. The S&P Mid-Cap and the smaller-cap Russell 2000, however, stayed well into minus territory, as sector rotation evolved notably. At the close, some late buying lifted the Dow comfortably above 22,000. In all, that index ended the day’s action at 22,016; while the S&P 500 and the NASDAQ were, respectively, just above and below the breakeven lines, and, as noted, the S&P Mid-Cap and Russell were off on the day, while losing issues were out ahead of gaining stocks on the NSYE.

On Wednesday Tesla reported a smaller quarterly loss than expected and said production of its Model 3 sedan remained on track to hit targets. The electric-car maker reported a loss of $1.33 per adjusted share on revenue of $2.79 billion. Analysts had forecast Tesla lost $1.88 per share and earned $2.51 billion in revenue, according to Bloomberg. In the earnings letter, Tesla said it averaged over 1,800 net Model 3 reservations daily and was confident it could produce just over 1,500 vehicles in the third quarter. Deliveries to non-Tesla employees would start in the fourth quarter, Tesla said. Tesla had said it planned to produce 500,000 vehicles annually by 2018 and would ramp up costs to meet that goal. The company burned through $1.16 billion in cash in the second quarter, up from $144 million a year before.

BMW, the German carmaker, posted stronger than expected profits after sales of its latest models in Europe and Asia helped offset a decline in the US. The Munich-based maker of luxury cars said operating margins at its automobiles unit rose to 9.7 per cent in the second quarter, from 9.5 per cent last year, near the upper end of its 8 to 10 per cent target. The figure compares with 9.2 per cent at Daimler’s Mercedes unit and 9.1 per cent at Audi, the luxury unit of Volkswagen. The improved margins helped BMW post a 9.2 per cent climb in profit before tax to €3.06bn in the quarter as revenues climbed 3.1 per cent to €25.8bn. After earnings report BMW is up 0,95%.

Continental’s second-quarter adjusted operating profit fell 10 percent as the auto parts maker raised spending on production and R&D capacities, but the company slightly lifted its sales outlook on growing demand for electric-car components. Adjusted earnings before interest and tax (EBIT) declined to 1.16 billion euros ($1.37 billion), near the low-end forecast of 1.15 billion in a Reuters poll of analysts. But the world’s second-largest automotive supplier raised its full-year sales guidance by 500 million euros to more than 44 billion euros and stood by its profit forecast which includes an adjusted EBIT margin target of 10.5 percent. Continental, which makes driver-assistance technology, fuel-injection systems and vehicle tires, said it expects about 450 million euros in raw material cost headwinds until the end of the year, 50 million euros less than previously forecast.

 

 

Commerzbank reports €637m of net losses

After recovering some of its losses on Tuesday,  the German Index is stuck on the spot, being down a mere 0,63 points, 2 hours before close. The only German stocks sticking out today are Heidelberg, a German Cement producer Lufthansa and Vonovia which are down 3%, up 2% and up 2,5% respectively. Vonovia, a German real estate broker, reported today that its half-year FFO 1 rose 18 percent to 457.7 million euros from 387.8 million euros, and FFO 1 per share grew 15.7 percent to 0.96 euro from 0.83 euro last year. Adjusted EBITDA from operations for the period totaled 607.6 million euros, up from last year’s 558.1 million euros. Rental income for the first half came in at 833.2 million euros, higher than the 774.4 million euros a year ago. Given the strong operating performance in the first half of 2017, Vonovia said it is confirming the forecast it has published for the year as a whole. The company continues to expect FFO 1 between 900 million euros and 920 million euros, representing about 20 percent above the previous year’s figure of 760.8 million euros.

After an unimposing start to the new week on Wall Street, traders got yesterday’s session off to a strong start, with stocks roaring out of the gate quickly. To wit, the Dow Jones Industrial Average, fresh off of an all-time high on Monday, fashioned another early record yesterday, soaring up close to the psychologically critical 22,000 mark in the first few minutes of trading. The principal spark for the further gains of the core indexes has been a solid earnings season, which continued in the latest session. Also helping, from time to time, have been supportive economic results. The market continued to press higher, but there was some weakening in spots, especially among the smaller indexes, such as the S&P Mid-Cap 400 and the small-cap Russell 2000. As before the principal focus remained the corporate arena, with so many of the reporting companies easily beating expectations for the second quarter. The solid earnings season thus far, in which 73% of the companies domiciled in the S&P 500 Index had surpassed earnings expectations for the latest period has been a big part of the continuing bull market in 2017. The stock market then meandered about in generally higher territory through the early to middle hours of the session, boosted by some generally supportive profit reports, along with a few misses or lackluster guidance. All the while, the Dow was unable to reach the 22,000 level. This pattern then continued into the close, with the session ending with the Dow holding a gain of 73 points. Lesser increases were tabulated by the S&P 500 Index (up six points) and the NASDAQ (ahead 15 points).Then, after the close of trading iconic technology stalwart Apple Inc. issued better-than-expected fiscal third (June) quarter results. Not only did Apple beat the consensus, but the tech giant gave investors something to cheer as they looked ahead to the next few months. On point, Apple sold more iPhones than expected and gave upbeat fourth-quarter guidance. The stock, already on the cusp of record highs, then surged in after hours trading, and seems poised to open higher this morning, a trend that should give the market an overall early lift this morning. In fact, U.S. equity futures, in general, are moving higher in pre-market action today, implying that the Dow Jones Industrials will possibly cross the 22,000 line this morning. Elsewhere, stocks in Asia were mixed overnight, though there was nice strength in the tech issues following the Apple beat, while in Europe the major bourses are trading lower in the early going. In other markets, oil is flat; gold is a little lower, backing away from a seven-week high; and Treasury yields are nominally higher.

Commerzbank lost more money than analysts expected in the second quarter of the year but said it expected a “slightly positive” result for 2017 despite the cost of a big restructuring programme. Germany’s second-biggest bank made net losses of €637m ($753.2m) in the second quarter, worse than the €556m predicted by analysts polled ahead of the results and far worse than the €215m net profit a year earlier. The bank had already warned that it would swing to a loss in the three months to end June, after it brought forward an €810m cost relating to 9,600 redundancies under a restructuring plan. “We have booked the provisions for the personnel reductions early and in full and have made further progress in the implementation of our strategy,” said chief executive Martin Zielke.

The Economic Calendar for today:

1. MBA Mortgage Application
2. EIA Petroleum Status Report

NASDAQ tech-stocks sell-off

The German Index is still under a lot of pressure noting 0,51% lower at the end of the week. After a technology sell-off on the NASDAQ yesterday and the continuous rise in the EURUSD investors are having a hard time finding incentives on the German market. Good economic data from the Eurozone and from the U.S. have been no catalysts for bearish buying behavior. The Euro zone sentiment is at its highest since August 2007. In the afternoon only 7 out of the 30 DAX members are recording a positive yield. At the lead of the winners pack is Adidas, which has upgraded its forecast on Thursday, with a yield of 2,54%. On the other end of the statistical tail is Continental with a intraday loss of 2,12%.

Fresh off of an earnings-driven record high in the Dow Jones Industrial Average on Wednesday, generated by a strong profit gain from aerospace and defense giant Boeing and some follow-up gains in that issue. Yesterday morning, Wall Street began the penultimate session of the week pressing nicely higher. In fact, within minutes of the open, the Dow had fashioned a gain of nearly 80 points. A strong profit showing by social networking behemoth Facebook, announced late Wednesday, helped the NASDAQ jump by close to 40 points in the first few minutes, meanwhile. Of course, it was not just earnings that have helped the stock market along in recent weeks, but also relief that the Federal Reserve had ended its FOMC meeting on Wednesday with the decision to keep interest rates unchanged. For the most part, though, the equity market’s strength reflects optimism that the rest of earnings reporting season will be a good one. The upward bias persisted further into the morning, though the early gains would prove the high-water mark for the day. Also on the profit front, Dow issue Verizon pleased investors with its profit report, and the stock perked up nicely, gaining more than 7% by mid-session. Overall, earnings season has been a good one, albeit with some high-profile misses. The reporting period still has another few weeks to go, but as far as the large-cap companies are concerned, this is the biggest week of the cycle. By early next month, more of the mid-and smaller-cap names will be on the clock.

The NASDAQ, which went from the earlier 40-point advance to a decline just north of 100 points. The sharp reversal was apparently brought about by valuation concerns in the tech space, following the morning’s euphoria. Still, Facebook retained some strength as the day wound down. On the other hand, the market was helped by additional firmness in the oil pieces on optimism that output can be better managed. Encouragingly, when the afternoon sell-off did not mushroom into a severe decline, the Dow firmed into the close, with that index, once in jeopardy of closing in the red, pushing up as the final bell sounded, gaining 85 points on the day. Then, after the close, chipmaker Intel, a Dow stock, posted strong second-quarter share net, giving that issue a likely modest lift this morning. Finally, in a pivotal government release just made, the nation’s gross domestic product advanced by a modestly reassuring 2.6% in the second quarter. That was materially better than the downwardly revised 1.2% gain logged in the opening period (initially posted at 1.4%), and in line with estimates issued before the latest GDP release. This was a big improvement over the first quarter, as noted, and suggested that the economy remained on track, with growth likely to hold in the current range going forward. The nice second-quarter pickup reflected positive contributions from personal spending, nonresidential fixed investment, and exports.

Credit Suisse reported a strong rise in net income for its second quarter on Friday, adding that assets under management had hit new highs for the bank. Assets under management hit a record high in the second quarter, led by gains in the wealth management division, as the Swiss bank enters into the second phase of its three-year restructuring program. The stock was up 1.8 percent in opening deals Friday.  The wealth management arm saw net new assets of $23.4 billion, a 12 percent increase on the previous year and the bank’s strongest asset inflows in six years. Overall assets under management were up 8 percent on the year at $737 billion. Net profit was up 78 percent year-on-year while net income came in at 899 million Swiss ($927 million) francs for the first half of this year. This compared to a net loss of 132 million Swiss francs for the same period last year. The surge comes as a boon to the bank’s chief executive, Tidjane Thiam, who was tasked with overhauling the bank and reducing its exposure to market movements. He said the strategy is now starting to pay off.

Intel is up 0,59% after reported better-than-expected earnings for the second quarter. In the second quarter the Client Computing Group made a strong showing with 12 percent revenue growth at $8.2 billion in revenue. The Internet of Things Group, for its part, was up a hefty 26 percent year over year, at $720 million in revenue. Intel’s typically high-margin Data Center Group, which includes sales to public cloud infrastructure providers and also competes with AMD, is key – last year its revenue rose 8 percent year over year, compared with the Client Computing Group’s 2 percent growth. This time around, the Data Center Group was up 9 percent at $4.4 billion. Altera is part of the newly formed Programmable Solutions Group, which had the worst performance of the quarter for Intel — $440 million in revenue, which is down 5 percent year over year. The top performer was Intel’s Non-Volatile Memory Solutions Group, whose revenue of $874 million was a record high, up year over year by 58 percent. With respect to guidance, Intel says it’s expecting 80 cents in earnings per share on $15.7 billion in revenue for the third quarter. For the full year, the company expects $3 in earnings per share and $61.3 billion in revenue. On the company’s conference call with financial analysts, Intel CEO Brian Krzanich committed to a spending target of 30 percent of revenue and said he’s expecting the company to reach that goal no later than 2020. The company will make these ongoing changes to meet that goal while also driving growth, Krzanich said.

The Economic Calendar for today:

1. U.S. GDP
2. Employment Cost
3. Consumer Sentiment

 

 

Daimler profits are up 70%

The DAX has been profiting from the bullish markets and is up 0,35%, reaching the 12310 point mark. The strongly criticized German car industry is still suffering the repercussion from the cartel allegations. Daimler and BMW are the only DAX members recording stock losses. Volkswagen is up 2,35%. Reports have surged, from the usually well-informed Sueddeustche Zeitung, that Daimler was first in coming clean with Germany’s and Europe’s cartel watchdogs, and it could avoid a multi-billion fine. Volkswagen came in second, and could get a 50% rebate on the punishment. BMW, one of the least suspicious in the dieselgate scandal, is kept holding the bag.

Following an inconclusive session on Monday and the start of the Federal Reserve’s two-day FOMC meeting yesterday morning, the bulls got the new session rolling in a big way with an immediate jump forward of more than 150 points in the Dow Jones Industrial Average. Along with the Dow’s snappy opening gain, the Standard and Poor’s 500 Index soared to another intraday all-time high, advancing to just shy of 2,480 at the opening bell. The NASDAQ, however, was held back, posting a small early loss under pressure from a 28-point loss in shares of Alphabet on news of an antitrust fine. The strong start, however, could not be sustained, and as we neared the one-hour mark of trading, the 57-point Dow gain had been pared to some 65 points. The NASDAQ, meantime, barely held at breakeven, while the S&P 500 Index saw its gain cut to a handful of points. The big influence was earnings, as industrial giant Caterpillar posted bottom-line results that exceeded expectations and shares of that Dow-30 component jumped nicely in early dealings. It was a far different story for fellow Dow stock 3M Company. That industrial giant disappointed investors with its top-and-bottom-line miss, and the stock tumbled. The Dow’s pullback didn’t continue, however, and as we passed the one-hour mark, that index again started to press higher, soon returning to past the 100-point advance mark. The strength continued through the morning, so that as the noon hour arrived, the market was up strongly, with the Dow’s advance holding at a formidable 130 points, in spite of the 3M profit miss and subsequent price drop. The strong advance persisted into the close, with the Dow’s triple-digit point gain staying intact until shortly before the concluding bell. As was the case earlier, the bullish tone was driven by better-than-expected earnings, not only from the Dow’s Caterpillar, but also from McDonald’s, another component of that 30-stock composite. Those two issues continued to overcome the further weakness in 3M. Also, most of the leading sectors were trading higher, led by basic materials and energy, while stocks rising in price easily topped those equities falling back. In short, there were few places for the encumbered bears to hide. When all the number were thus in, the Dow, with a last minute push higher closed higher by 100 points; the S&P 500 added seven points; and the NASDAQ eked out a small win. More substantial gains were posted by the smaller indexes. Now, as we await a new day, additional earnings data, and a report on sales of new dwellings (following Monday’s solid report of sales of existing homes, the big story will be the Fed. The central bank, which commenced its latest FOMC meeting yesterday, will end matters this afternoon at approximately 2:00 PM (EDT), with a likely decision, as noted above, to keep interest rates unchanged.

Daimler has posted another quarter of record sales and revenue, creating a strong base off which it says it will be able to “exploit new business models” amid industry disruption. The Stuttgart-based carmaker said net profit for the second quarter rose 2% to €2.51bn, as revenue rose 7 per cent to €41.2bn, Operating margins for Mercedes cars rose from 6.4% a year ago to an amazing 10.2%. Overall operating profit jumped 15% to €3.75bn, led by a stunning 70 % climb in Mercedes-Benz profits, to €2.4bn. Profits fell by double digits at the group’s vans, buses, and trucks’ divisions. After overtaking BMW to be the world leader leader in luxury car sales last year, Mercedes increased car sales by 9 % to 595,178 units.Total Daimler sales across all units were up 8 per cent from a year ago to 822,504 units.Chief executive Dieter Zetsche called the quarter excellent. “We have set ourselves ambitious targets. And we are achieving them – in terms of unit sales and of profitability.” The car industry is in the early stages of being upended by “megatrends” that will see passengers use electric, self-driving cars that are shared rather than owned. Mr Zetsche said Daimler’s “strong core business is the best basis” to meet this transformation. Meanwhile, the legacy business model is expected to keep growing. Daimler said worldwide demand for all cars is expected to 1-2 per cent this year, which would mark an 8th straight year of growth. US sales are expected to fall, but Europe and China should see slight growth, while India should see “significant” growth.

Philips announces share buyback program

The DAX continued its downfall this week, by dropping 0,47%. This downfall is fueled by the German car industry and the strong EURUSD. As we reported on Friday, allegations have surged suggesting that the German auto industry has not complied with various anti-trust regulations. These cartel suspicions have put a lot of downward pressure on the big players in the German auto industry. Daimler AG, BMW and Volkswagen being down 2,86%, 3,58% and 1,88% respectively.

In the U.S. the most recent five-day stretch of trading once again favored the bulls. The second-quarter earnings season, which kicked into gear last week, has thus far proven constructive for equities, but the results have not been as strong as the figures produced by Corporate America during the March period. The trading session on Friday saw some profit taking, as a couple of earnings reports disappointed. The setback, though, was pared into the closing bell. Also hurting stocks on the final day of last week was a drop in oil prices. The price of West Texas Intermediate contracts fell sharply, finishing the week in the vicinity of $45 a barrel, a level that will make it hard for the oil and gas companies to deliver solid earnings results. This comes ahead of some meetings this week among OPEC and non-OPEC leaders looking to find a solution to work down the glut of oil presently in the market. Not surprisingly, the energy sector was the biggest laggard among the 10 major equity groups. There also was weakness in the basic materials and technology areas. Conversely, there was interest in the higher-yielding consumer staples, telecommunications, and utilities sectors. Last week may prove to be the appetizer before the main course for the investment community. Indeed, the volume of quarterly results scheduled to be released over the next five days will far exceed last week, with data due on 12 Dow-30 companies, highlighted by the latest figures from the oil giants Exxon Mobil and Chevron on Friday. Too, the news on the economy will be much heavier this week, including the first reading on second-quarter GDP from the Commerce Department on Friday. These events will keep investors busy and will play a big role in whether the bulls will be able to keep the party going. As of now the Dow is down 0,22%.

Rocket Internet has been given a €22.00 price target by equities research analysts at Barclays PLC in a research report issued to clients and investors on Monday. The firm currently has a “neutral” rating on the stock. This downgrade has pushed the Rocket Internet stock down 5,05%.

Netherlands’ Royal Philips NV PHIA said Monday it will begin a 1.5 billion euros ($1.71 billion) share buyback program as it posted a 36% rise in second-quarter net profit. The health-technology company’s net income from continuing operations during the three months to the end of June rose to EUR161 million from EUR118 million the year earlier, while sales increased 4% to EUR4.3 billion from EUR4.13 billion during the second quarter in 2016. Adjusted earnings before interest and taxes or Ebit, the company’s preferred measure of its operational performance, rose 15% to EUR439 million during the quarter from EUR383 million a year earlier, Philips said.

The Economic Calendar for today:

1. PMI Composite Flash
2. Existing House Sales

 

 

General Electric hits 19 month low

The strong Euro, the falling oil prices and the supposed cartel allegations in the German auto-industry has propelled the German DAX to hit a low this week, quoting at 12‘240 points. At 15 o’clock the index was trading at a minus of 170 bps. U.S. crude prices fell 1 percent today in a sudden move after a report said supply from OPEC is rising. Reuters said OPEC’s July oil supply was set to rise by 145,000 barrels per day (bpd) compared to June, citing PetroLogistics, a company that tracks OPEC supply forecasts. The increase in oil supply would push production above 33 million barrels per day. WTI futures erased earlier gains on the report, trading at $46.52 per barrel. The European Central Bank President Mario Draghi’s difficult task of calming markets was laid bare on Thursday afternoon, as an initial dovish message by the ECB was quickly drowned out by talk of inflation and an end to asset purchases. The bank held interest rates and asset purchases steady on Thursday, amid speculation that it will start to scale back its ultra-loose monetary policy in the fall. It also struck a somewhat dovish tone and insisted that it would be poised to step in should the outlook take a downward turn. The German news outlet “Der Spiegel” reported that the German carmakers Volkswagen, Audi, Porsche, BMW and Daimler secretly worked together from the 1990s onwards on issues including polluting emissions from diesel vehicles. Volkswagen reported the cartel to German competition authorities in a letter seen by the “Der Spiegel”, as did Mercedes- Benz maker Daimler.

The U.S. stock market, which climbed nicely to end a mostly range-bound session on Wednesday, got out of the gate quickly yesterday morning, aided by comments from European Central Bank President Mario Draghi. But the buying was short lived. Indeed, as the half-hour mark of the session was passed, the composites were mixed, with the Dow Jones Industrial Average easing back modestly, while the S&P 500 Index and the NASDAQ scored additional all-time highs. In the case of these latter indexes, their early strength, too, lessened as the morning progressed, with the NASDAQ easing into the red for a spell. Meanwhile, investors were continuing to watch the release of corporate earnings. Most of the issuances were upbeat, if uneven, at times, with some three-quarters of the companies domiciled in the S&P 500 Index topping profit expectations. That is in keeping with the recent past on Wall Street and is reassuring for a market that is certainly not undervalued at this time. The solid earnings performances are helping to keep serious profit taking at bay, for now. Then, after a brief selloff, which took the Dow down to a morning-worst decline of some 65 points, the market, as has so often been the case this year, regrouped and as the afternoon began, the Dow’s loss had eased to a more manageable 10-20 points. The other indexes, both large- and small-cap, meantime, stayed modestly in the black, for the most part. A few stocks underwent moves of note, including PPG Industries, with that diversified chemicals manufacturer announcing an acquisition that did not sit well with investors, even though the giant corporation posted solid quarterly metrics in the meantime. The Streets strength was on display again in the afternoon, as the three large-cap averages all managed to turn positive as the final hour began. The market remained near the breakeven point until late in the session when the Dow saw enough, but still modest, selling to put that average down by 29 points. The S&P 500 Index was essentially flat, while the NASDAQ managed to gain a handful of points. The smaller indexes were little changed. As to economic influences, the Index of Leading Economic Indicators provided an upward surprise, increasing in June by 0.6%. That sharp increase followed unimposing 0.2% gains in both April and May. Expectations had been for a rise of 0.4%, within a forecast range of 0.2%-0.5%. Looking out to the concluding session of this week and casting our eyes abroad, as we most always do, we see that the markets lower in Asia overnight, while in Europe, the principal bourses are tracking downward.

GE slid down 1,7% this morning after releasing its Q2 results and reporting a 12% drop in revenue. Net profit slumped 58 percent to $1.34 billion, or 15 cents a share, in the quarter ended June 30, from $3.30 billion, or 36 cents a share, a year earlier. GE’s energy connections business provides electrification and automation products to the oil and gas, mining, utility and marine industries. Revenue fell to $29.56 billion from $33.49 billion, slightly better than the $29.02 billion consensus estimate of analysts polled by Thomson Reuters I/B/E/S. Adjusted earnings fell 45 percent to 28 cents a share, compared with estimates for 25 cents. GE’s closely watched cash flow from operations fell 67 percent to $3.6 billion from a year ago, reflecting the loss of contributions from the appliances division that the company sold.

 

Morgan Stanley tops expectations

After a bad start to the week the German DAX was able to recover from some of its losses in the early trading hours. In the afternoon the DAX has been has been circling around the 12’430 point mark. The sideward movement in the DAX is mainly due to the ECB meeting tomorrow. The EURUSD had to take a break on its rise and has weakened as of today.

In the US the stock market, following an indecisive start to the week on Monday, looked poised to press higher yesterday–or at worst mark time once again. And, in fact, the equity futures were showing little change several hours before the start of trading on our shores. Then, in some apparent rethinking, the bears started to flex their muscles. This shift was not dramatic at first, and there was no wholesale selloff of stocks through much of the morning, but there was some movement lower from the start. However, the impetus was not earnings season, which now is under way, but rather the dysfunction in Washington, which has taken a turn for the worse. Specifically, the bears resurfaced following news that the Republican leaders in the U.S. Senate had decided to abandon their health care bill, which was designed to repeal and replace the Affordable Care Act (ACA). The reason is that two more GOP Senators had gone on record with their intention to oppose the measure. That would leave the Senate Republicans two votes short of the 50 needed for approval. And without a new health care bill, efforts at tax reform–a key part of the bull market story–would be that much harder. So, stocks wilted and fell, even with no worse than a mixed early showing on the corporate earnings front. As noted, stocks pulled back, and the situation worsened as the morning progressed, with the Dow Jones Industrial Average falling to a morning-worst loss of almost 160 points before some subsequent buying surfaced to pare the deficit. For the moment, at least, earnings are taking a back seat to Washington. Interestingly, it was mostly the Dow that fell back, as the NASDAQ, on comparative strength in the technology group, managed to hold with just modest losses. As for the Dow, it was also influenced by a drop in the shares of Goldman Sachs, as the financial services giant reported a drop in bond trading revenues. Meanwhile, the Dow’s loss continued to ease into the lunch hour as a one-time near 160-point deficit was cut in half as the noon hour arrived. The S&P 500 Index’s loss was minimal at that time, while the NASDAQ was in the black. As we entered the afternoon, it looked as though we would remain in the loss column throughout the day’s session. The stock market continued to press lower as the afternoon moved along, but the deficit on the Dow gradually eased as the session proceeded, even though a proposal to just repeal the ACA failed as a third GOP Senator voiced her opposition even before a vote could be taken. When the final numbers were in, the worst morning’s setback had been overcome, with the Dow cutting its loss by some two-thirds to end matters off just 55 points. The S&P 500 Index managed to end on the plus side of the ledger, if incrementally, while the NASDAQ inked a 27-point increase. Just modest losses were tallied by the smaller composites, as losing stocks, once well ahead of winners, were just narrowly in the lead on the Big Board.

Morgan Stanley reported second quarter earnings Wednesday that soundly topped expectations, helped by an increase in stock trading revenues and profits from its wealth management business. Earnings per share: 87 cents vs. 76 cents expected by a Thomson Reuters consensus estimate. Revenue: $9.50 billion vs. the $9.09 billion estimate. The shares are trading about 3 percent higher this morning. Equity sales and trading net revenues increased by $100 million to $2.2 billion, little changed from a year ago but up 7 percent from the first quarter, “reflecting strong contributions across products and regions,” Morgan Stanely said in a statement. Overall sales and trading revenue decreased by $100 million, or 2 percent, from a year ago, to $3.2 billion. Bond trading revenue fell $100 million, or 4 percent, to $1.2 billion in the second quarter, “driven by lower volatility and sporadic activity during the quarter,” the release said. Fixed income trading revenue was $1.7 billion in the first quarter. The second quarter marked the second in a row for which Morgan Stanley’s fixed income trading revenue topped that of Goldman Sachs.

Today’s Economic Calendar:

1. MBA Mortgage Applications
2. Housing Starts
3. EIA Petroleum Status Report

 

Earnings Season: Goldman, Bank of America, Johnson & Johnson, Lockheed Martin

The ever increasing Euro is leaving its trail on the German DAX. The EU currency is on a bullish path and about to reach the 1,16 mark. The uncertainty reigning in Washington these days has put the US Dollar under a lot of pressure and the EURUSD opened at 1,1564. The Germany industry being very export-dependent is suffering from this evolution and so are the German export-sensitive companies. The DAX plotted a downward movement being down 1,42% to 12’408 points after opening at 12’540.

In the U.S. the stock market, which has made a habit recently of rising nicely on most Mondays, pretty much marched in place. On point, through much of the morning, the Dow was off marginally, while the S&P 500 and the NASDAQ were modestly higher in advance of earnings. As for the economy, following a week in which there was a succession of mixed data, including stronger results on industrial production and factory use and weaker metrics on retail sales, we will be getting figures on homebuilding tomorrow. This unimposing pattern then continued into the last part of the morning, when just around noon in New York, the Dow nudged into the black, while the other large-cap indexes held nominal gains. Boosting the market modestly was a report showing that China’s economy had expanded by 6.9% in the second quarter, which was better than expected. Meanwhile, in other news on this early flat-line session, oil was off a few pennies a barrel; gold was fairly flat; and Treasury yields had ticked down slightly. A holding pattern then evolved during the afternoon, as Wall Street awaited a slew of earnings reports this week from mostly larger companies, which tend to report early in the cycle. Among the high-profile names set to release results this week is Dow-30 component Microsoft. Overall, expectations are high and the flat performance through most of the session yesterday reflects the Street’s caution ahead of the heavy pace of reports that will have a major impact on the market’s showing in the weeks to come.

Johnson & Johnson tops 2Q profit forecasts. The maker of blood thinner Xarelto, Tylenol and other pain relievers, and medical devices on Tuesday reported net income of $3.83 billion, or $1.40 per share, down from $4 billion, or $1.43 per share, a year earlier. Adjusted results, excluding one-time charges, amounted to $5 billion, or $1.83 per share, 4 cents better than Wall Street analysts expected. Revenue was $18.84 billion, just shy of analyst expectations for $18.89 billion. The company’s prescription drugs business, its largest segment, saw sales dip 0.2 percent to $8.64 billion, while sales of consumer health products such as Johnson’s baby care items edged up 1.7 percent to $3.48 billion. Meanwhile, sales of medical devices and diagnostic products climbed 4.9 percent to $6.73 billion, indicating the restructuring is turning around problems in the segment. J&J said it now expects full-year earnings in the range of $7.12 to $7.22 per share, up from it April forecast of $7 to $7.15 per share. It forecast revenue in the range of $75.8 billion to $76.1 billion, up from $75.4 billion to $76.1 billion.

Goldman Sachs beat Wall Street estimates in the second quarter. The US bank delivered earnings per share of $3.95, ahead of $3.43 EPS expected. The bank reported net revenues of $7.89 billion, ahead of the $7.5 billion that was expected. The bank had its third best ever quarter for debt underwriting revenues, with $721 million in fees. Equities had its best quarter in two years, with $1.89 billion in revenues, up 13% from the first quarter. Fixed Income, Currency and Commodities Client Execution had a weak quarter, with revenues of $1.16 billion 40% lower than the second quarter of 2016. The bank put that down to “significantly lower net revenues in interest rate products, commodities, credit products and currencies, partially offset by higher net revenues in mortgages.” Investment management had record quarterly management and other fees of $1.28 billion. Assets under supervision increased to a record $1.41 trillion.

Lockheed Martin Corp, the Pentagon’s No. 1 weapons supplier, reported a better-than-expected quarterly profit, helped by higher sales in its aeronautics division that makes fighter jets. Lockheed raised its 2017 profit forecast for the second time and said it now expects to earn $12.30 to $12.60 per share. The company in April forecast $12.15 to $12.45 per share. The company raised it 2017 sales forecast to $49.80 billion to $51.00 billion, from $49.50 billion to $50.70 billion. Lockheed said sales in its aeronautics business, the company’s biggest, rose 19.4 percent during the second quarter. The F-35 program is the Pentagon’s costliest arms program and has been criticized by U.S. President Donald Trump and other U.S. officials for being too expensive. The company’s net income from continuing operations rose about 5 percent to $942 million, or $3.23 per share, in the quarter ended June 25. Net sales rose to $12.69 billion from $11.58 billion.

Bank of America said Tuesday its second quarter earnings rose 10% as demand for its retail banking services generated higher deposits and interest income. Net income totaled $4.9 billion, compared with $4.4 billion a year ago. Net interest income climbed 9% to $11 billion. Earnings per share were 46 cents, beating the 44 cents estimated by analysts who were polled by S&P Global Market Intelligence. Shares of Bank of America dipped 0.2% in pre-market trading to $23.98. The consumer banking unit, which operates more than 4,500 branches, was clearly the performance star, reflecting the robust job market and consumers’ healthy appetite for loans amid low interest rates. The unit’s revenue rose 9% to $8.5 billion. Net income spiked 21% to $2 billion. The unit’s deposits were up $56.3 billion to $652.8 billion. Loans rose by 8%. Combined credit and debit card spending climbed 6%.

Today’s Economic Calendar:

1. Import and Export Prices
2. Redbook
3. Housing Market Index

BlackRock earnings: EPS up 10%

After a good start to the week, the German Index had to incur some losses in the afternoon and is now steadily tumbling around the 12580 mark and the market seems to have given up on the 12600 mark for the day. The up and coming ECB conference scheduled for Thursday is leaving Investors worried. After some ECB members had announced an easing of the imposed monetary policy, the actual inflation rates don’t support this possibility, making an easing unlikely. The Euro zone headline inflation slowed in June but the core figure excluding volatile unprocessed food and energy rose, the European Union’s statistics office said on Monday, confirming its earlier flash estimates. Eurostat said consumer prices in the 19 countries sharing the euro rose 1.3 percent year-on-year in June, in line with market expectations, decelerating form 1.4 percent in May and 1.9 percent in April. But its core measure of price growth, which excludes unprocessed food and energy and is closely watched by the European Central Bank, rose to 1.2 percent on the year from 1.0 percent in May.  The figure was above market expectations of a 1.1 percent rise, but matched Eurostat’s earlier flash estimate released at the end of June.

The major U.S. equity indexes ended a strong week for those long equities on a very upbeat note on Friday. On Friday, U.S. stocks began the day on a positive, albeit uneven note. Each of the major indexes spent most of the opening hours above their respective breakeven line, save for the Dow’s momentary, finance-related dip shortly after the opening bell. But after traders digested some mixed information from Corporate America and the business beat, most equities extended their morning gains well into the afternoon. The Dow and S&P 500 each set all-time intraday trading highs in the final hour, while the tech-laden NASDAQ, Friday’s strongest performing index, rose to within striking distance of its own high mark, as well. Despite the broad-based gains in nearly every pocket of the exchange, there was some selling pressure stemming from the earnings front early on. Disappointing updates from a trio of banking giants contributed to the financial sector’s morning struggles. That is, while JPMorgan Chase and Citigroup each beat consensus earnings estimates for the June interim, lackluster investment income figures and less-than-encouraging outlooks weighed on investor confidence. Speaking of earnings, the second-quarter reporting season kicks into high gear this week, highlighted by reports from nine Dow-30 companies. This week will provide many clues as to how the second-quarter earnings season will likely play out. Over the next several weeks, analysts expect to see updated corporate earnings data play an outsized role in determining how the market moves. Sure, investors also will be keeping a close eye on the Capitol, particularly as it relates to the healthcare developments, but the performance of Corporate America will be the headlining force in trading through early August.

Today BlackRock posted second-quarter earnings and revenues that missed expectations. The world’s largest asset manager reported second-quarter adjusted earnings per share of $5.24 on revenue of $2.965 billion. In the year-earlier period, the company had posted adjusted earnings of $4.78 per share on sales of $2.804 billion, documenting a Quarter on Quarter increase of 9,62%. BlackRock shares fell 2.8 percent in the premarket following the report’s release. The firm’s second-quarter assets under management rose 16 percent year over year to $5.689 trillion, topping analyst expectations. The company, which now oversees $5.7 trillion in assets, received $94 billion in net investor money during the quarter, with $74 billion of that amount flowing into the company’s iShares-branded exchange traded funds. BlackRock now manages $1.5 trillion in exchange traded funds, passive investment vehicles that track a wide variety of indexes and investment strategies.

Valeant Pharmaceuticals International Inc. has agreed to sell its skincare business, Obagi Medical Products, to a Hong Kong-based firm for US$190mln in cash. Obagi, a drug company that specialises in products for skin aging, skin damage and other skin probems, will be sold to Zhonghua Finance Acquisition Fund I LP. Proceeds from the sale will be used to cut Valeant’s debt as the company works to turn around the business following a troubled year. The deal is expected to be completed in the second half. Valeant sees Obagi generating a net profit of US$85mln and adjusted underlying earnings (EBITDA) of US$30mln.

Bitcoin briefly fell below $2,000 for the first time in two months amid anxiety its dominant status is under threat. As enthusiasts consider adopting two competing software updates, raising the possibility that bitcoin will split, it’s lost about a third of its value since attaining a peak of just below $3,000 on June 12. Calls for a revamp of the cryptocurrency come as exchanges have struggled to keep up with rising volumes.

A reading of New York-area manufacturing cooled in July from a two-year high, according to data released Monday. The New York Fed’s Empire State manufacturing index fell to a seasonally adjusted reading of 9.8 from 19.8 in June. Economists polled by Econoday expected a reading of 15, on a scale where any figure above zero indicates improving conditions. Readings in July for new orders, shipments, inventories, delivery times and number of employees all decelerated. That said, the Empire State index has been positive for six out of seven months in 2017.