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Forex Blog - US Market Update
Tuesday, October 20, 2009 11:28:06 AM
US Market Update
Dow -35 S&P -4.35 NASDAQ -7
- Equity trading is muddling by this morning, as indices remain well off yesterday's highs, but declines are modest in light of the recent strong performance. The morning's housing data was lackluster, with the Sept housing starts and building permits both lower than expected. Adding to the downbeat tone, the National Retail Federation poll showed that US consumers plan to spend 3.2% less on a y/y basis on holiday shopping in 2009, stating that "Americans are not ready to declare an end to the recession." Overnight the front-month NYMEX crude contract took another run at $80 but is trading well below $79 in mid morning trade as markets await this afternoon's API inventory report. Treasury prices got a boost from more benign producer price data with continued compression seen along the curve. The benchmark spread has narrowed below 240 basis points while the long bond yields has retreated back towards 4.15%.
- Caterpillar's quarterly report was almost schizophrenic: thanks to a big tax benefit the company had earnings that were nearly an order of magnitude greater than the consensus view, while revenue fell short of expectations. Guidance for the remainder of FY09 remains below par, while CAT's initial view of 2010 revenue was much better than the Street expected. The story was similar at fellow Dow component DuPont: earnings outperformed while revenue fell somewhat short. DuPont also tightened up its EPS guidance range for FY09, and warned that revenue would remain flat next quarter, below expectations. Dow name Coca Cola's results were more or less in line with expectations. Shares of CAR are up 4% but off their best levels, while DD is down 2%.
- In tech, Apple has yet again surprised to the upside, beating the Street's top- and bottom-line expectations handily, although the firm's EPS guidance for next quarter was notably lower than the consensus. On the conference call, Apple executives said iPhone supply was short "virtually everywhere," and bragged that the iPhone has been deployed in more than 50%+ of Fortune100. Texas Instruments modestly exceeded expectations in its Q3 and its guidance for Q4. On TXN's call, the CFO said demand in all segments was stronger than expected in Q3. Shares of AAPL are up 5% and TXN is up 2%.
- The military-industrial complex had solidly profitable third quarter. Both Dow component United Technology and Lockheed Martin beat earnings expectations, although LMT's revenue was a bit behind the Street. Both firms offered firmly in line FY09 guidance, while LMT's FY10 outlook lagged expectations. Shares of UTX are climbing out of the red to around even, while LMT is down nearly 6%.
- Regional banking name Bank of New York topped consensus revenue and earnings projections. Executives said the bank took advantage of the recent strength in the fixed income markets to cut risk exposure by selling or recognizing losses on a significant portion of its investment securities portfolio. Regions Financial's loss was much bigger than expected, although revenue held together. With both ROE and ROA falling precipitously, the picture is not bright for the troubled firm. Asset manager State Street offered solidly in line quarterly results. BK is up 6% in early trading and RF has gained steadily since the open to trade up 4%. STT is -6%.
- Dow component Pfizer had largely in line results in the quarter, although the firm's full-year revenue guidance blew away analysts' expectations. Medical device maker Boston Scientific beat on earnings but missed revenue targets by a hair. BSX's EPS outlook for next quarter and the full year is well ahead of expectations, while full-year revenue guidance remains a bit below the Street. Note that BSX's CEO said Congress's health reform bill could be very damaging to the healthcare industry as a whole, and expects the legislation to double BSX's tax liability. Healthcare giant UnitedHealth was solidly in line with expectations, although its initial outlook for 2010 fell behind the consensus view. BSX has fallen off a cliff, down 16%, PFE is up just more than 1% and UNH is up 5%.
- In currencies, verbal intervention continued in the New York session as the Bank of Canada noted that the appreciation of the loonie has offset favorable economic developments since July. USD/CAD surged just over 100 pips to test 1.0425 area. Russian Central Banker Ulyukayev dismissed speculation of an imminent reweighing of the ruble basket and commented that there was no reason to change composition of reserves due to USD weakness. He viewed the weak dollar as a correction rather than devaluation. French President Advisor Guaino commented that the 1.50 level in EUR/USD would be a "disaster" for European industry. Note that the 1.50 option barrier in EUR/USD was successfully defended once again, and the pair remains with striking distance of fresh 14-month highs. Sterling maintained a constructive tone throughout the NY morning, and GBP/USD was testing its 14-month downtrend line on the approach of 1.65 ahead of BoE Gov King's speech later today.
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