Intraday Market Update
The pre-markets were weak this morning but bounced back at the open. But just when the major indices were about to turn positive S&P Ratings Services cut their ratings on Greek debt to junk and also cut Portugal's ratings two notches, while also slapping on a negative outlook for the country. Contagion is spreading outward from Greece and there are fresh doubts over the sustainability of public finances in other euro zone countries, which is causing fears that the sovereign debt crisis could derail the economic recovery. After the news broke the S&P 500 quickly sold of -24 points reaching an intraday low near 1,187. All of the US indices are now off by about -1% but are firmly off of their lows as the dip buyers appear to be alive and well.
Spreads for Portugal and Ireland were under pressure early this morning. Portuguese yields rose more than +30 bps to test 5.55%, with the spread widening to the highest levels against German Bonds since February 1997. This scenario was similar for Irish, Spanish and Greek bonds. The Greek 5-year CDS approached a record high of 800 bps.
There were three economic reports released today with mixed results. First, the ICSC-Goldman Store Sales report posted its sixth straight weekly gain at +0.2%. The report describes store traffic as robust and believes pent-up demand from consumers continues. Second, the Conference Board's consumer confidence report spiked for a second straight month, up about +5.5 points in April to 57.9. The gain is centered in expectations which jumped +7 points to 77.4. This may indicate rising optimism over the outlook for business conditions and slowing pessimism on the outlook for employment and income. Other details show a jump in buying plans for cars and major appliances, although buying plans for homes are still under pressure. Third, the Case-Shiller unadjusted home price index also continues to show that home prices appear to be in trouble. The composite 10 index was down -0.6% in February to 156.82. The unadjusted composite 20 index fell -0.9%. These results extend a long streak of declines and mark a step lower compared to January's declines of -0.2% for the composite 10 index and -0.4% for the composite 20 index. Another down move in home prices will put pressure on homeowners, while increasing foreclosures and distressed sales.
In Washington, Goldman Sachs executives are being drilled before a Congressional subcommittee about their specific role in the mortgage backed securities market.
In equities, chemical names 3M and Du Pont both beat expectations in their Q1 earnings reports and raised 2010 guidance. Du Pont cited particularly strong demand in the Asia-Pacific region. Shares of MMM are up +2%, while DD is down about -2%. BP's quarterly results were well ahead of expectations but its shares are off by -2% today. BP's shares are down -7% from their intraday high on April 15.
Ford and several auto sector names reported very strong quarterly results. F's earnings were ahead of expectations but revenue was a little soft. Shares of Ford are down 4%. Ford's CEO said that consumer spending growth in the US and Europe would remain below the trend in 2010, but expects a robust recovery to continue in Asia. Engine manufacturer Cummins reported double the quarterly profit expected, while auto retailer Group 1 was modestly ahead of earnings targets. CMI is up about +4.5%, while GPI is down about -1%.
Texas Instruments and ADP reported earnings in line. Executives from TXN said demand has remained strong so far, while ADP's CEO said the pace of decline in pays has slowed compared to a year ago. Shares of both companies are under pressure along with the market. Quarterly losses from leading airlines United and US Airways were much smaller than consensus estimates. US Airways said it would be profitable next quarter. UAUA is down -5% while LCC is about flat. And finally, retailers Office Depot and Radio Shack offered in line expectations. Office Depot said it expects to report a loss next quarter. Shares of ODP are down -16% while shares of RSH are up +1.3%.
Commodities are under pressure with the exception of gold. Front month crude is down -1.90% to $82.60 per barrel. Natural gas is about flat. Gold is up +0.70% t $1,162 an ounce, while silver is lower by -1.33%. Copper has plunged -4.34%.
The lone major market around the world that closed higher was Japan which tacked on +0.42%. Leading declines in the Asia-Pacific region were China (-2.07%) and Hong Kong (-1.51%).
All major European markets were sharply lower due to the mounting debt crises. The biggest losses were experienced in Spain (-4.19%), France (-3.82%), Germany (-2.73%), and London (-2.61%).
Core Sector List:
Overall reading: All 16 sectors declining.
Weakest Sectors: Oil Services, Home Construction, Insurance
S&P 500 - Daily and 30-minute Intraday Charts:
Dow Jones - Daily and 30-minute Intraday Charts:
NASDAQ - Daily and 30-minute Intraday Charts:
Russell 2000 - Daily and 30-minute Intraday Charts: