Intraday Market Update
Strong quarterly earnings results from Alcoa and CSX are greasing US equities higher today while expectations remain elevated for a positive June quarterly earnings cycle. Both companies beat top and bottom line estimates and both are more than -3% off of their morning highs. Intel reports after the bell today. All of the US equity indexes are higher by more than +1.25% with the Russell 2000 leading the way with better than +2.25% gains. The S&P 500 has stalled at its 50-day SMA which also corresponds to its primary downtrend line from the April highs to the June highs. Apple has lost -2.5% on the heels of an unfavorable report by Consumer Reports yesterday, citing unfavorable reception. In overseas trading the Asia-Pacific region finished mostly lower with China's Shanghai Composite Index losing -1.62% after the government reiterated its pledge to keep property speculation under control. The aforementioned earnings reports helped boost European markets as most throughout the region gained about +2%.
Meanwhile, the Obama Administration announced a new drilling moratorium by adjusting the requirements to maneuver around the hold put on its earlier moratorium by a US appeals court. The oil services sector, as measured by the OSX, is under performing and is only up +0.50%. Utilities is the worst performer at about breakeven. The best performing sectors are Internet (+2.8%) and home construction (+2.6%).
In economic news, the Commerce Department reported that the US trade deficit grew nearly +5% (m/m) in May to its widest levels since late 2008. Through May, the U.S. trade deficit is running at an annual rate of $474.8 billion which up +26.6% from $374.9 billion deficit for all of 2009. That had been the lowest annual trade gap since 2001, another year when the country was in a recession. A rebounding economy pushed up demand for imports of foreign made cars, computers and clothing. The deficit with China rose to $22.3 billion, making for the largest imbalance since October and a +15.4% jump from the April deficit. American exports of goods and services rose +2.4% but this increase was outpaced by a +2.9% rise in imports. American manufacturing has been a standout performer so far in this recovery, benefiting from a pending global economic recovery. But now the concern is that exports will be hurt by the European debt crisis, which has dampened growth prospects in Europe.
Alcoa raised its guidance for global aluminum consumption to +12% y/y (up from +10% prior) and said that its end markets remain strong. Executives on CSX's conference call said the firm's volume and revenue outlook for next quarter is favorable and said the economic recovery would continue in the second half of the year. Chevron is up more than 1% after telling investors that its Q2 results would beat expectations, thanks to improved refining margins and lower commodity prices.
In other earnings news Infosys met expectations and slightly increased its full year revenue outlook. INFY has sold off -6.50% on the report. Semi name Novellus beat on the top and bottom line and said that growth in China will continue to support a multi-year recovery in the semiconductor equipment industry. NVLS has gained +4.3%. Construction materials wholesaler Fastenal's earnings were slightly better than expectations. FAST is down -4.3%. Healthcare benefits administrator Amedisys (AMED) is off more than -23% after warning that it would miss expectations significantly due to one-time costs. California Pizza Kitchen (CPKI) is up +5.8% after boosting its Q2 estimates.
Core Sector List:
Overall reading: 15 sectors advancing, 1 sectors declining
Strongest Sectors: Home Construction, Internet, Banks, Biotechnoly
Weakest Sectors: Utilities, Oil Services
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