Intraday Market Update
US equities opened lower this morning after a mixed bag of earnings reports, but the weakness was short lived after a better than expected reading on consumer confidence, mixed reports on August home prices, and a positive surprise in the October Richmond Fed manufacturing survey, echoing recent strength seen in other regional Fed surveys. Dow member IBM added a boost to sentiment after they authorized an additional $10 billion to repurchase stock. All of the major indexes have recovered from there initial drop to trade in positive territory, however, they are heading back south again. US Treasuries are under pressure and the 10-year yield has risen above the 2.60% level for the first time in nearly a month. Commodities are hanging tough despite strength in the US Dollar. Crude oil has just turned negative and continues to find resistance at the $83 to $84 level. Equity markets throughout the world were mostly lower as investors digested disappointing earnings reports from UBS and ArcelorMittal, which trumped a better than expected Q3 GDP report from the UK.
There have been a slew of reports on home prices released in recent days and the results are mixed within a lot noise. This morning the FHFA said that home prices rose +0.4% compared to estimates calling for a -0.2% decrease. However, the Case-Shiller Home Price Index said prices rose +1.7% compared to estimates calling for +2.1% gain. On a seasonally adjusted basis the Case-Shiller composite 20 index was down -0.3% in August following July's -0.2% drop. Weakness was broad with 18 of 20 cities posting declines while the remaining two cities showing no change. Yesterday's existing home sales report indicated a sizable drop of -3.5% in prices for September which could point to trouble for price readings in tomorrow's September new home sales report. The bottom line is there is a lot of noise in these reports as many of the transactions in these reports occurred in the wake of extended closing deadlines during the second round of housing stimulus. And now with the freeze on foreclosures we may see will probably see an artificial up tick in prices in the coming months due to the distressed sales being removed from the data.
In other economic news, consumer confidence rose +1.7 points to 50.2, compared to estimates calling for a reading of 50.0. However, confidence is stubbornly holding near historic lows. Maybe the most telling part of today's report are respondent's saying that jobs are currently hard to get rose +0.3% to 46.1%, while those saying jobs are plentiful fell -0.3% to a severely depressed level of 3.5%. This may hint at a disappointing non-farm payrolls report scheduled to be released next Friday (11/5). In other readings, buying plans for homes remain depressed, buying plans for appliances slipped lower, and buying plans for cars remained stable.
In earnings news, Dow component DuPont handily beat earnings estimates with revenues rising +17% y/y. The firm also raised and raised its 2010 guidance slightly. On the conference call, executives said they saw "robust" volume increases in all segments, led by safety & protection and electronics & communications, while emerging markets also achieved solid sales growth. DD is down -1.9% despite the good news. Shares of steel makers US Steel (X), AK Steel (AKS) and ArcelorMittal (MT) have lost -3.8%, -4.8%, and -5.75% respectively after all three company's surprised with larger than expected quarterly losses. X's loss would have been even greater if it were not for a $0.96 gain due to foreign exchange activities. Both X and AKS blamed their horrible performance on a combination of higher iron ore costs and lower shipments, and neither company expects conditions to improve next quarter.
Ford continues to recover from the financial crisis when the firm nearly went bankrupt. The company firm beat earnings estimates on strong growth in net income. The firm said its market share continues to grow in the US and that it would be "debt neutral" ahead of schedule by the end of the year. F has gained +1%. Truck engine maker Cummins (CMI) in down -5% after earnings were in line with estimates in its Q3 report. Johnson Controls (JCI) has lost -1.24% after beating earnings and revenue estimates in its Q4 report.
Semiconductor maker Texas Instruments (TXN) slightly beat estimates in their Q3 report after the yesterday. On the conference call the company said that it expects sequentially lower revenue in Q4 due to a combination of seasonal patterns, continued soft demand in computing and consumer markets, and slowing growth in the industrial market. TXN is down -0.50% but well off its lows. Bristol Meyers (BMY), Amgen (AMGN) and Biogen Idec (BIIB) all reported earnings that were slightly ahead of estimates. Shares of BMY and AMGN are down about -1.50% while BIIB is down -0.60%.
Core Sector List:
Overall reading: 8 sectors advancing, 12 sectors declining
Strongest Sectors: Oil Services, Software, Transportation
Weakest Sectors: Pharmaceuticals, Real Estate, Insurance
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