Intraday Market Update
Equities gapped higher after solid earnings reports from Morgan Stanley and Wells Fargo before the bell this morning but have since given up their gains in mid-day trading. All of the leading indexes are teetering between positive and negative territory ahead of Bernanke's semi-annual monetary policy report to the Senate Banking Committee this afternoon. International markets were mostly higher being led by the Hong Kong's Hang Seng Index and London's FTSE 100 gaining +1.1% and +1.46% respectively.
Morgan Stanley has surged +10% after the firm posted Q2 earnings per share of 80 cents which was well above estimates calling for 48 cents. Investors love the fact the MS revenues gained +54% y/y to $8 billion which beat estimates of $7.9 billion. The firm's trading results were much better than analyst expectations with its equities trading performance beating that of rival Goldman Sachs which reported yesterday. MS did say it still has a "great deal of work to do" and it anticipates that the difficult market environment may continue in the months ahead. Elsewhere, Wells Fargo and US Bank are higher by more than +3% and +1% respectively after they beat estimates. Both banks saw more incremental improvements in credit quality and WFC's CEO said he expects the trend will continue in the coming year, and is seeing plenty of signs of continued improvement in the credit landscape.
Dow members Coca-Cola (KO) and United Technologies (UTX) both reported results mostly in-line with expectations. KO said the company is seeing very strong growth in emerging markets and its worldwide volume growth was +5% and ahead of its long-term target. However, the CEO warned that the state of the global economy remains uncertain in many regions, affected by ongoing deficit concerns in Europe, recent downward revisions to China's economy and weaker consumer confidence. UTX beat revenue on the top line and increased its full year guidance. KO is up +1.75% and UTX is up +1%.
Apple has gained +3% since their earnings report yesterday but the stock is well off of its highs. Yahoo's results were slightly better than estimates and the firm said their search business is stabilizing with revenues trending in the right direction, however, Citigroup downgraded the name to a Hold from Buy. YHOO is off more than -8%. Other tech names Altera (ALTR) and Seagate (STX) reported earnings more or less in-line with estimates. Altera guided revenue higher than expectations, while Seagate guided revenue a bit soft. ALTR is down -1.50% and STX is down -8.50%.
In economic news, the MBA Mortgage Application index jumped +7.6% as homeowners are trying to lock in record low mortgage rates. The average 30-year mortgage rate fell -10 bps to 4.59%, which is the lowest ever recorded in the survey. The refinancing portion of the index rose +8.6% and has surged nearly +30% over the past 4 weeks. The purchase index portion rose +3.4% from depressed levels and was driven by demand for government loans which have low down payments. Yesterday's rise in housing permits and record low interest rates are two positives signs for a possible rebound in the housing market, however, only time will tell. The fact that refinance applications are surging doesn't signal to me that demand in home purchases will pick up too much as homeowners remain content staying in their current home.
Core Sector List:
Overall reading: 4 sectors advancing, 12 sectors declining
Strongest Sectors: Biotechnology, Gold Miners, Broker Dealers
Weakest Sectors: Oil Services, Home Construction, Internet
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