DATA RELEASES 04/20/10
NO MAJOR ECONOMIC RELEASES
EARNINGS RELEASES (J&J, COCA COLA, GOLDMAN SACHS)
DATA RESULTS 04/19/10
US LEADING INDICATORS (1.4%/1.1%)
EARNINGS RELEASES (CITIGROUP-0.15 EPS VS. -0.17 EPS)
HALIBURTON (0.23 EPS VS. 0.42 EPS)
IBM ($1.97 EPS vs. $1.73 EPS Y/Y)
US DEBT REVIEW AND OUTLOOK
US Treasuries began the new week with a mostly negative bias as a late session rebound in equities and risk tolerance cut back on demand for perceived capital security. The Treasury complex failed to rally on the overnight session; even as Asian equities played catch up to the downside from Friday’s US fall and China announced stricter measures regarding lending in order to curb the rise in regional real estate.
Bond prices began to waiver after a US report on leading indicators came in stronger than expected and Citigroup posted revenues that beat analyst expectations and offered guidance that it’s scaling down strategy of underperforming and non synergetic assets will continue.
Even as stocks hit their worst levels of the session, Treasuries failed to post another significant rally, as participants took a wait and see attitude with regards to possible defense of the bottom end of the major equities recent trading ranges. Patience was rewarded as a late session rebound in financials lifted stocks into positive territory. It would appear that a great deal of the capital which came out on the Goldman Sachs uncertainty is seeking to remain liquid, as the perceive toll of doom for financials may be somewhat overdone for the time being.
At the very least, it may not warrant tying up excess capital in the US debt market-which by the way ends its recent reprieve of new supply next week when US Treasury auctions of 2, 5, and 7 year notes are scheduled. Announcements of the amounts will be released this Thursday.
TECHNICALLY SPEAKING- Resistance for US 30 years held at the 117-06 range. Monday’s 60 minute chart show a possible head and shoulders pattern forming. This suggests that a further test to the downside may be possible. Support for the contract sets up at 116-03 while an expansion of the recent trading range sets up resistance near the 117-10 level. Longer term outlook remains bearish, with downward momentum expected to test 115-04.
US EQUITIES REVIEW AND OUTLOOK
US stocks worked their way out of the proverbial gutter on Monday as buyer returned to pick up perceived value in the financial sector after Friday’s sharp selloff due to the SEC accusations of securities fraud against Goldman Sachs. The initial shock appears to have worn off though as better than expected earnings from Citigroup took some of the sting out of the financials. The fact that Citigroup actually posted earnings was an element that would not have been likely perceived this time last year. IBM also posted better than expected earnings, though the stock lost ground in the aftermarket as part of its report showed come uncertainty regarding future growth as its service contracts signs fell in the first quarter.
Considering the run up in technologies, it is not hard to surmise some selling into strength or a “buy the rumor-sell the fact” strategy during this tech heavy earnings week. Apple and Microsoft will release their 1st quarter earnings this week as well.
The rebound remained centered on financials today though, as the buyers looked for positive sentiment by noting “the devil is in the details” In its decision to bring charges against Goldman Sachs for failing to disclose elements of the CDO’s it was selling, the SEC actually posted a split decision to bring charges (3 to 2). This element took some of the sense of impending doom for the banking industry off the industry, reducing the notion that this action will be a complete witch hunt (at least for the time being). Again it appears that anytime the media begins to note the amazing fact that the VIX has hit a new low, elements combine to reintroduce volatility.
TECHNICALLY SPEAKING June S&P futures broke through support of its recent range at 1183.00. While the rebound to 1196.00 suggests that the market is not setting up for a freefall, it still looks vulnerable on the daily chart for a retest back down to 1171.25. Resistance sets up at 1201.10 and 1205.50.
Prepared by Rich Roscelli & Paul Brittain.
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DATA RELEASES 04/20/10