DATA RELEASES 04/14/10
8:30 AM US Retail Sales (1.2%)
8:30 AM US CPI (0.1%)
10:00 AM US Business Inventories (0.4%)
10:30 AM EIA Inventories (Crude)
After Market Close (Earnings-JP Morgan Chase)
DATA RESULTS 04/13/10
US INTERNATIONAL TRADE (-39.7/-39 B)
MAJOR EARNINGS RELEASES (INTEL/0.450/0.38 EPS)
US DEBT REVIEW AND OUTLOOK
US Bonds drifted higher ahead of Wednesday’s data on retail sales on consumer inflation. The complex continued to attract investors seeking value as the spread between Treasuries and high yield corporate debt continues to narrow, eroding some of the risk reward ratio that has driven the corporate bond rally. Bonds closed near their highs of the session despite a tech led rally in stocks ahead of Intel’s earnings release.
With a lack of new supply of debt from the long end of the US yield curve coming to market over the next several weeks and Monday’s report showing a record month to month drop in the Treasury budget, the short memories of Treasury bears appears to be manifesting itself right now. Those seeking a new bull run in the complex should take care though, as the elements which appear to be fueling this upward run may have a relatively short life span, particularly after the establishment of a new upside in the trading range for US Treasuries is set. In addition, a renewed commitment of searching for yield in corporate debt may resume once the “bunker” mentality of parking funds ahead of US tax day is complete.
Technically, US Treasuries continue to drift higher in search of a resistance point. The 30 year contract appears to be testing a key Fibonacci level at 116-23. Continued lack of fundamental opposition could allow for tests of 116-28 and 117-02. These appear to be attractive levels to initiate short position, as the market could stage a pullback to 115-26.
US EQUITIES REVIEW AND OUTLOOK
Stocks closed near their best levels of the session as the anticipation of earnings from technology bellwether Intel was too much for equity traders and investors to resist. Gains in technologies and industrials managed to overcome weakness in the energy and financials. Early pressure on the market from a higher than expected US trade deficit figure faded as support levels for the recent trading range held and expectations for strong earnings and guidance from Intel drove sentiment for global economic growth higher.
Intel beat earnings expectations by 5 cents per share (0.43 vs. exp 0.38) and forecast that its 2010 second quarter sales would be around $10.2 billion, plus or minus $10.2 billion. This prediction was significantly higher than most analyst expectations and staged an aftermarket continuation of Tuesday’s tech sector run. Intel highlighted its expected growth on construction of new server technology and strong PC and personal computing device demand.
Earnings periods have been a volatile time for Intel stock over the last several quarters; with profit taking the usual outcome after a strong post release run up. While this may be a likely play out in the tech sector, it remains to be seen if the upbeat guidance that many companies may now put forth will leave them more vulnerable to revenue sustaining performance.
Technically, June S&P futures should remain range bound between 1183.00 and 1203.00 for the near term, as the tone of earnings season sets up.
Prepared by Rich Roscelli & Paul Brittain.
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DATA RELEASES 04/14/10