Tuesday has quite a few economic reports scheduled. They are:-
• Auto sales
7:45 … ICSC Retail Store Sales
8:30 … Personal Income and Outlays
8:55 … Redbook Chain Store Sales
10:00 … Factory Orders
10:00 … Pending Home Sales
5:00 PM… ABC Consumer Confidence Index
Also the following companies are reporting their quarterly earnings:-
• Archer Daniels Midland Co. (ADM),
• ArvinMeritor Inc. (ARM),
• Coach Inc. (COH),
• D.R. Horton Inc. (DHI),
• Duke Energy Corp. (DUK),
• The Dow Chemical Co. (DOW),
• Marathon Oil Corp. (MRO),
• MasterCard Inc. (MA),
• MGM Resorts International (MGM),
• Molson Coors Brewing Co. (TAP),
• OfficeMax Inc. (OMX),
• Pfizer Inc. (PFE),
• The Procter & Gamble Co. (PG),
• Rowan Companies Inc. (RDC),
• Solarfun Power Holdings Co. Ltd. (SOLF),
• Tenet Healthcare Corp. (THC),
• Anadarko Petroleum Corp. (APC),
• AvalonBay Communities Inc. (AVB),
• CBS Corp. (CBS),
• Force Protection Inc. (FRPT),
• Leap Wireless International Inc. (LEAP),
• Novatel Wireless Inc. (NVTL),
• priceline.com Inc. (PCLN),
• STEC Inc. (STEC),
• True Religion Apparel Inc. (TRLG), and
• Whole Foods Market Inc. (WFMI).
Tuesday sees U.S. stocks set for a flat open, ahead of a slew of economic data, as investors mulled the previous session's big run-up.
U.S. stock index futures slipped this morning, after Wall Street closed at its highest level in 10 weeks, but bulls could be tempted into the market as the S&P pierced two key technical levels.
A bevy of economic and earnings reports are due out later in the day, so investors will likely wait for cues there to direct trading. Reports on personal income and spending, factory orders and pending home sales are all due out. Major companies including Procter & Gamble Co. and Pfizer Inc. release quarterly results.
The mixed futures trading Tuesday, follows a similar pattern seen in European markets where investors also avoided big moves, after a strong rally to start the month.
A number of reports are on tap Tuesday, including readings on personal income, factory orders, home sales and auto sales.
Economists polled by Thomson Reuters predict personal income and spending both rose in June, but at a slower pace than the previous month. That would fit the trend of economic reports indicating the economy continues to expand, but at a slower pace than earlier in the year.
Income likely rose 0.2 percent in June after climbing 0.4 percent in May. Spending likely rose 0.1 percent after a 0.2 percent rise a month earlier. Consumer spending accounts for a large portion of economic activity, so growth in personal spending is considered vital to a strong recovery. Personal spending is expected to be flat during the month.
Factory orders likely fell in June, but not by as much as in May. Economists expect factory orders dropped 0.5 percent in May. The results come a day after a broader manufacturing survey showed expansion in the sector in July. The report is due out at 10 a.m. EDT.
The National Association of Realtors is expected to report the number of people who signed contracts to purchase homes inched higher in June, but remains at very weak levels. The group's index of pending home sales likely rose to 78.1 from 77.6 in May. The report is due out at 10 a.m. EDT.
Like consumer spending, the housing market is also considered a key component for the recovery. A collapse in the market helped push the country into recession and after a home buyer tax credit expired at the end of April, sales have again plummeted. Signs of growth aren't expected. Instead more modest indicators like stabilization would likely be welcomed in the market.
Many housing reports indicated sales dropped to near record low levels just after the expiration of the tax credit.
July auto and truck sales are due throughout the day.
**Federal Reserve officials, meeting on Aug. 10, will consider whether to use cash the Fed receives when its mortgage bond holdings mature to buy new mortgage or Treasury bonds instead of allowing its portfolio to shrink gradually, as it had been expected to do in the months ahead, the Wall Street Journal reported.
Notes of Importance
There are a few further points to the mornings trading which need to be considered:-
• The Dow Jones Industrial Average (DJIA) kicked off August with a bang on Monday, soaring some 200 points, or 2%, to close just shy of former support in the 10,700 area. Look for support to hold near 10,600 for the Dow should selling pressure gain momentum.
• The S&P 500 Index (SPX) also put on quite a show on Monday, closing firmly above its 200-day moving average. The index also closed above the 1,125 level for the first time since May 17.
• Gold futures: The front-month gold contract is moving higher this morning, rallying $4.80 to trade at $1,190.20 an ounce. The malleable metal is still staring up at its falling 20-day moving average, as well as potential psychological resistance near the $1,200 an ounce region.
• The U.S. Dollar Index has continued to plunge this morning, with the index down 0.53% at 80.51. The dollar has not traded this low against its major foreign rivals since mid-April. The next level of support for the index should appear near the 80 level.
• Benchmark crude futures broke out above the $80 per barrel mark yesterday, and black gold has continued its advance in Asian trading. Heading in to the open, crude future are up 44 cents at $81.78 per barrel.
• Bonds: Treasury prices rose, pushing the yield on the 10-year note down to 2.92% from 2.97% late Monday.
• Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,167,750 call contracts traded on Monday, compared to 664,131 put contracts.
• The CBOE Market Volatility Index (VIX) plunged 6% to close at a three-month low yesterday. The "fear" index has now plummeted approximately 33% since the beginning of July.
European share markets: were mixed in the early going. The DAX in Germany was barely higher while Britain's FTSE 100 and the CAC 40 posted mild losses.
• In Europe at midday, London -0.2%. Paris -0.3%. Frankfurt +0.2%.
The dollar was lower versus the euro and the British pound, but up against the Japanese yen.
Earlier in Asia, Japan's Nikkei jumped 1.3% and the Hang Seng in Hong Kong gained 0.2%. The Shanghai Composite tumbled 1.7%.
• In Asia, Japan +1.3% to 9694. Hong Kong +0.2% to 21458. China -1.7% to 2627. India +0.2% to 18115.
As of 7:55 a.m. ET, the Dow Jones Industrial Average futures were down 11 points, to 10606, the S&P 500 index futures were down 2.4 points to 1,119.40 and the Nasdaq 100 futures lost 0.25 points to 1894.00.
• Futures: Dow flat. S&P -0.1%. Nasdaq +0.1%. Crude +0.7% to $81.90. Gold +0.2% to $1188.
*Dow Chemical Co (DOW) posted a quarterly profit after a year-ago loss, but missed revenue expectations. Its shares were down 1.2 percent at $28 in light premarket trade.
* Procter & Gamble Co (PG) shares were down 3% in pre-market trading following P&G reporting a profit of 71 cents a share, two cents below analysts' expectations, and the company's sales of $18.9 billion also falling short of estimates.
The company said increased marketing was the primary reason for the earnings shortfall this quarter, however the company did also cite lingering consumer weakness in the form of consumers trading down to lower-cost brands.
Shares of drug company Pfizer (PFE) advanced 3% following results that came well ahead of expectations. The producer of Lipitor posted an adjusted profit of $0.62 per share, beating estimates by 10 cents, while revenue of $17.3 billion also exceeded estimates of $16.65 billion.
Coach Inc. (COH) posted a fourth-quarter profit of $195.5 million, or 64 cents per share, with sales rising 22% to $950.5 million. Excluding one-time gains, Coach earned 56 cents per share, falling in line with the consensus estimate. The company said it expects to increase sales and per-share profit this year at a double-digit pace.
*Research In Motion Ltd (RIM.TO)(RIMM.O) will be in the spotlight as the BlackBerry maker is expected to unveil its answer to Apple Inc's (AAPL) iPhone later Tuesday.
* Additionally, Research In Motion is willing to block porn sites and allow governmental spying on users, according to reports, following a threatened ban on its services.
* In mergers and acquisitions news, Sanofi-Aventis SA(SASY.PA) has proposed a takeover of biotechnology company Genzyme Corp (GENZ.) valued at about $18.4 billion, or $69 per share, sources said. The two sides are in discussions.
*Archer Daniels Midland Co. (ADM), the food products company, saw earnings soar to 69 cents per share from 9 cents a share a year ago. The company said lower cost of goods helped boost profitability.
*Homebuilder D.R. Horton (DHI) swung to a profit this quarter, posting earnings of 16 cents a share compared with last year's loss of 45 cents a year. The results matched analysts' expectations.
*Shares of OfficeMax (OMX) rose 1% in pre-market trading following the company saying it swung to a 14-cent-per-share profit this quarter compared with last year's loss of 23 cents per share. Analysts had expected OfficeMax to break even.
Some Interesting News
• Sanofi, Genzyme open merger talks. Sanofi-Aventis (SNY) has reportedly sent a formal takeover proposal to Genzyme (GENZ) valuing the company at $18.4B, or $69 per share, and the two sides are discussing the offer. However, sources suggested Genzyme is unlikely to accept a deal under $80/share and is keeping in mind other possible suitors, including GlaxoSmithKline (GSK), Johnson & Johnson (JNJ) and Pfizer (PFE). In after-hours trading, Genzyme gained 2.2%.
• A golden merger for Kinross, Red Back. Kinross Gold (KGC) agreed to pay $7.1B in an all-stock deal to acquire the rest of fellow Canadian firm Red Back Mining (RBIFF.PK). The deal marks a 17% premium to Red Back's closing price yesterday, and will create a "gold growth powerhouse" with ten mines and four projects in eight countries. It also reflects a growing M&A trend in the industry; as gold discovery rates keep falling and the price of the metal keeps rising, gold-mining firms are realizing it's "often cheaper to buy growth rather than find it." In after-hours trading, Kinross fell 3.9%.
• H-P settles DoJ probe. Hewlett-Packard (HPQ) agreed to settle a Justice Department probe into a kickback scheme related to government contracts. The settlement is expected to reduce third quarter earnings by $0.02 per share. H-P denied wrongdoing and did not release additional details of the settlement, which must still be finalized. In yesterday's trading, H-P gained 3.3%.
• Santander moves on rivals' assets. Royal Bank of Scotland (RBS) is expected to announce, possibly as soon as today, the sale of a 318-branch network in the U.K. to Banco Santander (STD) for as much as £2B ($3.2B). The purchase will allow Santander to continue the major expansion of its U.K. business, pushing Santander ahead of HSBC (HBC) as the fourth-largest network in the country. Sources say Santander has also reached a preliminary deal in the U.S. to buy $4.3B of car loans from HSBC.
• Amazon, Apple focus of e-book pricing probe. Connecticut Attorney General Richard Blumenthal is investigating deals struck by Apple (AAPL) and Amazon (AMZN) with e-book publishers for possible anticompetitiveness. Both Amazon and Apple have "most favored nations" agreements with major publishers that guarantee they'll receive the best prices for e-books. With the e-book market "set to explode," Blumenthal said the deal arrangements warrant "prompt review of the potential anti-consumer impacts." Shares of Apple and Amazon closed up 1.8% and 1.85% respectively in yesterday's trading, while e-book rival Barnes & Noble (BKS) gained 6.5%.
• GE, Intel form healthcare JV. GE (GE) and Intel (INTC) announced the creation of a 50/50 joint venture in a new healthcare operation expected to launch by year's end. The companies have collaborated before on bringing technology into homes of seniors and those with chronic conditions via "telehealth." Financial terms of the deal weren't disclosed. In yesterday's trading, GE gained 1.8% and Intel climbed 2.7%.
• Stratospheric profit jump for mining firm. Xstrata (XSRAF.PK) reported its H1 net profit more than tripled to $2.3B, or $0.78 per share, thanks to an increase in the selling prices for all its commodities and $243M of cost savings. Revenue for the period grew 43% to $13.6B. Xstrata also approved two major projects that will help the coal and copper miner achieve its target for 50% higher production by 2014. Shares of Xstrata are +0.6% in London trading (7:00 ET).
• MetLife increases share sale. MetLife (MET) priced a common stock offering yesterday evening of 75M shares at $42 a share, which would raise $3.15B; this is around $1B more than the insurer had said it would raise to fund its acquisition of AIG's (AIG) Alico unit. Some analysts had expected an even bigger increase in the size of the offering, to as much as $4B-5B, in an effort to avoid a possible ratings downgrade from S&P, which has expressed concern over MetLife's capitalization following the acquisition. Premarket: MET -1% (7:00 ET).
• BP faces insider trading probe. The SEC is reportedly investigating possible insider trading at BP (BP) in the aftermath of the Gulf oil spill. Regulators are also looking into whether BP properly disclosed information on risks related to its deepwater oil operations in the Gulf of Mexico. The investigation is in a preliminary stage. Premarket: BP -0.4% (7:00 ET).
• Bernanke: Long way to go for recovery. "We have a considerable way to go to achieve full recovery in our economy," Bernanke said yesterday, "and many Americans are still grappling with unemployment, foreclosure, and lost savings." Constraints faced by budget-strained state and municipal governments are also hindering the recovery.
• Washington Post sells Newsweek. The Washington Post Co. (WPO) confirmed it's selling Newsweek to Dr. Sidney Harman, founder of Harman International (HAR). Terms of the deal were not disclosed, but Harman has agreed to keep most of the staff, while Washington Post Co. will retain the pension assets and liabilities. WPO closed up 3.2% yesterday.
• RIM to let India monitor BlackBerry. Research in Motion (RIMM) has agreed to let Indian security agencies monitor its BlackBerry services, according to a report in The Economic Times. The company will share with Indian security agencies its technical codes for corporate email services, open up access to all consumer emails within 15 days and also develop tools in the coming months to allow monitoring of chats. The move follows a ban on some BlackBerry services in the United Arab Emirates and Saudi Arabia, and ongoing security concerns in India.
• Funds fight for Occidental board seats. Two prominent institutional investors are fighting for board seats at Occidental Petroleum (OXY). In a letter sent to directors, Relational Investors LLC and the California State Teachers' Retirement System said they would try to unseat at least 4 of Occidental's 13 board members during the company's 2011 annual meeting, as the two funds are uneasy about the company's executive compensation and succession plans.
• Morgan Stanley to sell hedge fund. Sources said Morgan Stanley (MS) plans to spin off FrontPoint Partners, the hedge fund it bought in 2006, following the passage of the financial reform bill restricting bank ownership of such funds. This would mark the first big structural move by a Wall Street firm in response to the Dodd-Frank financial reforms.
Wall Street roared on Monday, lifted by positive economic news and strong earnings from Europe. The S&P 500 surged 2.2% and the the Dow and Nasdaq also each climbed 2%.
The Dow Jones industrial average jumped 208 points after a report on July manufacturing showed growth in the sector slowed modestly, but not as fast as economists had expected. It was the best start to August trading since 1934.
But after such a strong start to August, investors will wait take their cue from economic data due throughout the day.
"After yesterday's spectacular run-up, we've qot a quiet trading environment across the globe," said Art Hogan, chief market strategist at Jefferies & Co. "We've got a number of economic reports, so it's a bit of a wait-and-see game for now. But it's encouraging to see that markets haven't given back yesterday's gain ahead of all that data."
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