Stocks Seeing Pressure to Close out the Week

The domestic equity markets are trading lower in early action following mixed U.S. earnings reports. Global sentiment is being stymied by festering Greek debt deal uncertainty and reports that Chinese regulators are taking measures to slowdown the sharp rally in mainland equities. Dow members General Electric and American Express posted mixed quarterly results, along with Honeywell International, which also lowered its full-year revenue outlook. However, Mattel reported a smaller-than-expected loss and stronger-than-projected sales. Treasuries are slightly lower following a report that showed consumer price inflation rose modestly, ahead of reads on consumer sentiment and Leading Indicators. Gold and the U.S. dollar are higher, while crude oil prices are lower. Overseas, Asian stocks finished mostly lower, though mainland Chinese stocks continued to rally, while European equities are seeing broad-based losses.

As of 8:53 a.m. ET, the June S&P 500 Index future is 9 points below fair value, the DJIA future is 113 points below fair value, and the Nasdaq 100 Index is 28 points south of fair value. WTI crude oil is decreasing $0.44 to $56.27 per barrel, Brent crude oil is declining $0.11 to $63.87 per barrel, and gold is trading $3.81 higher at $1,202.36 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is up 0.1% at 97.50.

Dow member General Electric Co. (GE $27) reported 1Q earnings-per-share (EPS) excluding the impact of its GE Capital exit of $0.31, one penny above the FactSet estimate, with revenues declining 3.0% year-over-year (y/y) to $33.1 billion, below the $34.2 billion that the Street had projected. The company said foreign exchange negatively impacted revenues by about $950 million. GE added that it performed well in 1Q, in an environment that remains volatile but with continued growth opportunities in infrastructure, while it delivered good results in its industrial businesses.

Dow component American Express Co. (AXP $81) posted 1Q EPS of $1.48, above the expected $1.36, as revenues decreased 3.0% y/y to $8.0 billion, compared to the forecasted $8.2 billion. AXP said its 1Q results were “negatively affected by the significant impact of a stronger U.S. dollar on international operations,” though they showed solid core performance.

Mattel Inc. (MAT $25) announced an adjusted 1Q loss of $0.08 per share, slightly narrower than the $0.09 per share shortfall that was anticipated, with revenues decreasing 2.0% y/y to $923 million, above the $895 million that was expected.

Honeywell International Inc. (HON $104) achieved 1Q profits of $1.41 per share, north of the estimated $1.39, as revenues declined 5.0% y/y to $9.2 billion, south of the $9.5 billion that was expected. HON raised the lower end of its full-year EPS outlook, but cut its revenue forecast for the year.

Consumer price inflation rises modestly, ahead of consumer sentiment report

The Consumer Price Index (CPI)  was up 0.2% month-over-month (m/m) in March, below the Bloomberg forecast of a 0.3% rise, while February’s 0.2% increase was unrevised. The core rate, which strips out food and energy, increased 0.2% m/m, matching forecasts and February’s unrevised gain. Y/Y, prices were down 0.1% for the headline rate, compared to the flat reading that was forecasted, while the core rate was 1.8% higher, compared to expectations of a 1.7% rise. February’s y/y figures showed an unrevised flat reading and an unadjusted 1.7% rise for the headline and core rates respectively.

Treasuries are modestly lower in early action, with the yields on the 2-year and 10-year notes, along with the 30-year bond, are all ticking 1 basis point higher to 0.49%, 1.90% and 2.59%, respectively.

Later this morning, the U.S. economic calendar will yield the release of the preliminary University of Michigan Consumer Sentiment Index, projected to tick higher to 94.0 in April, from March’s 93.0 level. Finally, we will get the Index of Leading Economic Indicators (LEI) report, forecasted to rise 0.3% m/m in March, after gaining 0.2% in February.

Europe lower on U.S. earnings, Greek uneasiness and Chinese market actions

The European equity markets are trading broadly lower in afternoon action, led by basic materials stocks, on the heels of some mixed earnings reports out of the U.S. Sentiment is also being hampered by festering Greek debt deal uncertainty, which is causing some volatility in the bond markets in the region, with pessimism growing ahead the nation’s April 24 meeting with its international creditors. Meanwhile, the global markets are seeing downside pressure amid reports that Chinese regulators are taking efforts to try to slowdown the sharp jump in mainland stocks, including expanding the supply of shares available for short sellers. Elsewhere, U.K. political uncertainty is ramping up ahead of elections, while the nation reported some favorable employment figures. In other economic news, eurozone consumer price inflation accelerated m/m at a rate that matched expectations for March.

The U.K. FTSE 100 Index and Switzerland’s Swiss Market Index are down 1.0%, France’s CAC-40 Index is declining 1.6%, Germany’s DAX Index is decreasing 2.0%, Italy’s FTSE MIB Index and Spain’s IBEX 35 Index are dropping 2.1%, and Greece’s ASE Athens Index is falling 2.3%.

Asia mostly lower after lackluster day in U.S.

Stocks in Asia finished mostly to the downside on the heels of yesterday’s sluggish trading session in the U.S. amid some mixed earnings and economic reports. Japan’s Nikkei 225 Index fell 1.2% amid some strength in the yen and some caution ahead of next week’s key earnings reports in the nation. Mainland Chinese stocks continued to be buoyed by persistent expectations of further stimulus measures by the Chinese government as recent economic data has suggested a slowing economy. The Shanghai Composite Index rose 2.2%, hitting the highest level since March 2008.

The Hong Kong Hang Seng Index finished 0.3% lower, while weakness in banking stocks and basic materials bogged down Australia’s S&P/ASX 200 Index, which dropped 1.2%. India’s S&P BSE Sensex 30 Index traded 0.8% lower, hamstrung by a solid decline in Tata Consultancy Services Ltd. after the country’s largest company by market value, per Bloomberg, posted softer-than-expected quarterly sales. After the closing bell in India, the nation reported that its exports and imports both dropped sharply y/y in March. Finally, South Korea’s Kospi Index advanced 0.2%, extending its winning streak to six sessions.


IMPORTANT DISCLOSURES: Colburn Financial does not provide specific tax, or legal advice. The information presented here is not specific to any individual’s personal circumstances.To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.  Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials.  The information in these materials may change at any time and without notice.

Pin It on Pinterest