EmailA large batch of earnings results have been reported since yesterday's close. In total, they have not been very good. But that doesn't matter. The yield on Spain's 10-year note is down 27 basis points to 5.50%, and since everybody knows that eurozone sovereign bond yields drive the market, that's all that matters.
OK. Not really, but it sure seems that way in an equity universe where central bank support has been a forethought that has essentially relegated earnings to an afterthought.
Intel (INTC) and IBM (IBM) may have topped consensus earnings estimates by nine cents and one cent, respectively, but the fundamental message from their latest earnings results is one of disappointment. Demand for their products and services is not very strong right now. Both companies reported a 5% decline in revenue on a year-over-year basis.
But, hey, Moody's reaffirmed its Baa3 rating for Spain, albeit with a negative outlook. The understanding, however, that there wasn't a downgrade of the debt rating has been a focal point of support.
The S&P futures are trading slightly above fair value -- and that's with earnings misses from Stanley Black & Decker (SWK), Textron (TXT), Halliburton (HAL), Comerica (CMA), and Linear Technology (LLTC) in the mix along with warnings from Apollo Group (APOL), Potash (POT), Dover (DOV), Quest Diagnostics (DGX), and St. Jude Medical (STJ).
Bank of America (BAC) beat by six cents, but its report and the reports from the mega-banks are no easy reads since they are pockmarked with so many adjustments to account for debt valuation, litigation expense, asset sales and the like.
PepsiCo (PEP) beat by four cents on a 5% decline in revenue. Eh.
One piece of unmitigated good news this morning is the latest residential construction report.
Housing starts jumped 15.0% in September to a seasonally adjusted annual rate of 872,000 (Briefing.com consensus 768,000) while building permits increased 11.6% to a seasonally adjusted annual rate of 894,000 (Briefing.com consensus 815,000).
That was the most new housing starts since July 2008 and it was accented by an 11.0% jump in single-family starts to 603,000. Single-family starts haven't been above 600,000 since August 2008.
Separately, the number of new homes under construction increased 2.6% in September to 507,000. That will be a positive factor in Q3 GDP forecasts.
The S&P futures moved to their highs of the morning after the housing data. That makes sense. Then again, we saw the yield on Spain's 10-year debt tick down another two basis points to 5.50% at the same time. And that's all that really matters.
