EmailWaiting for the train this morning, I opened the CNBC app on my Droid to catch a glimpse of the latest news. Upon doing so, I was immediately struck by what I didn't see. Well over 100 companies had reported earnings since yesterday's close and not one of the top five headlines at 6:15 a.m. ET had anything to do with earnings.
The high five (or low five from a cynical standpoint) revolved around the debt ceiling impasse and Europe's ongoing struggle to keep its own debt problems in check.
The headline priority goes to show simply how the macro has trumped the micro or, looked at from another angle, how politics has trumped all else in the current environment.
Before we can be called out for the same editorial emphasis, we'll note that the earnings results were once again better than expected in most instances, highlighted by big beats from Boeing (BA), Dow Chemical (DOW), Aetna (AET), Norfolk Southern (NSC), Northrop Grumman (NOC), ConocoPhillips (COP), Energizer (ENR), Las Vegas Sands (LVS) and Amazon.com (AMZN).
The veiled inference in the earnings chronology above is that better-than-expected results are being reported across industry groups. It hasn't been all good though. There have been disappointments, like Juniper Networks (JNPR), Delta Airlines (DAL) and P.F. Chang's (PFCB) today, yet the positive surprises far outweigh the negative surprises.
As we alluded to previously, the good earnings news is providing a nice foundation for a relief rally if Washington can get its act together. Arguably, the good earnings news has kept things from falling apart while the drama in Washington continues to unfold.
The latest and far from greatest development on the debt ceiling issue in the U.S. is that there is reportedly a good deal of infighting among Republicans as it has become apparent that House Speaker Boehner's proposal won't deliver as much in spending cuts, according to the Congressional Budget Office, as had been previously advertised.
So, it's back to the drawing board for Mr. Boehner who has delayed a vote on his plan.
The problematic understanding in all of this is that it is hard for a compromise to be reached when Republican and Democrats can't find a common ground, and even harder when Republicans and Republicans can't find a common ground. The drama continues and there is certainly no sense yet that there will be anything other than an eleventh-hour solution if there is one.
That uncertainty continues to weigh on sentiment. The equity market is indicated to open lower, although it would be remiss not to add that the bulk of selling interest in the futures market came on the heels of a weaker-than-expected durable goods orders report for June.
Specifically, durable orders declined 2.1% (Briefing.com consensus +0.5%) while orders, excluding transportation, rose just 0.1% (Briefing.com consensus +0.5%). Durable orders growth in May was also revised down from 2.1% to 1.9%.
The durables report, however, isn't as bad as it appears at first glance.
The decline was driven by volatile aircraft orders, which dropped 28.9% after increasing 31.4% in May. Otherwise, new order increases were seen for primary metals (+1.0%), fabricated metal products (+2.1%), computers and electronic products (+0.2%), electrical equipment, appliances and components (+0.4%), and all other durable goods (+0.2%).
Machinery orders, it should be noted, declined 2.3%, yet that was on the heels of increases in both April and May.
Nondefense capital goods orders excluding aircraft dipped 0.4% after a 1.7% increase in May.
Despite the details of the durables report being better than the headlines advertised, the S&P futures have remained on the defensive and are 0.6% below fair value. That seems only fitting because a defensive disposition has been evident this week as Washington continues to offend with its game of political chicken.
--Patrick J. O'Hare, Briefing.com
Patrick J. O'Hare is the Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial please email researchsales@briefing.com.
