EmailToday is starting out as a good example of how central bank support is the market's main underpinning. Others might go so far as to say today shows that fundamentals matter less than the fun, mental part of knowing the Fed has the market's back.
Manufacturing reports out of China and Europe were disappointing, although everyone seems to want to make a big deal out of the fact that France saw an uptick in its April PMI report to 44.4 from 44.0, never mind that a number below 50 denotes contraction.
Germany for its part saw further slippage in its manufacturing sector, with a print of 47.9 versus 49.0 in March. The upshot of course is that the weak reading for Germany could prompt the ECB to lower rates soon -- or so it is believed in a fun, mental thought.
Spain had a successful bond auction that dropped its three-month borrowing costs to the lowest on record at the same time the Bank of Spain estimated the Spanish economy contracted by 0.5% in the first quarter. The fun, mental thought is that this, too, might encourage ECB easing.
Major European bourses are up between 1.0% and 3.0%
The HSBC PMI reading for China was 50.5 for April, down from 51.6 in March. The reading for export orders, however, moved into the contraction zone at 48.6.
That led to a 2.6% decline in the Shanghai Composite and weighed on regional averages, as investors there were unsettled by the less fun, mental thought that growth in China isn't as strong as many had hoped it would be and that China isn't in an easing mood as it attempts to rein in inflation pressures and property speculation.
Here at home, the S&P futures are up nearly 8 points and are trading 0.4% above fair value.
The positive bias is rooted in a rash of better-than-expected earnings results from the likes of NetFlix (NFLX), which is trading a mere 24% higher in premarket action, Texas Instruments (TXN), DuPont (DD), Coach (COH), and Travelers (TRV) to name a few.
The thing is that revenue growth is almost non-existent in many cases. Netflix and Coach are exceptions among the companies above, but take a look at Briefing.com's Earnings Calendar page and you will see that there are a plethora of minus signs in the column where year-over-year revenue growth is posted. If there isn't a minus sign, chances are there will be a very low, single-digit number.
Companies like Texas Instruments, Xerox (XRX), AK Steel (AKS), Brinker (EAT), Delta (DAL), DuPont (DD), Illinois Tool (ITW), Ingersoll-Rand (IR), Johnson Controls (JCI), Lexmark (LXK), Lockheed Martin (LMT) and Travelers (TRV) all fall into the underwhelming revenue growth mix.
Yet, the market is indicated to open higher because the fun mentals matter of knowing companies beat lowered earnings estimates and that weak economic data should keep the central banks in an easing frame of mind.
