EmailThe newsflow has picked up today with earnings results rolling in along with economic data and reports Spain may request a credit line from the ESM. For good measure, it was announced a short time ago that Citigroup (C) CEO, Vikram Pandit, and President and COO, John Havens, are stepping down, effective immediately.
With a lot to digest, the prevailing point is that the S&P futures are trading 0.5% above fair value, setting the stage for a higher start for the cash market following yesterday's 0.8% gain.
Briefly, Monday's action had the look of a technical rally that was shrouded in some fundamentally good news pertaining to retail sales in September. That impression was formed by the understanding that the equity market posted early gains, but gave them all back within the first hour of trading. A test of technical support at the 50-day moving average brought the buyers out and they held their ground into the close.
The broad-based rally underpinned foreign equity markets overnight. Europe benefitted further from a better-than-expected sentiment reading out of Germany and a report that Spain may request a credit line from the ESM. Many participants are pining for Spain to make such a request so that an element of uncertainty can be removed.
A credit line for Spain could remove some uncertainty. At the same time, though, it could invite some added uncertainty if bond vigilantes then turn their attention to Italy, which will be seen as unprotected by the ECB's bond-buying pledge.
There is more to be written in this chapter, but today's news is being read as a reassuring interlude.
Looking at the earnings results, it is a bit of a mixed bag. Goldman Sachs (GS), Johnson & Johnson (JNJ), Mattel (MAT) and UnitedHealth (UNH) are among the lumnaries that exceeded the Capital IQ consensus estimate. Coca-Cola (KO) was in-line. W.W. Grainger (GWW) missed by nine cents while Microchip Technology (MCHP), Diebold (DBD), and WD-40 (WDFC) all issued earnings warnings.
Still, the bigger surprises -- and the positive surprises -- came from the bigger and more widely-held companies. On a net basis then, earnings results can be considered supportive for the market even if there continue to be reminders that all is not well on the macroeconomic front.
There weren't any notable surprises in the September CPI report, which showed a 0.6% increase in the all items index and a 0.1% increase in core CPI, which excludes food and energy. The Briefing.com consensus estimates stood at 0.5% and 0.2%, respectively.
Like the PPI report, price increases in September were driven almost entirely by higher energy costs. To that point, the gasoline index spiked 7.0% on top of a 9.0% increase in August.
The 12-month change for both the all items index and core CPI was 2.0% in September -- levels that will not cause any undue inflation alarm at the Federal Reserve.
The Industrial Production report for September (Briefing.com consensus 0.3%; prior -1.2%) will be released at 9:15 a.m. ET and it will be followed by the NAHB Housing Market Index for October (Briefing.com consensus 42; prior 40) at 10:00 a.m. ET.
