The Day Ahead: Stocks Dip on Earnings, Much Data Ahead
US equities are looking to open lower after an earnings report from Bank of America missed the mark this morning. On the week the S&P 500 remains up 2.8%.
Bank of America, the nation’s largest lender, showed a Q3 loss per share of $0.26, against calls for a $0.21 shortfall. Revenue was $26.04 billion, compared to the Street’s $27.65 billion forecast.
Also reporting this morning was GE, whose earnings per share were $0.22, above calls for $0.20; excluding charges the firm earned $0.27 per share. Revenue of $37.80 billion was below estimates, however, and shares fell 2.5% on the release.
News from IBM and Google after the closing bell yesterday was mixed. IBM’s revenue fell for a fourth consecutive quarter, and signed services contracts ― a proxy for future business spending ― dropped 7% to its smallest level in six quarters. Google beat expectations as revenue kicked up 7% to $5.94 billion.
“The companies cited growing signs of an upturn in business spending on advertising and technology, and strong demand from East Asia, suggesting the economic recovery has legs,” said Sal Guatieri, senior economist at BMO.
While equities are weak this morning, the US$ index is somewhat stronger following the BofA release. Oil is down 0.3% to $77.35, spot gold is $2 lower at $1048, and base metals are mixed.
Key Events Today:
9:00 ― The Treasury’s International Capital report (TIC Flows) is closely watched to track demand for Treasuries, corporate bonds, and other financial instruments. In last month’s report for July, foreign demand for long-term Treasuries was just $15.3 billion, a quarter of what analysts were expecting, while total figures including short-term securities showed an outflow of $97.5 in the month versus -$56.8 billion in June.
“Though these data are lagging, the TICS report will likely receive some attention given the focus on the dollar and foreign appetite for U.S. dollar assets,” said economists from RDQ, who believe net long term foreign purchases will come in between -$15 billion to $45 billion.
9:15 ― Industrial Production rose a total 1.8% in July and August, but the gains will be tamed to just 0.2% in September. As with retail sales, investors want to know what the trend is in the absence of cash-for-clunkers.
“Manufacturing probably stayed in the black even though aggregate hours worked fell 0.5%, as manufacturing productivity gains in the third quarter have been massive,” said Brian Bethune and Nigel Gault, economists at IHS Global Insight. “Productivity overall continues to expand at exceptional rates, and this is providing not only a solid lift to corporate earnings, it is also keeping a lid on inflationary pressures.”
10:00 ― Consumer Sentiment unexpectedly rose last month. This month the median forecast is for a slight gain to 74.0, the highest score in two years.
“The index is well off its 28-year low of 55.3 in November but well below its long-run mean of 87, suggesting consumers are feeling better but not great about their financial situation,” said BMO’s Guatieri.
With the jobless rate continuing to climb, some analysts are expecting a “reality check” this month.
“News of continuing job losses, a rising unemployment rate, weak wage gains, and a falling dollar are expected to dampen some of the recent enthusiasm about the emerging economic recovery,” said forecasters from IHS Global Insight.
10:15 ― Richard Fisher, president of the Dallas Fed, delivers keynote address at conference at the Cox School of Business in Dallas.