The Day Ahead: Stocks Hit New 2009 Highs on Earnings, Oil Rally, Dollar Weakness

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US equities are set to open at fresh one-year highs on Tuesday morning. Sentiment is higher owing to Apple’s post-closing bell announcement that it had sold 7.4 million iPhones and more than 3 million computers. An upbeat session in Asia hasn’t hurt either. The Shanghai Index jumped 1.52%, while shares in Japan climbed 0.98% and those in Hong Kong moved up 0.83%. 

November contracts for light, sweet crude are coming close to the psychological barrier of $80 per barrel this morning. Prices have advanced for eight straight days as the US dollar continues to struggle near one-year lows. The euro approached $1.50 versus the greenback overnight before retreating.

Looking to today’s schedule, the main event is the housing starts index, which should continue to rise despite the unemployment rate. A positive number will help real estate sentiment rebound from the unexpectedly poor results yesterday from the National Association of Home Builders. Its housing market index, which tracks builder sentiment, fell for the first time in four months to 18, indicating deep pessimism for the construction industry.

Markets will also receive weekly retail sales statistics from the Johnson Redbook and the International Council of Shopping Centers. Recent weeks have seen better trends in consumer spending, and the reports are receiving more attention than usual as the holiday season approaches. 

Aside from data investors will keep their eyes on Q3 earnings. Key releases include the Bank of New York Mellon, which the Street expects to report earnings per share of $0.47. In addition, Caterpillar is due to announce earnings per share of $0.06, Coca-Cola is set to see earnings per share of $0.82, and Pfizer should see earnings per share at $0.48. After the closing bell, Yahoo! should announce EPS of $0.07.

Key Events Today:

8:30 ― Housing Starts have climbed 25% since bottoming out in April. The current pace of new unit construction is 598k per year, and Wall Street expects that to bump up to 615k in the September report. Within the report, single-family units are set to rebound after unexpectedly slipping 3.0% in August. Multi-family units are more volatile, having jumped 25% in August after diving 15% in July.

“Residential construction is expected to improve as a result of better affordability conditions and positive readings on home sales,” said forecasters from BBVA. “Despite the improvement, there is still a significant degree of uncertainty surrounding residential construction as the tax credit will expire in November and the economy will likely recover at a slow pace.”

8:30 ― The Producer Price Index is unlikely to get much attention this month as its more important cousin, the consumer price index, was released last week (headline and core CPI each rose 0.2% in the month). Forecasters look for the headline to fall 0.3% on falling energy prices. The core index, which strips out food and energy costs, is likely to add 0.1%.

Analysts from High Frequency Economics note that goods prices account for just 28% of the core CPI, which explains why little focus will be put on this data set. “But with many of the key components of the core CPI relentlessly slowing ― most notably rents ― downward pressure on domestically produced goods prices is not welcome.”

8:00 pm ― Charles Plosser, President of the Philly Fed, speaks on monetary policy to  the Stanford Institute for Economic Policy Research in Palo Alto, California.

 

  • Treasury Auctions:
  • 1:00 ― 4-Week Bills
  • 1:00 ― 52-Week Bills