The US equity markets are under pressure in early action despite continued favorable news from the earnings front, as the US debt ceiling issue remains unsolved in Washington, while durable goods orders unexpectedly fell. Treasuries are lower despite the data, which also included a decline in mortgage applications, as the US debt ceiling deadline is approaching. In earnings news, Dow member Boeing Co easily beat the Street's forecasts, while Amazon.com Inc, Dow Chemical Co, and Electronic Arts Inc all posted quarterly results that exceeded expectations. However, later today, we will get the release of the Federal Reserve's Beige Book, which will provide a look at business activity across the US. Overseas, Asian markets were mixed amid some upbeat corporate earnings reports, while Europe is under pressure amid weakness in financials.
As of 8:51 a.m. ET, the September S&P 500 Index Globex future is 8 points below fair value, the Nasdaq 100 Index is 17 points below fair value, and the DJIA is 36 points below fair value. WTI crude oil is $1.11 lower at $98.48 per barrel, and the Bloomberg gold spot price is up $4.18 at $1,623.50 per ounce. Elsewhere, the Dollar Index-a comparison of the US dollar to six major world currencies-is up 0.3% at 73.74.
Dow member Boeing Co. (BA $70) reported 2Q EPS of $1.25, well above the $0.97 consensus estimate of analysts surveyed by Reuters, with revenues increasing 6% year-over-year (y/y) to $16.5 billion, matching what the Street had expected.
Amazon.com Inc. (AMZN $214) announced 2Q profits of $0.41 per share, above the $0.35 that the Street was expecting, with revenues jumping 51% y/y to $9.9 billion, topping the $9.4 billion forecast of analysts. The online retailer said sales of its Kindle e-reader devices accelerated in 2Q, while sales in its North American and international units grew solidly compared to the same period last year. AMZN issued 3Q revenue guidance with the midpoint of its range above analysts' forecasts, while it projected operating profit that missed the Street's projections.
Dow Chemical Co. (DOW $36) achieved 2Q EPS ex-items of $0.85, four cents above the forecast of analysts, as revenues rose 28% y/y to $16 billion, well above the $14.7 billion that the Street was anticipating. The company said sales at its emerging geographies and Asia Pacific regions reached new quarterly records, while double-digit volume growth was seen in its health and agricultural sciences and plastics segments. Looking ahead, DOW said it sees developed markets continuing to gain traction, "albeit at a somewhat uneven and jagged pace, given persistently high unemployment in the US and sovereign debt concerns in Europe." Also, the company noted that in its emerging geographies, "despite some inflationary pressures, the rapid expansion of the middle class continues to drive robust underlying fundamentals."
Electronic Arts Inc. (ERTS $24) posted a smaller-than-forecasted fiscal 1Q loss of $0.37 per share, compared to the $0.39 shortfall that analysts had projected, while although revenues declined 2.8% y/y to $524 million, they exceeded the $512 million that the Street had estimated. The video game publisher said its results were driven by both digital and packaged goods, and it issued full-year guidance that was roughly inline with expectations.
Durable goods fall, mortgage applications decline, Fed report due out later today
Durable goods orders unexpectedly fell, dropping 2.1% month-over-month (m/m) in June, compared to the 0.3% increase that was expected by economists surveyed by Bloomberg, but May's figure was unrevised at a 1.9% increase. Meanwhile, ex-transportation, orders were below forecasts, inching 0.1% higher in June, compared to the expectation of a 0.5% rise, while May's figure was adjusted favorably to a 0.7% increase, after the 0.6% rise that was originally reported. Elsewhere, orders for non-defense capital goods excluding aircraft, considered a good proxy for business spending, surprised to the downside, falling by 0.4% in June, compared to the 1.0% increase that was anticipated, after rising by a positively revised 1.7% in May, from the initial report of a 1.6% increase.
Elsewhere, the MBA Mortgage Application Index fell 5.0% last week, after the index that can be quite volatile on a week-to-week basis, jumped by 15.5% in the previous week. The decline came as a 5.5% drop in the Refinance Index was accompanied by a 3.8% decrease in the Purchase Index. Elsewhere, the average 30-year mortgage rate moved higher by 3 basis points (bp) to 4.57%.
Treasuries are lower despite the data as the US debt ceiling disagreement remains in Washington, with the yield on the 2-year note up 1 bp to 0.40%, while the yields on the 10-year note and the 30-year bond are advancing 2 bps to 2.98% and 4.30%, respectively. Treasuries have been relatively stable despite the continued debt ceiling gridlock among US lawmakers.
Later this afternoon, the Federal Reserve will release its Beige Book wherein Fed staffers summarize anecdotal economic data from all twelve Federal Reserve districts in preparation for the next Federal Open Market Committee (FOMC) meeting scheduled for August 9. The Fed downgraded its assessment of the economy at the late June meeting, citing temporary factors, but also noted that some of the headwinds "may be stronger and more persistent than we thought."
Financials pressuring Europe
The equity markets in Europe are under pressure in afternoon trading, led by solid, broad-based losses in the financial sector following some disappointing earnings reports and as Goldman Sachs downgraded its outlook for the European banking sector. Shares of Banco Santander SA (STD $11) are under solid pressure to help pace the decline in financials, after Spain's largest bank, per Bloomberg, reported a sharp drop in earnings as it set aside more capital for bad loans. Meanwhile, the US debt ceiling uneasiness is exacerbating sentiment across the pond, along with the festering uncertainty regarding the eurozone debt crisis, after German Finance Minister Schaeuble warned against giving carte blanche to the euro-area's rescue fund to buy bonds in the secondary market, per Reuters. Meanwhile, other earnings reports are pressuring sentiment as shares of Clariant AG (CLZNY $18) are sharply lower after the chemical maker posted profits that missed analysts' forecasts, while Peugeot SA (PEUGY $43) is under heavy pressure after the carmaker tempered its second-half earnings expectations. In economic news, German consumer prices came in hotter than economists forecasted for July, while Italian business confidence deteriorated more than estimated.
The UK FTSE 100 Index is down 0.5%, France's CAC-40 Index is 1.0% lower, Germany's DAX Index is declining 0.7%, Spain's IBEX 35 Index is falling 1.7%, and Italy's FTSE MIB Index is dropping 2.6%.
Asia mixed as earnings meet global debt concerns
Stocks in Asia finished mixed as concerns about the political debt ceiling stalemate among US lawmakers and lingering uneasiness toward the eurozone crisis were somewhat offset by some favorable earnings reports in the region. Japan's Nikkei 225 Index declined 0.5%, but a solid gain in shares of Nippon Steel Corp. (NISTY $34) helped limit losses after the company offered an upbeat outlook for the second half of the year. Meanwhile, South Korea's Kospi Index closed 0.3% higher after overcoming early losses on a late-day rally in shares of LG Electronics Inc after the mobile phone maker posted a smaller-than-expected loss. In economic news, South Korea's 2Q GDP expanded at a rate that was inline with forecasts compared to 1Q. Elsewhere, stocks in China finished mixed, with the Shanghai Composite Index rising 0.8% amid gains in property developers on optimism regarding the Chinese government's efforts to boost affordable housing projects. Also, the Hong Kong Hang Seng Index dipped 0.1%, with the global debt uneasiness being mostly offset by a sharp advance in shares of Sands China Ltd. (SCHYY $27) after the casino company posted solid quarterly results. Finally, Australia's S&P/ASX 200 Index declined 0.8% as the aforementioned debt concerns were exacerbated by a report showing the nation's consumer prices came in hotter than expected in 2Q, fostering some concern about a potential return to its rate-hike campaign by the Reserve Bank of Australia.
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