Morning Market Update

Bulls Remain in the Stall Before the Fed Makes the Call

On the heels of concerns about the Chinese government meddling with the property markets and sustained fears about a possible default in Greece, the major US equity markets are under pressure in morning action. The weakness in the early going comes despite better-than-expected earnings reports and increased outlooks from Dow members 3M Co. and DuPont as well as a favorable report from Texas Instruments. In other earnings news, Ford Motor Co posted a mixed report, as it announced much better-than-forecasted profits but revenues were short of analysts’ forecasts. Treasuries are higher in early action after the S&P/Case-Shiller Home Price Index came in mixed and ahead of a report in consumer confidence. Overseas, markets are under pressure amid the aforementioned global uneasiness.

As of 8:50 a.m. ET, the June S&P 500 Index Globex future is 6 points below fair value, the Nasdaq 100 Index is 6 points below fair value, and the DJIA is 11 points below fair value. Crude oil is down $0.93 at $83.27 per barrel, and the Bloomberg gold spot price is down $4.55 at $1,148.95 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is up 0.3% to 81.73.

Dow member 3M Co. (MMM $87) reported 1Q EPS ex-items of $1.40, above the $1.20 consensus forecast of Wall Street analysts, with revenues increasing 25% year-over-year (y/y) to $6.3 billion, versus the $5.9 billion that analysts were anticipating. MMM said each of its six business segments posted double-digit sales growth and it also raised its full-year outlook.

Fellow Dow component DuPont (DD $41) announced 1Q earnings of $1.24 per share, well above the $1.06 that was anticipated by analysts, with revenues increasing 23% y/y to $8.5 billion, compared to the $8.0 billion that the Street had forecasted. DD also raised its full-year EPS guidance.

Texas Instruments Inc. (TXN $27) reported 1Q EPS of $0.52, compared to the $0.51 that the Street had expected, with revenues increasing 54% y/y to $3.2 billion, above the $3.1 billion that analysts were expecting. The company said momentum continues into 2Q as demand for its products “remains strong,” and it adds more manufacturing capacity to support its customers. TXN issued 2Q guidance that exceeded the Street’s estimates.

Ford Motor Co. (F $14) posted 1Q EPS ex-items of $0.46, much higher than the $0.31 that analysts had forecasted, while revenues improved by $3.7 billion y/y to $28.1 billion, but compared to the $28.9 billion that the Street expected. The company said based on its improving performance and the gradually strengthening economy, it now expects to deliver solid profits this year.

Home prices rise versus last year, consumer sentiment on tap

Just before the opening bell, the S&P/Case-Shiller Home Price Index was released showing an increase in home prices of 0.6% year-over-year (y/y) in February, short of the increase of 1.3% that economists surveyed by Bloomberg had expected. Month-over-month (m/m), home prices were 0.1% lower, matching forecasts, and snapping an eight-month winning streak. Treasuries remained higher.

Later today, the economic calendar will yield the release of the Conference Board’s Consumer Confidence Index, expected to increase to 53.5 in April, from March’s 52.5. The forecasted improvement in consumer confidence may be a result of the continued string of improving economic data and optimism that the labor market may soon show signs of support for the recovery.

Europe under pressure on continued Greece fears

Stocks in Europe are under pressure in afternoon action, led by solid weakness in financials amid continued fears about whether Greece will receive funds from the EU and International Monetary Fund’s (IMF) 45 billion euro rescue package in time to avoid a default and what further austerity measures the debt-ridded nation will have to deploy. The pressure on financials is outweighing a couple a favorable earnings reports out the sector, with shares of Deutsche Bank (DB $73) lower even after Germany’s largest bank posted a 49% y/y jump in 1Q profits that topped analysts’ estimates on strength at its investment banking unit. Also, Lloyds Banking Group (LYG $4) is being held under the flatline despite the UK’s largest mortgage lender and partly government owned firm swung to a profit sooner than analysts had expected in 1Q, led by lower provision charges for bad loans. Meanwhile, energy firm BP Plc (BP $58) is trading down as the company battles a 1,000 barrel-a-day oil leak in the Gulf of Mexico, which is more than offsetting its 1Q earnings report that exceeded analysts’ forecasts. BP said a relief well that it will drill to fight the oil leak will cost about $100 million.

The concerns surrounding Greece are also overshadowing a report that showed consumer confidence in Germany—Europe’s largest economy—rose more than economists had expected. Other reports that were released across the pond include a larger-than-forecasted increase in German import prices, an unexpected drop in producer prices in Sweden, a surprising deterioration in French consumer confidence, while Italy’s gauge of consumer confidence unexpectedly improved.

The UK FTSE 100 Index is down 1.3%, France’s CAC-40 Index is 1.6% lower, Germany’s DAX Index is off 0.7%, Italy’s FTSE MIB Index is declining 1.6%, Sweden’s OMX Stockholm 30 Index is 1.0% in the red, while Greece’s Athex Composite Index is tumbling 4.8%.

Asia falls but Japan manages to stand tall

Stocks in Asia were mostly lower, led by stocks in China as property issues came under pressure amid festering concerns about the impact on the industry of the government’s recent efforts to combat the formation of asset bubbles by cracking down on property speculation. Hong Kong’s Hang Seng Index fell 1.5% and the Shanghai Composite Index dropped 2.1%. However, stocks in Japan managed to post gains, with the Nikkei 225 Index rising 0.4% aided by optimism about company profits as several major reports are set to be released this week. Elsewhere, moves were more muted in lackluster trading as Australia’s S&P/ASX 200 Index finished flat, Taiwan’s Taiex Index dipped 0.1%, South Korea’s Kospi Index declined 0.2%, and India’s BSE Sensex 30 Index decreased 0.3%.

There were some economic reports that were released that deserve a mention, headlined by South Korea’s preliminary 1Q GDP expanding more than economists expected y/y and quarter-over-quarter (q/q), posting increases of 7.8% and 1.8%, respectively. Also, Australia’s 1Q producer prices rose more than anticipated q/q and was down y/y by a smaller amount than was forecasted. Elsewhere, Taiwan’s Leading Index rose 0.3% m/m in March and Hong Kong’s Trade deficit widened by a larger amount than expected.