With little economic data released until Thursday this week, investor attention should remain focused on first-quarter earnings releases, plus continued speculation on the Securities and Exchange Commission’s lawsuit against Goldman Sachs.
Before the Friday announcement that the SEC was charging Goldman with fraud, all three indexes in the US were at 52-week highs.
This morning, ahead of Q1 earnings from Citigroup, Halliburton and IBM, stock futures are sharply lower.
Dow Futures are down 47 points to 10,937 and S&P 500 futures are off 5.75 points to 1,184.50. The 2 year Treasury note is -0-00 at 100-02 yielding 0.963% and the 10 year Treasury note is -0-02 at 98-23 yielding 3.78%.
Commodities are also weaker with WTI crude oil trading $2.35 lower at $80.89 per barrel and Spot Gold down $9.30 to $1,128.10.
Continued earnings releases could reverse the decline quickly though. According to analysts at BMO Capital Markets, 18 of 20 S&P 500 companies to report have beaten earnings expectations, while 16 have beaten on revenues.
“One early theme emerging is a renewal of hiring plans,” the analysts wrote. “Intel now plans to hire as many as 2,000 people in 2010, Google expects aggressive hiring this year, JPMorgan plans to add nearly 9,000, while CSX is calling back workers.”
Other earnings results to be posted this week including Goldman Sachs tomorrow and Wells Fargo and Morgan Stanley on Wednesday.
Monday:
10:00 ― Leading Economic Indicators, a broad composite index that tracks turning points in the economy, is expected to rise a healthy 1.1% in March after a meager 0.1% gain in February. Factors leading the growth include lower jobless claims, gains in building permits, a stock market rally. Not all economists are convinced of strong growth though; the range of expectations is from 0.4% to 1.3%.
“After two modest gains averaging 0.3%, we look for a much bigger 1.3% increase in March,” said Ian Shepherdson at HFE. “Rebounding hours worked, surging building permits, longer delivery times, higher stock prices and the steep yield curve will offset the impact of a drop in the real money supply.”
10:00 ―Ben Bernanke, chairman of the Federal Reserve, speaks at a Financial Literacy and Education Summit. Following his congressional testimony last week, in which he said policy won’t be tightened until labor markets have improved dramatically, economists are not expecting anything new from this speech.
Treasury Auctions:
- 11:30 ― 3-Month Bills
- 11:30 ― 6-Month Bills
Tuesday:
Goldman Sachs Q1 2010 Earnings Release
Treasury Auctions:
- 11:30 ― 4-Week Bills
Wednesday:
Wells Fargo Q1 2010 Earnings
Thursday:
8:30 ― Producer Price Index should get little attention this month as consumer prices have already been published. In addition, inflation remains on the policy back-burner as prices remain flat or deflating. The headline is set to rise 0.4% this month ― a pace that may seem threatening ― but it follows a 0.6% drop in February. In core prices, which exclude volatile energy and food, the index is set to rise 0.1% for the second straight month.
“The energy category will likely see a limited gain as gasoline and natural gas prices were relatively quiet during the month, though electricity prices probably rose,” said economists at IHS Global Insight. “Burgeoning costs for food will account for most of the headline increase, as vegetable, meat and egg prices all moved markedly higher. Increased incentives offered by auto manufacturers helped propel car sales to an 11.8 million unit annual rate in March, and should hold down the core index, which we expect to be flat.”
8:30 ― Economists anticipate Jobless Claims to drop sharply after the unexpected increase last week, which may have been due to Easter holiday volatility. Initial claims were 484k in the week ending April 10, the highest level since February 20. In the first two weeks of April, claims have averaged 472k, much higher than the 448k in March and slightly higher than the 468k in February.
“Initial jobless claims rose by 42,000 in the first two weeks of April,” said economists from Nomura. “The Department of Labor attributed most of the increase to seasonal adjustment distortions and the clearing of a filing backlog in some areas. As these factors pass, claims should resume their steady decline.”
10:00 ― Existing Home Sales have been slow to make progress in the past three months, but in March the index is expected to jump nearly 5% from 5.02 million units, annualized, to 5.25 million. The strong forecasts are based on a 8.2% jump in pending home sales, an index that tracks signed contracts that haven’t been finalized (thus anticipating this index). With the tax credit for first-time homebuyers expiring at the end of April, potential buyers are finalizing transactions now.
Recapping February, Ellen Zentner from BTMU said: “Existing home sales were down -0.6%, new home sales fell by -2.2% and housing starts dropped by 5.9%. In sharp contrast March home sales are set to rebound from February as pleasant weather dominated the month and another rush, albeit much smaller this time around, of first-time home buyers came forward to get the tax credit before it expires at the end of April.”
11:00 ― Treasury announces the terms of next week's 2 year, 5 year, and 7 year Treasury note auctions
Friday:
8:30 ― Durable Goods Orders should rise 0.4% in March, compared to the +0.9% gain in February and a 3.8% leap in January. Expectations, however, are all over the map ranging from a strong 2.5% to a 0.8% drawback. Factors bringing the headline down include a decline in aircraft orders from Boeing and weak defense spending. Positive include core capital goods orders ― a proxy for business spending.
“Durable goods orders are expected to rise for the fourth consecutive month in March, pointing to the firming of private demand,” said economists from BBVA. “After contributing negatively in the last two months, motor vehicles and parts orders could have a positive contribution if the surge in auto sales depleted inventories. Furthermore, orders across other components have been strengthening. An increase in orders would point to further improvement in industrial production and non-residential investment in 2Q10.”
10:00 ― New Home Sales fell to a record low in February at 308,000. A fresh record low shouldn’t be in the cards for March though, thanks to tax incentives expiring at the end of April, a recent lift in of mortgage applications, and a two-year high in homebuilder sentiment. The consensus is to see the pace at 330k.
“It is hard to make sense of the recent sharp increase in single-family housing permits—unless new homes are selling,” said economists from IHS Global Insight, prediction a 10% jump in sales. “April's increase in the NAHB/Wells Fargo Housing Market Index implies that business was picking up last month. Based on this, and the latest single-family housing permits numbers (up 5.6% in March), we project that new home sales increased about 10% to a 338,000 rate in March.”
