Markets Weigh Earnings, China, Crude Oil & Fed

Markets Weigh Earnings, China, Crude Oil & Fed

The number of S&P 500 companies reporting each day remains high and today we have had another plenitude of companies announcing earnings, including Dow Jones components, DuPont ($DD), Merck ($MRK), and Pfizer ($PFE).  



Markets Weigh Earnings, China, Crude Oil & Fed
Markets Weigh Earnings, China, Crude Oil & Fed

DuPont fell 2.8% after matching earnings estimates but missing on revenue as a consequence of the negative foreign exchange effects of the strong dollar. Merck’s earnings were better than expected with a revenue miss, while Pfizer beat the consensus estimate of analysts for both earnings and revenue. Pfizer gained more than 1% in early trading, while Merck was little changed. 

Stocks on Wall Street opened mostly in positive territory this morning and shortly after the opening the Dow Jones was up 18 points or 0.10% at 17,458, while the broader stock-market measure of the S&P 500 Index rose 0.26% to 2071.3. This is hardly a convincing bounce back after the declines of the last few sessions, and the ructions going on in Asian markets (where the Shanghai Composite Index fell 1.7% following an 8% plunge in the previous session) appears to be having quite a strong constraining effect on risk appetite for stocks globally.

The deep decline in the Chinese stock market is also chopping the legs out from under the price of oil. China is a vast consumer of raw materials, and there are fears that the drop in the equity market could correlate with a similar pullback in Chinese GDP, creating a vicious circle in which demand is hit further. September US crude oil futures slid below the $46 per barrel mark earlier in the session, before paring some of the losses. By 10am in New York, US crude futures were down 0.34% at $47.26 a barrel.

On the domestic macroeconomic front, we have been seeing strength in the housing market, but a bit of a wobble is suggested by the latest Case-Shiller Home Price Index, which was released today. The 20-city index fell a seasonally-adjusted 0.2% in May, versus expectations for a 0.3% rise, while the year-on-year change eased to 4.9% from April’s upwardly-revised 5.0%. This was far below expectations, but remains a solid level. Home sales were strong in May, so it is curious to see a loss of momentum in prices, but with sales even more buoyant in June, there is a good chance of prices picking up in next month’s report. More housing data will be available on Wednesday with the release of figures for this month’s pending home sales.

 

The July Fed meeting begins today and there are a number of major economic releases this morning that the FOMC will no doubt be paying close attention to, including the flash reading for July of the services PMI  and the Conference Board’s Consumer Confidence Index for July (a decline to 99.6 is expected). PMI services was expected to come in unchanged at 54.8 for July, but the flash reading showed a surprise improvement from June, rising to 55.2 and suggesting a bounce back from the prior month’s slight loss of momentum.


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