U.S. Market Update

Dow -2.5 S&P -2.5 NASDAQ +0.25

US equity indices opened in the red this morning as the government's refusal to throw CIT a lifeline overshadowed better JP Morgan earnings and sent the overall financal sector lower in the pre-market. The better-than-expected weekly jobless claims were overlooked as well, despite the fact the continuing figure was tantalizingly close to dropping below six million (although the Labor Department noted that seasonal factors continue to play a role in the lower figures). The three leading indices popped into positive territory in the first 30 minutes of trade, only to get knocked down again by the July Philly Fed data, which offered a sharp contrast to yesterday's hopeful industrial tea leaves, with the figure nearly twice a bad as expected. Another piece of data is hovering in the background today: last night RealtyTrac reported that the foreclosure activity surged to record levels again in the second quarter, up 11% sequentially and up 20% over the same period last year. June was the fourth consecutive month to see foreclosures above 300K.

After dropping toward $60 earlier, front-month NYMEX crude is around unchanged at $61.70. Treasury prices have rallied getting back a good portion of yesterday's declines. The 10-year benchmark yield does remain above 3.5%. JP Morgan announced the sale $1.25B in credit card bonds not backed by TALF following their earnings announcement. This is ahead of a TALF announcement scheduled for later today that will be the first to include eligibility of CMBS

JP Morgan opened in negative territory along with the rest of the US financial sector despite the firm's Goldman-like quarterly performance. Adding to the weight in financials, FDIC Chairman Bair said tougher curbs and additional fees were needed for the largest US financial firms. JP Morgan's earnings and revenue totals were miles above consensus estimates, despite big charges for repaying TARP and the FDIC's special assessment fee. CEO Dimon had plenty to say before and after the conference call, noting that it is unlikely the credit card business will make money in 2010, and that the dividend could be increased next year if there are improvements in charge offs and overall conditions. Also note that Charles Schwab reported solid Q2 reports, in line with all expectations.

Mobile phone giants Nokia and Sony Ericsson reported contrasting second-quarter results, although their outlook . Nokia came in below expectations on both the top and bottom lines, predicting its market share would remain flat in mobile devices next quarter and overall industry volumes would be down 10% in 2009 over last year. The Sony Ericsson JV's net loss was significantly smaller than expected, while revenue was a bit below expectations. The JV saw challenging market conditions everywhere in the quarter and said it expects the market to remain difficult all year, echoing Nokia in saying the global mobile phone market would be down 10% in 2009. Nokia's ADRs are down nearly 14% in early trading, while the ADRs of Sony and Ericsson are both down about 2%. Note also that shares of MOT are down 6% and headed lower.

In other earnings, blood product and dialysis name Baxter offered in-line quarterly results and slightly upped its forecast for the full year. Biotech name Biogen Idec reported strong results in the quarter, although it cut back on its earnings outlook for 2009. Both names are up in the low single digits in early trading. Paint and coatings manufacturer PPG Industries shellacked earnings targets but slipped on the top line, noting that it only sees mild market improvement next quarter. Packaging manufacturer Sonoco also beat bottom-line targets and missed top-line revenue expectations, and trimmed its full-year earnings forecast. Both PPG and SON are both strong, up 6-7% in the early going. After a decent Q1, motorcycle legend Harley Davidson fell out of the saddle in Q2, thanks mainly to declining shipments and credit charges. After dropping a bit before the open, HOG is up 6% in early trading. Hotelier Marriott had a decent Q2, but cut its 2009 guidance due to economic conditions, sending shares of MAR down 8%.

In currencies, dollar sentiment appeared soften up initially during the New York session as earnings and economic data, including JP Morgan's earnings and the US claims data, helped stoke risk appetite. Note that the dollar is at or near numerous key chart points heading into the weekly close. EUR/USD was above 1.4140 and close to breaking out of its one-year downtrend line after hitting the all-time high of 1.6030 last August. However, the Philly Fed number helped reign in the risk appetite and EUR/USD was heading into mid-morning New York trade just above 1.41. The yen has maintained a firmer tone as well, with USD/JPY in the mid-93 level after testing 94.45 earlier today.

Trade The News Staff
Trade The News, Inc.

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