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US stock market, economy and companies update (April 16, 2010)

Contributed by Trade The News

By Trade The News

- Equity indices were under fire in the premarket this morning after quarterly results from Bank of America and General Electric rattled investor sentiment, while the Nasdaq led the charge lower thanks to mixed reports from Google and AMD yesterday after the close. The Greek problem was also in the background, with yet another round of intra-European squabbling over the debt backstop. The unexpected leg down in the preliminary April University of Michigan confidence survey, which hit its lowest level since November, kept the pressure on stocks around 10am. Then just after 10:30 there were reports the SEC has filed fraud charges against Goldman Sachs over the structure of certain CDOs, knocking the DJIA back into the red after it spent a few moments in positive territory. Note that March housing data out this morning was relatively robust. Front-month crude is headed lower, below the $84 handle.

- Bank of America destroyed consensus estimates in its Q1 numbers this morning, reporting nearly three times the expected EPS and beating on the top line by more than 10%. However, metrics indicated a mixed picture when it comes to the bank's hangover from the crisis: provisions for credit losses continue to fall, while allowances for loan losses are still growing, by hefty amounts, and non-performing assets remain stubbornly high. Morever, total credit extended by the bank fell for the third consecutive quarter. BAC is down 1.5%, as are most of the other major bank stocks. General Electric beat profit targets in its Q1 report, although its revenues disappointed, missing expectations. Meanwhile, there was no large increase in its order backlog. GE's CEO said that there would be more restructuring this year, supporting earnings, and said GE Capital continues to stabilize, insisting that losses at the firm's credit are "seem to have peaked." GE also reiterated its FY10 forecast. GE fell as much as 3% in the first 30 minutes of trade before recovering somewhat.

- Google modestly exceeded expectations in its Q1 report, growing earnings and revenue in double digits over last year's Q1. But shares of the search behemoth fell 5% in after-market trading and are not regaining ground in early trading this morning. Some commentators were focusing on the fact that Google plans to add up to 800 new employees in its Q2, plus a small decline in average ad prices in the quarter, unsettling skittish investors. On the conference call, Google's CFO said that "large advertisers are coming back in droves." Shares of GOOG are down 5%. PC chip manufacturer AMD surprised investors with quarterly profits, beating expectations for yet another loss. Note that this is the firm's first quarter in the black since late 2006, and is strongly support chiefly from some accounting footwork, namely excluding numbers from its spun off manufacturing operations. On the conference call, AMD executives echoed comments from Intel earlier in the week, stating that demand for chips is outpacing supply. Shares of AMD are down 7% and headed lower.

- The early part of the New York morning saw a Japanese lawmaker call for currency intervention to weaken the yen. USD/JPY moved from 92.60 to test above the 93 handle but dealers took notice that the reaction proved short-lived and moved back to test sub-9250 area. EUR/USD finally closed the chart gap at 1.3490 that was put in place on the weekly open in Wellington following the EU agreement to offer a ?30B loan to Greece last weekend. Technically dealers debated that correlation would suggest that filled the EUR/USD gap would have been complemented by a corresponding move in USD/CHF must be filled as well.

***Looking Ahead***
- 13:00 (US) Fed's Hoenig on financial crisis in NY
- 15:00 (AR) Argentina Feb Economic Activity Index M/M: No est v 0.4% prior; Y/Y: 5.4%e v 4.9% prior
- 16:30 (US) Fed's Baxter

***Economic Data***
- (CA) Canada Feb New Motor Vehicle Sales M/M: 8.1% v 7.0%e; Manufacturing Sales M/M: 0.1% v 1.0%
- (US) Mar Housing Starts: 626K v 610Ke; Building Permits: 685K v 625Ke
- (US) Apr Preliminary University of Michigan Confidence: 69.5 v 75.0e
- (MX) Mexico Central Bank Interest Rate Decision: Maintained the Overnight Borrowing rate at 4.50%; as expected