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US stock market, economy and companies update (October 21, 2010)

Contributed by Trade The News

By Trade The News

Dow +70 S&P +7 NASDAQ +16

- US equities are up across the board this morning, driven higher by relatively stable quarterly reports from major US corporations. While there were few real stand outs among the latest round of earnings, investors are encouraged by the moderately positive tone emerging from a broad selection of companies. The weekly claims data was back at the middle of its recent range, while continuing claims are holding steady and not falling. The headline October Philly Fed survey shows that manufacturing in the region is returning to growth after two months of contraction, while the key prices paid subcomponent surged to levels not seen since May. On the QE2 front, an article from the FT overnight speculated that the Fed would be fairly flexible on how they deploy further stimulus, with an approach emphasizing more discrete meeting-by-meeting disbursements. Gold is more or less flat on the day, sustaining the $1,340 level. Oil is around the middle off its highs, just shy of the $82 handle. The US 10-year yield continues to hover right around 2.5% ahead of $99B in coupon supply announced to come to market next week.

- Shares of Caterpillar are flat after the firm once again beat bottom-line expectations and merely met revenue targets. The firm also offered a first look at its very strong FY11 revenue forecast. Note that fellow heavy equipment manufacturer Terex is down more than 6% after reporting an unexpectedly large quarterly loss (the firm said it would be profitable in 2011). McDonalds modestly exceeded analysts' targets and reported very good comps across all its regions. MCD is up 2%. AT&T matched the Street's estimates and also improved many of the metrics that raised some eyebrows over the last several quarters (notably net wireless adds and iPhone activations were much higher). Shares of letter T are in the red. UPS topped profit expectations but missed by a hair on the top line. On the conference call, UPS executives said they believe there may be additional room for more restocking in the US. Union Pacific met expectations in its Q3 report and said Q4 results would be strong. UNP are -2%.

- Airline stocks are still higher this morning after yesterday's big run up. However, some more mixed earnings results may limit gains for now. EPS from United Airlines and JetBlue were ever so slightly below par, while Southwest was right in line. Revenue results at the three airlines also only just met expectations. Nevertheless, all three airlines echoed the comments heard from Delta, American and US Airways in yesterday's session, predicting strong revenue gains for the December quarter.

- Among tech names, eBay's results were better than expected and the firm also raised its full-year outlook and authorized a share buyback. Netflix was also modestly ahead of estimates, although there were hints of softness in the firm's guidance for next quarter. Netflix's net additions were very strong, nearly double last quarter's result. Semi names Xilinx and Cypress both reported below-par revenue and in-line earnings. Xilinx's guidance for Q4 was not strong, while Cypress's CEO warned that Q4 revenue would be lower sequentially. Drug giant Baxter is up more than 4% on slightly better quarterly results, while Lilly is in the red after revenue came in softer than expected.

- Euro strength has remained in place during the New York session. Dealers observed that positive euro sentiment seems to be based on German factors since markets ignored peripheral debt issues and even the ongoing strikes in core European nations. However, overall sentiment appears focused on reserve-related flows and built-in anti-greenback price action rather than enthusiasm for the euro itself. Peripheral spreads did eat away the EUR/USD's best levels, but the pair continues to hover around the 1.40 handle. The spread between the 10-year Irish/German Gov't Bonds moved back above the 400bps level, widening around 15 bps in the session. Note that Japanese Finance Minister Noda commented that it would hold a G7 meeting on the sideline of the weekend G20 Fin Min gathering to discuss the global economic outlook as a whole.

Looking Ahead
- 16:00 (US) Aug RPX Composite 28dy Y/Y: No est v -1.0% prior; RPX Composite 28dy Index: No est v 196.35 prior
- 21:45 US Fed's Hoenig to speak in Albuquerque on U.S. Economic Outlook

Economic Data
- (IS) Israel Aug Unemployment Rate: 6.3% v 6.2% prior
- (BR) Brazil Sept Unemployment Rate: 6.2% v 6.5%e
- (CA) Canada Sept Leading Indicators M/M: -0.1% v +0.1%e
- (US) Initial Jobless Claims: 452K v 453Ke; Continuing Claims: 4.441M v 4.420Me
- (EU) Euro-Zone Oct Advanced Consumer Confidence: -11 v -11e
- (US) Sept Leading Indicators: 0.3% v 0.3%e
- (US) Oct Philadelphia Fed: 1.0 v 2.0e
- (US) EIA weekly natural gas inventories: +93 bcf v +82 to +95 bcf est range