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US stock market, economy and companies update (January 27, 2012)

Contributed by Trade The News

- The DJIA and S&P500 are in the red this morning following the GDP data out this morning. US GDP grew 2.8% in Q4, a sharp acceleration from the 1.8% in Q3 and the quickest pace since the second quarter of 2010, although this rate was still less than expected. Inventory builds helped sustain growth, although lower Federal expenditures held back the measure. In Europe, no deal has emerged between Greece and its private creditors, only increasing the skittishness of investors. Both EU Commissioner Rehn and the Greek government insisted a deal is very close, however this is the same line that has been reiterated all week long. Treasury markets are flat on day consolidating the move high since the release of the FOMC statement. The US 10-year yield remains below 1.95%.

- Shares of Chevron are down 3% this morning after a disappointing Q4 report. It's not like the analyst community wasn't warned - back on Jan 11th, the company warned that earnings would be down significantly on a sequential basis. In any case, both earnings and revenue missed the mark by wide margins, and the firm's US downstream operation lost money, as warned. Chevron also said its production levels would be flat in FY12 y/y.

- Automaker Ford's profits in Q4 were lower than expected, although they were up on a y/y basis. Note that Ford's European unit posted a $190M loss due primarily to higher materials costs, while its Asia Pacific segment lost $83M the impact of flooding in Thailand. On the conference call, executives said they expect North American profitability to improve in 2012, and overall see a favorable environment for growth in the new year. Shares of Ford fell as much as 7% in the premarket, although they have drifted up to -2% in early trading. Honeywell's revenue was a little bit short of the consensus view while profits were in line. The firm reiterated its FY12 guidance, noting that the company is preparing for a more challenging macro environment in 2012, primarily driven by softness in Europe. HON is more or less flat on the day.

- Consumer names Proctor & Gamble, Starbucks and Altria reported in-line results. PG's guidance for Q3 was below expectations, and the firm warned that earnings will continue to be negatively affected by higher commodity costs versus prior year levels. In addition, PG said that competitors have generally followed its price increases, and the company would now consider lowering prices in some product categories to take back market share. Starbucks raised its FY12 outlook slightly. Altria's FY12 outlook was firmly in line with expectations. PG, SBUX and MO are all in the red this morning.

- Asset manager Legg Mason missed both top- and bottom-line expectations in its Q3 report. Like competitors, the firm said that AUM and revenue were strongly pressured by the very volatile environment in the quarter. Insurance name Chubb reported in-line results in its Q4, however its initial FY12 guidance was disappointing.

- Dealers were watching the yen through the US morning, as unwinding of short JPY trades has been a key driver. USD/JPY is sensitive to US interest rates and the drop in rates following the FOMC statement is undercutting the recent rally in USD/JPY. Month-end flows are also having an impact, with Japanese exporters take advantage of JPY weakness earlier in the week.

***Looking Ahead***
- No events seen

Dow -59 S&P -2.5 NASDAQ +7
***Economic data***
- (BR) Brazil Dec Tax Collections (BRL): 96.6B v 98.0Be
- (BR) Brazil Dec Private Bank Lending (BRL): 1.143T v 1.131T prior; Total Outstanding Loans: 2.030T v 1.984T prior
- (US) Q4 Advanced GDP Q/Q Annualized: 2.8% v 3.0%e; Personal Consumption: 2.0% v 2.4%e
- (US) Q4 Advanced GDP Price Index: 0.4% v 1.9%e; Core PCE Q/Q: 1.1% v 0.9%e
- (US) Jan Final University of Michigan Confidence: 75.0 v 74.0e