Morning Call

Morning Call: January 15

US markets recovered on better than expected retail sales data and all eyes will now be on the release of the Fed’s Beige Book

morning-call-cover

US indices rallied yesterday, on news of strong retail sales data, which erased most of the losses incurred after the earlier release of weak jobs data. US retail sales in December increased 0.2% month-over-month (MoM), better than analysts’ expectations of a 0.1% increase. The S&P 500 Index (SPX) increased 1.08%, the Dow Jones Industrial Average by 0.71%, and the Nasdaq by 1.69%.

Solar, biotech, and automobile companies’ shares led the rally yesterday, while defensive stocks were on the back foot. All of the sectors ended the day in black. Even hawkish comments from Fed officials like Charles Plosser and Richard Fisher failed to dent the recovery in US indices. The S&P 500 is still down week-to-date and year-to-date, by 0.26% and 0.6% respectively.

Major Indices

Shanghai Composite Index -0.17% at 2,023.35

CSI 300 Index closed down 0.2%

Weak Chinese data accelerated the slide in the Shanghai Composite index. M2 money supply increased 13.6%, missing expectations of a 13.8% increase year-over-year (YoY). The most alarming data from China was the drop in new loans in December, which totaled 482.5 billion yuan, missing analysts’ expectations of 600 billion yuan.

Nikkei 225 +2.5% at 15,808

The Japanese index recovered most of its losses from Monday, following news of strong US macro data and an increase in preliminary Japanese machine tool orders by 28% YoY in December, up from the previous month’s increase of 15.4%.

FTSE +0.1%

DAX +0.5%

CAC 40 +0.3%

IBEX 35 +0.01%

FTSE MIB +0.3%

Commodities

Gold -0.2%

Silver -0.52%

Copper   -0.74%

Crude Oil WTI +0.12%

Natural Gas -0.16%

Currencies

Dollar Index +0.28%

USD/JPY +0.15%

EUR/USD -0.46%

GBP/USD -0.17%

USD/CHF +0.58%

Market Movers

Gainers

The S&P 500 Information Technology sector increased the most yesterday, moving up 1.9% with Jabil Circuit (JBL) leading the rally.

Tesla Motors (TSLA) was up 15.7% after its announcement at the Detroit Motor Show that sales and service locations doubled in the US this year. The company also announced that it had delivered 6,900 vehicles, higher than its guidance of 6,000 vehicles for the fourth quarter of fiscal year 2013 (4QFY13).

Regeneron Pharmaceuticals (REGN) was the top performer in the S&P 500 yesterday, and its stock price increased 11.8% following a bullish note from ROTH Capital Partners. The company also announced collaboration with Geisinger Health System. Furthermore, Sanofi SA (SNY) has amended its investor agreement with Regeneron and will retain the right to acquire up to 30% of the company’s common stock and Class A stock.

Jabil Circuit’s share price increased 7.8% after Goldman Sachs upgraded the stock to “Conviction Buy.” Jabil Circuit shares had plunged last month after the company had provided disappointing guidance.

Intuitive Surgical’s (ISRG) stock price increased 6.8% after the company announced better-than-expected earnings guidance for 4QFY13. The company is eyeing revenues of $576 million for the quarter, higher than analysts’ expectations of $548.6 million.

Losers

The S&P 500 Utilities sector was the worst performer yesterday, increasing by only 0.09% as investors sold defensive stocks on stronger retail sales data.

GameStop Corp. (GME) shares slumped almost 20% in value after the company announced disappointing holiday sales data and 4QFY13 guidance. GameStop comparable store sales rose by just 10.2% whereas analysts were expecting higher numbers due to several new game releases. The company also announced its EPS guidance midpoint of $1.9 for 4QFY13, which missed analyst expectations of $2.14.

Bed Bath & Beyond (BBBY) continued its decline after missing EPS expectations last week. Investors are still offloading the company’s shares as overall results were way below analyst expectations. Bed Bath & Beyond stock was down 2.36% yesterday.

Earnings

 Pre market

 

  Company

 Quarter 

 Revenue Forecast 

 Adjusted EPS Forecast 

 Bank of America (BAC)

 4QFY13 

 $21.14 billion 

 27 cents 

 Fastenal Company (FAST)

 4QFY13

 $815.27 million

 34 cents 

After market

 Company

 Quarter 

 Revenue Forecast  

 Adjusted EPS Forecast 

 CSX Corporation (CSX)

 4QFY13

 $3.10 billion

 43 cents

 El Paso Pipeline Partners (EPB)

 4QFY13

 $387 million

 51 cents

 Kinder Morgan (KMI)

 4QFY13

 $3.77 billion

 34 cents

 Kinder Morgan Energy Partners (KMP)

 4QFY13

 $3.43 billion

 73 cents

 Plexus Corp. (PLXS)

1QFY14

$535.89 million

61 cents

Macro Data

Pre Market

MBA Mortgage Application numbers will be released today. Mortgage application numbers are a leading indicator of the US housing market. Previously, MBA Mortgage Applications dropped by 4.2% MoM.

US Producer Price Index data will also be announced today. Analysts are expecting an increase of 0.1% MoM and an increase of 1.3% YoY.

During Market Hours

Fed’s Beige Book is the most important data to be released today. The Beige Book reports the US economic situation and paints a picture of overall growth.

European

German real GDP growth failed to meet analysts’ expectations of 0.5%, coming in at 0.4%.

Swiss retail sales were stronger than expected, increasing 4.2% YoY in November, and beating analysts’ expectations of a 1.6% YoY increase.


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