Red Option 7/23/2013
U.S. equity futures are indicating a slightly higher open. The early strength is in response to world markets, which moved towards five-year highs, and optimism over the bevy of earnings reports that are scheduled to be released this week. Investors will also be watching a home price index report for clues about the strength of the housing recovery, and the Richmond Fed Manufacturing report for clues about the strength of the U.S. manufacturing sector. Yesterday’s existing home sales were weaker than expected but caused no downturn for equities. Equities are in a one-direction rally that is supported by Fed intervention on negative data and higher levels on positive reports.
The CBOE Volatility Index (VIX) continues to grind lower as equities trade near all-time highs. The ‘Fear Gauge’ is showing investor apathy toward risk protection in the option market. Treasuries slid lower overnight paced by weakness in European bonds as risk appetite picked up. Asian equities were supported by hopes for a pick-up in Japan after Sunday's election. Japan's government upgraded its economic assessment for a third straight month and dovish policy speculation out of China after reports that Premier Li told the State Council last week that growth needs to be kept above at least 7%. Improving French business confidence and U.K. BBA mortgage approvals lifted European stocks. Data includes just the May FHFA home price index, the July Richmond Fed manufacturing index, and weekly chain store sales. Chain store sales rebounded 1.4% after the prior week's 1.1% decline. The first of three Treasury note auctions takes place mid-day today. There's more key earnings news, including reports from Apple (AAPL), United Parcel Service (UPS), United Technologies (UTX) and Valero (VLO).
Stock Stories:
Netflix (NFLX) – Mixed stream – Online video streaming service beats EPS expectations but misses on Revenue and subscriber growth. Despite a massive rally this year and a mediocre report, the shares are only down 3% ahead of the opening bell. Option markets were pricing in a move of 12% into the release..
United Parcel Service (UPS) – In line – Shipping giant reports in-line EPS earnings on lowered estimates. The Company previously announced weaker expectations which proved spot on as economic headwinds continue to affect growth. The company’s shares are relatively unchanged in the pre-market.
Major Economic Reports:
6:45 am CT – GS Store Sales
8:00 am CT – Housing Price Index
9:00 am CT – Richmond Fed Mfg. Index
12:00 pm CT – 2- Year Note Auction
Notable Earnings:
Before Market: AMTD, BTU, DD, FCX, LMT, MO, RF, TRV, UPS, UTX, VLO
After Market: AAPL, ALTR, BRCM, DFS, JNPR, NSC, PNRA, T, VMW
Wednesday – 7/24: AKAM, BA, BIDU, CAT, F, FB, FFIV, GD, LLY, LVS, PEP, QCOM, V
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