Markets look poised to build on three days of rapid gains which have pulled markets up 6.1% since Monday. Futures are looking up this morning after JP Morgan posted Q2 earnings of 28 cents per share, well above expectations of just 4 cents. A better than expected GDP report from China (+7.9%) doesn’t hurt sentiment either.
Meanwhile, oil is down 1% to $60.90, spot gold is trading $2 lower at $937, and base metals have fallen around 1% across the board.
Earnings remain the focus: The 3-day rally has been helped by earnings from Goldman Sachs and Intel earlier in the week, and after the close today Google will post its results, followed by Bank of America and GE tomorrow.
Lehman 2.0: Treasury has refused to extend aid to CIT Group, making it likely that the business lender will see the same fate as Lehman Brothers back in September. On Wednesday CIT Group said "there is no appreciable likelihood" it would receive government support.
FOMC Minutes: Yesterday’s FOMC minutes showed central bank officials were confident that the Fed has the right tools to implement an appropriate exit strategy when the right time comes. More interesting was their discussion of why the Fed was purchasing Treasuries, an activity the bank conceded was not marketed well.
"Announcements of substantial additional purchases could add to perceptions that the federal debt was being monetized,” the minutes read. “While most members did not see large-scale purchases of Treasury securities as likely to be a source of inflation pressures given the weak economic outlook, public concern about monetization could have adverse implications for inflation expectations."
Key Releases Today:
8:30 ― Last week’s Jobless Claims report saw initial filings break a 22-week trend above the 600k level. Weekly filings fell to 565k for the week ending July 4, and for the week ending July 11 analysts expect to see further reduction to 555k.
Analysts from RDQ warned last week that claims may not be a reliable indicator for the next several weeks, as July is known to be a volatile period for the labor market, and auto shutdowns earlier this year are skewing the data. So even if today’s report is in line with expectations, it doesn’t necessarily confirm that last week’s figure was not a blip.
“Given the auto-related volatility, it continues to be the case that we cannot read much into the claims data for the next few weeks,” said RDQ in a client note this morning.
As for Continuing Claims ― they hit another all-time high in the final week of June at 6.883 million. Analysts expect to see slight moderation for the week ending July 4.
10:00 ― On the heels of the Empire State survey, which improved to indicate stabilization in the New York manufacturing sector, the Philadelphia Fed Survey is expected to report only slight deterioration in the month. The median forecast looks for -5.0 reading in July, but some analysts look for growth in the month.
1 pm ― The Builder Confidence Index from the National Association of Home Builders is expected to edge up a single point to 16, indicating that pessimism is still the norm. Still, things are improving from the January low of 8.
“We are hopeful, tentatively, that the NAHB index will creep a it higher in today’s report,” noted chief US economist Ian Shepherdson from HFE. “The index has already risen far enough to suggest new home sales should rebound to about 400k from their recent trend of about 340k per month, but the further the survey rises the more convinced we will be that the increase in sales will actually happen.”