Wall Street Greek: Market Summary: CPI, Industrial Production & Intel

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Market Summary

Yesterday's hot PPI data managed to cool an enthused market that seemed poised to post a nice jump on Goldman Sachs' (NYSE: GS) earnings beat. By the end of the day, the market was dwelling on the sustainability of Goldman's and the banking industry's performance. Hot prices on the producer level is just the right concern to sicken stocks these days, so this morning's consumer price data was all the more important. However, we got a busy news day, with a positive report from Intel, decent Industrial Production data and more to smooth out a hot Core CPI number.

Consumer Price Index (CPI)

The Consumer Price Index (CPI) was reported at 8:30 this morning. As with the PPI, gasoline price increase was seen driving overall prices higher. Headline CPI was reported right in line, up 0.7% in June, which compared against the modest 0.1% increase posted in May. The gasoline index increased 17.3%, playing the most significant role in the increase and complemented by other energy costs (Energy Index +7.3%).

However, Core CPI, which excludes food and energy prices, was expected to exhibit only a moderate rise. Core CPI surprised slightly higher this morning, rising 0.2%, versus the consensus expectation for a 0.1% increase. May's Core CPI posted a 0.1% increase.

As with the PPI, a reincarnated auto industry, with manageable debt structure, was able to boost pricing to reflect the less desperate sellers in General Motors (NYSE: GM) and Chrysler. This played a significant role in driving both Core PPI and CPI. Most components increased though, and so we continue to view forward looking inflation concerns warranted.

NY Fed Manufacturing Survey

The Empire State Manufacturing Survey showed a pleasant improvement this morning. July's reading showed a -0.55 number, which restored a longer term improving trend from cycle bottom. Today's reading beat economists' forecasts for a result of -4.5 this month, versus -9.4 in June.

Mortgage Activity

Last week's mortgage application data got a weather aided boost, in our opinion. After day in and day out of rain here in the busy Northeast, the sun broke through. Recall, the prior week's data dropped off significantly, and it is seasonally adjusted so the holiday should have played no role. So last week noted recovery, as the Market Composite Index jumped 10.9%. This week, the Market Composite Index change normalized, and rose 4.3%, but got a late push from dropping long rates. Contracted 30-year fixed rate mortgages fell to 5.05% last week, from 5.34%. Look for next week's data to see a significant refinance push as a result.

Industrial Production

Industrial Production, posted this morning, showed one of those "less bad" results the market is tired of. However, at -0.4%, it also beat economists' expectations for a contraction of 0.7% for June, and compared more favorably against the 1.2% revised decline recorded in May. Manufacturing capacity was expected to slip further to a new record low of 67.8%, from 68.2% (revised) in May, but it only fell to 68%. Might we be setting up for an inflection point turn...

Oil Inventory - 10:30 AM

The EIA Petroleum Status Report is up later this morning. Last week's data showed crude oil stocks saw a draw of 2.9 million barrels, while gasoline stocks built by 1.9 million.

Fed Meeting Minutes - 2:00 PM

The Federal Reserve releases the meeting minutes from its last get-together at 2:00 PM. The Bank of Japan, under political pressure and economic strain will likely extend corporate financing aids, given its lack of room to help with rates. The SEC is hearing testimony on broker dealer underwritings of municipal securities. The Senate Banking Committee interrogates folks on hedge-fund regulation, while the House Financial Services group discusses the Administration's financial regulation reform plan.

Corporate Earnings Schedule

Intel (Nasdaq: INTC) reported results last evening, and said sales would be significantly higher than Wall Street expected in the third quarter. Not insignificant, Intel also beat analysts' consensus Q2 estimates for $0.08 by posting EPS of $0.18, on an adjusted basis. The chip giant sees revenues of $8.5 billion this quarter, which compares against analysts' view for $7.8 billion. Needless to say, INTC shares jumped 7% on the open.

Earnings season heats up on Wednesday, with reports due from Abbott Laboratories (NYSE: ABT), Acergy (Nasdaq: ACGY), ADTRAN (Nasdaq: ADTN), Alliance Financial (Nasdaq: ALNC), AMR Corp. (NYSE: AMR), ASML Holdings (Nasdaq: ASML), China-Biotics (Nasdaq: CHBT), Cintas (Nasdaq: CTAS), Crown Holdings (NYSE: CCK), Fortune Industries (AMEX: FFI), Gannett (NYSE: GCI), Joe's Jeans (Nasdaq: JOEZ), Kinder Morgan Management (NYSE: KMR), Landstar System (Nasdaq: LSTR), Lufkin Industries (Nasdaq: LUFK), MEDTOX Scientific (Nasdaq: MTOX), Polycom (Nasdaq: PLCM), Resources Global Professionals (Nasdaq: RECN), Rurban Financial (Nasdaq: RBNF), Schawk (NYSE: SGK), Stanley Furniture (Nasdaq: STLY), Texas Industries (NYSE: TXI), United Community Fin'l (Nasdaq: UCFC), Universal Forest Products (Nasdaq: UFPI), W.W. Grainger (NYSE: GWW), Wolverine Worldwide (NYSE: WWW), Worthington Industries (NYSE: WOR) and Xilinx (Nasdaq: XLNX).