Business News Musings - EPS Misses and Geithner's Gallant Debt Deeds

Today's Coffee

The day after a long awaited American victory lifted U.S. markets and the dollar, the broader indices have continued their drift lower today. Several corporate earnings warnings and troubling forecasts have added an irregular spin to a usually well-set positive corporate earnings season. We also received a rate hike by the RBI, Factory Orders and auto sales data, among other points.

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Business News Musings

It takes work for companies to mess up earnings, since they set the bar as low as possible. Yet today, bad news (or less good than expected) from Pfizer (NYSE: PFE, down 4.1%), Sears (Nasdaq: SHLD, down 9.8%), Computer Sciences (NYSE: CSC, down 13%) and Archer Daniels Midland (NYSE: ADM, down 5.7%) added on to news flow recently received from the likes of Research in Motion (Nasdaq: RIMM), to weigh on the broader market.

Intensifying market pressure tied to political jockeying around a critical debt-limit legislation and a recent warning from Standard & Poor’s caught a break today from Timothy Geithner. The Treasury Secretary sent a letter to Congress today, the third in a series, alerting the bumblers of the extreme circumstances in store in the absence of some sort of budget resolution, and in the near-term, a debt limit hike. As the government is now on target to reach its borrowing limit on May 16, and given that it does not look likely to pass a debt limit increase by then, the Treasury Secretary has found some other troubling ways to extend the fumes for another few miles, or more specifically, to August 2nd. We hope to have more to say about this later, but for now, it's important to note that it simply brought more market focus to the debt limit deadline and the unsavory actions the Treasury Chief will have to engage in to extend it.

Factory Orders were reported for the month of March this morning. The report produced a revision to February, showing growth of 0.7%, rather than the 0.1% decrease initially reported. Since Durable Goods Orders for March came in up 2.5%, economists were forecasting stronger Factory Order growth of 2.0% for March, based on Bloomberg’s survey. Today’s data showed an even better level of activity, with orders increasing by 3.0%, so we cannot blame the broader economy this day.

April’s Motor Vehicle Sales trickled in through the day. Economists were looking for the aggregate data to show April’s domestic motor vehicle sales running at an annual rate of 9.9 million, which would mark an increase above the March pace of 9.7 million. Including imports, estimates were upward of 13 million for April, with March sales at a 13.1 million annual rate. General Motors (NYSE: GM) looks to have excelled, with its sales rising 27% in the U.S. in April. GM said its stellar performance was driven by sales of compact vehicles. Ford (NYSE: F) fell short of expectations, with its U.S. sales rising 13% in April. Overall, its sales were up 26%, driven by smaller engine trucks and its fuel efficient vehicles.

Tuesday’s regular weekly same-store sales data from ICSC and Redbook found the wire this morning. Easter played havoc with comparisons, since it falls on different days in different years. ICSC noted a 0.8% week-to-week decrease, as the week before Easter sees holiday driven consumer spending; we measured the week after with this report. On a year-to-year basis, ICSC reported a 2.8% increase, but Redbook noted a 5.5% gain. You just cannot read anything into this data due to the Easter skew, but Chain Store Sales, coming later this week, should allure nonetheless.

In overseas news this morning, the Reserve Bank of India (RBI) hiked its repo rate and reverse repo rate by 50 basis points each. The growth tempering action sent the BSE SENSEX 30 Index down 2.4% and weighed on developed markets currently supported by emerging growth nations. In other words, the move to temper inflation in India was no support to U.S. stocks today, though perhaps good for its long-term health also.

Gold, silver and oil prices eased again Tuesday, but the dollar ceded its short-term strength before midday. The dollar was lifted by the elimination of al-Qaeda founder, Osama Bin Laden. However, as time passes, the budget deficit, debt limit and sovereign rating risks threaten it, not to mention inflation.

In corporate news, company investor and analyst meetings are being held by Allied Nevada Gold (AMEX: ANV), Albemarle (NYSE: ALB), Leica, FirstEnergy (NYSE: FE) and A.H. Belo (NYSE: AHC). Look for earnings results from American Capital (Nasdaq: ACAS), American Financial (NYSE: AFG), Amtrust Financial (Nasdaq: AFSI), Anadigics (Nasdaq: ANAD), Archers Daniels Midland (NYSE: ADM), Aspen Technology (Nasdaq: AZPN), Avis Budget (NYSE: CAR), Avon (NYSE: AVP), Baltic Trading (Nasdaq: BALT), Boyd Gaming (NYSE: BYD), Bridgepoint Education (NYSE: BPI), BTU International (Nasdaq: BTUI), Callidus Software (Nasdaq: CALD), Cardionet (Nasdaq: BEAT), CBS (NYSE: CBS), Cephalon (Nasdaq: CEPH), Charter Communications (Nasdaq: CHTR), Checkpoint Systems (NYSE: CKP), Cognizant (Nasdaq: CTSH), Coherent (Nasdaq: COHR), Comcast (Nasdaq: CMCSA), Corinthian Colleges (Nasdaq: COCO), Denny’s (Nasdaq: DENN), DineEquity (NYSE: DIN), Dole Food (Nasdaq: DOLE), Duke Energy (NYSE: DUK), Emerson Electric (NYSE: EMR), FEI (Nasdaq: FEIC), First Solar (Nasdaq: FSLR), Foster Wheeler (Nasdaq: FWLT), Genco Shipping (NYSE: GNK), Green Mountain Coffee (Nasdaq: GMCR), Harris (NYSE: HRS), Henry Schein (Nasdaq: HSIC), Hyatt (NYSE: H), Jack Henry (Nasdaq: JKHY), Jazz Pharmaceuticals (Nasdaq: JAZZ), Kulicke & Soffa (Nasdaq: KLIC), Las Vegas Sands (NYSE: LVS), Legg Mason (NYSE: LM), Level 3 Communications (Nasdaq: LVLT), Marathon Oil (NYSE: MRO), MasterCard (NYSE: MA), MetroPCS (NYSE: PCS), Molex (Nasdaq: MOLX), Mylan (NYSE: MYL), Network Equipment Tech (NYSE: NWK), Oneok (NYSE: OKE), OpenTable (Nasdaq: OPEN), Papa John’s (Nasdaq: PZZA), Pfizer (NYSE: PFE), Pioneer Natural Resources (NYSE: PXD), Plantronics (NYSE: PLT), Primerica (NYSE: PRI), Rowan (NYSE: RDC), Scott’s Miracle Gro (NYSE: SMG), Sirius XM (Nasdaq: SIRI), Six Flags (NYSE: SIX), Solar Senior Capital (Nasdaq: SUNS), Spectra Energy (NYSE: SE), Standard Parking (Nasdaq: STAN), Techne (Nasdaq: TECH), Tenet Healthcare (NYSE: THC), Clorox (NYSE: CLX), Hain Celestial (Nasdaq: HAIN), THQ (Nasdaq: THQI), ValueClick (Nasdaq: VCLK), Yamana Gold (NYSE: AUY) and a few more.

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