Pre-Market: Trade Data, GM, Geithner Testimony

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Pre-Market

GM Emerges

GM gained approval to complete its asset sales to the newly formed and mostly publicly owned entity. GM's emergence from bankruptcy will allow it to halve its product lines and cut 6K more salaried employees. This looks like a positive driver today, similar to the bank announcements in March, through which they declared their return to profitability. It's a change symbolic of putting our troubles behind us and the risk of catastrophe away.

Trade Data

The trade gap narrowed in May, surprising economists who forecast a widening deficit on the significant rise in crude oil pricing that occurred through the measured period. The trade gap narrowed to -$26.0 billion, from April's revised $28.8 billion deficit (from -$29.2 billion). Bloomberg's tally of economists had pegged consensus at a $-28.8 billion for May, and Barron's saw consensus at -$30.0 billion. The surprising result came on expanding exports that matched against declining imports, no doubt the result of a softer dollar. While a weaker dollar raises the dollar cost of imported oil, it also makes exported goods more competitive overseas. The only segment to show decrease in exports was automotive and auto parts and engines, for obvious reasons.

Import & Export Prices

The dollar impact was also visible in June's Import & Export Price data. June export prices rose 1.1% (against May's 0.5% rise), but that matched against an import price increase of 3.2% (revised 1.4% increase in May). June's import price jump was largely driven by a 20.3% increase in petroleum prices. However, non-petroleum import prices also increased 0.2%, marking the second sequential monthly rise; and likely due to the change in the dollar. Inflation is not a concern in the near-term though, given the sharp year-over-year price drops for both imports and exports.

Later Today

Geithner Testimony

Treasury Secretary Timothy Geithner testifies before the House Financial Services Committee at 10:00 a.m. The focus of the hearing is on derivatives and the President's financial reform plans.

Reuters/University of Michigan Consumer Sentiment

This data is due up at 9:55 a.m. Consensus sees further improvement to 71.5, from 70.8 in June. May produced 1.9 points of positive change, but the impact of "green shoots," and perhaps smoke, have stalled as investors weigh the potential drag of significant unemployment.

IEA Oil Report

The International Energy Agency (IEA) produces its Monthly Oil Report Friday.

Corporate EPS Schedule

The earnings slate includes Audiovoxx (Nasdaq: VOXX), Infosys Technologies (Nasdaq: INFY), PriceSmart (Nasdaq: PSMT), The Progressive Corp. (NYSE: PGR) and a few pink sheets.


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Before the Bell: Jobless Claims & Alcoa's EPS Results

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Weekly initial jobless claims and Alcoa's lead-off earnings report key the wire this morning. However, the day's schedule is full of market-moving news potential.

Before the Bell

Weekly Initial Jobless Claims

New benefits filers amounted to 565K in the week ending July 4, comparing favorably against consensus expectations for 610K, based on economists surveyed by Bloomberg. We remind you though that the forecast for this regular count never varies far from the prior week result, which makes perfect sense. Even so, the dip below 600K is welcomed. It marked a 57,000 decrease from the prior week's revised count of 617K. The four-week moving average moved 10K lower, to 606K.

Now the bad news... Continuing claims filers stuck, piling on the insured unemployment pool and taking that rate to 5.1%, from 5.0% (+159K continuing claims filers). The total count of unemployment claims beneficiaries amounts now to 6,883,000, which is nothing to get excited about.

The highest insured unemployment rates in the week ending June 20 were in Michigan (6.8 percent), Puerto Rico (6.8), Oregon (6.7), Pennsylvania (6.4), Nevada (6.2), Wisconsin (5.7), California (5.3), Illinois (5.3), North Carolina (5.3), and South Carolina (5.3).

The largest increases in initial claims for the week ending June 27 were in New Jersey (+7,876), Massachusetts (+4,730), Kansas (+4,469), Kentucky (+3,614), and New York (+3,019), while the largest decreases were in Florida (-12,493), Illinois (-5,321), Pennsylvania (-3,949), California (-2,919), and Tennessee (-2,743).

Alcoa's EPS Results

Alcoa (NYSE: AA) reported quarterly results last evening, formally kicking off the second quarter earnings season. However, earnings do not get into full swing for a couple weeks yet.

Alcoa noted a narrower loss than was anticipated by Wall Street, giving enthusiasm to futures in the early going. Much of the surprise came due to Alcoa's cost cutting efforts, but the cyclical barometer noted some aluminum markets have begun stabilizing. Still, the company kept with its forecast that the aluminum market will contract by 7% this year due to the global recession.

Alcoa lost $0.32 per share from continuing operations, and after restructuring charges, the bellwether lost only $0.26 (analysts usually exclude these charges). This compared against analysts' consensus expectations for a loss of $0.38. Revenue, perhaps a better barometer of the environment in times of chaos, dropped 41% versus the prior year count. The decline in year-over-year revenue was driven by a 49% drop in the price of the metal relative to Alcoa's dealings. Compared to the quarter just prior, sales rose 2%, lending to market enthusiasm.

To see the entire schedule for Thursday, including the yet to be reported data, please see our "Week Ahead" copy.

Other Corporate EPS Today

The corporate earnings slate includes news from 3Com (Nasdaq: COMS), Chevron (NYSE: CVX), Adams Express (NYSE: ADX), CalAmp (Nasdaq: CAMP), Chattem (Nasdaq: CHTT), FCStone Group (Nasdaq: FCSX), Franklin Covey (NYSE: FC), Helen of Troy (Nasdaq: HELE), Lawson Software (Nasdaq: LWSN), Rocky Mountain Chocolate Factory (Nasdaq: RMCF), Shaw Group (NYSE: SGR), Tortoise Capital Resources (NYSE: TTO) and Value Line (Nasdaq: VALU).


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Weekly Mortgage Applications Survey Weed

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Wall Street Greek suggested in our weekly preview that weekly mortgage application activity was disrupted by weather in its latest reporting. We feel our insight has been verified by this week's reflexive bounce.

"Mortgage Activity increased in the week ended July 3rd, and several major media outlets are reporting the news as if it were a "green shoot." It's a weed folks, and you heard it here first!"

Weekly Mortgage Applications Survey

Mortgage applications activity increased in the week ended July 3rd, and several major media outlets are reporting the news as if it were a "green shoot." It's a weed folks, and you heard it here first! Last week's data showed sharp decline in mortgage activity despite favorable rate change. Contracted 30-year fixed rate mortgages adjusted to 5.34%, from 5.44% in the week ended June 26. Yet, the Market Composite Index dropped 18.9%, after seasonal adjustment. The Refinance Index sank 30.0%, and recently resilient Purchase Activity fell 4.5%. We pointed to notable levels of rainfall through the measured period, and this week's data seems to verify its impact.

Even as contracted rates on 30-year fixed rate mortgages held steady at 5.34%, and as 15-year contracts inched higher, mortgage application activity reportedly climbed significantly. The Market Composite Index of activity showed an improvement of 10.9%, after adjustment for the shortened holiday week. This adjustment may have also exacerbated the special impact of the prior week's weather. Refinance Activity increased 15.2% and the Purchase Index rose a strong 6.7%, but pick the weed folks.


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