Morning Minutes

Bank Earnings and US Retail Sales In Focus




Coming off of yesterday’s big bullish reversal where US indices shrugged off early losses driven by bad news on the inflation front to finish with gains of 2.2%-2.8%, trading in US index futures has been choppy overnight and into this morning while investors await this morning’s flood of earnings and economic news.

The UK has been particularly active today with the Pound plunging 1.2% and the FTSE soaring 0.8%. The Bank of England’s latest QE program is scheduled to end today and amid press speculation that the government may be about to walk back recent unpopular tax cut proposals, the country’s finance minister has been pushed out.

In economic news, US retail sales were mixed. The headline number came in below expectations (0.0% over month vs street 0.2%) but sales excluding autos were better than expected (+0.1% vs street -0.1%). In Canada, wholesale sales beat expectations (1.4% vs street 0.8%), but manufacturing sales were worse than feared (-2.0% vs street -1.8% ad previous -0.6%). China’s consumer price index increased in line with expectations (2.8% vs previous 2.5%), while inflation in France and Spain hovered around 6.0% and 9.0% respectively, keeping pressure on the ECB to keep tightening. At 10:00 am, the University of Michigan 5-year consumer inflation expectation report (previous 2.7%) may attract attention both from investors and the Fed.

The first big day of earnings season finds bank results generally down significantly from a year ago but mixed relative to expectations. JPMorgan Chase ($3.12 vs street $2.90) and UnitedHealth ($5.79 vs street $5.43) beat the street, but Morgan Stanley ($1.47 vs street $1.49) and Wells Fargo ($0.85 vs street $1.09) disappointed. General themes from the bank/brokerage results are mixed, including a pickup in interest income from traditional banking, increasing loan loss provisions, a plunge in investment banking revenue, an increase in trading revenues. Market reaction to these numbers has been muted with the biggest premarket move being a 3.4% decline for Morgan Stanley.

A big deal has been announced in the US grocery sector with Kroeger agreeing to purchase Albertsons for $24.6B. Surprisingly both stocks are down about 3.0% in premarket action suggesting that investors have concerns about the deal, perhaps in terms of timing, potential antitrust issues/competition reviews, or something else.

The US Dollar has been strong again today, gaining 1.0% against Gold, 0.5% against the Euro and 0.4% against the Canadian Dollar. Commodities are struggling against economic headwinds with WTI crude oil down 1.8%, natural gas down 1.3% and copper holding steady.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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