Need to Know
JULY 31, 2013
7 gut checks before the opening bell
By Barbara Kollmeyer
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flickr/pasukaru76
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Good morning.
Two big pieces of economic data rolled in this morning. First up, ADP payrolls, which came in better than expected. And then second-quarter GDP data, which was a mixed bag. But it seems fears of potential Fed tapering on strongish data is taking a bite out of stock futures.
Investors are hoping for more direction from the Fed meeting outcome later. Bernanke and the gang are expected to stand pat on policy, but investors will be hanging on every word of that statement.
Meanwhile, WSJ's Jon Hilsenrath says Fed Chairman-to-be Larry Summers isn't likely to stray from the easy-money policy set up by Ben, who apparently has dropped us into a "lame-duck" period through to January.
Fearing that great rotation? Some say the Fed should be battening down the hatches. That's according to Philadelphia Trust Company CEO Mike Crofton , who told CNBC :
"If the great rotation that everybody talks about out of bonds into stocks does happen, and that gains its own momentum, you will see rates begin to back up very quickly; the Fed will not be able to control it."
Wednesday also marks the end of July. The Nasdaq , S&P 500 and the Russell 2000 are all set for the biggest monthly point gains since October 2011.
Key market gauges: The Shanghai Composite index rose 0.2% after the Chinese government vowed to support growth, but Japan stocks fell 1.5% on a stronger yen. Europe is down along with Dow and S&P futures . A nervous market at best.
The economy:Private-sector employers added 200,000 jobs in July , a figure that came above economists' expectations and June figures were revised up. Second-quarter GDP rose 1.7%, topping expectations for a 1% gain, but first-quarter GDP was revised down to 1.1% from a prior estimate of 1.8%. Still to come, Chicago PMI at 9:45 a.m. and then the Fed announcement at 2 p.m. Eastern.
And there was an overseas shocker as the EU's jobless rate fell in June for the first time in over 2 years. Incremental is the operative word here – the drop was from 11% to 10.9%. Reformed Broker's Josh Brown was seeing green shoots and reason to like Europe stocks well before this news. More on euro-zone investing a go-go.
Earnings: Plenty going on before the open and after the close, with Comcast , Phillips 66 , Whole Foods Market and Yelp among the highlights.
The buzz: Riverbed Technology is off over 16% in premarket trading after swinging to a loss a day prior.
Symantec shares were up over 6% after the security-software maker's earnings beat the Street view .
Shares of Anheuser-Busch InBev are up over 7% in premarket after the beermaker posts rising profit and recovering beer volumes.
Air Products is up 4% in premarket after CNBC reported activist investor William Ackman's Pershing Square Capital has taken a nearly 10% stake in the company.
Facebook shares have hit $38 IPO price in premarket since results that blew away markets a week ago. In light of this, MarketWatch's John Shinal asks if LinkedIn's ad-revenue growth has kept pace with the social-media giant.
The chart of the day: "I'm turning Japanese, I think I'm turning Japanese, I really think so. "Remember that catchy tune from Britpop group the Vapors back in the 80s? Well, ECRI's Lakshman Achutha n says the U.S. economy is now resembling Japan's "lost decades." He tells Bloomberg that a recession began last year and as the chart below shows, according to Achuthan, the U.S., along with other major developed economies, has seen slower growth in the last five years than Japan saw in it its lost decades. And current policy isn't going to help, Achuthan adds.
Two big pieces of economic data rolled in this morning. First up, ADP payrolls, which came in better than expected. And then second-quarter GDP data, which was a mixed bag. But it seems fears of potential Fed tapering on strongish data is taking a bite out of stock futures.
Investors are hoping for more direction from the Fed meeting outcome later. Bernanke and the gang are expected to stand pat on policy, but investors will be hanging on every word of that statement.
Meanwhile, WSJ's Jon Hilsenrath says Fed Chairman-to-be Larry Summers isn't likely to stray from the easy-money policy set up by Ben, who apparently has dropped us into a "lame-duck" period through to January.
Fearing that great rotation? Some say the Fed should be battening down the hatches. That's according to Philadelphia Trust Company CEO Mike Crofton , who told CNBC :
"If the great rotation that everybody talks about out of bonds into stocks does happen, and that gains its own momentum, you will see rates begin to back up very quickly; the Fed will not be able to control it."
Wednesday also marks the end of July. The Nasdaq , S&P 500 and the Russell 2000 are all set for the biggest monthly point gains since October 2011.
Key market gauges: The Shanghai Composite index rose 0.2% after the Chinese government vowed to support growth, but Japan stocks fell 1.5% on a stronger yen. Europe is down along with Dow and S&P futures . A nervous market at best.
The economy:Private-sector employers added 200,000 jobs in July , a figure that came above economists' expectations and June figures were revised up. Second-quarter GDP rose 1.7%, topping expectations for a 1% gain, but first-quarter GDP was revised down to 1.1% from a prior estimate of 1.8%. Still to come, Chicago PMI at 9:45 a.m. and then the Fed announcement at 2 p.m. Eastern.
And there was an overseas shocker as the EU's jobless rate fell in June for the first time in over 2 years. Incremental is the operative word here – the drop was from 11% to 10.9%. Reformed Broker's Josh Brown was seeing green shoots and reason to like Europe stocks well before this news. More on euro-zone investing a go-go.
Earnings: Plenty going on before the open and after the close, with Comcast , Phillips 66 , Whole Foods Market and Yelp among the highlights.
The buzz: Riverbed Technology is off over 16% in premarket trading after swinging to a loss a day prior.
Symantec shares were up over 6% after the security-software maker's earnings beat the Street view .
Shares of Anheuser-Busch InBev are up over 7% in premarket after the beermaker posts rising profit and recovering beer volumes.
Air Products is up 4% in premarket after CNBC reported activist investor William Ackman's Pershing Square Capital has taken a nearly 10% stake in the company.
Facebook shares have hit $38 IPO price in premarket since results that blew away markets a week ago. In light of this, MarketWatch's John Shinal asks if LinkedIn's ad-revenue growth has kept pace with the social-media giant.
The chart of the day: "I'm turning Japanese, I think I'm turning Japanese, I really think so. "Remember that catchy tune from Britpop group the Vapors back in the 80s? Well, ECRI's Lakshman Achutha n says the U.S. economy is now resembling Japan's "lost decades." He tells Bloomberg that a recession began last year and as the chart below shows, according to Achuthan, the U.S., along with other major developed economies, has seen slower growth in the last five years than Japan saw in it its lost decades. And current policy isn't going to help, Achuthan adds.
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ECRI
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The call of the
day: On Tuesday, Obama offered up a so-called "grand
bargain" -- a corporate-tax overhaul in exchange for middle-class job
creation. And this has gotten the folks at Goldman Sachs thinking:
"Repatriation was not specifically mentioned, but market participants intrepreted the "one-time revenues" associated with the transition to a new business tax system as a sign of possible support for low-tax repatriation of foreign profits," says Goldman's Amanda Sneider.
Sneider highlights 50 S&P 500 stocks with $1.3 trillion of permanently reinvested foreign earnings, adding that those with "high accumulated balances of earnings held overseas may benefit from a repatriation tax holiday." Foreign sales for these 50 companies totaled $1.8 trillion in 2012 and account for 53% of total foreign sales reported for the S&P 500. These stocks represent 38% of S&P 500 market capitalization, with info tech and health care representing half of that list.
The top 10 on that list: GE , Pfizer , Microsoft , Merck , J&J , IBM , Exxon Mobil , Citigroup , Cisco and good old Apple .
Random reads: Cover the kids' ears. A bad case of potty mouth on the New York mayoral campaign trail.
The Bank of England comes clean on selling gold looted by the Nazis .
Spain deals with its housing glut with a wrecking ball .
Water? China doesn't have enough and that could be an economy-wrecker for all of Asia.
Need to Know starts early and is updated as needed until the opening bell, but sign up here to get it delivered once to your e-mail box. Be sure to check the Need to Know item. The e-mailed version will be sent out at approximately 8:45 a.m. Eastern. Follow @bkollmeyer on Twitter.
"Repatriation was not specifically mentioned, but market participants intrepreted the "one-time revenues" associated with the transition to a new business tax system as a sign of possible support for low-tax repatriation of foreign profits," says Goldman's Amanda Sneider.
Sneider highlights 50 S&P 500 stocks with $1.3 trillion of permanently reinvested foreign earnings, adding that those with "high accumulated balances of earnings held overseas may benefit from a repatriation tax holiday." Foreign sales for these 50 companies totaled $1.8 trillion in 2012 and account for 53% of total foreign sales reported for the S&P 500. These stocks represent 38% of S&P 500 market capitalization, with info tech and health care representing half of that list.
The top 10 on that list: GE , Pfizer , Microsoft , Merck , J&J , IBM , Exxon Mobil , Citigroup , Cisco and good old Apple .
Random reads: Cover the kids' ears. A bad case of potty mouth on the New York mayoral campaign trail.
The Bank of England comes clean on selling gold looted by the Nazis .
Spain deals with its housing glut with a wrecking ball .
Water? China doesn't have enough and that could be an economy-wrecker for all of Asia.
Need to Know starts early and is updated as needed until the opening bell, but sign up here to get it delivered once to your e-mail box. Be sure to check the Need to Know item. The e-mailed version will be sent out at approximately 8:45 a.m. Eastern. Follow @bkollmeyer on Twitter.
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