Benzinga Market Primer: Wednesday, July 31: Futures Higher Heading Into FOMC Decision
Futures Higher Heading Into FOMC Decision, Second Quarter GDP
U.S. equity futures rose slightly in early pre-market trade ahead of some key economic data from around the world. Also, the FOMC rate decision is due out today after the first look at second quarter GDP but there will be no press conference at this meeting and the Bank of England and European Central Bank decision are due out early Thursday.
In other news around the markets:
- The number of people claiming unemployment benefits in Germany in July unexpectedly fell 7 thousand on expectations of a flat reading but was worse than June's decline of 12 thousand. The unemployment rate was in line with expectations and flat month-over-month at 6.8 percent.
- The unemployment situation across the eurozone was slightly better than expected in June as the unemployment rate was 12.1 percent, better than the forecast for a 12.2 percent reading and flat from May's downwardly revised 12.1 percent (was previously estimated at 12.2 percent).
- China's Xu of the National Reform and Development Commission spoke overnight, saying that the government is committed to the reforms which will bring a consumption based economy despite the negative impact it may have in the short run. The government will proactively boost domestic demand and support smaller companies.
- S&P 500 futures rose 1.7 points to 1,686.40 per ounce.
- The EUR/USD was higher at 1.3280.
- Spanish 10-year government bond yields rose 1 basis point to 4.67 percent.
- Italian 10-year government bond yields rose 1 basis point to 4.41 percent.
- Gold rose 0.63 percent to $1,333.20 per ounce.
Asian shares were mixed overnight as Japanese shares sold off on news that the government will stand by its policy to increase the sales tax in April 2014 to lower deficits. The Japanese Nikkei 225 Index fell 1.45 percent and the Topix Index declined 1.47 percent. In Hong Kong, the Hang Seng Index fell 0.32 percent while the Shanghai Composite Index rose 0.19 percent in China. Also, the Korean Kospi fell 0.16 percent and Australian shares gained 0.69 percent.
European shares were mixed heading into the key U.S. data after European data was roughly in line with expectations. The Spanish Ibex Index fell 0.35 percent and the Italian FTSE MIB Index declined 0.25 percent. Meanwhile, the German DAX rose 0.12 percent and the French CAC 40 Index rose 0.18 percent while U.K. shares gained 0.62 percent.
Commodities were mostly higher overnight as metals rose into the Fed's meeting. WTI Crude futures gained 0.4 percent to $103.49 per barrel and Brent Crude futures fell 0.27 percent to $106.62 per barrel. Copper futures rose 1.27 percent to $308.05 per pound. Gold was higher and silver futures jumped 1.14 percent to $19.91 per ounce.
Currency markets were on the move overnight as the dollar weakened ahead of the GDP report and the Fed. The EUR/USD was higher at 1.3280 and the dollar fell against the yen to 97.67. Overall, the Dollar Index declined 0.09 percent on weakness against the yen, the Swiss franc, the Canadian dollar and the euro despite strength against the pound.
Key companies that reported earnings Tuesday include:
- Merck (NYSE: MRK) reported second quarter EPS of $0.84 vs. $0.83 expected on revenue of $11.00 billion vs. $11.22 billion.
- Pfizer (NYSE: PFE) reported second quarter EPS of $0.56 vs. $0.55 expected on revenue of $12.97 billion vs. $13.03 billion expected.
- Amgen (NYSE: AMGN) reported second quarter EPS of $1.89 vs. $1.74 expected on revenue of $4.68 billion vs. $4.49 billion expected.
- Aetna (NYSE: AET) reported second quarter EPS of $1.52 vs. $1.41 expected on revenue of $11.54 billion vs. $11.99 billion a year ago.
Stocks moving in the pre-market included:
- Cubist Pharmaceuticals (NASDAQ: CBST) shares rose 5.74 percent pre-market after the company announced two acquisitions that have a combined total maximum price of just over $1.6 billion.
- Trius Therapeutics (NASDAQ: TSRX) shares gained 17.42 percent pre-market as Cubist announced that it was buying the company for $13.50 per share plus a contingent right value (CVR) worth an additional $2 in cash dependent on certain sales figures.
- Optimer Pharmaceuticals (NASDAQ: OPTR) shares fell 7.83 percent pre-market as Cubist announced that it was buying the company for $10.75 per share in cash with a CVR worth an additional $5.
- Potash (NYSE: POT) shares fell 0.89 percent pre-market after the large drop the day before as market prices for its fertilizers will fall. Mosaic (NYSE: MOS), Agrium (NYSE: AGU), and Intrepid Potash (NYSE: IPI) were all slightly higher pre-market.
Notable companies expected to report earnings Wednesday include:
- Mastercard (NYSE: MA) is expected to report second quarter EPS of $6.30 vs. $5.65 a year ago on revenue of $2.00 billion vs. $1.82 billion a year ago.
- Metlife (NYSE: MET) is expected to report second quarter EPS of $1.33, flat from a year ago, on revenue of $17.33 billion vs. $16.79 billion a year ago.
- Comcast (NASDAQ: CMCSA) is expected to report second quarter EPS of $of $0.63 vs. $0.50 a year ago on revenue of $16.01 billion vs. $15.21 billion a year ago.
- Hess Corp. (NYSE: HES) is expected to report second quarter EPS of $1.40 vs. $1.72 a year ago on revenue of $4.62 billion vs. $9.31 billion a year ago.
- CBS (NYSE: CBS) is expected to report second quarter EPS of $0.72 vs. $0.65 a year ago on revenue of $3.52 billion.
On the economics calendar Wednesday, MBA Purchase Applications and the ADP Employment Report kick off a heavy economic calendar followed by the first estimate of second quarter GDP, the employment cost index, the Treasury refunding announcement, and the Chicago PMI. Later, the FOMC rate decision is due out. Overnight, manufacturing PMIs from China, the eurozone, France, Germany, Italy, Spain and the U.K. are due out as well as the Bank of England and European Central Bank rate decisions.
Good luck and good trading.
Tune into Benzinga's PreMarket Info show with Dennis Dick and Joel Elconin here.
For a recap of Tuesday's market action, read Benzinga's daily market wrap here.
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