Daily Market Briefing

By 19 Oct 2010 0 comments

Fundamentals:

US equity markets rose after a very strong earnings report from Apple.  The company far surpassed the consensus estimates, which were expected at $18.08 billion, and printing revenues of $20.34 billion.  Earnings per share came in at $4.64 against the market estimate of $4.10.  Apple is clearly managing to bring in customers even with the dire economic outlook in the US, and the company reported that they expect sales growth to remain steady next quarter.  Today, we will see if this strong earnings season can continue with reports from Johnson & Johnson, Bank of America and Goldman Sachs.

In macro data, we will see US housing starts and building permits released today, with many analysts calling for a weak report, given the current climate in the real estate market.   The National Association of Homebuilders Market Index rose to 16 in October from 13 the previous month.  Numbers below 50 are indicative of market contractions, so we have a long way to go before that report is likely to start signaling expansion.

Today, we will see speeches made from many central bank members, including the Fed’s Lockhart, who has gone on record recently saying that a “reasonably large” amount of quantitative easing is needed to strengthen the slowing US economy but it should be remembered that Lockhart is not a voting member of the FOMC.

US industrial production dropped0.2% month-on-month in September, consensus was for a rise of 0.2%.  Third quarter industrial production rose 1.5% down from 2.0% in the second quarter.  Manufacturing production also dropped 0.2% in September which will translate to a 1.3% gain for the third quarter, down from the 2.5% increase in the second quarter.

The earnings season moves forward today with earnings reports Johnson & Johnson, Bank of America and Goldman Sachs.  The story for Bank of America is likely to center on their credit portfolio.  J.P. Morgan and Citigroup increased earnings using loan loss provisions, and it is possible that Bank of America will do the same.  The Goldman will also be watched closely to see whether or not their typical showing of strong performances can be repeated but analysts will pay close attention to the sources of company earnings.

Technicals:

Commodities:

Oil has remained incredibly faithful to support and resistance for the past few weeks.  The range between $84.40 and $82.30 is still intact.  Play the range or wait for a breakout in one direction.  Support to the downside comes in at $78.90.  Resistance above is seen at $87.

Currencies:

The USD/JPY looks like it could finally be forming a base, as a tight range has developed between 81.00 and 81.60.  It is unlikely that prices will be contained here for very long, so the inevitable break here will determine the short term bias.  Resistance comes in at 82.30 and 83.00.

Stocks:

The S & P 500 has risen to threaten the triple top resistance at 1180.  A break of this area confirms the upward bias suggested by the 4-hourly uptrend channel.  Hourly RSI is at mid levels, so prices have plenty of room to extend.  Support is still strong at 1164.

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