Markets have a steady tone this morning after both the S&P 500 and Dow Jones industrial average closed at record highs on Thursday, with traders taking in earnings reports from Wall Street giants JPMorgan Chase & Co. and Walls Fargo & Co. While the second-quarter banking results were largely favourable, an earnings warning from United Parcel Service decidedly was not.
Stock futures are flat and European markets are up modestly, but the overall backdrop suggests the major U.S. indexes have a shot at closing at another record later today.
The violent upturn in long-term bond yields over the last several weeks has subsided; they've dropped about 21 basis points this week, their biggest weekly decline in a year, according to Bloomberg. That's calming a lot of fears about higher interest rates denting corporate earnings growth. The S&P 500 has retraced all of its 5.8 per cent fall between May 21 and June 24, and if it ends higher today, it would be for a seventh day in a row.
China continues to be a weak spot on the global equity scene, with the Shanghai index shedding a further 1.6 per cent overnight on continued worries about the slowdown of economic growth there.
In Europe, the economic picture is far from robust - and there was further evidence of that today. Euro zone factory output in May fell for the first time in four months, according to fresh data, with industrial production falling 0.3 per cent on the month. That was just slightly weaker than the 0.2-per-cent decline expected by economists, however, and an official from the European Central Bank's executive board provided some soothing words to the market, saying that the euro area's sluggish recovery means monetary policy "has to stay accommodative for a longer period of time."
That's in keeping with the message from the U.S. Federal Reserve this week that downplayed any near-term desire to hike interest rates.
There will be a couple of Federal Reserve speeches this afternoon from Philadelphia Fed President Charles Plosser and St Louis Fed President James Bullard. Mr. Bullard is a voting member of the Fed and recently suggested the central bank didn't strongly enough signal its intention to defend its inflation target.
Now, here's a closer look at what's going on this morning and what's to come.
MARKETS:
Equities:
Futures: S&P 500 +0.05 per cent; Dow +0.04 per cent; Nasdaq +0.13 per cent; TSX Toronto +0.25 per cent
Hong Kong's Hang Seng -0.7 per cent
Shanghai composite index -1.6 per cent
Japan's Nikkei +0.2 per cent
London's FTSE 100 +0.5 per cent
Germany's DAX +0.9 per cent
France's CAC 40 +0.3 per cent
Commodities:
WTI crude oil (Nymex Sep) -0.1 per cent at $104.23 (U.S.) a barrel
Gold (Comex Aug) -0.3 per cent at $1,275.10 (U.S.) an ounce
Copper (Comex Sep) -0.8 per cent at $3.15 (U.S.) a pound
Currencies:
Canadian dollar at 96.32 (U.S.), up 0.03 from Thursday's North American close.
U.S. dollar index up 0.25 at 83.00
Bonds:
U.S. 10-year Treasury yield 2.53 per cent, down 0.04
ECONOMIC INDICATORS TO WATCH:
The U.S. Labor Department said the producer price index in June rose 0.8 per cent from May, higher than the 0.5 per cent expected by economists.
(955 a.m. ET) Reuter's/University of Michigan consumer sentiment index is released, expected to hold steady at 84.1.
STOCKS TO WATCH:
JPMorgan Chase & Co. reported earnings of $1.60 a share, beating the Street view of $1.44. But shares are down 0.7 per cent in the premarket.
Wells Fargo & Co. said its net income rose 20 per cent to 98 cents a share. Shares are up 1.2 per cent in the premarket.
UPS cut its fiscal 2013 earnings guidance to $4.65 to $4.85 a share, below the Street consensus of $4.98. Shares are down 3 per cent in the premarket. Shares of rival FedEx Corp. are down 2.2 per cent.
Dell Inc. shares are up 0.7 per cent after activist investor Carl Icahn said late Thursday on Bloomberg TV that he would make a better buyout offer by today.
Bank of Nova Scotia said it is withdrawing its proposed acquisition of a 19.99 per cent stake in China's Bank of Guangzhou "in light of changing conditions."
Domtar Corp. said it expects to post a second-quarter operating loss of between $30-million and $35-million, hurt by a litigation-settlement charge, restructuring costs and other charges. Sales are projected at $1.31 billion.
THIS MORNING'S TOP INVESTING READS ON THE WEB:
Hedge funds are for suckers. This week's cover of Bloomberg Businessweek.
U.S. mortgage rates have hit a two-year high, an increasing threat to the U.S. housing market.
People looking for safe, simple investments generating regular income are facing an ugly reality: There aren't any.
Is it time for a contrarian bet on China?
Gold miners hold similarities to the greatest oversold conditions of all time.
Hope to profit from the Shiller Cape Ratio.
The rise in energy prices this month lacks a good reason why - other than traders are trying to make money.
-----
The premarket report is constantly updated to reflect the latest news developments and market moves. For instant headlines on breaking economic and corporate news in the premarket, follow Darcy Keith on Twitter at @eyeonequities. You can also be notified using our dashboard feature when new articles appear from this author. Read more on using this feature here.
Darcy Keith