We are seeing a very bullish start to the trading day on strong corporate earnings, a decline in sovereign-debt yields in the Euro-zone, including the distressed Spanish and Italian markets, and encouraging U.S. home sales data.
Please be aware that we are back at the upper end of our recent trading channel, with the S&P 500 hovering just above the 1,570 technical ceiling, currently at 1,575 as of 10:30AM. With a strong close above this threshold today, we could easily see a move to re-test the all time highs of 1,593 and push to 1,600. Investors will be closely watching the Apple (AAPL) earnings announcement after the close for trading direction for the remainder of the week.
Main Factors Driving Morning Trade:
Positive Corporate Earnings – Netflix reported first quarter earnings that exceeded analysts’ consensus estimates, while revenues were right in line with expectations. The company added 3 million new subscribers in the quarter. Shares are up over 20% in morning trade. Diversified U.S. manufacturer United Technologies reported a better-than-expected profit, helped in part by its 2012 buyout of aircraft components maker Goodrich. Chemicals maker DuPont’s quarterly profit beat analysts’ estimates as higher sales of its seeds and agriculture chemicals offset weak demand for the once-lucrative titanium dioxide paint pigment. Texas Instruments posted first-quarter results slightly ahead of Wall Street expectations and it forecast growth for the current quarter on improving demand for its chips. Upscale leather goods maker and retailer Coach reported higher-than-expected quarterly results and raised its annual dividend, sending its shares up over 10%.
Encouraging Home Sales Data – Sales of new single-family homes rose 1.5% in March following a substantial drop in the prior month, signaling that the housing market continued to gain strength. Sales are 18.5% higher than during the same period in the prior year, and economists expect the housing market to continue to gain momentum this year. Additionally, U.S. home prices rose 0.7% in February, according to the FHFA. U.S. home prices are up 7.1% in the 12 months through February.
Commodities Under Pressure Again As Yields Continue To Drop – Treasury demand increased to briefly push yields down to their lowest levels of 2013. Driven by weak economic data out of China and Germany, the 10-year note hit a yield of 1.646% before retreating back to 1.67%, still a fall of nearly 3 basis points on the day. Upsetting commodities, the composite German purchasing managers’ index fell to a six-month low at 48.8 from 50.6 in March, indicating contraction — the first such reading for the country since November. Also, HSBC’s Flash China Manufacturing PMI missed expectations and dropped to its equal lowest ‘expansionary’ print in six months. In Europe, the search for higher returns continued to spark demand for euro-zone government debt, pulling 10-year Italian and Spanish bond yields to their lowest levels in over two years, and some French yields to record troughs and Irish bond yields to levels not seen since 2006.