- Google's Q1 results are bogging down the Nasdaq this morning, while the DJIA and S&P500 eek out minor gains. Inflation is very much on everyone's mind following the two-year high in the Chinese March CPI figures and the release of US CPI data. The March US inflation data was right in line with expectations, and some are saying that the Fed should see the mild core CPI increase as vindication for arguments that higher energy prices of late will only have a temporary effect on inflation. In a CNBC interview before the data, Fed Governor Plosser stated that in the medium- to long-term, only headline inflation matters, and core inflation is merely a useful guideline. The April Empire Manufacturing index rose to its highest level in a year, and the employment component jumped to its highest since May 2004. Bond bulls were satisfied by the CPI data and have continued to bid up prices, putting this week's coupon auction participants well into the black. The benchmark 10-year is up more than half a point dropping the yield to 3.42% which is down nearly 20 basis points this week.
- Bank of America's first quarter profits fell nearly 40% y/y, missing estimates by a very wide margin, as higher expenses from delayed home foreclosures weighed on its mortgage business. These results shed some light on why the Fed refused to let the bank raise its dividend last month, and in fact CEO Moynihan said that the bank would continue to focus on its more immediate mortgage problems before getting around to raising the dividend. Surprisingly shares of BAC climbed one percent after the open, before quickly dropping down to -1%. Other major banking names are also giving up some modest early gains. Market participants were not terribly surprised by BoA's sour quarter, but they were positively shocked by Google's poor showing. Shares of GOOG are down more than 6% this morning after the firm displayed unsettling trends in its first quarter report. Former CEO Eric Schmidt has taken the training wheels off and investors do not like the more than 50% surge in spending for new hires, better salaries and more marketing. Multiple firms cut the firm's ratings overnight, with some analysts concerned about expenses growing quicker than sales.
- In other news, Mattel is up 5% after profits met expectations and revenue beat, thanks to robust sales growth. Charles Schwab met expectations in its first quarter, and shares are modestly higher. Mortgage servicing firm Assured Guarantee is up more than 20% after settling all outstanding RMBS litigation with BoA and receiving a $1.1B award from the bank. Competitor MBIA is up 16% on the news. Transocean is down 3.5% on a big downgrade from Howard Weil.
- EUR/USD continued to drift lower during the NY morning and tested below the 1.44 handle, although the cross remained above the 200-hour moving average of 1.4397. Apparently dealers are lightening up on euro longs ahead of a weekend vote out of Finland regarding the Portugal aid package. Unlike most other eurozone countries, Finland has the right to put requests to use the European Financial Stability Fund to a majority parliamentary vote. Dealers are cautious that the teflon coating the euro has exhibited all week under other peripheral concerns could show some cracks. ECB member Weber expressed concerns that inflation could top 3.0% at various time this year but expressed a more 'dovish' tone on his 2012 CPI view with energy prices expected to decline under his scenario.
***Looking Ahead***
- (US) G20 Finance Ministers meet in Washington DC underway
- 11:00 (US) Fed to buy $5-7B in Notes and Bonds
- 11:15 (US) Fed's Evans speaks in New York City
- 11:30 (PE) Peru Feb GDP Y/Y: 9.1%e v 10.0% prior
- 11:30 (PE) Peru Mar Unemployment Rate: 9.3%e v 9.1% prior
- 13:30 (US) Fed's Hoenig to speak on Economy at Purdue University
- 15:00 (AR) Argentina Mar Consumer Price Index M/M: 0.8%e v 0.7% prior; Y/Y: 9.8%e v 10.0% prior
- 15:00 (AR) Argentina Mar Wholesale Price Index M/M: No est v 0.9% prior; Y/Y: No est v 13.6% prior
- 17:00 (CO) Colombia Feb Trade Balance: $250Me v $209.9M prior
Dow +38 S&P +4.3 NASDAQ +1
***Economic data***
- (BE) Belgium Feb Trade Balance: +€206.2M v -€1.1B prior
- (BR) Brazil Apr FGV Inflation IGP-10 M/M: % v 0.6%e v 0.8% prior
- (IS) Israel Mar Consumer Prices M/M: 0.2% v 0.3%e; Y/Y: 4.3% v 4.4%e
- (US) Mar Consumer Price Index M/M: 0.5% v 0.5%e; CPI Ex Food & Energy M/M: 0.1% v 0.2%e; CPI NSA: 223.47 v 223.15e
- (US) Apr Empire Manufacturing: 21.7 v 17.0e
- (US) Feb Total Net TIC Flows: $97.7B v $32.5B prior; Net Long-term TIC Flows: $26.9B v $40.0Be
- (PD) Poland Mar Budget Level YTD (PLN): -17.3B v -14.4B prior; Budget Performance YTD: 43.1% v 35.8% prior
- (US) Mar Industrial Production: 0.8% v 0.6%e; Capacity Utilization: 77.4% v 77.4%e
- (US) University of Michigan Confidence: 69.6 v 69.0e
- (MX) Mexico Central Bank leaves the Overnight Rate unchanged at 4.50%; As Expected For the latest updates PRESS CTR + D or visit Stock Market news Today
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