US Market Update: A Welcome Dose of Volatility



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Article content US Market Update: A Welcome Dose of Volatility

25.06.2014 17:31 Wednesday
***Economic Data***
- (UK) Jun CBI Industrial Reported Sales: 4 v 23e
- (US) MBA Mortgage Applications w/e Jun 20th: -1.0 v -9.2% prior
- (US) May Durable Goods: -1.0% v 0.0%e; Durables Ex Transportation: -0.1% v +0.3%e;Capital Shipments Non-defense/Ex-aircraft: 0.4% v 1.0%e; Capital Goods Orders Non-defense/Ex-aircraft: 0.7% v 0.5%e; Ex-Defense: % v -0.8% prior
- (US) Q1 Final GDP Annualized Q/Q: -2.9% v -1.8%e; Personal Consumption: 1.0% v 2.5%e
- (US) Q1 Final GDP Price Index: 1.3% v 1.3%e; Core PCE Q/Q: 1.2% v 1.2%e
- (US) Jun Preliminary Markit US Services PMI: 61.2 v 58.0e; Composite PMI: 61.1 v 58.4 prior
- (US) DOE Crude: +1.74M v -1Me; Gasoline: +710K v +1Me; Distillate: +1.2M v +1Me

- A modicum of volatility has returned to stock markets over the last two sessions, while trading volumes have ticked a bit higher. The VIX bounced back above 12 this morning, while trading in US equities has been choppy, but firmly in positive territory. As of writing, the DJIA is up 0.37%, the S&P500 is up 0.22% and the Nasdaq is up 0.27%.

- The second revision of the weather-impacted first quarter GDP was worse than expected, at -2.9% final from -1.0% preliminary. and the surprise relative to our forecast was all in the health care estimates. Analysts point out that most components behaved roughly as expected with the exception of the services component of PCE, which was revised from a growth rate of +4.3% in the preliminary data to +1.5% this morning, driven entirely by updated estimates of health care spending. The feds had assumed medical services would be up sharply due to expanded access under the ACA, but the latest quarterly services survey showed few signs of acceleration. Meanwhile the May durables report was weak, with the exception of the capital goods orders (non-defense, ex-aircraft).

- The front-month WTI contract has come off levels seen last night around $107.50 to trade as low as $105.75 as officials pooh-poohed headlines suggesting the Obama administration had cleared the way for the first exports of US crude oil in 40 years. The Commerce Department clarified that there has been no broad change in policy, pointing to the fact that only two firms - Pioneer Natural Resources and Enterprise Products Partners - were granted permission to export shale condensate, and only after it had been run through a distillation tower to become a petroleum product. PXD and EPD are up a few percent on the news, while refiners are tanking on the story, with VLO down more than 8% and other refiners down 4-7%.

- The US Supreme Court has ruled against IACI's Aereo streaming television service, stating that it is in violation of broadcaster copyrights. The sweeping and definitive ruling was split 6 to 3, and the majority opinion went out of its way to call out Aereo as the equivalent of a cable company, not merely an equipment provider. They also emphasized that the ruling does not endanger other technologies, including cloud computing technology. IACI has lost 2% or so, while CBS is up 5% and DIS is up 1%.

- Monsanto beat earnings expectations in its third quarter results and authorized a big new share buyback program. Note that earnings were down 5% y/y and revenue missed expectations, dragged lower by a 16% y/y decline in sales of genetically-engineered corn seeds. Executives warned they still expect most growth to come from the seeds business despite the industry's shift this year from corn to soybeans. MON is up 6.5%.

***Looking Ahead***
- 11:30 (US) Treasury to sell $13B in 2-Year Floating Rate Notes Reopening
- 12:00 (CA) Canada to sell 10-Year Bonds
- 13:00 (US) Treasury to sell $35B in 5-Year Notes
- 15:00 (AR) Argentina May Industrial Production M/M: No est v 0.9% prior; Y/Y: -0.6%e v -4.0% prior
- 17:00 (CO) Colombia Apr Trade Balance: -$0.5Be v -$0.3B prior
- 17:00 (KR) South Korea May Department Store sale: No est v -1.4% prior