Thursday, July 14, 2011
The market will likely be reassured by this morning’s tripple-play of economic reports – favorable Jobless Claims numbers, a better than expected retail sales report, and a fairly benign wholesale inflation reading. Stocks will also find the solid earnings report from JP Morgan (JPM) reassuring enough to overlook the Moody’s warning and furthter European debt concerns following a less-than-successful Italian debt auction.
The market thus far has been able to see through the partisan bickering associated with the never-ending debt ceiling/budget talks going on in Washington. The late Wednesday warning from Moody on the AAA credit rating enjoyed by Treasury bonds may unsettle the markets momentarily, but is not expected to have an enduring negative impact. On the positive side, the warning may force the politicians to move beyond their partisan comfort zones towards a desirable middle ground.
On the earnings front, we had a solid earnings and revenue beat from JP Morgan (JPM) on the back of strong investment banking business. Hotel operator, Marriott (MAR), reported inline results after the close on Wednesday, but provided a tepid outlook. Yum! Brands (YUM) came ahead of expectations on strength in China and raised guidance. We have Google (GOOG) reporting after the close today.
The market has been so volatile lately that handicapping its day-to-day moves has become extremely difficult. Driving this volatility is the uncertain macro backdrop given the recent run of soft economic readings. This morning’s reports do nothing to change the overall economic outlook, but nevertheless provide some relief.
Sheraz Mian
Director of Research
Zacks Investment Research
