Day Traders Diary

10/12/17

The stock market advanced modestly on Wednesday--settling at a new record high--but looks poised to give back most of that gain this morning as earnings season gets under way. The S&P 500 futures are trading six points, or 0.2%, below fair value.

JPMorgan Chase (JPM 96.45, -0.39) delivered its fiscal third quarter results this morning, beating both earnings and revenue estimates and officially kicking off the third quarter earnings season. Financial peer Citigroup (C 74.65, -0.29) is also due to report this morning while Bank of America (BAC 25.69, -0.14) and Wells Fargo (WFC 55.36, -0.30) will report on Friday.

Although the financial sector started on the front foot with JPMorgan's results, the group is expected to be the weakest among the S&P 500's 11 sectors this earnings season due to hurricane-related insurance claims in the third quarter. S&P 500 earnings are expected to increase just 2.8%, down from an estimated growth rate of 7.5% on June 30--largely due to said insurance claims.

It's also worth pointing out that the financial space has climbed 10.4% since hitting a three-month low on September 7, so it wouldn't be surprising to see financial names sell off even in the face of better-than-expected results. For instance, JPM shares are down 0.4% in pre-market action despite the company's upbeat report.

In the bond market, U.S. Treasuries are mixed this morning with longer-dated issues showing relative strength. The yield on the benchmark 10-yr Treasury note is down two basis points at 2.33%. Meanwhile, the 2-yr yield is up one basis point at 1.51%.

WTI crude futures are down 1.4% at $50.57 per barrel after the American Petroleum Institute reported a build of 3.1 million barrels on Wednesday evening. The Energy Information Administration will report its weekly inventory figures later this morning at 10:30 ET.

On the data front, investors will receive the Producer Price Index for September (Briefing.com consensus +0.4%) at 8:30 ET, the weekly Initial Claims Report (Briefing.com consensus 255K) also at 8:30 ET, and the Treasury Budget for September at 14:00 ET.

In U.S. corporate news:

• JPMorgan Chase (JPM 95.45, -0.39): -0.4% despite beating both top and bottom line expectations and reaffirming its outlook for 2017.
• Juniper Networks (JNPR 25.37, -1.49): -5.6% after lowering its revenue guidance for the third quarter.
• Domino's Pizza (DPZ 200.86, -8.38): -4.0% despite reporting better-than-expected earnings and revenues and authorizing a $1.25 billion share repurchase program.

Reviewing overnight developments:

• Equity indices in the Asia-Pacific region ended Thursday on a mostly higher note. Japan's Nikkei +0.4%, Hong Kong's Hang Seng +0.2%, China's Shanghai Composite -0.1%, India's Sensex +1.1%.
  • In economic data:
    • Japan's September PPI +0.2% month-over-month, as expected (last 0.0%); +3.0% year-over-year, as expected (last 2.9%). September Bank Lending +3.0% year-over-year (consensus 2.6%; last 3.2%). Tertiary Industry Activity Index -0.2% month-over-month (expected 0.1%; last 0.1%)
    • Australia's August Home Loans +1.0% month-over-month (expected 0.5%; last 2.8%) and August Invest Housing Finance +4.3% month-over-month (last -3.9%). MI Inflation Expectations accelerated to 4.3% from 3.8%
    • New Zealand's September FPI -0.2% month-over-month (last 0.6%)
    • Singapore's August Retail Sales -0.3% month-over-month (last 2.9%); +3.5% year-over-year, as expected (last 1.7%)
  • In news:
    • Markets in China were subdued ahead of the 19th Party Congress, which will begin on October 18. Reports from China indicate the country's government has been pushing large technology firms to give the government a direct role in decision-making.
    • In Japan, a poll conducted by Nikkei showed that the country's ruling coalition is on track to secure 2/3 majority.
    • The International Monetary Fund lowered Australia's 2017 GDP growth forecast to 2.2% from 3.1%.

• Major European indices trade near their flat lines. UK's FTSE +0.4%, Germany's DAX -0.1%, France's CAC -0.3%.
  • In economic data:
    • Eurozone August Industrial Production +1.4% month-over-month (expected 0.5%; last 0.3%); +3.8% year-over-year (consensus 2.6%; last 3.6%)
    • France's September CPI -0.2% month-over-month (expected -0.1%; last -0.1%)
  • In news:
    • European Chief Negotiator for Brexit Michel Barnier said that Brexit talks have reached a deadlock that prevents moving to discussions about a future trade deal.
    • Catalan President Carles Puigdemont has been given five days to confirm Tuesday's independence declaration. If Mr. Puigdemont confirms the declaration by Monday, he will be given three days to withdraw the declaration.