The Market Today

Positive Corporate Earnings; Key Brexit Vote Today


by Craig Dismuke, Dudley Carter

TODAY’S CALENDAR

Regional Fed Index and Existing Home Sales: Today’s economic reports include the October Richmond Fed Manufacturing Index (9:00 a.m. CT) and the September report on existing home sales (9:00 a.m. CT).  The manufacturing data, nationally or regionally, continue to be disappointing and this morning’s report is not expected to change that. Existing home sales are expected to pull back 0.7% in the September report after climbing 11.3% since January.  Housing continues to show an improving trend thanks to a notable decline in mortgage rates.

Key Brexit Votes Today: U.K. Prime Minister Boris Johnson will present his Brexit deal to Parliament today with two votes anticipated for approximately 1 p.m. CT (7:00 p.m. BST).  The votes will be on the general principles of Johnson’s bill, along with a possible fast-track agreement to move the bill through Parliament over three days.  If either of the votes fail, the EU would come under pressure to grant the requested Article 50 extension or else deal with a no-deal Brexit on October 31.


OVERNIGHT TRADING

Corporate Earnings Continue Positive Trend, Markets Jockey Ahead of Brexit Vote: U.K. and Eurozone yields set the tone overnight with yields down a few basis points following two weeks of generally higher yields.  The 10-year Gilt is down 1.7 bps while the 10-year Bund is down 3.0 bps ahead of the key parliamentary vote on the newest Brexit plan. U.S. yields have followed with the 10-year down 2.6 bps coming into today’s session (1.76%).  In a flurry of corporate earnings reports released early this morning, the trend of positive earnings continued, giving investors a bit more confidence that companies are weathering the recent uncertainty better than expected.  Proctor & Gamble beat sales expectations and raised their full-year revenue guidance. UPS beat expectations but McDonalds disappointed on weak U.S. growth.  McDonalds’ global growth, incidentally, beat expectations. U.S. stock futures are mixed on the modest news and uncertainty of today’s Brexit vote.


YESTERDAY’S TRADING

Bond Yields and Stocks Grinds Higher on Trade Optimism: Stocks rose along with Treasury yields yesterday on sparse economic news and low volumes, but positive headlines on U.S. – China trade.  President Trump indicated mid-day that he and Chinese President Xi will meet at the Asia-Pacific Economic Cooperation summit in Chile in November.  He said he was hopeful that a trade deal could be signed there.  Economic Council Director Larry Kudlow said that December’s tariffs could be avoided if a deal is reached.  Commerce Secretary Wilbur Ross, however, said that getting the terms of a deal right was more important than the deal being signed in Chile.  Stocks continued to grind back near all-time highs with the S&P up 0.7% yesterday to 3,006, just 19 points below its July high.  Treasury yields slid higher with both the 2-year and 10-year Treasurys up 4.7 basis points on the day.  While the trade news was positive, investors continue to await potentially more compelling headlines on Brexit, the ECB’s meeting Thursday, and almost one-fifth of S&P 500 companies reporting later this week.  The corporate earnings calendar includes McDonalds (Tue.), Caterpillar (Wed.), Microsoft (Wed.), and Amazon (Thu.) to mention a few.


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