Originally posted at Briefing.com
This is a busy week for earnings reporting and today has been a busy day for disappointing earnings guidance. The latter factor more than anything else is the main reason why the S&P futures are trading 1.1% below fair value. A weak durable orders report for December isn't helping either.
It isn't going to be an uplifting start for the major indices. Dow Jones Industrial Average futures are off by 290 points, bloodied by Microsoft (MSFT), United Technologies (UTX), Caterpillar (CAT), DuPont (DD), Pfizer (PFE), and Procter & Gamble (PG). Each of those companies issued disappointing guidance and each cited, among other things, the adverse impact of a stronger dollar.
It will be interesting to see how the Russell 2000 fares today. Arguably, it should exhibit some relative strength since it is populated with mostly domestic-oriented companies and U.S. multinational companies are clearly feeling the pinch of the stronger dollar.
The underperformance of the Russell 2000 on a day like today would speak to underlying concerns in the market about problems abroad bleeding into the U.S. economy. Anyhow, with the blue chips stealing the spotlight at the moment, the small-cap stocks are definitely an area to watch.
Something else that will be looked at closely is the December Durable Goods Orders report. It was a wholesale disappointment as well.
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New orders declined 3.4% (Briefing.com consensus +0.5%) on top of a downwardly revised 2.1% decline for November (from -0.7%). Excluding transportation, orders were down 0.8% (Briefing.com consensus +0.7%) in December on top of a downwardly revised 1.3% decline for November (from -0.4%).
The durables report featured order declines for most categories, highlighted by a 9.2% decline in transportation equipment orders, a 3.7% decline in machinery orders, and a 1.3% decline in orders for computers and electronic products. The bright spots were motor vehicle and parts orders (+2.7%) and fabricated metal products (+1.0%).
Nondefense capital goods orders,excluding aircraft, declined 0.6%. That is the fourth straight monthly decline in this proxy for business investment.
This durables report will be interpreted as a negative for Q4 GDP forecasts considering that shipments of nondefense capital goods, excluding aircraft, fell 0.2% on top of a 0.6% decline in November and a 0.9% decline in October.
Clearly, the durable goods orders report missed forecasts in a big way. The same can be said for the snowfall forecast for New York City associated with winter storm Juno.
There is still plenty of snow on the ground in the Big Apple, yet it isn't near what the weather models suggested it could be. Be that as it may, there is a chill on Wall Street from the disappointing earnings and economic data.
Fittingly, there is the big Apple (AAPL) earnings report after the close today. There is some pent-up hope that Apple can thaw things out with its results and guidance. If it fails to do so, one can expect more blood on the Street.
