Tougher day for stocks, as the poor 5-year Treasury auction appears to have put upward pressure on Treasury rates. Stock traders not sure what to make of this: They know the market has been buying credit like crazy, so any sustained move up on yields will almost certainly put pressure on stocks. Still too early to tell.
Some contradictions in the earnings reports, last couple of days:
1) home builder Lennar reported a notably better-than-expected increase in orders last quarter, but KB Home did not.
2) in restaurants, Darden may have had better earnings (Olive Garden, Red Lobster, and LongHorn Steakhouse), but Sonic, which runs a chain of drive-in restaurants, did not. Predictably, they blamed it on poor weather.
The positives driving the market:
1) Earnings trend improving
2) Retail sales improving
3) dividends, buybacks increasing (see Starbucks)
4) Corporate bond issuance, secondaries strong
On that last note, two big companies announced corporate debt issuance this afternoon:
1) Anheuser-Busch InBev launched a $3.25 debt offering
2) Wal-Mart begins a $2 billion offering of 5 year notes and 30 year bonds
1) new and existing home sales show no improvement
2) dollar strength all this week
3) Treasury weakness
There is more at stake in the jobs report, due out next Friday, than usual. Consensus is for a gain of 200,000 but some economists have estimates as high as 300,000 (Joe LaVorgna at Deutsche Bank, for example).
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