It's Not the Selling—It's Lack of Buying Interest
Bids are light. This was no selloff yesterday: bidders simply walked away. Consolidated volume at the NYSE (trading in all NYSE listed stocks on all exchanges) was 4.7 billion shares (5 billion is normal), one of the lighter volume days of the year.
1) Mortgage rates drop to 4.75 percent, lowest since May 2009, but MBA says applications to buy a home fell by 1.2 percent.
2) The disappointing May existing home sales number (new home sales is this morning) has put an emphasis on how the Fed might describe the situation in its statement today. On April 28, the FOMC said, "Housing starts have edged up but remain at a depressed level."
We are expecting May new home sales to come in at 430,000 at 10 AM ET; 504,000 were reported in April, a significant jump from prior months.
3) Tougher quarter for banks: Barclays Capital cut its Q2 numbers for Goldman Sachs , saying "Financial market conditions have deteriorated notably since 1Q10, evidenced by sharply wider credit spreads, cash-derivative basis, declines in structured finance indices, sharply higher volatility and a "flight-to-safety" trade in less risky assets."
Separately, Wells Fargo also reduced estimates for large caps banks:
- Bank of America
- Goldman Sachs,
- JPMorgan Chase ,
- and Morgan Stanley ,
driven by weakness in trading and banking, though they note credit should improve.
4) Weak euro starts to pinch: yesterday, it was Carnival that mentioned the weaker euro hurting earnings. Today, Philip Morris International , which sells Marlboro, cut its full-year earnings outlook to $3.70-$3.80 from $3.75-$3.85, citing in part a weaker euro.
5) The filing for the General Motors IPO could come as early as next week; not clear when the actual IPO will come, but Secretary Geithner has said it could be in the fourth quarter.
6) CarMax surges 11 percent after Q1 earnings topped estimates ($0.41 vs. $0.33 consensus). The used car dealer reported higher traffic as same-store sales jumped 9 percent. Good signs: both used car unit sales and prices rose nearly 9 percent each.
Separately, Standard & Poor's announced that CarMax would replace XTO Energy in the S&P 500 index, effective Friday after the close. XTO Energy is being acquired by Exxon Mobil .
7) Rite Aid rises 11 percent as its Q1 loss was less than expected (loss of $0.09 vs. loss of $0.14 consensus). The decline in the drugstore chain's sales was inline with estimates, but comps fell 1 percent as sales of general merchandise (down 1.3 percent) and pharmacy items (down 0.9 percent) were weak.
The company reaffirmed its loss and sales expectations for the year, both of which are inline with current Street estimates.
8) Jabil Circuit jumps 10 percent after reporting better-than-expected Q3 earnings ($0.40 vs. $0.33 consensus). The circuit board maker saw revenues rise 32 percent and margins expand by nearly 2 percentage points.
Guidance for its fourth quarter is also strong, with earnings seen between $0.45 and $0.50 and revenues between $3.8 billion and $4.0 billion (vs. $0.38 and $3.4 billion consensus).
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