Trader Talk

What's Weighing On The Market


Futures dropped slightly as the July ADP report showed job lossesslightly greater than anticipated (loss of 371,000 jobs vs. 350,000 loss expected), but the slowest rate of decline since October of last year. Nonfarm payrolls, out Friday, is expected to see a loss of 328,000 jobs.


1) Consumer products giant Procter & Gamble is down 3 percent pre-open. Q4 earnings beat estimates by a penny as margins improved on greater cost cuts. However, revenues fell short ($18.7 billion vs. $19.3 billion est.) - hurt largely by stronger dollar, as price increases largely offset a 5-percent decline in volumes.

Earnings guidance is a bit below analyst consensus: $0.95-$1.00 vs. $1.00 consensus.

2) Dow component Kraft Foods falls 1 percent pre-open despite beating estimates by 2 cents and raising full-year guidance above expectations ("at least" $1.93 vs. $1.93 est.).

The stronger dollar also hurt the global food company as revenues were just shy of the Street's forecast ($10.16 billion vs.$10.37 billion est.). Many of its product categories saw strong organic revenue growth as demand improved. Unfortunately, the increased volumes came as the firm realized slightly lower prices.

3) Oil driller Transocean falls 5 percent pre-open after Q2 earnings missed estimates ($2.79 vs. $3.03 est.). Poor demand caused revenues to fall 7.6 percent, more than expected as rig utilization worsened to 84 percent from 87 percent a year ago.

4) Expect more volume in Citi at the close: recall that a short while ago Citi completed a big exchange of its preferred stock for common stock. Today, the S&P 500 will be rebalanced at the close to account for the increased weighting of Citi in that index (the Russell indices were rebalanced on Friday; over a billion shares traded on that day).

According to KBW, the S&P buy will be about 672 m shares of Citi toward the close; traders will also be selling the remaining 499 components in the S&P, though the effect on prices is expected to be minimal.

5) Honda , the second-largest car company in Japan, said it expects to sell 100,000 more cars in the second half than in the first half and that its car business would return to profitability in that time.

6) More bullishness: 47.2 percent of the financial newletter writers surveyed by Investors Intelligence were bullish this week, a steep rise from last week's 42.9 percent. Other than one week in June, this is the highest level of bullishness since early 2008. Just 25.8 percent were bearish; 27 percent anticipate a correction. There has been a steep rise in most investor sentiment indicators recently. 



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