Global Stocks, Commodities Lower—Here's Why

Global stocks and commodities are lower on several issues:

1) a debate on the strength of the global recovery this year. Goldman's comments on a potential top in commodities, made yesterday, is typical of that debate. Several traders have noted that lumber is down nearly 20 percent in the past two weeks.

2) the S&P 500 earnings numbers may be a little tougher to hit due to higher material costs and Japan. Ford for example said it expected to reduce or halt certain operations in Asia and the Pacific because of material and parts disruption. They said it would not affect overal results, which seems odd. They are not the only who will be making these comments.

3) the current debate on whether to raise the debt ceiling is being overshadowed by the larger debate on how to pay it back if you do.


1) Alcoa down about 4 percent pre open. Even though sales were up 22 percent to $5.96 billion, it was still slightly shy of the $6.07 billion analyst consensus.

Two big issues: higher raw material costs, and the weak dollar. Aluminum, like most commodities, is priced in dollars. So Aloca sells aluminum in dollars but pays costs in local currencies. All the commodity players have seen big gains in their currencies against the dollar: Brazil, Australia, Canada.

Still, give Alcoa credit for tremendous cost control in the face of higher raw material costs. Profits were $0.28 a share (excluding restructuring costs), a penny ahead of expectations. They reiterated that global demand for aluminum will grow 12 percent this year.

2) Ahead of earnings from financial firms, Goldman Sachs cut estimates on Morgan Stanley by 60 percent, to $0.32 from $0.80, largely on lower investment banking revenue and global wealth management revenues. They are now below street consensus of $0.42.

3) Chevron falls 1 percent after providing its interim Q1 update. Despite lower production, the oil giant sees stronger Q1 profits (compared to Q4), thanks to the rise in oil prices and improved margins in its refining business.

4) Dow component Procter & Gamble raises its quarterly dividend 9 percent to $0.525 from $0.4818.

5) Fastenal's earnings topped estimates ($0.54 vs. $0.52 consensus) as sales grew a more-than-expected 23 percent and margins improved. The seller of fasteners and industrial/construction supplies noted that sales to non-residential customers jumped 18 percent and sales to manufacturing customers rose 16 percent.

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