‘Good, but Not Good Enough’ Today’s Theme

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Good, but not good enough? That seems to be the theme this morning with lots of data:

a) Spanish and European stocks dropped following a well-received Spanish bond auction. Spain sold 1.1 billion euros of two-year bonds at 3.463 percent, with a healthy bid-to-cover ratio of 3.3, and 1.4 billion euros for the 10-year bond at 5.743 percent, with a 2.4 bid-to-cover ratio. That is higher than the 5.403 percent paid for the last 10-year auction in January.

b) S&P futures drop as weekly jobless claims disappoint. For the second week, jobless claims have spiked up, as have continuing claims.

c) Good, but not good enough...for earnings. Eighteen companies beat on earnings this morning. Morgan Stanley, Boston Scientific, and Travelers lead in pre-market gains. These modest beats will add up, but don’t get too excited: We are expecting only roughly one percent growth in earnings, these earnings beats will allow us to proclaim earnings beat by, say, three percent. But that is a far cry from the double-digit growth we have seen in the prior two years. Revenue growth also has been more modest.

d) Good, but not good enough...even for housing? So far, that’s what the spring housing data are starting to look like. March existing-home sales are out at 10 a.m. February existing sales were up 8.8 percent from a year ago. Good, just not good enough.

For March, we are expecting an increase of 8.4 percent from the same month last year.

On Tuesday, March housing starts were similar. Not seasonally adjusted, single-family sales were up 17 percent, multifamily 28 percent for the first three months of the year.

This is clearly a recovery, but off a very low base and it may not be enough, particularly given the run-up in housing starts.


1) Initial public offerings are strong: A better week than last week, because the IPOs are tech-related, for the most part. Data analytics software maker Splunk priced 13.5 million shares at $17, after raising the price talk of $8 to $10 up to $11 to $13. Luggage maker Tumi priced 18.8 m shares at $18, above the price talk of $15 to $17.

Also coming this week: Infoblox (networking), and Proofpoint (data protection — antispam).

2) Even Dupont is seeing pull-forward from the warmer weather. Dupont reported earnings above consensus, but most analysts seem to give much of the credit for the beat to the agriculture division (hybrid corn and soybean), because seed sales were pulled forward by the warm weather. Other segments — performance chemicals, performance coating, performance materials, and nutrition — were all strong. Dupont gets about two-thirds of its revenues outside the U.S. The company also reaffirmed full year guidance.

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