Friday, June 25, 2010

Compromise Reached on Fin Reg Legislation

Underwhelming results and/or guidance from Nike(NKE)Bed Bath & Beyond (BBBY), Research In Motion(RIMM), and Dell (DELL) over the last week have contributed to fears that estimates may prove to be too optimistic.
The news has not been all bad, however.  While some earnings estimates may not be reached, corporate earnings growth overall remains strong - a fact that continues to support valuations. Oracle (ORCL) posted an upside result after Thursday's close, pushing its stock up nearly 4%. The bottom line is that the bar has been set higher this earnings season. 
U.S. equity futures are indicating a slightly higher open, but the Treasury market is still leaning towards the risk-aversion trade. The 10-year yield is holding at 3.12%. An intraday low was reached on May 25 at 3.06%.
Premarket headlines are being dominated by news that House and Senate lawmakers reached an agreement on the Financial Regulation Bill that sets the stage for the most sweeping regulatory overhaul of the U.S. financial industry in decades.
The so-called "Volcker rule," which is aimed at banning banks from proprietary trading, was softened by Senate negotiators. This fact may be providing a bit of relief for the banking stocks premarket.
The legislation still needs to be approved by the full House and Senate. Congressional leaders hope to hold these votes next week and to send the bill to the President for his signing by July 4th.
On the economic front, investors will receive a report on consumer confidence. The final read on Q1 GDP is also out. The figure came in at 2.7% (down from 3.0%) vs. the consensus estimate of 3.0%. The final Michigan sentiment reading for June comes out at 10:00 a.m. ET. The consensus is 75.5 - inline with the preliminary report.

The Group of Eight leaders meet today in Toronto ahead of the Group of 20 summit tomorrow.
Asian trading was broadly weaker, led by the exporters which rely heavily on U.S. consumption. Asia is taking its cues from the U.S. right now as concerns mount that the economic recovery is slowing. The Nikkei fell nearly 2% as the yen continues to rally against the dollar.
The losses are less severe in European trading. Shares of BP (BP) are trading at a 14-year low on concerns a tropical storm may hamper the oil clean-up efforts. The first tropical storm of the Atlantic hurricane season has a 60% chance of forming this weekend according to government forecasters.  The evolution of the storm is influencing oil trades, yet the bigger concern on the supply side is the evolution of a global economy that appears to be slowing down.

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