U.S. equity futures are taking a breather Monday snapping up four days of gains. Stocks are being pressured by worries of easing demand from China, a stronger dollar, and caution ahead of second quarter earnings season. The market's focus shifts entirely to earnings as the second quarter results season begins with Alcoa(AA) reporting after today's close.Per usual, tech companies and banks will dominate the headlines out of the gate. The big names on the docket this week include Intel (INTC) and Google (GOOG) with JPMorgan (JPM), Bank of America (BAC), and Citigroup(C) closing up the week for which investors will be watching to see if credit trends improve. And while expectations are high, market participants are grappling with a higher degree of uncertainty as to forward guidance given a quiet preannouncement season, coupled with mixed economic data. Uncertain global economic undercurrents will continue to serve to temper the markets' mood.
From our vantage point, the key tell will be whether companies retain a cautiously optimistic tone or will they start to lean more negative in lieu of recent economic data. We will be listening for commentary on companies' strategy in terms of capital spending, hiring, and M&A activity given high corporate cash balances. The trend in each will be tell-tale signs of corporate confidence.
Following a mixed session in Asia, the European bourses are trending modestly higher. The euro is hovering at 1.2578 against the dollar, while the yen is trading at 88.57. Gold prices are holding above the $1200 per ounce level, while copper is weakening to $301.40 per ounce after China reported the third consecutive month of lower imports.
After a strong week in the oil pits, crude is holding comfortably at $76 per barrel. Natural gas meanwhile cannot seem to break through to $5/MMbtu despite record temps currently trading at $4.394/MMBtu.
With the relief wells only an estimated 7-10 days from reaching the blowout Macondo well, shares in BP (BP) are on the rise. But the move has more to do with ongoing takeover speculation than the what will hopefully be the successful cementing of the blowout well.
For weeks, the rumor mill has been running at full tilt speculating BP's fate as its market cap shrank under the weigh of a realistic cost outlook to clean up the largest spill in U.S. history. Exxon (XOM) is now at the top of a short list, which consists of mainly of supermajors, despite the fact the company just completed its largest takeover in years. The company is currently in talks to sell up to $12 bln in asset sales including a stake in Alaska's Prudhoe Bay to Apache (APA), according to news reports.
Insurance broker, Aon (AON), has agreed to buy Hewitt Assoc. (HEW) for $4.9 bln in cash and stock to expand its consulting operations. The $50 per share price tag is a 41% premium to Hewitt's Friday closing price.The calendar for the week is a busy one with earnings, economic data, and several key auctions including the Treasury and key PIIGS issuances which could make for a volatile week in the stock, bond, and currency markets. In addition, Congress is back in session which will only add to the headlines.
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