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Markets are called to open flat this morning. This is what's happening today:
Spain figured at the center of last week’s debate, with borrowing costs climbing after S&P cut the kingdom’s sovereign credit rating for the second time this year, to BBB+ from A, on concern about further fiscal tightening and the country’s banks. Today Spain GDP data for Q112 will be released. Analysts are expecting Spain to fall back into recession.
A war of words erupted last week between Hollande, who decried Germany’s fiscal-focused leadership in the two-year-old financial crisis, and Merkel, who said that the turmoil can’t be resolved without cutting debt. Polls show that Hollande is likely to succeed Nicolas Sarkozy as France’s next president after winning the first round of voting April 22.
Analysts predict US shares will rise enough this year to boost the S&P Index to a record, even as Wall Street strategists say the best is already over for American equities. Bullish forecasts are based on analysts’ expectations that S&P 500 earnings will reach records every year through 2014 as stimulus by the Federal Reserve props up the US economy. More than 70% of companies have exceeded estimates with Q112 results. Bears say Europe’s debt crisis won’t be contained and economic growth will be insufficient to maintain gains that have restored more than $3t to US equities in six months.
Stocks rose last week, pushing the S&P 500 up 1.8% to 1,403.36, as earnings topped estimates at Apple and Boeing. Computer and software providers, telecommunications companies and banks and brokerages are topping estimates by more than 10% on average. The benchmark gauge for American equities has climbed 107% since March 2009, pulling within 12% of its record high. The measure is up 28% after falling to a one-year low Oct. 3 as US unemployment dropped from 9.1% to 8.2% in seven months.
About 75% of the companies in the benchmark measure that reported results since April 10 have exceeded Wall Street earnings projections, beating by an average of 7.1%, according to data compiled by Bloomberg. That’s the highest rate in four quarters, the data show. Eight of the 10 groups in the index have delivered income that surpassed projections. Analysts are signaling that 13 straight quarters of higher- than-expected earnings and record profits through 2014 will help drive the gauge back to its all-time high. Earnings will jump 14% to $105.12 a share in 2012, according to analysts’ estimates compiled by Bloomberg.
China’s securities regulator released new rules for initial public offerings, saying the changes should make the price of shares “more reasonable” and improve disclosure. The guidelines set out the responsibilities of issuers and other organizations involved in IPOs, including law and accounting firms, and pledge to punish illegal practices, according to a statement posted on the China Securities Regulatory Commission website yesterday. The regulator also removed a three-month lock-up period for institutional investors to boost the circulation of new shares in the market.
Stock to watch: Corn Products International (Price $58.07, Price Target $77 )
Corn Products is transitioning from a company largely associated with HFCS to one with a more diversified, ingredients-based business model, including acquisition of National Starch. This should enable more stable growth and company-specific drivers (vs. solely based on macro trends) and smooth earnings volatility over time. This combined with favorable pricing/utilization trends, and upside to our target, drives our Buy rating.
Good day and happy trading!
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