The US equity markets moved lower in early action on the heels of a smaller-than-forecasted rate of US GDP growth for 4Q, as personal consumption came in below expectations. Treasuries pared early losses following the report and the ensuing weakness in stocks, with 4Q inflation coming in mixed, while a report on consumer sentiment is due out later this morning. Meanwhile on the earnings front, Starbucks Corp posted better-than-expected results, while Dow members Procter & Gamble Co and Chevron Corp missed expectations. Moreover, Ford Motor Co and Amgen both missed the Street’s forecasts. Overseas, Asian stocks finished mixed, with Japanese equities finding some pressure on a slew of reduced outlooks, while the European equity markets are lower on the US data and amid caution as Greece continues its debt-swap negotiations.
As of 8:54 a.m. ET, the March S&P 500 Index Globex future is 6 points below fair value, the Nasdaq 100 Index is 5 points below fair value, and the DJIA is 57 points below fair value. WTI crude oil is declining $0.13 to $99.57 per barrel, Brent crude oil is increasing $0.20 to $110.99 per barrel, and the Bloomberg gold spot price is moving $1.03 lower at $1,719.05 per ounce. Elsewhere, the Dollar Index—a comparison of the US dollar to six major world currencies—is down 0.2% to 79.41.
Dow member Procter & Gamble Co. (PG $65) reported fiscal 2Q earnings ex-items of $1.10 per share, compared to the $1.09 consensus estimate of analysts surveyed by Reuters, with revenues increasing 4% year-over-year (y/y) to $22.1 billion, below the $22.2 billion that the Street had anticipated.
Fellow Dow component Chevron Corp. (CVX $107) posted 4Q EPS of $2.58, below the $2.84 that the Street had expected, with revenues rising 11% y/y to $60 billion, compared to the $71 billion that analysts were anticipating.
Ford Motor Co. (F $13) announced 4Q profits ex-items of $0.20 per share, missing the $0.27 estimate on the Street, but revenues, which rose 6.5% y/y to $34.6 billion, topped the $32.3 billion that analysts had projected.
Amgen Inc. (AMGN $68) reported 4Q EPS ex-items of $1.21, one penny below the Street’s expectations, but revenues increased 3% y/y to $4.0 billion, above the $3.9 billion that analysts were looking for.
Starbucks Corp. (SBUX $48) achieved fiscal 1Q earnings of $0.50 per share, one cent north of analysts’ forecasts, with revenues growing 16% y/y to $3.4 billion, exceeding the $3.3 billion that the Street had expected.
First read on 4Q GDP growth misses expectations, consumer sentiment gauge on deck
The first look at 4Q Gross Domestic Product, the broadest measure of economic output, showed a quarter-over-quarter (q/q) annualized rate of expansion of 2.8%, versus the 1.8% increase in 3Q, and the 3.0% growth that economists surveyed by Bloomberg had forecasted. Also, personal consumption came in below forecasts, rising 2.0%, following the 1.7% increase recorded in 3Q, and versus the 2.4% gain that was projected.
On inflation, the GDP Price Index dropped to a 0.4% rise, from the 2.6% advance seen in 3Q, and compared to the 1.9% increase that economists anticipated, while the core PCE Index, which excludes food and energy, rose 1.1%, versus the 0.9% gain that was expected and the 2.1% growth in 3Q.
Treasuries pared early losses and are nearly unchanged in early action following the GDP report, with the yield on the 2-year note calm at 0.21% and the yield on the 10-year note flat at 1.93%, while the 30-year bond rate is advancing 1 basis point (bp) at 3.10%.
Later this morning, the US economic calendar will continue to release key data, in the form of the final University of Michigan Consumer Sentiment Index for January, forecasted to come in unrevised at 74.0, the highest since May 2011, after rising to 69.9 in December.
Europe mostly lower amid continued Greek uncertainty
The equity markets in Europe are mostly lower in afternoon action, following yesterday’s broad-based gains, amid continued caution as Greece remains in negotiations with its private sector bondholders. Earlier this week, Greece rejected an offer from its private creditors as they asked for an interest rate of 4% in exchange for the restructuring of their current debt holdings, but yesterday reports surfaced that the bondholders were willing to lower their rate demand. An agreement on a debt-swap that will allow Greece to lower its debt burden could go a long way in the troubled nation receiving the next installment of bailout funds and the avoidance of a default. Stocks are finding pressure today despite comments from EU Commissioner Olli Rehn that he believes a deal between Greece and its private bondholders could be reached today or over the weekend. Also, most of the equity markets are moving lower even as bond yields of sovereign debt in the region are falling, aided by a debt auction in Italy, which saw yields fall from previous auctions.
Meanwhile on the European economic front, German import prices rose inline with expectations, Spain’s retail sales fell more than expected, and Switzerland’s leading indicators declined more than expected.
The UK FTSE 100 Index is declining 0.7%, France’s CAC-40 Index is decreasing 0.8%, Germany’s DAX Index is moving 0.2% to the downside, Italy’s FTSE MIB Index is trading 0.6% lower, Spain’s IBEX 35 Index is descending 0.6%, Switzerland’s Swiss Market Index is dropping 0.4%, and Greece’s Athex Composite Index is falling 1.8%.
Asia mixed as Greek talks continue and earnings reports weigh on Japan
Stocks in Asia finished mixed with most markets supported by optimism toward the Greek debt-swap talks on reports of progress being made, while caution remained ahead the US GDP report. Also, volume remained lighter than usual, with China’s Shanghai markets, along with Taiwan, remaining closed for the Lunar New Year holiday. Japan’s Nikkei 225 Index declined 0.1%, pressured by a steep decline in shares Nintendo Co. (NTDOY $16) after the company boosted its loss forecast, while NEC Corp. (NIPNF $2) also fell sharply to weigh on the Japanese markets as the company issues a disappointing outlook and announced that it plans to cut about 10,000 jobs. Moreover, shares of Nippon Steel (NISTY $26) also came under pressure after the company slashed its annual outlook. In economic news, Japan’s consumer prices declined inline with economists’ expectations for December, while the nation’s large retailers’ sales decreased by a smaller amount than anticipated for December.
However, South Korean stocks moved higher, with the Kospi Index rising 0.4%, aided by an advance in shares of Samsung Electronics Co. (SSNLF $907) after the company posted record quarterly profits. Elsewhere, Australia’s S&P/ASX 200 Index rose 0.4% and India’s BSE Sensex 30 Index gained 0.9%.