TUESDAY 7/8/14; Q2 Earnings Season Kicks Off with AA

The dollar/yen remains flat at 101.80. Asian indexes trade flat to lower following the US lackluster day. The NIKK trades negatively since the yen is not weak today to pump the stock market higher (dollar/yen remains at 101.80 and lower). If the dollar/yen moves above 102 (weaker yen), the Japan and US stock market will move higher. US futures trade marginally lower in sync with the lower Nikkei. S&P -2. The US Dollar is 80.24.

Samsung reports earnings that miss on both the top and bottom lines. The weaker Samsung earnings jive with the downgrades and weakness in GTAT (glass supplier for electronic devices) yesterday. Samsung promises better results in Q3 so the stock trades higher despite the disappointing earnings. Casio Computer leaps +7.5% higher after announcing a buyback program.

China markets are tranquil ahead of the CPI data released in a few hours. Chinese real estate companies such as Vanke and Gemdale trade lower. Indonesia’s presidential election is set to begin and the Jakarta JKSE bounces +1%. India’s stock market catapulted higher after its elections perhaps bullish traders are thinking the same for Indonesia. Typhoon Neoguri hits Okinawa (southern Japan) and nuclear plants in the path of the storm are taken off line. The typhoon will move towards the Philippines and Taiwan next.

Pro-Russian rebels in East Ukraine destroy seven bridges. Europe threatens more sanctions against Russian oligarchs as early as today. The relative recent calmness in Ukraine is giving way to increased tension. The worst violence in two years flares up in Israel and the Gaza Strip. 






[Text is Redacted: Purchase July 2014-07 to Read the Complete Chronology]

After the closing bell, the Q2 earnings season kicks off with AA earnings. Alcoa reports a beat on the top and bottom lines and raises guidance. EPS is 18 cents better than the 12 cents expected with top line revenue at $5.84 billion above the $5.66 billion expected. Alcoa reaffirms the aluminum growth forecast at 7% for 2014 and says all business segments are performing well especially the engineered products and solutions group. Alcoa says the aircraft business has a nine-year backlog and the move by F to aluminum truck bodies will also fuel the aluminum sector. AA bounces in AH trading up +3%.

Retailer TCS misses on top and bottom lines with a negative EPS worse than expected and guides lower. The Container Store says sales are in a “retail funk” and the softness is due to “more than weather.” TCS collapses -14%. IPO data shows that the offerings are pricing at the mid-point of the projected initial price ranges which does not indicate frothiness (where IPO’s would all be going off at the high end or higher), however, volumes are at the highest levels since the 2000 dotcom bubble and market top. The volume hints that there is frothiness to the IPO market with people chasing companies that do not have earnings. Short selling, short interest in US stocks, is at the lowest levels in years. Everyone is programmed to trust the Fed and other central bankers delivering easy money sugar candy each day.

New York Times writer Neil Irwin pens an article Welcome to the Everything Boom, or Maybe the Everything Bubble that gains attention on trading floors over the last couple days. The article states the case that nearly every asset class is expensive by historical standards. Raymond James Jeff Saut continues to call for higher markets but says the stock market is susceptible to a -10% to -12% sell off in the coming weeks. Even a bearish call on the markets is placed into context that a secular bull market is expected to continue for the years ahead. Virtually no one, zero, nada, expects the stock market to place a multi-year top currently (think about this from a contrarian perspective).

A scientist at National Institutes of Health discovers forgotten vials form the 1950’s that contain the deadly small pox virus. Small pox was eradicated in the 1980’s. An M6.5-class solar flare hits the earth causing limited disruptions to high frequency radio communications. The M class solar flares are mid-level events; the X-class flares are more serious. Washington State begins selling and offering marijuana products.

Hamas rocket fire hits Israel including Jerusalem. The conflict is increasing. Israel calls up 40K ground troops and plans to go in to Gaza to root out Hamas. The Sunni and Shiite are fighting across Syria and Iran and serve as a proxy for the Middle East in general but both Sunni and Shiite are enemies of Israel. The Middle East is a powder keg with multiple fuses lit.