morning review - 080410

8/9/2019 Morning Review - 080410

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Nicholas Colas (Chief Market Strategist): 212 448 6095 or [email protected] Clark: 212 448 6085 or [email protected]

Beth Reed: 212 448 6096 or [email protected]

One overlooked factor, however, may well be the relative predictability and generally lower rate of inflation in the Eurozone versus U.S. economy. By ouranalysis, the U.S. seems far more likely to slip into statistical deflation (negative Consumer Price Index readings) than the Eurozone. U.S. deflation is just a few months ofweak cars sales and the inevitable industry-wide discounting - away, everything else equal. Eurozone inflation, while modest, is at least grounded in several sectorsable to raise price.

Deflation, it seems, is good for bond prices witness the recent rally at the long end of the U.S. Treasury curve. But a history of lower inflation andsteady/predictably low inflation might be just a little bit better hence the modestly lower rates in Germany versus those in the U.S.


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Euro Area vs US Inflat ion: 1990-1999 ( Index = 100 in January 1990)

Euro area US

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Euro Area vs US Inflat ion: 2000-Present ( Index = 100 in January 2000)

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Contr ibution to Overall Euro Ar ea Inflation: 1 997-2002

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Contr ibution to Overall Euro Ar ea Inflation: 2003 -2008


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Contribution to Overall Euro Area Inf lation: 2009-Present


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U.S. EQUITIES

Despite an increase in sales, shares of PG fell 3.4% after the company missed earnings estimates and posted a 12% drop in quarterly net income.Meanwhile, PFE added 5.6% as it beat both earnings and revenue expectations, aided by cost savings from its merger with Wyeth. Homebuilder DHI(-5.8%) swung to a profit but missed estimates, while COH (-3.5%) topped estimates, helped by strong demand for a less expensive line and expansion ofits outlet stores. AMZN shares rallied 2.0% following news that several of its Kindle models are currently sold out. Auto makers F (-1.9%) and TM (+1.1%)reported year-on-year sales growth in July of 0.7% and -6.8%, respectively.

Important Conferences/Corporate Meetings Today:None

Important Earnings Today (with Estimates) From

Source: Thomson ONE

Three Day (High 1124.25; Low 1101.75):Prior Day SPX (High 1125.44; Low 1116.76; Close 1120.46):

S&P Futures

One Day (High 1122.75; Low 1113.25): NDN: $0.19 ALL: $0.71 UHAL: $1.70 AOL: $0.40 AINV: $0.25 CAR: $0.17 BRS: $0.69 XEC: $1.52 CLH: $0.83

CLWR: $-0.52 CWH: $0.93 CNW: $0.30 DVN: $1.40 EQY: $0.25 ESS: $1.29 FTR: $0.15 GRMN: $0.73 HIG: $0.73

SD: $0.12 SINA: $0.29 SIRI: $0.00 SPW: $0.71 TWX: $0.45 RIG: $1.69Source: Bloomberg

HI: $0.41 HSNI: $0.33 ICE: $1.41 IBOC: $0.38JACK: $0.53 KFN: $0.34 MUR: $1.21 NNN: $0.37 NWSA: $0.20

ONXX: $-0.03 OC: $0.60 PRE: $1.75 PEGA: $0.17 PCG: $0.90 RL: $0.89 PHM: $-0.01 Q: $0.09 REG: $0.55


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FIXED INCOME

Source: Bloomberg

Todays Important Economic Indicators/Events: MBA Purchase Applications Challenger Job-Cut Report ADP Employment Report Treasury Refunding Announcement ISM Non-Manufacturing Index: 53.0

Treasury Secretary Tim Geithner speech on tax and fiscal policy at 4pm in Washington, DC

Source: Bloomberg

Treasuries advanced following government reports showing weakness in housing and consumer spending, pushing the 2-year note yield to yet anotherrecord low (0.51 percent) and the 5-year note yield to the lowest level (1.53 percent) since March 2009. Benchmark 10-year debt yields fell 5 basis pointsto 2.91 percent. German 10-year bonds also gained in response to the weak U.S. economic data, as the yield on the bunds dropped 9 basis points in itsbiggest intraday decline in 3 months.


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morning review - 080410

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