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- With another extremely light economic calendar stock investors continue to turn their attention to the upcoming earnings seasons and are lightening up in equity holdings in the early going. The US indices are down about 1.5% a piece, although they are off their worst levels mid morning. PIMCO CEO Mohamed El-Erian had plenty to say to CNBC ahead of the open, noting that he would not be surprised if equities retested lows and that government bonds are "not worth owning." Front-month crude is below $50, around $1.50 off overnight highs, while natural gas is making six-year lows around trading below $3.60. The Colorado States latest forecast for the upcoming hurricane season only confirmed the early weakness in the energy complex when they lowered the number of named storms expected to 6, with only 2 major.
- Pessimism over upcoming earnings at leading financials is sending the banks down 2-4% in early trading. Overnight "Heard on the Street" wrote that after a strong start in 2009, banking shares may be due for a pullback due to uncertainty over book values, which may fall amid uncertainty of banks being able to earn ROE above the current 13% cost of equity. Meanwhile, the IMF has said that the toxic assets held by financial companies could rise to $4T, with the deterioration in US-originated assets to reach $2.2T by the end of next year. Citi is an exception this morning, spiking up 2.5% in early trading.
- There has been a smattering of guidance reports and profit warnings ahead of earnings season, but nothing like the deluge of highly negative guidance seen ahead of last quarter's earnings season. Two consumer-facing names offered strong guidance this morning, restaurateur Brinker International and electronics retailer HH Gregg, with EPS forecasts for the coming quarter that blew out consensus estimates. Shares of EAT+6% and HGG+10% have lost a little altitude in early trading. March same-store sales come on Wednesday and Thursday, and the analysts are out talking up retailers. Yesterday Needham was positive on the sector, while Merrill raised price targets on multiple names. But today most retail names are down with overall indices and headed lower in early trading.
- Managed healthcare names traded off somewhat in the premarket after being granted a substantially lower baseline rate increase for Medicare Advantage (0.8% rather than the approx 4% increase in recent years), although the cuts are slightly less severe than those initially proposed in February. Humana, Aetna, UNH, Cigna, Wellpoint and Health Net slipped 2-3% before quickly heading back toward positive territory, with HUM, AET and UNH up 2-3%.
- Currency markets are still seeing the effects of some risk aversion trades, but the Pound Sterling is showing some relative strength late in the NY morning. Cable has paired nearly all if its losses for the day to trade back towards 1.4750 after trading below 1.46. EUR/GBP has droped below 0.90 for the first time in roughly a month. JPY has also exhibited some relative strength trading pretty much higher across the board. The EUR.USD pair has been down more than 1% for most of the session trading below 1.33.
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