Trade the Nerws Market Internals Update at 15:30

Dow +74 S&P +11 NASDAQ +32

***Economic Data***

– (BR) Brazil July FGV Inflation IGP-M M/M: -0.1% v -0.1%e; Y/Y: 8.4% v 8.3%e
– (SA) South Africa Q2 Unemployment: 25.7% v 24.9%e
– (US) Initial Jobless Claims: 398K v 415Ke; Continuing Claims: 3.703M v 3.70Me
– (CL) Chile Jun Industrial Production Y/Y: 4.0% v 7.0%e; Industrial Sales Y/Y: 26.0% v 6.9% prior
– (CL) Chile Jun Total Copper Production: 426.5K v 442.6K prior
– (CL) Chile Jun Jun Retail Sales Y/Y: 12.5% v 10.0%e
– (US) Jun Pending Home Sales M/M: +2.4% v -2.0%e; Y/Y: 17.3% v 14.7%e
– (US) Weekly EIA Natural Gas Inventories: bcf vs. +38 to +43 bcf expected range

– Buyers are stepping in this morning, helping US equities recover from yesterday afternoon’s big slide. Another batch of strong earnings reports plus the unexpected decline in the weekly initial jobless claims are putting a floor under recent declines. Note that initial claims fell below the 400K level for the first time in 16 weeks. House Republicans plan to vote Thursday on Majority Leader Boenher’s debt plan this evening, although nobody expects the measure to pass the Senate. In the upper chamber Majority Leader Reid and Minority Leader McConnell have been exchanging insults, boding ill for chances to pass any legislation to raise the debt ceiling before the August 2nd hard deadline. Around the world investors, governments and companies are preparing for the worst, although no one has a clear idea of what will happen if no debt deal is reached. Chinese rating agency Dagong Global Credit said overnight it might cut the US sovereign rating from A+ as soon as Aug 1st. Spot gold is down sharply this morning, dropping back towards the $1,600 level after a solid week of gains. US Treasury markets continue to show little signs of stress with the 10-year up a quarter point yielding 2.95% ahead of this afternoon’s 7-year note auction. Other quarters of fixed income trade like 1-month bills and the repo markets continue to show signs investors are preparing for at the very least a downgrade to the US sovereign rating.

– Exxon surprised investors by offering less profit growth than expected in its second quarter, although profits still hit three-year highs. Analysts blamed the earnings miss on trouble in the firm’s international downstream business, possibly due to FX issues. Upstream profits gained strongly on a y/y basis thanks to high oil prices. Net income at Royal Dutch Shell rose more than 50% y/y, a little shy of expectations, while revenue was much higher than year-ago levels. Like Exxon, downstream earnings were weaker at Shell. Murphy Oil missed earnings targets, despite improved income in both upstream and downstream ends of the business. The firm’s guidance for Q3 fell well short of expectations, due to various one-time items, including taxes and expenses.

– Visa met expectations in its Q3 and reaffirmed its FY11 outlook. Payments and transactions grew in the double digit percentage range in the quarter. The company told investors that the majority of the impact from debit card fee caps will happen in FY12. Insurance name Aflac also met expectations and reaffirmed its guidance for the year.

– DuPont beat expectations and raised its full-year forecast, citing contributions from its acquisition of Danisco. Sales at key units remain robust, including in its key titanium dioxide and agriculture businesses. Ag names Bunge and Potash both crushed expectations on very strong demand dynamics. Potash also raised its FY11 guidance.

– Heart stent firm Boston Scientific crushed earnings expectations in its Q2 and offered continued strong guidance for Q3 and the full year. Note that analysts are projected potential gains for the firm’s stent sales after Johnson & Johnson said last month that it would withdraw from the business. Bristol-Myers Squibb was right in line with expectations, aided by strong initial demand for the firm’s new Yervoy drug.

– Sprint is no closer to profitability this quarter, as losses were more than twice the expected amount. Net adds were stable on a sequential basis, and overall customers grew by 4M on a y/y basis. In addition, Spring signed a huge 15-year, $13B deal with LightSquared to build and manage a 3G/4G network for the new wireless communications firm. Consumer products firms Kellogg and Colgate both offered solid results, meeting expectations and reaffirming guidance.

– The euro rolled into the New York session heading lower against the major pairs as peripheral spreads widened out once again, causing technical damage on the charts. EUR/USD ducked below 1.4330 and the subsequent break of the 200-hour moving average elected stops as the pair proceeded to test 1.4255. The situation settled down with renewed rumors that the ECB might be purchasing peripheral debt (something that has not been done since the end of Q1). The reality of the US debt ceiling situation was highlighted by the Russian Central Bank, which stated that it had no plans to adjust its portfolio rapidly even in event of US debt default as investors might chose to reduce risks by placing even more funds into Treasuries as there are no safe havens in emerging markets.

***Looking Ahead***

– 12:45 (US) Fed’s Lacker speaks on economy in Chantilly, Virginia
– 13:00 (US) Treasury to sell $29.0B in 7-Year Notes
– 14:30 (US) Fed’s Williams speaks in Salt Lake City
– 15:00 (AR) Argentina Jun Supermarket Sales Y/Y: No est v 14.0% prior
– Approx 18:00 (US) House vote on Debt Ceiling plan expected