Saturday, September 23, 2023
Homemarket insiderLook-ahead: Earnings data and a new Treasury floater

Look-ahead: Earnings data and a new Treasury floater

Amid the barrage of earnings reports, some key housing and jobless claims data could influence markets Thursday.

Stock traders will also be watching the aftermath of Wednesday afternoon's earnings news, including Netflix, which took a wild ride higher on stronger-than-expected revenues and earnings. Ebay also jumped after its earnings news brought word of an investment by investor Carl Icahn, who wants the company to spin off PayPal.

Weekly jobless claims data are at 8:30 a.m. ET. Existing home sales and leading indicators are at 10 a.m., and FHFA home price data is released at 9 a.m. Manufacturing PMI data is at 8:58 a.m.

The bond market will be watching the Treasury's 11 a.m. announcement of the details of next week's auctions. Of special interest are details of a new floating-rate 2-year note to be auctioned next Wednesday, the first such instrument in 17 years.

(Read more: Treasury launches new security—first in 17 years)

With the prospect of rising rates, the Treasury has created the note to move with them.

Tom Simons, money market economist at Jefferies, expects the Treasury to announce $12 billion of the new floating-rate notes, which are not expected to be a replacement for the 2-year fixed-rate note. A traditional 2-year auction will be held Tuesday, and the 5-year and 7-year auctions will both be held Thursday, he said.

"The auction is going to be next Wednesday," Simons said. "The indexed rate is tied to the three-month bill auction. It just gives them another security to market to a group of investors interested in the short end."

The auction should go well, he added.

"They are going to allow themselves to lock in greater amounts of financing at lower levels than would be otherwise available," Simons said. "It has a daily reset as a floater, but the rate it's referencing is only going to change every week."

(Read more: Pisani's vote: Most influential person)

While important, that wasn't the big talk of the day in the bond market.

The real buzz was about Pimco CEO Mohamed El-Erian who announced Tuesday that he was leaving the company. More than one bond market participant said it was quite symbolic that one of the biggest names in the bond market is leaving at such an important inflection point for bonds.

The Fed began to slow its quantitative easing program this month and is expected to continue. Turbulence in the bond market began last year with talk of the Fed pullback, and the market's concern is that the Fed's exit may not go smoothly.

"If [El-Erian] is going, it makes you wonder if you've been in this business for a long time whether this is the time to get out," said one Wall Streeter, half jokingly.

Bond market participants had theories of their own, but many thought El-Erian was taking the blame for outflows and the performance of Pimco funds. Investors withdrew a net $41.1 billion from its Total Return fund last year, and its U.S. listed mutual funds saw $30.4 billion in withdrawals.

The Financial Times on Wednesday quoted sources saying that El-Erian was leaving because of long hours and friction with Pimco founder Bill Gross, who runs intense, early-morning meetings and is said to make member strenuously defend their viewpoints.

(Read more: Look out, earnings are the wild card for stocks)

What else to watch

Companies reporting before Thursday's open include McDonald's, Union Pacific, Baxter, Lockheed Martin, United Continental, Southwest Ari, KeyCorp, Cypress Semi and Johnson Controls. Companies reporting after the close include Microsoft, Starbucks, Discover Financial, Juniper Networks, Federated Investors, E-Trade, Applied Micro, International Game Tech, Altera, Celanese and Intuitive Surgical. Samsung also reports.

"The big news items right now are earnings," said Steve Massocca at Wedbush Securities. "They're barely clearing the recently lowered bar."

Stocks meandered Wednesday in a mixed market. The Dow was down 41 at 16,373, dragged down by IBM, which reported disappointing earnings news Tuesday afternoon. The S&P 500 was up 1 at 1,844, and Nasdaq was up 17 at 4,243.

The small cap Russell 2000 jumped ahead, gaining 1.1 percent to 1,181. It and the Nasdaq are now outpacing the S&P 500 and Dow with 1.5 percent gains since Jan. 1.

(Read more: Is Wall Street too bullish on the stock market?)

Treasury prices fell Wednesday, and yields rose slightly. The 10-year was yielding 2.85 percent. There was some focus on Europe, where German bund prices declined as investors jumped into a 10-year Spanish debt issue, showing continued strong demand for riskier peripheral debt.

—By CNBC's Patti Domm. Follow here on Twitter @pattidomm.


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