July 27: Looking Past the Washington Circus – Economic Highlights

Strong corporate earnings reports will be trying to gain traction for another day in the face of the still-unresolved Washington debate on the debt ceiling/budget issue. The soft Durable Goods numbers for June will not help matters either.

With the August 2 debt-ceiling deadline just days away now and the two sides still poles apart in their respective positions, the odds of a comprehensive budget deal are very low. The most likely outcome at this stage is an 11th hour kick-the-can-down-the-road solution that will provide for a temporary debt-ceiling increase, while leaving the thornier deficit reduction issue for a later date.

The rating agencies have painted themselves in a corner by threatening a rating downgrade if the debt ceiling increase was not accompanied by a credible enough deficit-reduction plan. They seem to be using this event as an opportunity to buttress their image following their negligent behavior in the sub-prime mortgage crisis.

Beyond the Washington Circus, we had a number of solid earnings reports this morning. Boeing (BA) posted a solid EPS beat on inline revenue, but the top of its full-year earnings guidance came short of the current Zacks Consensus. We had a solid EPS and revenue beat from Dow Chemical (DOW), with the chemicals giant continuing to see growth momentum in its various markets. Oil giant ConocoPhillips (COP), which is in the process of splitting itself into two companies, also came out with better-than-expected results.

Health insurers Aetna (AET) and WellPoint (WLP) posted better-than-expected results, but provided divergent outlooks, with Aetna guiding higher and WellPoint a tad lower. Autonation (AN) came out with an earnings beat, though its revenue came modestly short of expectations.

Amazon (AMZN) came out with better-than-expected top- and bottom-line results after the close on Tuesday, even as margins continued to be squeezed by the online retailer’s expansion spending. In other major after-market results on Tuesday, Las Vegas Sands (LVS) came ahead of expectations on international strength, while Juniper Networks (JNPR) came short.

Crude Inventories are scheduled to be released today at 10:30 AM EST. For the week ending July 15, crude inventories decreased by 3.7 million barrels from the previous week to 351.7 million barrels.