Looking Past the Washington Circus – Ahead of Wall Street (AET) (AMZN) (BA) (COP) (DOW) (JNPR) (LVS) (WLP)

Zacks

Wednesday, July 27, 2011

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.

But the credit markets appear to have called their bluff. With the 10-year Treasury bond in the 3% vicinity, there are no signs of panic in the bond market. As such, the loss of the ‘AAA’ rating may not exactly be an end-of-the-world event, after all. All we need right now is for the stock market to see the issue the same way as the bond market is doing.

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.

Sheraz Mian
Director of Research

AETNA INC-NEW (AET): Free Stock Analysis Report

AMAZON.COM INC (AMZN): Free Stock Analysis Report

BOEING CO (BA): Free Stock Analysis Report

CONOCOPHILLIPS (COP): Free Stock Analysis Report

DOW CHEMICAL (DOW): Free Stock Analysis Report

JUNIPER NETWRKS (JNPR): Free Stock Analysis Report

LAS VEGAS SANDS (LVS): Free Stock Analysis Report

WELLPOINT INC (WLP): Free Stock Analysis Report

Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.

Be the first to comment

Leave a Reply