Earnings season temporarily overshadows US debt concerns

U.S. stocks will open higher Wednesday as companies continue to beat estimates, with technology juggernaut Apple leading the pack having beat the mark by a whopping 33 percent. We expect IBM and Apple’s earnings to drive tech stocks higher.

Apple blasts earnings estimates signalling go ahead for tech stocks
After yesterday’s close Apple beat earnings estimates by 33 percent driven by strong demand, particularly in China, for the company’s iPhones and iPads. In the aftermarket the shares rose to record USD 400 per share. We expect the extraordinarily strong earnings from Google, IBM and Apple to set in motion a robust performance of technology stocks across the board, as demand for software (also content) and hardware will continue to rise as the economy expands. On this note, we expect Intel to deliver solid earnings later in today’s session.

Other noteworthy earnings releases ahead of the open are Blackrock posting 2Q operating EPS of USD 3.00 compared to USD 2.89 expected as assets under management grew in the quarter and the net flow of capital from clients brought in via the Barclays Global Investors deal halted, as expected by the company. United Technologies reported 2Q EPS of USD 1.45 compared to USD 1.42 estimated by analysts and raised its sales and profit forecast for the year with orders strong across all business segments. This earnings release may give a hint to what we can expect from General Electric’s earnings release on Friday.

American Airlines announced the largest order ever of commercial jets as the company has agreed to buy 460 jets from Airbus and Boeing. Despite part of the order being anticipated, as the American Airlines fleet has an average age of 15 years, the order reflects an optimistic view of the future.

Will U.S. existing home sales follow housing starts?
S&P 500 Index futures are currently up 0.6 percent ahead of the open. Today’s main economic data release is U.S. existing home sales in June which is expected (14:00 GMT) to come out at 4.9 million compared to 4.81 million in May signalling a significant change in the U.S. housing market. Nevertheless, the market is still in quite a depressing state. Housing starts came out yesterday but despite the positive surprise the level remains at historical lows and with existing home sales hovering around the 5 million level we see no uptick in housing for the remainder of the year. Added to this view it's interesting to note that Alcoa sees no pick up at all in U.S. construction and very weak forecasted demand for 2012 as well. The U.S. economy will continue its deleveraging process leading to relatively low economic growth without any help from the housing market.