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Ahead of Wall Street

Friday, February 12, 2016

Stocks are on track for a positive start to today’s session, with gains in oil prices and optimism about the European banking industry giving sentiment a boost. The January Retail Sales report is helpful as well, though it’s hard to tell how much resonance this report has with market participants in the current uncertain environment.

Deutsche Bank’s (DB) announcement of buying back its debt, confirming reports that had been floating around in the market lately, is helping market confidence in the stability of this key German bank. Concerns about DB had emerged as a source of anxiety for the entire financial sector, particularly in Europe. This appeared to be becoming an issue for the U.S. banks as well.

We were already struggling with the fresh downturn in benchmark treasury yields save haven flows, even though the U.S. banking industry is in a lot stronger position as a result of greater capital requirements mandated by regulatory changes in the wake of the 2008 crisis.

On the data front, we got a better-than-expected January Retail Sales report that provides a favorable and reassuring read on the domestic economic scene. The ‘headline’ growth number matched estimates. But given the positive revision to the prior month’s reading (moves into positive from negative growth), the in-line ‘headline’ growth is actually a good thing.

The growth pace, excluding gasoline and autos, came in better than expected for January, and the prior month’s flat growth got revised higher. Even more importantly, the so-called ‘control group,’ — the part of this monthly report that feeds directly into GDP calculation — came in better than expected.

All in all, this report is pointing towards a good start for the U.S. economy in 2016 Q1, bouncing back from the anemic pace of the preceding period. The Atlanta Fed’s GDPNow forecast is currently at +2.5% growth for Q1 GDP, which will most certainly get bumped up following this report.

Even the December quarter’s modest growth pace will likely get revised higher in the coming days. This may not be enough to turnaround market sentiment that seems to be pricing in a negative economic outcome for the U.S. economy, but it is nevertheless reassuring. We will see if data in the coming days will corroborate what we saw in today’s Retail Sales report.

Sheraz Mian
Director of Research

Note: In addition to this daily pre-open article about the market, economy, and the corporate earnings picture, Sheraz Mian also provides detailed earnings analysis in his weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz Mian publishes a new article, please click here.

Stocks On The Move

Company Symbol Price $Change %Change
SHIP FINANCE INTERNATIONAL LTD SFL 11.65 1.34 13.00
PETROLEO BRASILEIRO SA PETROBRAS PBR.A 2.22 0.16 7.77
CLEAN ENERGY FUELS CORP CLNE 2.46 0.15 6.49
DAVE & BUSTER'S ENTERTAINMENT IN PLAY 33.38 2.03 6.48
CHURCHILL DOWNS INC CHDN 132.05 7.05 5.64

Stocks Research Reports

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CA INC CA No report
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UNIVERSAL AM.. UAM View Snapshot Report

Downgrades

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AMERICAN CAM.. ACC View Snapshot Report
AMERICAN CAM.. CA View Snapshot Report
HORIZON BANC.. HBNC View Snapshot Report
LADBROKES SP.. LDBKY View Snapshot Report
UNIVERSAL AM.. UAM View Snapshot Report

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1800FLOWERS... FLWS RETAIL-MAIL .. View Snapshot Report
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Earnings and Economic News

Key Earnings Reports For Feb 12, 2016

Economic Event Reported
(+) Treasury bills (3 mth) - Feb 12, 2016 4:15 PM Eastern Time
(+) Treasury notes (10 yr) - Feb 12, 2016 4:15 PM Eastern Time
(+) Federal Funds Rate - Feb 12, 2016 4:15 PM Eastern Time
(+) Export Prices ex-ag. - Feb 12, 2016 --
(+) Export price index - Feb 12, 2016 --
(+) Import price index - Feb 12, 2016 --
(+) Retail Sales ex-auto - Feb 12, 2016 --
(+) Business Inventories - Feb 12, 2016 --
(+) Retail Sales - Feb 12, 2016 --
(+) Mich Sentiment-Prel. - Feb 12, 2016 --
(+) Import Prices ex-oil - Feb 12, 2016 --