EmailThe equity market got rolling early yesterday and it kept on truckin' to the closing bell, parking for the night with a 1.3% gain ahead of a key confidence vote in Greece for the prime minister and his new cabinet.
Taking a page out of U.S. party politics, the prime minister and his entourage survived in a party-line vote (155-143 and two abstentions) that won him the right to be pilloried more by Greek citizens as he pushes parliament to approve new austerity measures in a crucial June 28 vote.
(We interrupt this regularly scheduled programming on the Greek debt crisis to bring you news that the world isn't falling apart after all because of Greece.
Earlier this morning, FedEx (FDX) posted earnings for its fiscal fourth quarter, which ended in May (i.e., a quarter that encompassed the Japan earthquake, the spike in oil/gas prices, and Greece boiling over again) that beat the Capital IQ consensus estimate of $1.73 by two cents on better-than-expected revenue.
FedEx also issued reassuring guidance, saying it expects fiscal first quarter earnings in the range of $1.40-1.60 per share and FY12 earnings in the range of $6.35-6.85 per share. The midpoint of those ranges -- $1.50 and $6.60 -- is comfortably above the current Capital IQ consensus estimates of $1.42 and $6.49, respectively.
We now return you to your regularly scheduled programming.)
Passage of the new austerity program in Greece is a prerequisite for receiving a EUR12 bln funding tranche from the EU and IMF that will enable Greece to make good on its impending debt payments. It is also an important step for EU leaders who are attempting to formulate a second bailout package for Greece.
In any event, the market had been showing some mojo on the excited thought that it would hear a positive outcome on the confidence vote. Since last Thursday's low, the S&P 500 has gained 3.0%.
Having gotten what it wanted, the market is in a refractory period this morning as it awaits the FOMC policy directive at 12:30 p.m. ET and the Fed chairman's press conference at 2:15 p.m. ET. The S&P futures are 0.4% below fair value, signaling a lower start for the cash market.
It is expected that the FOMC will downgrade its near-term economic projections but stick to the view that growth should start to accelerate again in coming quarters.
Knowing that the next regularly scheduled FOMC meeting won't take place until August 9, we see a possibility that there could be some new verbiage with respect to the "extended period" reference in a bid to placate nervous participants that the Fed is intent on keeping rates low after the end of QE2 as it considers the debt crisis in Europe, the relatively weak labor market in the U.S., and Congress toying with not raising the debt ceiling by August 2 posing heightened risks to the outlook.
We suspect the market will want to see another unanimous vote, too. A dissenting vote at this juncture would be rocking the vote and that in turn might rock the market, which doesn't want any more uncertainty than it is already handling.
--Patrick J. O'Hare, Briefing.com
Patrick J. O'Hare is the Chief Market Analyst for Briefing Research, Briefing.com's institutional research service. To request a free trial please email researchsales@briefing.com.
