Gold and Silver Resume Uptrend, Stocks Higher Amid Mixed Earnings

Posted On: Friday, January 20, 2012

Precious metals resumed their uptrend despite a fall in the EUR-USD with silver notably outperforming.  Spot silver rose $1.71 or 5.5%, and now sits comfortably above the $30 per ounce line which had been resistance.  Gold also rose, but a much less impressive .62%.  The gold-silver ratio narrowed to 51.70, having the started the day near 55.

After falling below 1.27 a mere 5 sessions ago, the EUR-USD rate came within a whisker of hitting 1.30 overnight before dropping into the red.  The EUR-USD managed to hold above the 1.29 level, currently at 1.29339.  As we have noted before, the EUR-USD has shown a very strong correlation with precious metals and stocks.  Today's USD strength had initially translated into some mild losses for gold and silver, but both metals are now in the green.

Stocks meanwhile are weighing a number of earnings releases from several technology and industrial bellwethers, and a positive tone among European sovereigns.  Notably, Italian bond yields fell to 6.4%, continuing their rally from over 7% a few weeks ago.  News reports are also indicating progress on Greece's private creditor negotations, seen as key if Greece is to avoid default on March 20th.

Google (GOOG) is sharply lower after the company reported disappointing fourth quarter earnings.  Q4 EPS came in at $8.22 versus the estimate of $9.50, and following last year's $7.81.  More worrying, revenues, which had exceeded estimates for the past 8 quarters trailed estimates of $8.4 billion at $8.13 billion.  Shares of GOOG were currently off $53.58 at $585.99.  GOOG closed yesterday at $639.57.

Intel (INTC) reported fourth quarter earnings of $0.64 versus the consensus estimate of $0.61.  Shares of INTC were up $0.75 at $26.38.

Microsoft (MSFT) reported fourth quarter earnings per share of $0.78, beating the consensus estimate of $0.76, and following last year's $0.77.  Shares of MSFT were solidly higher, up $1.59 at $29.71.

GE (GE) reported fourth quarter earnings of $0.39 per share, above the consensus estimate of $0.38.  However, revenues were below the consensus of $40.05 billion at $37.97 billion.  Shares of GE were unchanged $19.15.

In Europe, the ongoing sovereign debt crisis remains the primary focus.  Indeed, among the reasons for GOOG's miss was the slowdown in Europe's economy.  Bloomberg View yesterday published an article providing an excellent summary on why the EUR crisis is far from over.  The basis line taken is that while the ECB has taken steps to easy the liquidity crisis, particularly in the banking sector, the solvency crisis remains unchanged.  In particular, both Greece and Portugal are no where close to being in a sustainabile financial position, even with their respective bailouts. 

Today's economic calendar was light with only existing home sales for December.   The rate rose to 4.61 million annual rate, largely in-line with the 4.65 million annual rate, and up from 4.42 in November.

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