MORNING COFFEE

Q2 Earnings Kick Off. The Q2 earnings season kick off yesterday on a positive note, with earnings beats from Alcoa (AA), CSX (CSX) and Novellus Systems (NVLS). So far we have had 71 negative preannouncements and 60 positive preannouncements.  The negative-to-positive ratio currently stands at 1.2, which is less the Q1 ratio of 1.3, when 78% of the companies beat their estimates.  Currently the estimated EPS growth rate is 27% and revenue growth rate is 9%.

Moody’s Lowers Portugal’s rating. Moody's has downgraded Portugal debt rating by two notches to A1 from Aa2, with a stable ratings outlook. The ratings firm said Portugal's financial strength will continue to weaken over the medium term, as evidenced by ongoing deterioration in the country's debt metrics." Additionally, they said growth is "likely to remain relatively weak unless recent structural reforms bear fruit over the medium to longer term."

Don’t Buy an iPhone 4. Consumer Reports said it can't recommend the iPhone 4 to buyers after their tests confirmed reception problems.  Consumers Reports said it was a hardware flaw that is causing the problems and not an easily-fixed software glitch.

Upgrades

Cheesecake Factory (CAKE): MKM Partners raised their rating from Neutral to Buy.

Downgrades

Aon (AON): RBC Capital Markets lowered their rating from Outperform to Sector Perform and lowered their target price from $46.00 to $40.00.

Hewitt Associates (HEW): Stifel Nicolaus lowered their rating from Buy to Hold.

Coverage Initiated

JP Morgan Chase (JPM): RBC Capital Markets initiated coverage with an Outperform rating and target price of $45.00.

CVS Caremark (CVS): Collins Stewart initiated coverage with a Buy rating.

Medco Health Solutions (MHS): Collins Stewart initiated coverage with a Hold rating.

Express Scripts (ESRX): Collins Stewart initiated coverage with a Hold rating.

Earning Reports

Infosys Technologies (INFY): Reported FQ1 EPS of $0.57 which was in-line with estimated on revenue of $1.4 billion.

Alcoa (AA): Reported Q2 EPS of $0.13 beating estimates by +$0.01 on revenue of $5.2 billion. 

CSX (CSX): Reported Q2 EPS of $1.07 beating estimates by +$0.09 on revenue of $2.7 billion. 

Novellus Systems (NVLS): Reported Q2 EPS of $0.66 beating estimates by +$0.06 on revenue of $321 million.

·         Futures: Dow +0.5%. S&P +0.65%. Nasdaq +0.8%. Crude +0.6% to $75.41. Gold +0.6% to $1205.60.

·         Asia: Japan -0.1% to 9537. Hong Kong -0.2% to 20431. China -1.6% to 2450. India +0.3% to 17986.

·         Europe: London +1.4%. Paris +1.5%. Frankfurt +1.4%.