Evening Headlines
Bloomberg:
- Cash Hoard Shows Borrowers' Angst Over Economic Growth. U.S. corporations are hoarding almost $1 trillion of cash, an amount that Moody’s Investors Service says shows borrowers are still concerned that the economy may tip back into recession. Cisco Systems Inc., Microsoft Corp. and Google Inc. have socked away the biggest portion of the $943 billion stockpile, Moody’s said today in a report. That’s up from $937 billion at the end of 2009 and $775 billion in the prior year. Companies have a ratio of cash to capital expenditures of 1.64 times, possibly an all-time high, the New York-based ratings firm said, and compares with 1.1 times in December 2008. Borrowers have bolstered their finances by slashing spending and raising cash, selling $945.8 billion of U.S. corporate bonds this year, following a record $1.23 trillion in 2009, according to data compiled by Bloomberg. While that’s helped corporate credit quality improve, a reluctance to use the money for hiring and investing until more signs of growth emerge isn’t helping shorten a “jobless recovery,” Moody’s said. “The mantra is better safe than sorry,” said Mark Luschini, chief investment strategist at Philadelphia-based Janney Montgomery Scott LLC, which has $50 billion of assets under management. “Companies have been very aggressive in finding ways to do business without having to hire.”
- Arizona Voter Law Requiring Citizenship Proof Invalidated by Appeals Court. Arizona’s requirement that people show proof of citizenship to register to vote was struck down by a federal appeals court, which said the law conflicts with the National Voter Registration Act. The U.S. Court of Appeals in San Francisco today invalidated parts of Arizona’s Proposition 200, a 2004 voter- approved initiative on registration for state and federal elections.
- California Borrows $6.7 Billion Cash From JPMorgan(JPM)-Led Group. California borrowed $6.7 billion from JPMorgan Chase & Co. and five other banks to pay delinquent bills that piled up during the state’s record-length budget impasse, Treasurer Bill Lockyer said.
- Irish Bondholders Suffer Pain Again as Budget Cuts Take Toll: Euro Credit. Bond investors are losing faith in Ireland’s plan to lower the deficit as spending cuts threaten to undermine economic growth, reducing government revenue. Irish 10-year bond yields climbed within 50 basis points of the 454 basis-point record spread, set Sept. 29, relative to similar-maturity German bunds. Portugal’s spread fell about 1 percentage point against the German benchmark in the past month, the Greek-German yield gap narrowed 102 basis points and the Spanish spread was close to the lowest level since Aug. 10.
- Wall Street Proprietary Trading Under Cover: Michael Lewis. A few weeks ago we asked a simple question: Why are the same Wall Street banks that lobbied so hard to dilute the passages in the Dodd-Frank financial overhaul bill banning proprietary trading now jettisoning their proprietary trading groups, without so much as a whimper? The law directs regulators to study the prop trading ban for another 15 months before deciding how to enforce it: why is Wall Street caving now? The many answers offered by Wall Street insiders in response boil down to a simple sentence: The banks have no intention of ceasing their prop trading. They are merely disguising the activity, by giving it some other name.
- Apple(AAPL) Starts Online Store in China to Increase Sales of iPhones, iPads.
- Fed Gears Up for Stimulus. Eyes Gradual Bond Buying of Several Hundred Billion Dollars; Doubts Linger. The Federal Reserve is close to embarking on another round of monetary stimulus next week, against the backdrop of a weak economy and low inflation—and despite doubts about the wisdom and efficacy of the policy among economists and some of the Fed's own decision makers. The central bank is likely to unveil a program of U.S. Treasury bond purchases worth a few hundred billion dollars over several months, a measured approach in contrast to purchases of nearly $2 trillion it unveiled during the financial crisis. The announcement is expected to be made at the conclusion of a two-day meeting of its policy-making committee next Wednesday. Officials want to avoid the "shock and awe" style used during the crisis in favor of an approach that allows them to adjust their policy, and possibly add to their purchases, over time as the recovery unfolds. Fed Chairman Ben Bernanke's push to restart the bond-buying program—a form of monetary stimulus known as quantitative easing—has been greeted with deep skepticism among some of his colleagues. In some of his strongest words yet, Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, said Monday that more expansive monetary policy was a "bargain with the devil." In the next few months, internal opposition to Mr. Bernanke's approach could intensify as presidents of three regional Fed banks who have expressed skepticism about the plan—Narayana Kocherlakota of Minneapolis, Richard Fisher of Dallas and Charles Plosser of Philadelphia—take voting positions on the Fed's policy-making body. Some Fed officials argue the economy is going through long-term changes that the central bank can't rush, and worry a large bond-buying program might only stoke future inflation or a new asset bubble. The Fed could leave open the possibility of more purchases in the future, particularly if inflation is projected to remain below 2% and the unemployment outlook remains high, which is currently the expectation of many officials. Or it could halt the program if the economy or inflation surprisingly take off, officials have said. Fed officials will update their forecasts for growth, unemployment and inflation through 2013 at the upcoming meeting.
- Steelmakers Brace for Weak Demand. Strength From Early 2010 Is Sapped by Weak Demand, High Costs. After a strong start to the year, the world's biggest steelmakers lost ground in the third quarter and raised caution flags for the rest of the year, expecting to be hit by uneven demand, falling prices and high raw-material costs.
- U.S. Military Sees Additional Document Leaks Ahead.
- EU Pushes China to Open Bidding. Seeking Access to Public Contracts, Bloc Urges Beijing to Sign 1996 Treaty.
- Act Now, CFTC is Urged. A Commodity Futures Trading Commission regulator is putting pressure on the agency to take action in a high-profile, two-year-old investigation of the silver market. At a CFTC hearing Tuesday to consider new rules to strengthen its commodity-enforcement powers, commissioner Bart Chilton said market players have made "repeated" and "fraudulent efforts to persuade and deviously control" silver prices. Mr. Chilton said he believed there have been violations of CFTC rules that should be prosecuted, though he couldn't publicly disclose trader names.
- U.S. Lost Communications With 50 Nukes. Communications with some 50 nuclear missiles were disrupted for 45 minutes on Saturday, making it more difficult to launch them and sending the military scrambling to determine the cause of the incident, according to defense officials. The incident was significant enough that President Barack Obama was briefed on it this week.
- The Unseen Carbon Agenda. The EPA wants to take away 7% of U.S. power generation. Anyone who cares about the U.S. economy is breathing easier now that cap and tax appears to be on the political garbage barge, but don't be so sure. The White House is still pursuing its carbon agenda through regulation, albeit with almost no public attention, and a new study shows the damage that is already being done.
- Obama Administration Wants to Fill Holes in the Gulf of Mexico for the Sake of Filling Holes.
- Weird: China Sharply Weakened its Currency Tonight.
IBD:
- Fed Zombies Hungry for Quantitative Easing. The easy-money policies of Federal Reserve chairmen Ben Bernanke and Alan Greenspan rarely impress veteran fund manager Jeremy Grantham, but now the chief investment strategist at GMO, a Boston investment firm, is likening Fed actions to an economic horror show. “Adhering to a policy of low rates, employing quantitative easing, deliberately stimulating asset prices, ignoring the consequences of bubbles breaking, and displaying a complete refusal to learn from experience has left Fed policy as a large net negative to the production of a healthy, stable economy with strong employment,” Grantham wrote in his latest quarterly commentary, “Night of the Living Fed.” In a scathing indictment of the Fed, he casts Bernanke as a desperate zombie whose manipulation of asset prices through lower interest rates — exacerbated by a widely expected second round of quantitative easing beginning next month — weakens not just the U.S. economy but also destabilizes currency and commodity markets.
- Now is the Time to Buy Stocks, Argues a Bullish Merrill Lynch. Contrarian report says earnings yield gap, upcoming buybacks to boost equities. Investors have been pouring tens of billions of dollars into bonds and bond mutual funds in recent months, and many are sitting on nice gains to show for it. But like a college party, all good things have to come to an end, and now is the time for savvy investors to move into stocks. That's according to a new report published by Bank of America Merrill Lynch Global Research. A key argument behind the bank's analysis: That corporations have raised so much money issuing bonds that they're going to begin using an increasing share of it to buy back their own stock--boosting the value of the remaining shares outstanding in the process.
- Throwing Darts at Takeover Targets. Many big companies are sitting on wads of cash and showing a willingness to use it on acquisitions. That's led investors to essentially start throwing darts to find takeover targets.
- Very Unfavorable Ratings for Reid, Pelosi Hit New High. With midterm congressional elections just a week away, the number of voters who view Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid Very Unfavorably have reached their highest levels yet. The latest Rasmussen Reports national telephone survey finds that 60% of Likely Voters have an unfavorable impression of Pelosi, including 52% who hold a Very Unfavorable opinion of her. That’s her highest Very Unfavorable rating since regular tracking began in early February 2009. Only 33% share a favorable impression of the California Democrat, including 16% who view her Very Favorably. Fifty-four percent (54%) view Reid unfavorably, including 41% with a Very Unfavorable opinion, also the highest finding since February of last year. Twenty-nine percent (29%) hold a favorable view of Reid, who is struggling for reelection in Nevada. That includes just seven percent (7%) with a Very Favorable regard for him.
- Independents Turn to GOP in Senate Races. Independent voters are tuning into Senate races and settling on candidates in the final week before the election, clarifying some of the hardest-fought contests of the campaign. And with many of these unaffiliated voters unhappy with President Obama and the country’s direction, they’re showing signs of breaking to Republicans.
Reuters:
- Commercial Property Sales Rebound in Third Quarter. Two of the world's largest commercial real estate services companies reported sharply improved earnings on Tuesday, fueled chiefly by a pickup in building sales and leasing, particularly in the United States. After more than a year of nearly no activity, U.S property sales have begun to pick up as buyers and sellers agreed on prices.
- Broadcom(BRCM) Outlook Beats Street, Shares Up. Broadcom Inc's (BRCM) surprise forecast of a potential rise in fourth quarter revenue from strong sales of chips used in gadgets such as Apple Inc's (AAPL) iPhone sent its share price up 12 percent.
- F5 Networks(FFIV) Gives Upbeat Q1 View on Market Share Gains. Network equipment maker F5 Networks (FFIV) forecast an upbeat first quarter as it expects strong demand for its products to carry through to fiscal 2011, sending its shares up 5 percent in extended trade.
- Illumina(ILMN) Q3 Profit Beats Expectations, Shares Rise. Illumina Inc (ILMN), which makes tools for genetic analysis, posted a higher-than-expected quarterly profit helped by higher product sales. The San Diego-based company's shares were up about 3 percent at $53 in after-hours trade.
Citigroup:
- Reiterated Buy on (CSGS), raised estimates, target $27.50.
- Reiterated Buy on (CMI), target $107.
- Asian equity indices are -1.0% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 103.0 +2.0 basis points.
- Asia Pacific Sovereign CDS Index 95.75 +.75 basis point.
- S&P 500 futures -.36%.
- NASDAQ 100 futures -.18%.
Earnings of Note
Company/Estimate
- (EAT)/.15
- (WHR)/2.22
- (PX)/1.20
- (PG)/1.00
- (PFCB)/.45
- (S)/-.28
- (IP)/.79
- (CMCSA)/.30
- (ODP)/.03
- (OC)/.37
- (HES)/1.03
- (GD)/1.65
- (SE)/.43
- (IACI)/.27
- (ADP)/.53
- (BWA)/.63
- (NOC)/1.46
- (COP)/1.45
- (NSC)/1.09
- (ESRX)/.64
- (AKAM)/.33
- (OI)/.86
- (V)/.95
- (ALL)/.95
- (SYMC)/.28
- (FLS)/1.83
- (RYL)/-.27
- (LVS)/.23
8:30 am EST
- Durable Goods Orders for September are estimated to rise +2.0% versus a -1.3% decline in August.
- Durables Ex Transports for September are estimated to rise +.5% versus a +2.0% gain in August.
- New Home Sales for September are estimated to rise to 300K versus 288K in August.
- Bloomberg consensus estimates call for a weekly crude oil build of +1,000,000 barrels versus a +667,000 barrel gain the prior week. Gasoline supplies are estimated to rise by +652,000 barrels versus a +1,155,000 barrel gain the prior week. Distillate inventories are expected to fall by -1,500,000 barrels versus a -2,155,000 barrel decline the prior week. Finally, Refinery Utilization is estimated to rise by +.3% versus a +.6% gain the prior week.
- None of note
- The Fed's Dudley speaking, $35 Billion 5-Year T-Note Auction, weekly MBA mortgage applications report, (ADBE) analyst meeting, (SCHW) business update, (MAR) analyst meeting and the (PCAR) analyst meeting could also impact trading today.
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