Evening Headlines
Bloomberg:
- Republican Victory in U.S. Midterm Elections May Keep Bull Market Alive. The midterm elections that ended Democrats’ control of the U.S. House of Representatives are likely to sustain the bull market that began in March 2009 at the depths of the financial crisis. U.S. stocks will continue their ascent because victorious Republicans probably will block Democrats’ plans to raise taxes and impose stricter regulations on businesses, according to money managers interviewed before the vote. “The near-term issue of importance to investors is the Bush-era tax cuts,” said Robert Doll, chief equity strategist at New York-based BlackRock Inc., the world’s largest fund manager with $3.45 trillion in client assets. The new Republican majority in the House may force President Barack Obama to back off efforts to let tax cuts enacted under President George W. Bush expire and to raise rates on dividends and capital gains. That would boost optimism among investors and company executives, driving improvements in financial markets and the economy, according to Barclays Capital in New York.
- U.S. Labor Unions Face 'Huge Sinkhole' for New Agenda as Republicans Win. Organized labor’s window of opportunity in Congress slammed shut last night. “The election profoundly reshapes labor’s agenda,” said Harley Shaiken, a professor of labor relations at University of California at Berkeley, in an interview. “The Republican pickup of seats in the House is going to be a huge sinkhole for labor.”
- Mortgage Bond Returns Accelerate as Fed Moves Toward QE2: Credit Markets. Relative returns on government-backed mortgage bonds are showing debt investors have little confidence the Federal Reserve’s efforts to contain interest rates will break the gridlock in homeowner refinancing. U.S. agency mortgage bonds returned 0.92 percentage point more than similar government debt in October, the second-best performance on record, and the most since April 2008, the month after the central bank calmed markets with its rescue of Bear Stearns Cos., Barclays Capital index data show.
- Credit-Default Swaps Fall to Six-Month Low While Fed Decides. The cost of protecting U.S. corporate bonds from default fell to the lowest since May as investors awaited a Federal Reserve decision on whether the central bank would act to boost the economy and election results that may divide Congress. The Markit CDX North America Investment Grade Index, which investors use to hedge against losses on corporate debt or to speculate on creditworthiness, fell 2 basis points to a mid- price of 92.4 as of 4:56 p.m. in New York, according to index administrator Markit Group Ltd. Swaps on Wells Fargo & Co. dropped for the first time in five days. The cost to protect debt issued by Wells Fargo fell 6.9 basis points to 114.7 and contracts on JPMorgan Chase & Co. dropped 3.9 basis points to 91.5, according to CMA. Swaps on Goldman Sachs Group Inc. eased 5.1 basis points to 127.3, and those on Citigroup fell 6.5 basis points to 144.3, CMA data show.
- Oil Rises to a Six-Month High on U.S. Stimulus Bets, Fuel Supply Forecast. Crude oil surged to its highest level in six months as the dollar weakened against major currencies on speculation the Federal Reserve will take measures to stimulate the economy. Crude rose 1.2 percent as the dollar’s decline boosted the appeal of commodities as an alternative investment. The Fed will probably start a fresh round of stimulus tomorrow, announcing a plan to purchase at least $500 billion of long-term securities, according to economists surveyed by Bloomberg News. “It’s the weaker dollar and expectations for the stimulus package,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. “Half a trillion dollars was supposedly priced in since we rallied from September to October, but people are already anticipating that it could be larger.” Crude for December delivery rose 95 cents to $83.90 a barrel on the New York Mercantile Exchange, the highest settlement price since May 3.
- Greece Halts Foreign Mail Service on Athens Blasts, Merkel. Greece suspended mail deliveries to foreign destinations after parcel bombs exploded at the Swiss and Russian embassies in Athens and German Chancellor Angela Merkel was sent a package mailed from the country. Overseas mail will be halted for 48 hours, Greek’s Civil Aviation Authority said in a statement today. The move came after police defused two makeshift explosive devices at Athens International Airport and at least three other packages around the city.
- Republicans Poised to Recapture House. Republicans claimed a slew of victories that put them on the verge of taking control of the House of Representatives late Tuesday, as voters dealt a rebuke to President Barack Obama and the Democratic Party.
- Welcome, Senate Conservatives by Senator Jim Demint. Remember what the voters back home want—less government and more freedom.
- CFTC Probing Trading Activity in Natural Gas Market - Sources. The Commodity Futures Trading Commission is probing a wide range of natural gas derivatives-trading activity spanning parts of 2008, according to people familiar with the matter. The CFTC's enforcement division sent out subpoenas broadly across the industry to hedge funds and other large natural gas traders last month seeking information about trading that was discussed in emails, voice recordings, instant messages and other documents.
- Pride International(PDE) Weighs Strategic Options. Offshore driller Pride International Inc. is evaluating strategic options that could include a possible sale of the company after recent merger interest from rivals, people familiar with the matter said.
- BP(BP) Dividend Takes Back Seat to Growth. BP PLC will likely pay a much smaller dividend and spend more on oil exploration as it remakes itself into a leaner, more growth-oriented company following the Gulf of Mexico oil spill, its new chief executive said Tuesday.
- High Rollers at the Fed. The Federal Reserve's Open Market Committee seems poised today to make a historic decision to expand its balance sheet by as much as $1 trillion or more to boost inflation and reduce unemployment. We've said before that we think this is a monetary mistake, but the public and Congress should also be aware that it increasingly carries fiscal risks.
- Banks Go Toe to Toe as Wall Street Woos Hedge Funds. The battle to be the top dog in the lucrative business of clearing trades and lending money to hedge funds is heating up as a handful of U.S. and European banks are intensifying their push into the space.
Rasmussen Reports:
- Election Night 2010: Exit Poll Results. Most Voters Like Tea Party, Tax Cuts and Reduced Government Spending.
- 55% of Today's Voters Says Views of Congressional Democrats are Extreme.
- House Switch Imminent as Republican Wave Crashes on Democrats. Republicans made deep inroads into the Democratic House majority and racked up a series of big-ticket Senate wins Tuesday evening, appearing on their way to capturing at least one chamber of Congress in a powerful electoral wave. The Democrats’ House losses quickly grew to alarming proportions. The GOP claimed the seats of several highly endangered Democrats, including Florida Reps. Suzanne Kosmas and Alan Grayson and New Hampshire Rep. Carol Shea-Porter. But the insurgent conservative party also knocked off entrenched incumbents like Texas Rep. Chet Edwards, who had long survived in a challenging district and Virginia Rep. Rick Boucher, a coal-country centrist who had been expected to prevail against Republican state Del. Morgan Griffith.
- Exit Polls: Voters Sour on Economy. Voters may not love Republicans, but they trust Democrats even less to turn around the sputtering economy. That’s the message emerging from exit polls amid the GOP’s growing gains in congressional and governor’s races.
- Republican Leader Vows to Repeal US Health Care Reform. U.S. Representative Eric Cantor, who is likely to become majority leader in the new Republican-led House of Representatives, vowed on Tuesday to repeal healthcare reform and cut federal spending. "We will repeal the trillion-dollar health care bill that threatens to bankrupt ... this country," he said, according to prepared remarks. "We will get to work right away to reduce the deficit by cutting federal spending next year down to 2008 levels. That will save $100 billion in the first year alone," he said.
- Wynn(WYNN) Meets 3rd - Quarter Estimates, Sets $8 Dividend. Casino operator Wynn Resorts Ltd's (WYNN) quarterly profit met Wall Street estimates as revenue in Macau rose 50 percent and it made money on nightclubs in Las Vegas. The company also said it would pay a cash dividend of $8 per share on Dec. 7. Its shares, which have nearly doubled so far this year, fell about 1.8 percent.
- Discovery(DISCA) Profit Nearly Doubles; Advertising Surges. Discovery Communications Inc's (DISCA) quarterly profit nearly doubled and the media company raised its outlook for 2010 revenue, reaping the rewards of bigger audiences and stronger advertising at its roster of cable networks.
- OpenTable(OPEN) Q3 Profit Beats Street View; Shares Rise. OpenTable Inc, the restaurant reservation platform, reported a higher third-quarter profit that topped Wall Street estimates as more restaurants used its services, sending its shares up 11 percent in extended trade. The San Francisco-based company reported a net profit of $3.8 million, or 16 cents a share, compared with $896,000, or 4 cents a share, a year ago. Excluding items, the company earned 23 cents a share. Revenue rose 44 percent to $24.5 million. Analysts had expected a profit of 15 cents a share, excluding exceptionals, on revenue of $23.2 million, according to Thomson Reuters I/B/E/S. The company's installed restaurant base as of Sept. 30 was up 31 percent at 15,246, and seated diners jumped 54 percent to 15.9 million. OpenTable stock, which has more than doubled in value this year, rose to $68.21 Tuesday in trading after the bell. The stock closed at $61.40 on Nasdaq.
- GM Can Avoid Federal Taxes on $50 Billion of Profits - WSJ. General Motors Co [GM.UL] will not have to pay U.S. federal taxes on up to $50 billion of profits for as long as 20 years, The Wall Street Journal reported on Tuesday, citing people familiar with the matter. With the standard federal corporate tax rate at 35 percent, that tax break could save GM $17.5 billion, not factoring in tax deductions, the Journal reported. Under the Troubled Asset Relief Program, $50 billion of losses that GM racked up before its government-funded bankruptcy can be used to offset its future tax liabilities, the Journal reported.
- Flat Costs Reflect Tale of Two Cities. Prices fell in Beijing but rose in Shanghai in October - the first month since the initiatives. Those in the capital declined 6.6 percent month-on-month to 19,160 yuan (HK$22,223) per square meter. It was the first time this year that prices in Beijing fell below 20,000 yuan psm. Transactions fell 36 percent from September, after advancing for four months running. It is a tale of two cities regarding property prices after the central government launched a second round of tightening to squash speculation.
Citigroup:
- Reiterated Buy on (OPEN), boosted target to $80.
- Reiterated Buy on (ENR), target $86.
- Reiterated Buy on (ABC), target $38.
- Reiterated Buy on (ADM), target $38.
- Asian equity indices are unch. to +1.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 103.0 -1.0 basis point.
- Asia Pacific Sovereign CDS Index 97.25 -.25 basis point.
- S&P 500 futures +.06%
- NASDAQ 100 futures +.10%.
Earnings of Note
Company/Estimate
- (PWR)/.33
- (FSS)/.06
- (TDW)/.50
- (WLP)/1.59
- (AET)/.67
- (DVN)/1.33
- (CVS)/.64
- (TRW)/.79
- (TWX)/.53
- (AOL)/.49
- (EP)/.21
- (TAP)/1.13
- (MGM)/-.23
- (QCOM)/.59
- (NWSA)/.25
- (CHK)/.64
- (WFMI)/.28
- (PRU)/1.44
- (BDX)/1.24
- (IPI)/.10
- (DNDN)/-.44
- (PZZA)/.35
- (SKYW)/.40
- (SPW)/1.09
8:15 am EST
- The ADP Employment Change for October is estimated at +20K versus -39K in September.
- ISM Non-Manufacturing for October is estimated to rise to 53.5 versus 53.2 in September.
- Factory Orders for September are estimated to rise +1.6% versus a -.5% decline in August.
- Bloomberg consensus estimates call for a weekly crude oil inventory build of +1,500,000 barrels versus a +5,007,000 barrel gain the prior week. Gasoline supplies are estimated unch. versus a -4,387,000 barrel decline the prior week. Distillate supplies are estimated to fall by -1,000,000 barrels versus a -1,613,000 barrel decline the prior week. Finally, Refinery Utilization is expected to rise by +.3% versus a +1.2% gain the prior week.
- The FOMC is expected to leave the benchmark fed funds rate at .25%.
- Total Vehicle Sales for October are estimated to rise to 11.8M versus 11.73M in September.
- None of note
- The Challenger Job Cuts report for October, weekly MBA mortgage applications report, Oppenheimer Healthcare Conference, Goldman Sachs Industrials Conference and the (PMTC) investor day could also impact trading today.
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