Evening Headlines
Bloomberg:
- BNP Paribas Downgraded by S&P as SocGen Gets Negative Outlook. BNP
Paribas SA was among three French banks cut by Standard & Poor’s on
concern that their home market may be hurt by prolonged economic
weakness in Europe and a housing slump. BNP, the nation’s biggest bank,
had its long-term counterparty credit grade lowered one level to A+ from
AA-, S&P said yesterday in a statement. The ratings company also
revised its outlook to negative from stable for 10 other French banks,
including Credit Agricole SA and Societe Generale SA. The effects of
joblessness, government debt and international competition
“are being aggravated in our view by the ongoing euro-zone crisis, a
more protracted recession across Europe, and lower domestic-growth
prospects,” S&P said. French banks also face “potentially limited,
but still noteworthy, impact from an ongoing correction in the
housing market.”
- RBC, SocGen Said to Be Among Banks Subpoenaed in Probe. Royal Bank of Canada, Societe Generale SA (GLE) and Bank of America Corp. are among nine additional
banks that were subpoenaed in New York and Connecticut’s probe
of alleged manipulation of Libor, a person familiar with the
matter said. The subpoenas, issued by New York Attorney General Eric Schneiderman starting in August, bring to 16 the total number of
banks that have been subpoenaed in the states’ investigation,
said the person, who asked not to be named because there wasn’t
authorization to speak publicly.
- China’s Stocks Decline Most in Five Weeks on Earnings Concerns. China’s
stocks fell, dragging the benchmark index down the most in five weeks,
as companies from Maanshan Iron & Steel (323) Co. to ZTE Corp.
reported losses. Maanshan Iron & Steel Co. tumbled the most in two
years after its third-quarter loss was wider than analysts estimated.
ZTE, China’s second-largest maker of telephone equipment, retreated 2.6
percent to its lowest level since 2008. Hisense Electric Co., China’s
biggest manufacturer of flat-panel televisions, plunged by the 10
percent maximum limit after profit dropped. “The market is still
worried about the magnitude of the economic recovery and deterioration
of corporate earnings,” said Wu Kan, a fund manager at Dazhong Insurance
Co. in Shanghai, which oversees $285 million. The Shanghai Composite
Index (SHCOMP) dropped 1.7 percent to
2,066.71 at the 11:30 a.m. local-time break, the most since
Sept. 20.
- Korea’s Growth Slows as Global Cooling Caps Export Demand.
South Korea’s economy grew at the slowest pace in three years as
Europe’s debt crisis and a slowdown in emerging markets reduced
corporate investment and capped demand for exports. Gross domestic
product expanded 1.6 percent in the three months through September from a
year earlier, the slowest pace since 2009, Bank of Korea data
showed today. That compares with the median 1.7 percent estimate of 13
economists surveyed by Bloomberg News. Asia’s fourth-largest economy
grew 0.2 percent
from a quarter ago.
- Bo Xilai Removed From National People’s Congress, Xinhua Says. Former Politburo member Bo Xilai was
removed from the National People’s Congress, China’s legislature, a month after he was expelled from the ruling
Communist Party and accused of involvement in the death of a
British businessman.
- Expedia(EXPE) Jumps After Third-Quarter Profit Tops Estimates. Expedia Inc. surged as much as 16
percent in extended trading after the second-biggest online
travel agency by market value reported third-quarter earnings
that topped analysts’ estimates. Excluding some items, profit rose 4.2 percent to $188
million, or $1.32 a share, from $180.5 million, or $1.28, a year
earlier, the Bellevue, Washington-based company said today in a
statement. Analysts on average expected profit to decline to
$1.26 a share, according to a Bloomberg survey.
- Ballmer Sees Billions Lost From China Piracy. (video)
- Amazon(AMZN) Posts Loss on Higher Spending, LivingSocial Stake. Amazon.com
Inc., the world’s largest online retailer, reported revenue that missed
analysts’ estimates and posted the first quarterly net loss since 2003,
hurt by higher expenses and its investment in LivingSocial.com.
Wall Street Journal:
- Iranians Build Up Afghan Clout. Iran is funding aid projects and expanding intelligence networks
across Afghanistan, moving to fill the void to be left by the U.S.
withdrawal from Afghanistan by the end of 2014, according to U.S. and
Afghan officials. While Iran's spending here is nowhere near the
billions the U.S. spends, Tehran's ability to run grass-roots programs
and work directly with Afghans is giving its efforts disproportionate
clout—something it could wield against American interests should the
U.S. military strike Iran's nuclear program.
- Troops Shot After Taliban Leader's Call. Two U.S. Special Operations troops were killed by a man in Afghan
police uniform on Thursday, a day after Taliban leader Mullah Omar
called on more Afghan soldiers and policemen to kill Americans. The attack in southern Uruzgan province came a day after two British
troops—a female medic and a Royal Marine commando—were gunned down in
another suspected insider attack that involved an off-duty Afghan
policeman. Insider attacks have become a critical issue for the
U.S.-led coalition. Thursday's U.S. deaths brought to 55 the number of
coalition troops killed by their Afghan comrades-in-arms this year,
according to coalition statistics.
- Credit Suisse Seeks to Run Exchange. Bank in Talks With U.S. to Win Status for New Trading System; Concerns of Potential Conflicts. Credit Suisse Group AG is quietly pushing to turn one of its trading
venues into an exchange, an unusual bid that, if successful, would
create the only U.S. stock exchange owned outright by a Wall Street
bank.
- Hang Up the Phone, Swaps Traders. CFTC Drafts Rules Designed to Bring Sunlight to Derivatives Market; '15-Second Rule' Draws Fire.
Swaps trading is one the last bastions of Wall Street where brokers
arrange deals over the phone. That clubby way of doing business could go
the way of the rest of Wall
Street, where trading takes place on computers, under a roughly 500-page
draft set of rules designed to push the market away from the opaque
world of over-the-counter, phone-based trading, into more transparent
electronic venues.
- Noonan: When Americans Saw the Real Obama. Why the Denver debate changed everything.
- Strassel: A Chronic Case of Obamnesia. The president has left a long trail of flip-flops.
MarketWatch.com:
CNBC:
Zero Hedge:
Business Insider:
NY Times:
- Iran Said to Nearly Finish Nuclear Enrichment Plant. Intelligence officials from several countries say Iran in recent weeks has virtually completed an underground nuclear
enrichment plant, racing ahead despite international pressure and heavy
economic sanctions in what experts say may be an effort to give it
leverage in any negotiations with the United States and its allies.
- Citi(C) Chairman Is Said to Have Planned Chief’s Exit Over Months.
Vikram Pandit’s last day at Citigroup swung from celebratory to
devastating in a matter of minutes. Having fielded congratulatory
e-mails about the earnings report in the morning that suggested the bank
was finally on more solid ground, Mr. Pandit strode into the office of
the chairman at day’s end on Oct. 15 for what he considered just another
of their frequent meetings on his calendar.
Nasdaq:
- Deckers Outdoor(DECK) Q3 Profit Down; Cuts Q4, FY12 Outlook - Quick Facts. Deckers
Outdoor Corp. reported that its third-quarter net income declined to
$43.06 million from $62.35 million in the year ago quarter. Earnings per
share was $1.18 compared to $1.59 last year. Analysts polled by Thomson
Reuters expected the company to report earnings of $1.04 per share for
the quarter. Analysts' estimates typically exclude special items.
Washington Post:
- FBI investigating Metropolitan Washington Airports Authority, according to sources. The FBI is investigating the authority responsible for overseeing the
$ 5.6 billion Dulles Rail project, the latest in a series of
revelations that has rocked a board seeking to right itself after a
series of scathing reports about ethical lapses in its operations,
according to people with knowledge of the investigation. News of the probe comes just days before the expected arrival
of a federal inspector general’s report critical of the Metropolitan
Washington Airport Authority’s contracting and hiring practices.
- Fiscal cliff already hampering U.S. economy, report says. The fiscal cliff is still two months off, but the scheduled blast of
tax hikes and spending cuts is already reverberating through the U.S.
economy, hampering growth and, according to a new study, wiping out
nearly 1 million jobs this year alone. The report, scheduled for release Friday by the National
Association of Manufacturers, predicts that the economic damage would
deepen considerably if Congress failed to avert the cliff, destroying
nearly 6 million jobs through 2014 and sending the unemployment rate
soaring to near 12 percent.
- U.N. to probe drone attacks by U.S., others resulting in civilian deaths. An independent U.N. human rights researcher on Thursday announced plans
to launch an investigation into the use of drone attacks and other
targeted assassinations by the United States and other governments that
result in civilian deaths or injuries.
Reuters:
- Greek debt to badly miss target - euro zone official. Greek debt will be
above the target of 120 percent of GDP in 2020, a preliminary report by
the IMF showed on Thursday, and Athens will need more reforms before
emergency credit from international lenders can start flowing again. "It
is clear that Greece is off track and there is no chance they will cut
the debt to 120 percent of GDP in 2020 as envisaged. It will be rather
136 percent, and this would be under a positive scenario of a primary
budget surplus, a return to economic growth, and privatisation," a euro
zone official, who insisted on anonymity, said. "New prior
actions will be needed, on top of the existing 89," the official said,
referring to a list of already agreed reforms that need to be in place
before any new tranches of euro zone and IMF emergency loans to Greece
can be paid.
- Obama Tells Magazine He Will Target Executive Pay Next- report. In
an interview to be published on Friday in Rolling Stone magazine, Obama
said that despite passage of Dodd-Frank financial reform legislation,
there is more to be done to make financial markets safe after the damage
caused by the crisis of
2007-2009. "The single biggest thing that I would like to see is
changing incentives on Wall Street and how people get
compensated," Obama said. It's questionable, even after
enactment of Dodd-Frank reforms, that those incentives have
completely been changed, he added.
Financial Times:
- Finland
policy makers have begun discussing scenarios of a possible exit from
the euro, without indicating that the nation would begin such a process,
citing Heikki Neimelaeinen, CEO of the Municipal Guarantee Board. If
the nation were to exit the euro, one possible mechanism would be a
parallel currency system in which both the euro and markka would be
legal tender for a transition period, citing a Nordea analysis.
Evening Recommendations
Jefferies:
- Downgraded Wynn Macau Ltd(1128 HK) to Underperform, target HKD 15.90.
Night Trading
- Asian equity indices are -1.50% to -.75% on average.
- Asia Ex-Japan Investment Grade CDS Index 119.0 -4.0 basis points.
- Asia Pacific Sovereign CDS Index 93.50 -2.5 basis points.
- FTSE-100 futures -.66%.
- S&P 500 futures -.72%.
- NASDAQ 100 futures -.63%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (AXL)/.33
- (ACI)/-.15
- (B)/.48
- (CMCSA)/.46
- (CVH)/.73
- (GT)/.60
- (HMSY)/.22
- (LEA)/1.19
- (LM)/.79
- (MRK)/.93
- (MCO)/.62
- (OSK)/.46
- (QSII)/.28
- (SUP)/.19
- (WY)/.18
Economic Releases
9:30 am EST
- Advance 3Q GDP is estimated to rise +1.8% versus a +1.3% gain in 2Q.
- Advance 3Q Personal Consumption is estimated to rise +2.1% versus a +1.5% gain in 2Q.
- Advance 3Q GDP Price Index is estimated to rise +2.1% versus a +1.6% gain in 2Q.
- Advance 3Q Core PCE QoQ is estimated to rise 1.3% versus a +1.7% gain in 2Q.
9:55 am EST
- Final Univ. of Mich. Consumer Confidence for October is estimated to fall to 83.0 versus a prior estimate of 83.1.
Upcoming Splits
Other Potential Market Movers
- The Italian bond auction and the Spanish/French Unemployment data could also impact trading today.
BOTTOM LINE: Asian indices are lower, weighed down by technology and real estate shares in the region. I expect US stocks to open modestly lower and to maintain losses into the afternoon. The Portfolio is 25% net long heading into the day.
Broad Market Tone:
- Advance/Decline Line: Higher
- Sector Performance: Mixed
- Volume: Below Average
- Market Leading Stocks: Underperforming
Equity Investor Angst:
- VIX 18.41 +.44%
- ISE Sentiment Index 107.0 +40.79%
- Total Put/Call .82 -9.89%
- NYSE Arms 1.14 -23.09%
Credit Investor Angst:
- North American Investment Grade CDS Index 97.77 bps -.92%
- European Financial Sector CDS Index 171.77 bps +.62%
- Western Europe Sovereign Debt CDS Index 103.77 bps -3.96%
- Emerging Market CDS Index 212.25 bps -.49%
- 2-Year Swap Spread 10.5 +1.0 basis point
- TED Spread 20.25 -.5 basis point
- 3-Month EUR/USD Cross-Currency Basis Swap -24.0 unch.
Economic Gauges:
- 3-Month T-Bill Yield .11% unch.
- Yield Curve 151.0 +2 basis points
- China Import Iron Ore Spot $120.0/Metric Tonne +1.1%
- Citi US Economic Surprise Index 51.70 +3.5 points
- 10-Year TIPS Spread 2.49 +1 basis point
Overseas Futures:
- Nikkei Futures: Indicating +15 open in Japan
- DAX Futures: Indicating +5 open in Germany
Portfolio:
- Slightly Lower: On losses in my Tech/Retail sector longs and emerging markets shorts
- Disclosed Trades: None
- Market Exposure: 25% Net Long
Bloomberg:
- Europe’s Crisis Creeps North as Schneider, Daimler Cut Targets. The European debt crisis is moving north into the region’s corporate engine room. Companies
from Schneider Electric SA (SU) to Daimler AG (DAI) reduced forecasts
for the year, while Sweden’s Sandvik AB said it will cut production.
Pernod-Ricard SA, BASF SE (BAS) and ABB Ltd. (ABBN) cautioned for a
continued slowdown. “The current economic situation is marked by a
growing insecurity and volatility,” Daimler Chief Financial Officer
Bodo Uebber said on a conference call today. Daimler “can’t hold onto
targets that are then not realistic. We have to accept that it is so.” Almost
half of the companies in the Stoxx Europe 600 Index that have reported
earnings this quarter missed estimates for net income as consumers and
governments rein in spending. The effects of the debt crisis that
started in Greece in 2009 have spread to Germany, the region’s largest
economy. Business confidence there fell to the lowest in more than two
and a half years this month as neighbors’ demand for its exports waned. “The
problems of southern Europe are spreading to the core of the
continent,” said Markus Steinbeis, who helps manage about 1 billion
euros ($1.3 billion) at Huber, Reuss & Kollegen Vermoegensverwaltung
GmbH in Munich. “The earnings figures are showing slowing growth trend
in the core. We will see slow growth ahead of us in Europe as a whole.”
- ECB Is Said to Push Bankia Losses as Spain Purges Assets. European authorities are pushing
Bankia group to impose losses on junior debt holders as Spain
purges a banking system clogged with about 180 billion euros
($234 billion) of bad real estate assets, people familiar with
the talks said.
The European Central Bank and European Commission want
investors including holders of preference shares to swap their
securities for new stock to reduce the cost to the taxpayer,
according to two people who asked not to be named because the
discussions are private.
- Santander Profit Plunges on Spain Property Purge, U.K. Banco Santander SA (SAN), Spain’s biggest bank, said
third-quarter profit fell a greater-than-estimated 94 percent after
purging more soured real estate and as earnings fell in the U.K. and in
Brazil, its largest market. Net income dropped to 100 million
euros ($130 million) from 1.8 billion euros a year earlier, the
Santander, Spain-based bank said in a filing to regulators today. That
missed the 1.21 billion-euro median estimate in a Bloomberg survey of 10
analysts.
- WPP(WPP) Cuts Sales Growth Forecast as Clients Slash Spending. WPP Plc (WPP), the largest advertising
company, slashed its full-year sales growth target for the
second time in two months as clients in North America and Europe
cut spending. The stock dropped as much as 5.2 percent. Revenue growth for the year, excluding the effect of
currency fluctuations and acquisitions, will be 2.5 percent to 3
percent, down from an earlier forecast of about 3.5 percent, the
company said in a statement today.
- Goods Orders Point to U.S. Business Spending Slump: Economy. Orders for business equipment such as computers and
communications gear stalled in September, signaling a slowdown in
investment that may curb U.S. economic growth. Bookings for
non-defense capital goods excluding aircraft, considered a proxy for
future spending, were little changed after rising 0.2 percent in August,
a Commerce Department report showed today in Washington. Other data
showed consumer confidence is climbing even as the labor market makes
limited progress. “Businesses are not prepared to commit to
big-ticket investments,” said Nigel Gault, chief U.S. economist at IHS
Global Insight in Lexington, Massachusetts. “The uncertainty and global
slowdown are clear negatives for capital spending. The third quarter was
soft, and we can’t see the fourth quarter being much better.”
- New York Times Co.(NYT) Plunges -17% After Reporting Surprise Loss. “A very disappointing third quarter,” Douglas Arthur, an
analyst with Evercore Partners Inc. (EVR), said in an interview.
“Very weak advertising and higher costs than expected,” said
Arthur, who has rated the stock the equivalent of buy since
August 2010. Times Co. fell 17 percent to $8.86 at 11:40 a.m. in New
York, the biggest intraday drop since April 2009.
- Hamptons Home Prices Fall as Buyers Seek Cheaper Retreats. Home prices in New York’s Hamptons, the Long Island
oceanside retreat for summering Manhattanites, declined in the third
quarter as mortgage rates near record lows focused buyer attention on
cheaper properties. The median price of homes that sold in the
period fell 10 percent from a year earlier to $765,000, according to a
report today by New York appraiser Miller Samuel Inc. and broker
Prudential Douglas Elliman Real Estate. In the Hamptons and North Fork,
the median for luxury properties, defined as the top 10 percent of all
sales, fell 23 percent to $4.23 million. About 63 percent of luxury
deals were for properties under $5 million. “Multimillion-dollar
properties, that’s the brand of the Hamptons,” said Jonathan Miller,
president of Miller Samuel. “But there’s an expansion to that, so its
not as one- dimensional as it was during the peak.”
- Syria Accepts Muslim Holiday Cease-Fire as Violence Rages. The
Syrian army will recognize a
cease-fire for the Eid al-Adha Muslim holiday proposed by the United
Nations and reserves the right to respond to rebel attacks, state
television announced. The cease-fire, proposed by UN Special Envoy
Lakhdar Brahimi, will end on Oct. 29, the state broadcaster said today.
The announcement came as clashes raged near Damascus, the capital, and
in Aleppo, Daraa and Deir Ezzor, claiming the lives of 25 people,
according to Rami Abdel Rahman, head of the opposition Syrian
Observatory for Human Rights. Arabyia
television, citing activists, said the death toll rose to 46.
Wall Street Journal:
- World Trade Volumes Fall for Third Month. The volume of world trade fell for the third straight month in
August, a decline which could make it difficult for many economies
undergoing austerity programs to return to growth. In its
monthly report, the Netherlands Bureau for Economic Policy Analysis,
also known as the CPB, said Thursday that exports from the U.S., Japan
and Latin America declined, and world trade volumes fell by 0.4% as they
did in July, having fallen by 1.3% in June.
CNBC:
- Fitch: July statement points to late 2013 U.S. rating decision. Fitch Ratings on Thursday said it was sticking
to a likely timeline for a late 2013 resolution on its rating for the
United States that was laid out in a July statement. Reuters
contacted Fitch after rumors that the rating agency was set to
downgrade the United States, the world's largest economy, rattled
markets on Thursday. "I
can just refer you to our ... affirmation where we said that it was
unlikely that we were going to resolve the rating or the outlook until
late 2013," said Brian Bertsch, a company spokesman. On July 10, Fitch said: "Absent material adverse shocks, Fitch does not expect to resolve the Negative Outlook until late 2013."
- Get Ready: Everything Is Going to Cost More Next Year. Consumers will have to dig deeper into their pockets next year to pay
for costlier health care, more expensive grocery bills and higher taxes,
an extra drag on the country's already slow-moving economy.
- Why Today's Housing Report Spooked Investors So Much.
- CEO Words of Gloom Cast Shadow Over Earnings Season. An earnings season described even by the most optimistic as muted has
been made even more worrying by the pessimism shown by chief executives
at globally dominant companies.
Die Welt:
- The German parliament and other euro-area legislatures should be empowered to sue the ECB, the Free Democrat Justice Minister in Hesse state Joerg-Uwe Hahn said in an interview.
Nikkei:
- Japan July-Sept. Robot Shipments Fall -18.7%. Shipments fall for fourth-straight quarter, citing Japan Robot Association figures released yesterday. Exports fell -26.2% to 74.5b yen, 5th consecutive decline. Exports to China and Europe dropped.
Style Underperformer:
Sector Underperformers:
- 1) Disk Drives -2.70% 2) Education -2.31% 3) Homebuilders -1.80%
Stocks Faling on Unusual Volume:
- DFT, FIO, FTE, CBB, MRCY, TV, MNST, COT, CLF, TCBI, SZYM, WLL, TBI, SPR, CROX, CAB, ATHN, TZOO, SIMO, ESI, NAV, SWI, OFIX, MJN, ACAT, CLGX, BCO, FFIV, DTG, ARII, NOW, NVO, UA, ASPS, MKSI, BOE, BCO, PHK, STJ, KEX, ATI, CBST, GPI, TRN, NOV, PDH, AN, BHE, CTXS, JAH, TEX, SHW, LAD, EGN, TAL, BBY and SPR
Stocks With Unusual Put Option Activity:
- 1) NOV 2) LRCX 3) CME 4) DHR 5) HYG
Stocks With Most Negative News Mentions:
- 1) NUVA 2) CP 3) TBI 4) MJN 5) UAL
Charts:
Style Outperformer:
Sector Outperformers:
- 1) Gaming +2.98% 2) Gold & Silver +1.98% 3) Steel +1.16%
Stocks Rising on Unusual Volume:
- NCT, PSSI, ANGI, RCL, CRR, LOGM, DDD, AKAM, TEN, GTI, ARRS, HRC, SYMC, WYNN, TER, NXPI, TWI, LQDT, ADT, PCAR, AMP and ILMN
Stocks With Unusual Call Option Activity:
- 1) RCL 2) EA 3) NOV 4) GRPN 5) FIO
Stocks With Most Positive News Mentions:
- 1) AKAM 2) AB 3) SYMC 4) GPI 5) PG
Charts:
Evening Headlines
Bloomberg:
- Spain’s Bad Bank Seen as Too Big to Work: Mortgages. Spain’s efforts to sell as much as
90 billion euros ($117 billion) of toxic property assets it uses
to create a bad bank from lenders that take state aid will be
constrained by the size and inability to provide credit to
potential buyers, adding to the risk of taxpayer losses. “When managing tens of thousands of assets scattered
across the whole of Spain, big is not beautiful, it’s sheer
chaos,” said Mikel Echavarren, chairman of Irea, a Madrid-based
financial adviser. A large, “clumsy” bad bank will be at a
“tremendous” disadvantage and will generate losses that
Spaniards will have to foot the bill for.
- Spain
Rally at Risk as Pioneer Sells on Aid Delay: Euro Credit. The rally
that sent Spanish 10-year government bond yields to a six-month low is
at risk after Pioneer Investments and ING Groep NV suggested selling the
securities as the nation resists asking for a sovereign bailout. "It
was a good time to sell," said Cosimo Marasciulo, who helps oversee $200
billion as head of government bonds and currencies at Pioneer in
Dublin. "From a risk-reward point of view, we are happy to take some
profits. We don't see the government in any rush."
- Daimler Scraps 2013 Targets After Cutting Forecast. Daimler
AG (DAI), the world’s third- biggest maker of luxury vehicles, lowered
its 2012 forecast and scrapped profit targets for next year amid
declining demand in Europe and increased competition in China. The parent of Mercedes-Benz forecast full-year earnings
before interest and taxes will fall 11 percent to 8 billion
euros ($10.4 billion), after a previous target of matching last
year’s 9 billion euros. The Stuttgart, Germany-based automaker
also said late yesterday it will no longer reach 2013 operating
margin goals because of toughening market conditions.
- France’s Quiet Bank Rescues Top EU60 Billion With Peugeot Aid.
France’s aid to PSA Peugeot Citroen SA (UG)’s troubled finance arm
brings the state’s backing for the nation’s banks to more than 60
billion euros ($78 billion). The government yesterday said it will
guarantee 7 billion euros in new bonds by Banque PSA Finance, the
consumer-finance unit of Europe’s second-largest carmaker. The aid comes
on top of support for Dexia SA (DEXB), the French-Belgian municipal
lender, and for home-loans company Credit Immobilier de France. “These
bank rescues on the quiet should be getting more critical market
attention,” said Bill Blain, a strategist at Mint Partners Ltd. in
London. “We don’t know what’s next, but
it certainly demonstrates that some of the specialized financial
institutions remain very, very weak.”
- Firings Reach Highest Since 2010 as Ford(F) to Dow(DOW) Face Sales Slump. Ford
Motor Co. (F) and Dow Chemical Co. (DOW) joined a growing number of
companies firing thousands of workers as sluggish U.S. growth and
Europe’s deepening recession lead to a persisting slump in sales.
North American companies have announced plans to eliminate 62,600
positions at home and abroad since Sept. 1, the biggest two-month drop
since the start of 2010, according to data compiled by Bloomberg.
Firings total 158,100 so far this year, more than the 129,000 job cuts
in the same period in 2011. “Companies are saying, ‘Let’s not build
up inventories, let’s be lean and mean until we know until we have a
better idea of what 2013 is going to look like,’” said Janna Sampson,
who helps manage more than $3 billion for Oakbrook Investments in Lisle,
Illinois. “There is a fear now as companies see that the economic
recovery is not picking up.” So far, out of 204 S&P 500 companies
that have released
third-quarter earnings, 120 have reported sales that trailed
analysts’ estimates, according to data compiled by Bloomberg.
- Japan Protests After Four Chinese Vessels Enter Disputed Waters. Japan
issued a protest after four Chinese patrol boats entered East China Sea
waters near islands at the center of a territorial dispute that has
worsened ties
between Asia’s two biggest economies. Chief Cabinet Secretary Osamu
Fujimura confirmed that the
vessels entered waters administered by Japan this morning. He
told reporters in Tokyo that repeated incursions by Chinese
boats are regrettable and the vice foreign minister had asked
China’s government that they be withdrawn.
- Hubbard: Good Chance Obama Puts U.S. Over Fiscal Cliff.
The U.S. economy stands a good chance of facing legislated tax
increases and spending cuts if President Barack Obama is re-elected next
month, Glenn Hubbard, a senior economic adviser to Mitt Romney, said
today. “There is a good chance, if the president wins, we go over the
cliff,” said Hubbard, who serves as dean of Columbia Business School.
- China’s Stocks Fall to One-Week Low; Coal, Drug Shares Decline. China’s
stocks fell, driving the benchmark index down to its lowest level in a
week, after a leading index for the nation’s economy rose at a slower
pace in September and earnings for resource producers declined. Guizhou Panjiang Refined Coal Co. and Jiangsu Yueda Investment Co. (600805), which makes cars with Kia Motors Corp., declined
at least 1.9 percent after reporting lower profits. Shanghai
Fosun Pharmaceutical (Group) Co. led a gauge of health-care
stocks, this year’s biggest gainer, to the second-biggest
decline among industry groups.
- Wynn Macau Profit Declines as High Rollers Cut Back. Wynn
Macau Ltd., a unit of billionaire Steve Wynn’s Las Vegas-based casino
operator, reported a 3.1 percent drop in third-quarter profit as high
rollers spent less. Net income fell to $203.3 million from $209.9 million a
year earlier, Wynn Macau said in a statement to the Hong Kong
stock exchange today. The company’s casino revenue dropped 4
percent to $857.3 million. The revenue decline reflects slowing growth in the world’s
largest gambling hub, where high rollers, or VIP bettors, from
China’s mainland have cut back. Still, VIP table game wins as a
percentage of turnover was 3.08 percent, exceeding the company’s
expected range and that recorded in the third quarter of 2011,
Wynn Macau said.
- Best Buy(BBY) Says Third-Quarter Profit Will Fall ‘Significantly’. Best Buy Co. said fiscal third-
quarter profit will be “significantly” below last year’s
results as sales at established stores continue to decline. Best Buy fell 3 percent to $16.41 at 4:44 p.m. in New York.
- Cliffs(CLF) Misses Profit Estimate After Iron-Ore Prices Decline. Cliffs Natural Resources Inc., the
largest U.S. iron-ore producer, reported third-quarter results
that missed analysts’ estimates as the price of the steelmaking
raw-material dropped. Net income fell 86 percent to $85.1 million, or 59 cents a
share, from $601.2 million, or $4.15, a year earlier, the
Cleveland-based company said today in a statement. Profit from
continuing operations was 61 cents a share, missing the $1.02
average of 21 estimates compiled by Bloomberg. Sales dropped 30
percent to $1.45 billion. The price of seaborne iron ore fell 36 percent to an
average $112 a metric ton in the quarter, compared with $176 a
year earlier, according to Steel Business Briefing data compiled
by Bloomberg. Cliffs decreased its outlook for the spot price of
iron ore this year by 12 percent to $128 a ton from a July
forecast of $145 a ton. Cliffs fell 6.9 percent to $39.76 at 6:29 p.m. after the
close of regular trading in New York.
- An Obama Re-Election Nightmare by Caroline Baum.
It is April 2015. The cherry
blossoms are in full bloom in the nation’s capital, yet the
colorful display can’t dispel the cloud hanging over the city and the
country. The skies are gray. The mood is gray. Even President Barack
Obama is gray as he looks forward to the end of his second term.
- Obama Slanders the 1920s to Justify His Failures by Amity Shlaes.
Wall Street Journal:
- U.S. Firms Get Dinged in Europe.
- Gupta Gets Two Years for Leaking Inside Tips.
Former Goldman Sachs Group Inc. director Rajat Gupta was sentenced to two years in federal prison for
leaking corporate secrets about the bank to a hedge fund at the height
of the financial crisis.
- China Banks Hurt By Weak Economy.
China's major banks are expected to report significantly slower
third-quarter profit growth in coming days, as a weakened economy
reduced business appetite for borrowing and prompted lenders to set
aside more provisions for potential bad loans. The going could
get tougher in coming quarters if economic growth rates don't improve.
Beijing's recent moves to allow some loosening of interest-rate
controls, letting banks price loans more cheaply, could start having a
more pronounced impact on lenders' already-shrinking interest margins.
- The President Sends His Non-Regrets. A revealing interview about his priorities in 2009—and 2013. President Obama doesn't give many interviews these days outside
Comedy Central, so it caused a stir Wednesday when editors at the Des
Moines Register managed to pin him down and even elicit some news.
Specifically, Mr. Obama said he wants to pursue immigration reform in a
second term, as well as a budget "grand bargain" with Republicans that
includes tax reform.
This will come as a surprise to voters
reading the President's just-released 20-page brochure on his
second-term agenda, which makes little or no mention of these
priorities. Perhaps that's why the White House first demanded that the
interview be off the record, making the transcript public only after the
Register editor objected in a public blog post. But the larger reason to be skeptical concerns Mr. Obama's answer to
another Register question: Whether he regrets pursuing ObamaCare and
other liberal social priorities in his first two years rather than
focusing on the economy.
"Absolutely not," Mr. Obama told the Iowa journalists.
CNBC:
- The Germans Are Coming for Their Gold. A
German federal court has said that country’s central bank should
conduct annual audits and physically inspect its gold reserves
worldwide, including gold in the custody of the Federal Reserve Bank of
New York. In addition to the FRBNY, Bundesbank gold is stored in
London, Paris and Frankfurt.
- Why CEOs Are on the 'Fiscal Cliff' Warpath. More and more CEOs are getting restless and starting to beat the drum
about Congress dragging its feet on the nation’s looming budget problem.
Zero Hedge:
Business Insider:
CNN:
- E-mails: White House knew of extremist claims in Benghazi attack. Two hours after first being notified of an attack on the U.S.
diplomatic mission in Benghazi, Libya, a government e-mail to the White
House, the State Department and the FBI said an Islamist group had
claimed credit, according to a copy obtained by CNN. An initial e-mail was
sent while the attack was still underway, and another that arrived two
hours later -- sent from a State Department address to various
government agencies including the executive office of the president --
identified Ansar al-Sharia as claiming responsibility for the attack on
its Facebook page and on Twitter.
Reuters:
- F5 Networks(FFIV) sees weakness spilling into 2013. Network gear maker F5 Networks Inc
forecast a weak first-quarter as its large U.S.
enterprise and telecoms customers reduced spending, sending its
shares down as much as 12 percent in trading after the bell.
F5 expects first-quarter earnings to be between $1.14 and $1.16 per
share, before items, on revenue of $363 million to $370 million.
Analysts were expecting earnings of $1.20 per share on
revenue of $373.5 million, according to Thomson Reuters I/B/E/S. The company said on a conference call that macroeconomic
uncertainty led many of its larger customers to slow down or
reduce spending. Network equipment makers have been hit as telecom service
providers -- their biggest customers -- cut spending due to a
faltering U.S. recovery and weakness in Europe. Rival Juniper Networks Inc forecast current-quarter
results below expectations on Tuesday, citing cautious customer
spend.
- California school districts risk downgrades-Moody's. Moody's Investors Service
said on Wednesday that it would place California school
districts with weak liquidity on review for possible downgrades
if the state's voters reject two November ballot measures that
propose tax increases to raise money for education spending.
- Akamai(AKAM) beats estimates on cloud computing demand, shares rise. Akamai Technologies Inc
beat Wall Street expectations as the internet content delivery company
reported higher revenue in its cloud computing and media delivery
segments. Shares of the company, which
helps firms deliver content faster by avoiding congestion on the Web,
were up 5.5 percent in after-market trade.
Financial Times:
- The German govt is asking Greece to agree to hire external experts to help collect taxes, fight corruption, sell assets in exchange for a bailout with 2 more years of EU aid, citing a copy of the plan. France and the European Commission support the plan, while the IMF is said to be skeptical. The plan also calls for automatic, across-the-board spending cuts if Greece misses the bailout's revised deficit targets.
Telegraph:
- Foreign firms face tax crackdown in UK and Europe. Foreign companies face a tax crackdown as David Cameron demanded an
investigation into claims of large-scale avoidance while Brussels moved to
close European VAT loop-holes enjoyed by Amazon(AMZN), Skype and Netflix(NFLX).
China Daily:
- China
needs to overcome "reform fatigue," according to an unidentified
commentary in the newspaper. Reform in China is at a critical stage and
if the nation doesn't do a good job, it will face great difficulties
that set back its modernization, the commentary said.
Evening Recommendations
Night Trading
- Asian equity indices are -.50% to +.25% on average.
- Asia Ex-Japan Investment Grade CDS Index 123.0 +1.0 basis point.
- Asia Pacific Sovereign CDS Index 96.0 +.75 basis point.
- FTSE-100 futures -.31%.
- S&P 500 futures +.21%.
- NASDAQ 100 futures +.36%.
Morning Preview Links
Earnings of Note
Company/Estimate
- (ESI)/1.78
- (CRI)/.89
- (AN)/.66
- (PG)/.96
- (PCP)/2.34
- (PHM)/1.20
- (BG)/2.16
- (DBD)/.39
- (IP)/.77
- (HSY)/.87
- (MCK)/1.78
- (RCL)/1.46
- (SPG)/1.92
- (BIIB)/1.59
- (OXY)/1.62
- (CELG)/1.27
- (SHW)/2.20
- (HOT)/.53
- (AET)/1.33
- (CL)/1.38
- (ZMH)/1.13
- (CME)/.69
- (RTN)/1.127
- (UA)/.52
- (COP)/1.19
- (MXIM)/.44
- (KLAC)/.88
- (CA)/.59
- (AMZN)/-.08
- (CERN)/.59
- (DECK)/1.04
- (DV)/.30
- (CB)/1.50
- (APKT)/.07
- (EXPE)/1.26
- (BYI)/.71
- (AAPL)/8.73
- (SCHN)/.00
Economic Releases
8:30 am EST
- The Chicago Fed Nat Activity Index for September is estimated to rise to -.2 versus -.87 in August.
- Durable Goods Orders for September are estimated to rise +7.5% versus a -13.2% decline in August.
- Durables Ex Transports for September are estimated to rise +.9% versus a -1.6% decline in August.
- Cap Goods Orders Non-Defense Ex Air for September are estimated to rise +.8% versus a +1.1% rise in August.
- Initial Jobless Claims are estimated to fall to 370K versus 388K the prior week.
- Continuing Claims are estimated to rise to 3260K versus 3252K prior.
10:00 am EST
- Pending Home Sales for September are estimated to rise +2.5% versus a -2.6% decline in August.
11:00 am EST
- Kansas City Fed Manufacturing Activity for October is estimated to rise to 5.0 versus 2.0 in September.
Upcoming Splits
Other Potential Market Movers
- The 7Y T-Note auction, South Korean GDP report, weekly Bloomberg Consumer Comfort Index and the weekly EIA natural gas inventory data could also impact trading today.
BOTTOM LINE: Asian indices are mostly lower, weighed down by technology and transportation shares in the region. I expect US stocks to open modestly higher and to weaken into the afternoon, finishing modestly lower. The Portfolio is 25% net long heading into the day.
