Futures are ~20bps lower this morning as Q3 earnings move to the fore. In fact, 34% of the S&P500 is set to report this week. This morning, Citigroup (C; +2.5%) beat by 1c but missed revenue expectations. Oil giant Halliburton (HAL; -3%) reported in-line results. Electronics giant Philips (PHG; -5%) is trading lower on their overseas earnings release and SAB Miller (
SAB LN; +40bps) is trading higher. Toy-maker Hasbro (HAS) is indicated higher on a 5c/share earnings beat. In M&A news, the NY Post reports EMC is in talks to acquire ISLN. The Wall Street Journal reports Bain Capital has joined talks to acquire STX. Northeast Utilities (NU) announced it would merge with NSTAR (NST) to combine six electric and gas utilities in three states. Pfizer (PFE) plans to acquire Biocon’s (BIOS IN) rights to four insulin products. St. Jude Medical (STJ) is buying devicemaker AGA Medical (AGAM). Also, Barron’s highlighted the following attractive LBO targets over the weekend: EBAY, DELL, YHOO, GPS, FIS, SWY, CSC, WDC, WHR, STX, GME, ARO. Asia was weaker overnight. Europe is slightly higher. USD up 25bps. Oil +65bps and Gold -40bps.
Looking ahead, AAPL and IBM report tonight. YHOO reports tomorrow, EBAY reports Wednesday, and AMZN on Thursday. In financials, BAC and GS report Tuesday, MS and WFC report Wednesday, and CS reports Thursday. MTG (Tuesday) and FNF (Wednesday) earnings may shed some light on the mortgage putback issue. In the industrial sector, ITW and PH report tomorrow, ETN, TXT, and UTX report Wednesday, CAT reports Thursday, and HON reports Friday. In healthcare, UNH and JNJ report Tuesday while BAX reports Thursday. And in telecom, T reports Thursday and VZ reports Friday.
Not much “real” news this weekend, but a few newspaper article garnered attention (especially the “
USA = ” New York Times article). Here’s a summary borrowed from JPM: Japan
$ may already be pricing in QE; it may not fall much further on Nov 3 – FT http://www.ft.com/cms/s/0/e075c278-da0d-11df-bdd7-00144feabdc0.html US
· CEO confidence deteriorates - The Conference Board's measure of CEO confidence hit 50 in the third quarter, down from 62 in the second quarter. It was the lowest score since the first quarter of 2009 – DJ
US as the new Japan – NYT article – “a growing number of economists are pointing to Japan as a dark vision of the future” for the . “Just as inflation scarred a generation of Americans, deflation has left a deep imprint on the Japanese, breeding generational tensions and a culture of pessimism, fatalism and reduced expectations” http://www.nytimes.com/2010/10/17/world/asia/17japan.html?partner=rss&emc=rss US
· White House urges calm on mortgage issue - members of the Obama administration on Sunday expressed anger about the revelations, but urged caution as multiple investigations into the crisis unfold. NYT http://www.nytimes.com/2010/10/18/business/18foreclosure.html?partner=rss&emc=rss
· “The Dems’s Brutal Weekend” – Politico says the news is getting worse for Dems – “more bad polls. More bad fundraising numbers. More dreary talk on the Sunday talk shows”. Analyst Stu Rothenberg is predicting a likely Republican gain of 40 to 50 seats, with 60 seats possible. Republicans need a net pickup of 39 seats to take the House. One House Democrat, reflecting widespread conversations with his colleagues, guessed Sunday that his party will lose 50 seats. Politico http://dyn.politico.com/printstory.cfm?uuid=BC2BE674-EE60-EBE4-F95AC2B55054250B
· Dems are giving up on about 12 seats they currently hold and are focusing their resources on races w/better odds of success; Dems insist they have a narrow path to retaining control of the House (WSJ) http://online.wsj.com/article/SB10001424052748704049904575554541788565012.html?mod=ITP_pageone_0
· Obama’s ’08 coalition deteriorating; defects to the GOP; one-quarter of those who voted for the Democrat are defecting to the GOP or considering voting against the party in power this fall. Just half of them say they definitely will show up Nov. 2 – AP
· Consensus points to 50 seat GOP gain in the House. The “enthusiasm gap” playing a big part in Republican success. The GOP could gain as many as 70-80 if everything broke their way or only 20-30 if the Dems make up some ground. NYT http://fivethirtyeight.blogs.nytimes.com/2010/10/16/consensus-points-to-50-seat-g-o-p-gain-in-house-but-may-understate-uncertainty/?partner=rss&emc=rss
· Is the Fed on the verge of changing how it handles inflation? Recent comments from Fed officials signals the answer to the question may be yes – comments at the Boston Fed conf this week suggest the Fed may be willing to tolerate levels of inflation that run hotter than the unofficial 2% target for longer in order to help stimulate economic activity. WSJ http://blogs.wsj.com/economics/2010/10/16/some-officials-mull-more-flexible-inflation-mandate/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wsj%2Feconomics%2Ffeed+%28WSJ.com%3A+Real+Time+Economics+Blog%29&utm_content=Google+Reader
· QE may help keep rates low but it prob. won’t help the economy – respondents to a WSJ survey think QE will keep 10yr yields at 2.5% or lower through the end of the year; most think the Fed will conduct a gradual program of purchases rather than a “shock and awe” campaign; estimates of the total amount of purchases range from $500B to $1.2T. Most respondents were skeptical of more QE helping the economy all that much. WSJ http://online.wsj.com/article/SB10001424052748704049904575554530630999098.html?mod=rss_whats_news_us
PETS misses by 4c and misses on revenues. WSJ “Heard on the Street” warns that EMC’s ownership of VMW is becoming a problem since VMW represents 2/3rds of the combined mkt-cap. FBRC ups DFT. BCAP cuts TXT, CPNO. CITI cuts MICC. WEFA cuts GPI. RBCM cuts ALTR. AGN is higher on news that the FDA approved Botox as migraine remedy. FLR lowers FY2010 guidance and announces 90c/share charge. RBCM ups JACK. KWK to explore “strategic alternatives.” Barron’s cautious on LULU. ZOOM raises guidance. JPHQ ups SYNA. CVC resumes talks with NWS/A on restoring Fox to CVC’s NY and
subscribers. KFT to increase Philadelphia manufacturing. WDFC beat by 3c. China
S&P 500 PreMarket 8:30am (last/% change prior close/volume):
Today’s Trivia: What is widely considered the largest gathering of human beings on the planet?
Yesterday’s Question: Name the author of The Godfather, born on this day in 1920.
Yesterday's Answer: The Godfather author Mario Puzo was born on October 15th, 1920.
Best Quotes: “Same themes as last week, QE2 speculation, currency controls and inflows into emerging markets. An FT article highlighted the recent rise in inflation expectations as the long bond has sold off, the dollar has sold off and commodity prices have rallied. Charles Evans, president of the Chicago Fed said the Fed should to prime the economy because ultra-low interest rates and growing savings rates can make monetary policy ineffective and “much more policy accommodation is appropriate today.” Fed officials are of course trying to avoid a ‘Lost Decade’ of deflation and no growth as
has experienced. Japan Japan’s deflated economic power was featured in the NY Times yesterday in ‘ goes from dynamic to disheartened.’ If the threat of deflation in the Japan didn’t scare you, read this article and you’ll be ready for QE2! The papers also continue to highlight record inflows in EM equity and credit and attempt to call a top - today the WSJ took a turn in the article ‘Boom in emerging markets has some fearing backlash.’” --MSCO global FX summary US