Futures surge 1% higher after five days of weakness on the back of better-than-expected Q3 GDP, which came in at +3.5% vs. +3.2%/e. Among other things, this represents a chink in the GS armor – recall they trimmed their expectations to +2.7% from +3% yesterday. Initial Jobless Claims did not surprise, at 530k vs. 525k/e, but obviously remain at elevated historic levels. Continuing Claims were 5.797M vs. 5.905M/e. Personal Consumption was +3.4% vs. last quarter’s -0.9% reading and vs. the +3.1% expectation. In corporate news, Kellogg’s (K) is higher on an earnings beat, gold miner AEM is lower on earnings, P&G beat by 7c, AKAM is higher after it raised estimates for Q4 sales, Burger King (BKC) missed earnings estimates, First Solar (FSLR) is down 13% on earnings, FLS is lower on reduced guidance, LSI is higher on earnings, MOT is higher on earnings, SYMC beat estimates, Timberland (TBL) beat expectations, Sprint (S) missed by 2c, and oil giant XOM is lower following their earnings release. $31B in seven-year Treasuries will be auctioned today – results at 1pm. Reminder that year-end for many mutual funds is Friday. (For those interested, some base year-end on Friday’s NAV…others use September 31st as year-end…and for some year-end was Tuesday the 27th, which represents T+3…it just depends on the fund apparently.) Geithner testifies before the House today. Note the R2000 and the NASDAQ underperformed the DJIA and the SPX yesterday. In fact, the Russell was down 3.5% and the SPX closed below the 50-day moving average…
Markets are positively buoyant on this morning’s GDP data, and – as always – how markets react today will be critical. Was the better-than-expected number simply a result of “Cash for Clunkers” and other stimuli? Will the jobs data provide a somber reminder of massive unemployment? After all, there are still 500k people out of work each week… Feels like we came close to a rout (to the downside) yesterday – today’s tone is obviously positive, but why do I feel the proverbial Sword of Damocles swishing ever-closer? Taking the 30,000 foot view, there is not much to love about the world these days – we have a state of emergency over H1N1, bank failures continue to grow, states and municipalities remain underwater financially, the consumer remains squeezed and unemployed, things are heating up geopolitically between the Taliban and Pakistan (which means the Taliban is probably acting on behalf of India at this point, creating the potential down the road for two nuclear powers in India and Pakistan squaring off), demand has been pulled forward in the form of Cash for Clunkers and first-time homebuyer tax breaks, more insider-trading arrests could be down the road, and so on… But the Bears have certainly gotten their +5% pullback over the last few days…will the Bulls now buy the dip given the GDP number? Beware this number being “already priced in” to the markets, and beware – as always – the rush to take profits… Further, here’s one negative thought following a great GDP number: does this mean the government will lean toward reducing artificial stimulus sooner? If so, a positive GDP number could become a negative catalyst for equities.
A friend passed on some absolutely fascinating numbers yesterday, and they are well-worth sharing (more details can be found at http://www.ritholtz.com/blog/2009/10/putting-the-60-rally-into-perspective/):
Stock markets are up 60% plus. How does this rally stack up with previous ones? Here are some key criteria of what previous 60% rallies have looked like when analyzed across 10 different key economic dimensions:
* Year over Year Retail Sales: 9.3% average in prior 60% rallies versus -5.3% in the current one
* Consumer Confidence: 95.5 average; 53.1 now
* Capacity Utilization: 79.9% average; 66.6% now
* Year over Year Industrial Production: 4.1% average; -10.7% now
* ISM: 53.9 average; 52.6 now
* Payroll employment gains over period: 2.2% average; -2.0% now
* Decline in continued unemployment claims from cycle peak: -26.3 average; -11.6% now
* Year over Year growth in total credit market debt: 9.3% average; 3.0% now
* Year over Year growth in household debt: 8.8% average; -0.1% now
* P/E Multiple: 16.8x average; 20.0x now
Asia down 2% overnight following yesterday’s US Europe roughly 1% higher this morning. USD -40bps. Oil +140bps. Gold +70bps.
Brightpoint News:
Brightpoint PreMarket (yest close/premkt/% change/volume):
S&P 500 PreMarket (last/% change prior close/volume):
AKAMAI TECH 22.15 +9.87% 69403
FANNIE MAE 1.11 +8.82% 1128245
AMERICAN CAPITAL 2.89 +7.84% 6150
SYMANTEC CORP 16.95 +7.76% 63800
EXCEED CO LTD 10.87 +7.62% 100
DEVELOPERS DIVER 9.79 +6.99% 750
FREDDIE MAC 1.24 +6.9 % 391199
EXPEDIA INC 26.00 +6.82% 29860
MANITOWOC CO 10.10 +6.77% 20671
MGIC INVT CORP 4.49 +6.65% 4350
FIFTH THIRD BANC 9.41 +6.45% 32500
XL CAPITAL LTD-A 17.25 +6.28% 11250
MOTOROLA INC 8.43 +5.9 % 2669911
STARWOOD HOTELS 31.24 +5.9 % 200
LSI CORP 5.28 +5.81% 9079
JABIL CIRCUIT 14.41 +5.26% 700
GENWORTH FINANCI 9.13 +5.06% 245844
Today’s Trivia: ICANN votes tomorrow on the use of “universal URLs,” meaning Chinese and Arabic characters, for example, are set to become much more commonplace on the web. The argument is that the English language has dominated the first phase of internet growth, but will not – by any stretch – dominate the next. That’s the backdrop for today’s question – roughly how many people worldwide currently use the internet?
Yesterday's Answer: Pepsi is named – in part – for dyspepsia, which is simply the fancy name for a stomach ache.
Best Quotes: “The weakness was fairly widespread. Breadth heavily negative in the broad based Russell 3000 with Decliners leading Advancers at a rate of 10 to 1. Investors were definitely clearing the decks ahead of tomorrow’s Q3 Advance GDP Report. The Vix has crept up to 27.91, the last two times it rose above 28.5 (in the past two months) the market has rallied 7%-8% in the next couple of weeks. Remember pre-Lehman, the 30 level was a buy signal level. The Composite Put/Call rose to 1.1 a level signaling we were close to a rally in the other pullbacks since March. The potential wrench is the GDP report, which can move the market in either direction pre-open. As long as GDP is close to in line, ideally, investors should want to see early downside follow through to put long money back to work. A pullback of 6%-7% in as many days, without a major shift of economic data should prove to be a buying opportunity.” --BTIG note
