Morning Report: October 12, 2011

Ahead of the Bell: Dow futures are trading up 103 points and S&P futures are trading up 10 points. Alcoa reported disappointing 3rd quarter results, and blames the global economic down turn that hurt demand and pushed metal prices lower, forcing the company to miss its profit forecast. Slovakia is the only country of the 17 member European Union to vote against the expansion of the Euro zone rescue fund. European Economic and Monetary Affairs Commissioner, Olli Rehn said, the region is moving toward a consensus on resolving the sovereign debt crisis.

  • On the economic calendar today, investors will get the minutes from the Federal Reserve's September meeting, when the central bank announced operation twist, a plan to swap out $400 billion in short-term Treasuries for longer term bonds. Dallas Federal Reserve Bank President, Richard Fisher will be speaking on Fed operations and the economy to a Dallas Fed community forum. Philadelphia Federal Reserve Bank President, Charles Plosser will be speaking on the economic outlook at Wharton in Philadelphia, and Cleveland Federal Reserve Bank President, Sandra Pianalto will be speaking on leadership in challenging times at the University of Akron. Companies reporting earnings include Host Hotels & Resorts, Kinder Morgan, PepsiCo Inc., Teradyne, and Valmont Indus Inc. The dollar is down against the major currencies. Crude oil is currently trading at $86 a barrel.  Gold is trading at $1,684.   
  • Yesterday, stocks were flat as concern about Europe’s debt crisis eased, commodity and industrial companies gained, while telephone and utility shares fell.
  • On CNBC today, Hugh Johnston, Chief Financial Officer of PepsiCo, talked about the company’s 3rd quarter earnings results and upcoming challenges (PEP reported Q3 EPS $1.31 vs. consensus $1.30 and Q3 revenue $17.6 B vs. consensus $17.19 B.) Johnston said he was happy with the growth in the quarter considering the economy. He also said developing markets are more of a challenge, and while he likes the way the company competed in the quarter, there’s no question the competitive environment is tough. Johnston predicts a continued climb in commodity prices for next year which may cause pricing pressure, a difficult dilemma with already cash strapped consumers. When pressed, Johnston said he does not see a lot value in a spinoff of PepsiCo’s business at this time, rather he thinks it would just create more costs.
  • Happy Wednesday, have a nice day.  

Tuesday’s Close

DJIA down 16.80 pts/-0.15%/11,416.30

S&P up 0.65 pts/+0.05/1,195.54

Nasdaq up 16.98 pts/+0.66/2,583.03

Wednesday’s Futures

Dow Futures up 103.00 pts/+0.91%

S&P Futures up 10.50 pts/+0.86%

Nasdaq Fut up 25.58 pts/+1.13%

Overseas Markets

FTSE +0.43%

CAC 40 +1.39%

NIKKEI 225 -0.40%

HANG SENG +1.04%

Overseas:  World stock markets were up today.  European and Asian markets were up on optimism Euro zone leaders are working on a plan to resolve the regions sovereign debt crisis.

Economic Reports:  FOMC minutes at 2:00 p.m.

Top Headlines:    

  • Reports indicate Hewlett Packard (HPQ) is rethinking its proposed spinoff of its personal computer division as the cost might out weight the benefits.
  • The senate rejected President Obama's jobs bill in a 50 to 49 vote, the bill needed 60 votes to pass the senate.
  • NeuStar Inc. (NSR) announced it is acquiring TARGUSinfo for $650 million in cash.  TARGUSinfo, is an independent provider of real-time, on-demand information and analytics services. 
  • Bloomberg reports Transatlantic Holdings (TRH) is in talks with an unidentified party after a deal to merge with Allied World Assurance Co. Holdings AG was scrapped.
  • MBA reports mortgage applications were up 1.3% versus down 4.3% last week.  The thirty-year fixed mortgage rate increased to 4.25% from 4.18%.    

Commodities/Currency:

Gold:up $21.10 to $1,684.85

Oil:up 0.45 to $86.26

EUR/USD 1.3773 +0.0122

USD/JPY 76.6950  +0.0200

GBP/USD 1.5722 +0.0130

Volatility Index (VIX): As of the close of business Tuesday, October 11, the VIX is down 0.17 at 32.86

Companies Reporting Quarterly Earnings:     

Pepsico (PEP): Q3 EPS of $1.31 beats by $0.02. Revenue of $17.6B (+13% Y/Y) beats by $350M. Sees high-single-digit PES growth for FY11.

Host Hotels & Resorts, Inc. (HST): Q3 FFO of $0.16 in-line. Revenue of $1.14B (+13.9% Y/Y) beats by $10M.

Today’s Opening and Closing Bells:

XPO Logistics Visits the New York Stock Exchange Chairman and CEO Bradley S. Jacobs will ring the opening bell.

VAALCO Energy Celebrates 5 Years of Trading on the NYSE Robert L. Gerry III, Chairman and Chief Executive Officer, to Ring The Closing Bell will ring the closing bell.