Morning Report: October 27, 2011

Ahead of the Bell: Dow futures are trading up 206 points and S&P futures are trading up 26 points following an agreement of European leaders to reduce Greek debt. The plan calls for private investors and banks to take a 50% cut in their holdings, while banks will be recapitalized and the rescue fund will be leveraged to 1 trillion euros. Traders are cautious the deal isn’t enough to contain the debt crisis in the short term and investors will be looking for a long term solution to the region’s financial woes.

• On the economic calendar today, 3^rd quarter GDP will be out before the market opens, and economists are forecasting growth of 2.5%, compared with the previous quarter of 1.3%. The Labor Department will also release initial jobless claims before the market opens, and is expected to be 405K compared to 403K from the previous week. Pending home sales will be released after the market opens and is anticipated to be flat compared with a negative 1.2% for August. The Fed’s balance sheet will be out in the afternoon. Companies reporting earnings include Aetna, Altria, Bristol-Myers Squibb, Coca-Cola, Colgate-Palmolive, Exxon Mobil, Hershey, Legg Mason, Moody's, Motorola Solutions, Procter & Gamble, Raytheon, and Royal Dutch Shell PLC. The dollar is up against the Japanese yen and down against the euro and British pound. Crude oil is currently trading at $92 a barrel. Gold is trading at $1,732.   
• Yesterday, stocks were up on reports European leaders have reached an agreement on plans to recapitalize banks and China may be willing to invest in the region’s bailout.
• On CNBC today, Jon Moeller, Chief Financial Officer of Procter & Gamble, talked about the company’s fiscal 1st quarter earnings. P&G reported Q1 EPS $1.03 vs. consensus $1.03 and Q1 revenue $21.9B vs. consensus $21.55B. Moeller said he believes earnings and revenues are right on target as the company has been raising prices to cover commodity costs. He is confident of delivering double-digit operating growth in Q2 and for FY and sees commodity concerns easing year over year. On the European debt deal, Moeller thinks it will help and will result in growth going forward as it translates into benefits for companies, especially on margins. Finally, Moeller thinks the markets could be helped dramatically by lowered volatility and he sees China and other developing markets continuing to show strong growth.                                                    
• Happy Thursday, have a nice day.

Wednesday’s Close

DJIA up 162.42 pts/+1.39%/11,869.04

S&P up  12.95 pts/+1.05/1,242.00

Nasdaq up 12.25 pts/+0.46/2,650.67

Thursday’s Futures

Dow Futures up 206 pts/+1.75%

S&P Futures up 26.80 pts/+2.08%

Nasdaq Fut up 48.25 pts/+2.06%

Overseas Markets

FTSE +2.25%

CAC 40 +5.05%

NIKKEI 225 +2.04%

HANG SENG +3.26%

Overseas:  World stock markets were up today.  European and Asian markets were up after European leaders struck a deal to stem the sovereign debt crisis in the region.   

Economic Reports:  GDP is expected to be 2.5% & Initial Jobless Claims is expected to be 405K at 8:30 a.m. and Pending Home Sales Index is expected to be flat at 10:00 a.m. 

Top Headlines:    

• Hertz Global (HTZ) said it is withdrawing its offer for Dollar Thrifty (DTG) in light of Dollar Thrifty's plan to commence a share repurchase program and current market conditions.
• Bloomberg reports MF Global Holdings Ltd. (MF) is exploring strategic options, including a potential sale.  The firm is headed by former Goldman Sachs Group Inc. CEO Jon Corzine.
• The SEC has filed a law suit for over $30 million against the Bank of NY Mellon (BK) for allegedly overcharging state pension funds on currency trades.
• Neiman Marcus said beginning Nov 1 customers will be able to use their Visa (V) and Mastercard (MA) in its stores.  Prior, the company was only accepting American Express cards.
• Sony Corporation (SNE) announced it is taking over Ericsson mobile phone joint venture for $1.05 billion as it tries to gain access into the smartphone table market.          

Commodities/Currency:

Gold:down $.10 to $1,732.85

Oil:up 2.39 to $92.59

EUR/USD 1.4025 +0.0132

USD/JPY 75.8005  -0.44

GBP/USD 1.6005 +0.0045

Volatility Index (VIX): As of the close of business Wednesday, October 26, the VIX is down 2.21 at 30.01

Companies Reporting Quarterly Earnings:     

Dow Chemical (DOW): Q3 EPS of $0.62 misses by $0.01. Revenue of $15.11B (+17% Y/Y) beats by $0.5B.

Raytheon (RTN): Q3 EPS of $1.39 beats by $0.06. Revenue of $6.1B (+11% Y/Y) misses by $250M.

Altria (MO): Q3 EPS of $0.56 in-line. Revenue of $6.1B (+4% Y/Y) beats by $1.7B.

Avon (AVP): Q3 EPS of $0.38 misses by $0.08. Revenue of $2.7B (+6% Y/Y) misses by $120M.

Time Warner Cable (TWC): Q3 EPS of $1.08 misses by $0.06. Revenue of $4.9B (+4% Y/Y) misses by $40M.

Wabco (WBC): Q3 EPS of $1.19 beats by $0.05. Revenue of $706M (+20% Y/Y) misses by $22M.

Bunge (BG): Q3 EPS of $0.86 misses by -$0.76. Revenue of $15.6B (+34% Y/Y) beats by $1.3B.

Potash (POT): Q3 EPS of $0.94 in-line. Revenue of $2.3B (+47% Y/Y) beats by $150M.

Starwood Hotels (HOT): Q3 EPS of $0.60 beats by $0.21. Revenue of $1.37B (+9% Y/Y) beats by $10M.

Synovus Financial (SNV): Q3 EPS of $0.02 beats by $0.05.

Movie Star (MSI): Q3 EPS of $0.64 beats by $0.05. Revenue of $2.1B (+10% Y/Y) in-line.

Legg Mason (LM): Q2 EPS of $0.61 beats by $0.24. Revenue of $670M (-7% Y/Y) misses by $4M.

Barrick Gold (ABX): Q3 EPS of $1.39 beats by $0.04. Revenue of $4.01B (+45% Y/Y) beats by $130M.

Today’s Opening and Closing Bells:

Guggenheim Equal Weight Enhanced Equity Income Fund will ring the opening bell.

Comstock Celebrates 15 Years of Trading on the NYSE President and Chief Executive Officer of Comstock Resources, Jay Allison, (CRK) will ring the closing bell.