Morning Report: October 28, 2011

Ahead of the Bell: Dow futures are trading down 62 points and S&P futures are trading down 7 points following the previous trading session’s sharp gains after European leaders struck a deal to halt the regions debt crisis. The focus will be on Euro zone implementation of the plan. Traders are looking for a long term solution for Europe and the health of Italy is top of mind. Other countries in the EU block experiencing similar financial distress include Spain, Ireland, and Portugal.

  • On the economic calendar today, The Commerce Department will release personal income and consumption data for September before the market opens. Economists are forecasting a 0.3% increase in income and a 0.6% rise in spending. In the previous month income was down 0.1% and  spending was up 0.2%. The Labor Department will issue the Employment Cost Index before the market opens for Q3, it is expected to rise 0.6% compared with a 0.7% increase for Q2. Thomson Reuters/University of Michigan Survey of Consumers will be out after the market opens, and economists are anticipating a reading of 58.0 versus 57.5 from the October preliminary report.
  • Companies reporting earnings include Rockwell Collins, Goodyear Tire & Rubber, Aon, and Merck.  The dollar is up against the major currencies. Crude oil is currently trading at $92 a barrel. Gold is trading at $1,738.   
  • Yesterday, stocks were up, after the government reported the economy grew in the third quarter at the fastest pace in a year, and European leaders agreed to expand a bailout fund to stem the region’s debt crisis.
  • On CNBC today, former NYSE Chairman, Dick Grasso, talked about banks and “too big to fail.”  Grasso said the problems with the banks started a while ago and he questions the oversight from boards and compensation committees. He thinks the biggest loss here, though, is the devaluation of institutions. Grasso believes going forward we can’t have any too big to fail institutions and the government should step aside and let the free market work. Finally, Grasso said there is a misalignment of short term versus long term when it comes to compensation and he thinks boards should be held accountable by tying compensation to risk.
  • The St. Louis Cardinals forced a Game 7 after pulling out a 10-9 win over the Texas Rangers last night.                                                
  • Happy Friday, have a nice day and a wonderful weekend.

Thursday’s Close

DJIA up 339.51 pts/+2.86%/12,208.55

S&P up  42.59 pts/+3.43/1,284.59

Nasdaq up 87.96 pts/+3.32/2,738.63

Friday’s Futures

Dow Futures up 62.00 pts/-0.53%

S&P Futures up 7.80 pts/0.44%

Nasdaq Fut up 12.25 pts/-0.53%

Overseas Markets

FTSE -0.42%

CAC 40 -0.61%

NIKKEI 225 +1.39%

HANG SENG +1.68%

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

Economic Reports:  Personal Income and Outlays expected 0.3% & Employment Cost Index expected to be 0.6% at 8:30 a.m. and Consumer Sentiment expected to be 58.0 at 9:55 a.m.

Top Headlines:    

  • Reports indicate big banks include JPMorgan (JPM) are considering canceling plans to increase debit card fees after surveying consumers and following Bank of America (BAC) increasing its fees.
  • Reports indicate MF Global Holdings (MF) has draw down on its revolving credit lines after its credit ratings was cut to junk by Moody’s and investors are withdrawing funds from their accounts.
  • Bloomberg reports Brocade Communications System Inc. (BRCD) may be on the block for a possible sale.
  • Hewlett-Packard Company (HPQ) said it is canceling plans to spin off its PC unit as it would cost the firm billions of dollars in expenses and lost business.
  • Avon Products Inc. (AVP) said the SEC is investigating the company amid a probe involving possible bribes to Chinese officials.          

Commodities/Currency:

Gold:down $6.10 to $1,738.85

Oil:down 1.39 to $92.73

EUR/USD 1.4154 -0.0033

USD/JPY 75.8465  -0.1265

GBP/USD 1.6106 +0.0003

Volatility Index (VIX): As of the close of business Thursday, October 27, the VIX is down 4.40 at 25.46

Companies Reporting Quarterly Earnings:     

Newell Rubbermaid (NWL): Q3 EPS of $0.45 beats by $0.03. Revenue of $1.54B (+5.8% Y/Y) in-line.

NiSource (NI): Q3 EPS of $0.11 beats by $0.02. Revenue of $1.02B (+1.9% Y/Y) in-line.

AON Corp. (AON): Q3 EPS of $0.69 misses by $0.03. Revenue of $2.72B (+51.2% Y/Y) beats by $100M.

Coventry Health Care (CVH): Q3 EPS of $0.84 beats by $0.03. Revenue of $2.98B (+4.9% Y/Y) misses by $50M.

Constellation Energy Group (CEG): Q3 EPS of $0.68 misses by $0.12. Revenue of $3.52B (-11.3% Y/Y) misses by $1B.

Lear (LEA): Q3 EPS of $0.95 misses by $0.27. Revenue of $3.5B (+22.7% Y/Y) beats by $260M.

Merck (MRK): Q3 EPS of $0.94 beats by $0.03. Revenue of $12.0B (+8.1% Y/Y) beats by $400M.

Goodyear Tire & Rubber Company (GT): Q3 EPS of $0.60 beats by $0.33. Revenue of $6.06B (+22.2% Y/Y) misses by $150M.

Rockwell Collins (COL): Q3 EPS of $1.13 in-line. Revenue of $1.29B (+2% Y/Y) misses by $50M.

Today’s Opening and Closing Bells:

The U.S. Fund for UNICEF Gets in the Halloween Spirit with the Trick-or Treat for UNICEF Campaign Caryl Stern, CEO and President of The U.S. Fund for UNICEF will ring the opening bell.

Industry experts and business executives gather at the NYSE for the first-ever Russia Business and Investment Summit.  Summit participants will ring the closing bell.