Dell earnings suffer from slump in PC demand. Dell's (DELL) FQ3 earnings missed forecasts as net profit plunged 47% to $475M, EPS came in at $0.39 and revenue slid 11% to $13.72B. Like its peers, Dell is hurting from the global slump in PC demand, with revenue in the segment diving 19% and sales to consumers 23%. Dell suffered falling revenue across most of its businesses in Q3, although server and networking grew 11%. Dell expects the earnings decline to continue in FQ4. Shares were -2.5% premarket.
Obama, Congress to hold talks over fiscal cliff. Barack Obama is due to meet with Congress' four top leaders this morning to discuss how to avert the fiscal cliff. Meanwhile, state budget chiefs are making contingency plans in case Washington fails to come to a deal, setting money aside and looking at where they can start reducing costs. States that could be hit hardest include Virginia, due to its proximity to DC, as well as South Dakota, Georgia and Illinois.
Postal Service's losses soar to record $15.9B. The U.S. Postal Service's FY loss more than tripled to $15.9B, mainly due to defaults of over $11B. Revenue slipped 0.8% to $65.2B as mailing volume declined 5%, although online shopping helped boost package revenue 8.7%, suggesting it's not all doom in the Internet age. However, paralysis due to Congressional control, as well as labor costs, continue to maim the USPS, with the latter accounting for 80% of expenses vs 61% at UPS (UPS) and 41% at FedEx (FDX).
Top Stock News
Google holds talks with Dish over 4G build-out. Google (GOOG) has reportedly held talks with Dish Network (DISH) about building a massive 4G network using the latter's spectrum. Such a tie-up would be costly for Google and risk hurting carrier support for Android, but, as BTIG's Walter Piecyk observes, the company also "wants people to watch 10 hours of YouTube a day...What hurts them is (wireless carriers) restricting capacity."
Hostess set for liquidation request. Well-known brands Wonder Bread, Twinkies, and Dolly Madison could be put up for sale as Hostess moves closer to asking a bankruptcy court for permission to shut down its business. The company's biggest customer by far is Wal-Mart (WMT), with 40% of its annual sales coming from the retailer.
Gap profit surges 60% as turnaround program pays off. Gap's (GPS) FQ3 net profit soared 60% to $308M as the clothing retailer continued to enjoy the fruits of a recovery plan it launched last year, helped by increased margins and stronger sales in North America. EPS of $0.63 came in as expected while revenue climbed 8% to $3.86B and beat forecasts. Gap also raised its FY EPS guidance to $2.20-$2.25, although that's below consensus of $2.27. Still, shares rose 2.6% in AH trading.
JPMorgan's legal problems keep on mounting. The Office of the Comptroller of the Currency may reportedly slap JPMorgan (JPM) with a cease-and-desist order connected to alleged weaknesses with the bank's anti-money laundering systems, and demand that it strengthen its procedures and look at past transactions. It's the latest in a series of legal problems for JPMorgan, which include investigations into its London Whale trading fiasco and mortgage bonds.
India probes Wal-Mart over investment. India's Enforcement Directorate is reportedly investigating allegations that Wal-Mart (WMT) breached forex rules when it invested $100M via a convertible debenture in a unit owned by Bharti Enterprises, the U.S. company's partner in a wholesale joint venture. The probe could delay parliamentary discussions next week over the government's policy to allow foreign companies to enter India's retail sector.
FTC OKs Hertz / Dollar Thrifty deal. The FTC yesterday voted 4-1 to approve Hertz's (HTZ) $2.6B acquisition of Dollar Thrifty (DTG) after Hertz agreed to divest 62 Advantage brand outlets - as already known - and the rights to operate 29 Dollar Thrifty airport locations, 13 more than originally planned. "These concessions are not a needle-mover, for Hertz at least," says analyst Fred Lowrance.
Top Economic & Other News
Japanese PM Noda sets election for next month. Japanese PM Yoshihiko Noda has called an election for December 16 after the upper house approved a bill to issue bonds that will fund government spending for the rest of the fiscal year and stop it from running out of money. Noda's DPJ party is expected to lose to the opposition LDP, which favors uber-easing to help Japan get out of its deflationary black hole. That's sent the yen falling and Tokyo shares higher.
Japan downgrades economic outlook yet again. With Japan looking like it's sliding into recession, the government has downgraded its economic outlook for the fourth consecutive month, the longest stretch since the financial crisis. In its monthly report, the government blamed the "deceleration of the world economy" as it cut its assessment of consumption, investment, corporate profits and the job market.
FHA losses hit $16.3B. The Federal Housing Aministration's projected losses amounted to a much larger-than-forecast $16.3B at the end of September, an annual independent report shows, with the agency holding reserves of $30.4B vs expected losses of $46.7B on the loans it has insured. A bailout of the FHA, which is suffering badly from backing loans made from 2007-2009, is getting ever more likely, although a decision won't be made until February.
Fed sets out stress-test requirements for banks. The Fed's stress tests on the banks will require lenders to show they can withstand a "Severely Adverse Scenario:" a recession in which unemployment rises by over 400 bps, GDP declines 5%, equity prices fall more than 50% (along with the VIX jumping 70%), and residential and commercial property values slump over 20%. It sounds harsh, but it's still not as bad as what happened from 2007-09. Capital plans are due on January 7.
SEC rebukes ratings agencies. The SEC yesterday criticized ratings agencies in an annual report, saying that S&P (MHP), Moody's (MCO), Fitch (OTC:FMLCF) and two smaller firms don't always follow their own standards when rating deals. All nine firms reviewed in the report had "poor documentation" and "inaccuracies" when counting analysts' votes in a decision. The SEC hasn't determined whether its findings represent a "material regulatory deficiency."
In Asia, Japan +2.2% to 9024. Hong Kong +0.2% to 21159. China -0.8% to 2015. India -0.9% to 18309.
In Europe, at midday, London -0.4%. Paris flat. Frankfurt -0.2%.
Futures at 7:00: Dow -0.1%. S&P -0.1%. Nasdaq -0.1%. Crude flat at $85.42. Gold -0.3% to $1708.70.
Today's economic calendar:
9:00 Treasury International Capital
9:15 Industrial Production
10:00 E-Commerce Retail Sales
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