- Post-election selloff. U.S. stocks plunged to finish with their worst losses in two weeks. With the election settled, traders focused on more mundane matters like weak job numbers and deep declines in goods and services industries. A weak outlook from tech bellwether Cisco (CSCO) sent stocks futures down further in overnight trade. Sellers unloaded financial stocks like Citigroup (C) and Bank of America (BAC) in the last hour of trading, which likely represents heavy mutual-fund selling. "People have accepted that even with a new president and new policies perhaps in play, it's going to take a while before [the economy] can turn around," broker Trenton Kimminau said.
- BoE announces major rate cut. Bank of England cuts its benchmark interest rate by 1.5%, well beyond expectations of a 50-100 basis point cut, to 3.0%. It is the largest reduction since the U.K.'s last recession in 1993. With the U.K. once again facing steep recession, some economists predict the rate will have to go as low as zero for the economy to recover. Read the Bank's official statement. Update: ECB cuts its key rate by 0.5% to 3.25%, in line with expectations. However, after the BoE's 1.5% cut many thought a cut greater than 0.5% was coming.
- Cisco sounds a cheerless note. Shares of Cisco (CSCO) are down 11% premarket after CEO John Chambers told analysts sales will decline as much as 10% in the company's fiscal Q2; in August he predicted a gain of 8.5%. The credit crunch hit Cisco's order stream, pushing October orders down 9%. Perhaps even more gloomy, Chambers said his comfort level with the forecast was the lowest since the dot-com crash in 2000. "He's normally a very optimistic guy, so when you hear him talk about the tone of business being what it is now, I don't even know what to say," UMB's Chuck Heath said. "It just makes you want to throw up your hands and give up." Futures moved lower during and after Cisco's conference call (transcript).
- Toyota trims outlook, earnings. Toyota (TM) reported FQ2 net profit fell a worse-than-expected 69% to ¥139.8B ($1.43B), missing consensus estimates of ¥235.98B, on a strong yen and falling demand. Sales were down 8% to ¥5.975T. Operating profit fell 72% to ¥169.5B. Toyota also cuts its full-year outlook by 56%, revising estimated net income to ¥550B ($5.6B), its smallest profit since 1999 and a 68% discount from last fiscal year's ¥1.72T net profit. Shares -10.6% in Japan.
- Profit estimates go down, down, down. Analysts are cutting their estimates for S&P 500 companies as Q3 projections miss their mark at the highest rate in nearly 11 years. Revised earnings for Q4 have been cut to 15% growth from 42%, while 2009 profit has been cut to 13% growth from 24%. The now-outdated growth figures were predicted just two months ago but as the financial crisis worsens, and the S&P 500 faces possibly its worst annual performance since 1937, "estimates have been coming down with a vengeance." According to one analyst, "it's just plain ugly out there."
- Automakers plead with Pelosi. CEOs from GM (GM), Ford (F) and Chrysler will meet with House Speaker Nancy Pelosi today in Washington, sources say, hoping to secure support in their bid for government aid for the ailing auto industry. UAW President Ronald Gettelfinger will also attend. The next 100 days are critical for the industry, GM North America President Troy Clarke said yesterday: "We certainly intend to make sure the new Obama administration understands and appreciates the immense significance of our industry and the issues facing our business. "And that the cost of support to the auto industry is cheap when you consider the potential ramifications and future benefits." Yesterday the Department of Energy said it completed the interim rules for automakers to borrow up to $25B, doing so in half the two months it was given. Fancy that.
- Citi, Goldman launch layoffs. Citigroup (C) and Goldman Sachs (GS) began firing workers as they move toward implementing more than 12,000 planned job cuts, sources say. "We haven't hit bottom yet," Henry Hidgon of Hidgon partners said. "They have to adjust the size of their businesses to the realities, not only today, but what it's going to look like in the next two or three years." Citigroup will shed 9,100 jobs, while Goldman is seen trimming 3,200.
- Yahoo, Google not meant to be. Will Microsoft return? Yahoo's (YHOO) and Google's (GOOG) web-ad deal is over. "It's clear that government regulators and some advertisers continue to have concerns about the agreement. Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners," Google said on its blog. Yahoo responded by saying it "continues to believe in the benefits" of the pact, "and is disappointed that Google has elected to withdraw from the agreement rather than defend it in court." Following the break-up, rumors of an imminent Yahoo/Microsoft (MSFT) deal sent Yahoo's shares up by as much as 10%, but were later denied. Rumors began after a broker cited an internal Yahoo memo which referred to a "major & historical announcement."
- Fed boosts deposit interest. The Fed increased the interest rate it pays to depositors. Required reserves will now receive the average fed funds target (previously avg. -10 BPs) over the period of the deposit. Excess reserves receive the lowest fed funds target (previously lowest -35 BPs). The interest rate change will "help foster trading in the funds market at rates closer to the FOMC's target federal funds rate," it says.
- Job market weakens, again. Nonfarm employment fell by 157K in October, ADP said, evidence of a labor market that continues to weaken. Consensus was for -100K. The loss was driven by the goods-producing sector, which declined by 126K, its 23rd consecutive decline. Manufacturing marked its 26th straight decline with a 85K loss. Small business shed 25K jobs, the first monthly loss since Nov. 2002. Assuming a monthly 20K addition of government jobs, ADP's employment data suggests Friday's nonfarm payroll number will be about -137K - not as severe as the Street consensus of about -200K.
- Service sector activity disappoints. Economic activity in the non-manufacturing sector decreased by 5.8% in October to 44.4%, ISM says, worse than the 47.5% consensus. Following two months of growth, the sub-50% reading indicates sector contraction. Companies are having difficulty making payroll, ISM's Anthony Nieves remarked. "The biggest impact has been on available lines of credit. Everyone's trying to spend less and reduce expenses across the board."
- Layoffs leap. October layoff announcements soared 19% M/M and 79% Y/Y to 112,884, the highest level in nearly five years, Challenger said. Hard hit sectors included industrial goods manufacturing, consumer products, pharmaceutical, food and electronics. "Job cuts are now rising across the board," John A. Challenger said. "Companies not only have been hit hard by this downturn, but they do not see a rebound any time in the near future."
Earnings: Thursday Before Open
- AbitibiBowater (ABH): Q3 EPS of -$1.81 misses by $0.01. Revenue of $1.73B (+112.3%) in-line. "Based on customer input, we expect a further decline in North American newsprint consumption," it says. (PR)
- AutoNation (AN): Q3 EPS of $0.25 misses by $0.04. Revenue of $3.54B (-21.5%) vs. $3.88B. "We expect the rest of 2008 will continue to be challenging and foresee U.S. industry new vehicle sales for 2008 in the low 13-million unit level, an 18-year low," company says. It sees 2009 sales at 12M. (PR)
- Cott (COT): Q3 EPS of -$1.25 vs. consensus of $0.03. Revenue of $420.5M (-9.5%) vs. $443M. (PR)
- Dynegy (DYN): Q3 EPS of $0.72 beats by $0.62. Revenue of $1.89B (+80.3%) vs. $1.25B. (PR)
- Lamar Advertising (LAMR): Q3 EPS of $0.04 misses by $0.01. Revenue of $312M (-0.6%) vs. $306M. (PR)
- Huntsman (HUN): Q3 EPS of -$0.01 misses by $0.11. Revenue of $2.73B (+12.7%) in-line. (PR)
- IAMGOLD Corp. (IAG): Q3 EPS of $0.06 misses by $0.01. Revenue of $227M (+33.4%) vs. $189M. (PR)
- James River Coal (JRCC): Q3 EPS of -$0.86 misses by $0.48. Revenue of $152M (+16.7%) vs. $160M. "We believe that the volatility in financially traded coal contracts has been greatly influenced by factors other than the underlying supply and demand for coal," including tight credit conditions on several large traders. Expects the impact of these factors will be reduced during the next several months. Shares -22%. (PR)
- King Pharmaceuticals (KG): Q3 EPS of $0.33 beats by $0.07. Revenue of $388M (-28.7%) vs. $362M. (PR)
- Nasdaq OMX (NDAQ): Q3 EPS of $0.52 in-line. Revenue of $411M (+6.9%) vs. $420M. (PR)
- OfficeMax (OMX): Q3 EPS of $0.36 beats by $0.03. Revenue of $2.1B (-9.5%) in-line. Sees "significant sales declines as a result of both the existing difficult economic environment and a weaker 2008 holiday selling season than last year." (PR)
- Pinnacle Airlines (PNCL): Q3 EPS of $0.43 beats by $0.05. Revenue of $222M (+7.8%) in-line. (PR)
- Pinnacle Entertainment (PNK): Q3 EPS of -$0.14 misses by $0.07. Revenue of $263M (+10.5%) in-line. (PR)
- Perrigo Company (PRGO): FQ1 EPS of $0.41 misses by $0.02. Revenue of $480M (+25.4%) vs. $496M. Shares -3.2%. (PR)
- Smith & Nephew (SNN): Q3 EPS of $0.61 misses by $0.07. Revenue of $930M (+10.1%) vs. $950M. Shares -12%. (PR)
- Toyota (TM): FQ2 net profit fell 69% to ¥139.8B. "We are in a difficult economic climate facing a variety of risks and uncertainties, including higher energy and raw material prices," it said. Shares -7.3%. (PR)
- Tyco Electronics (TEL): FQ4 EPS of $0.69 beats by $0.04. Revenue of $3.71B (+6.3%) in-line. Sees FQ1 EPS of $0.24-0.28 vs. $0.54. (PR)
- Virgin Media (VMED): Q3 EPS of £0.37 misses by £0.13. Revenue of £991M (-1.5%) vs. £1.12B. (PR)
- Warnaco Group (WRC): Q3 EPS of $0.62 misses by $0.10. Revenue of $549M (+16%) vs. $520M. Sees full-year EPS of $2.50-2.65 vs. $2.87. Shares -7.1%. (PR)
Earnings: Wednesday After Close
- Activision Blizzard (ATVI): FQ2 EPS of $0.07 beats by $0.03. Revenue of $711M (+118.1%) vs. $632M. Shares +9.3%. (PR)
- Cisco Systems (CSCO): FQ1 EPS of $0.42 beats by $0.03. Revenue of $10.3B (+7.8%) in-line. Gross margin of 64.7% vs. 65.1% consensus. Shares -11%. (PR)
- Hertz Global (HTZ): Q3 EPS of $0.33 misses by $0.19. Revenue of $2.42B (-1.1%) in-line. Hertz says it will not meet its previous outlook, and suspends further guidance. Shares -11%. (PR)
- News Corp. (NWS): FQ1 EPS of $0.20 misses by $0.03. Revenue of $7.51B (+6.3%) in-line. Shares -11.4%. (PR)
- Teva Pharmaceutical (TEVA): Q3 EPS of $0.72 beats by $0.02. Revenue of $2.84B (+20.1%) in-line. Shares -6.1%. (PR)
- THQ Inc. (THQI): FQ2 EPS of -$0.46 misses by $0.08. Revenue of $165M (-28.1%) vs. $160M. Sees FQ3 EPS of $0.05-0.15 vs. $1.09 and revenue of $400-420M vs. $566M. Announces restructuring plan to focus on fewer, higher quality titles. (PR)
- Whole Foods Market (WFMI): FQ4 EPS of $0.13 in-line. Revenue of $1.79B (+2.6%) in-line. Announces $425M equity investment by Leonard Green & Partners. Shares +19.3%. (PR)
- Asia finishes deep in the red. Nikkei -6.53% to 8,899. Hang Seng -7.08% to 13,790. Shanghai -2.44% to 1,718. BSE Sensex -3.81% to 9,734.
- In Europe, London -2.1%. Paris -2.7%. Frankfurt -2.7%.
- U.S. futures are sharply lower, but up quite a bit from their overnight lows. Dow -0.97% to 9091. S&P -1.28% to 946. Nasdaq -1.93%. Crude -2.6% to $63.60. Gold +0.3% to $744.70.
Thursday's Economic Calendar
- 6:00 Retail Same-Store Sales
6:00 Monster Employment Index
7:00 BoE Announcement
7:45 ECB Announcement
8:30 Productivity and Costs
8:30 Jobless Claims
10:35 EIA Natural Gas
4:30 PM Money Supply
- Notable earnings before Thursday's open: ABH, ABV, AN, ANSS, ARD, BRL, BX, BZH, CCOI, CDL, CEG, CHTR, CLR, CXW, DPTR, DTV, DYN, EP, FLO, FTO, GOL, HK, HUN, IAG, INCY, JRCC, KG, LAMR, LINE, NDAQ, NRF, OMG, OMX, PCG, PNK, PRGO, SE, SFY, SNH, SONS, TEL, TEVA, TM, VCI, VRX, WEN, WMB, WNR, WRC
- Notable earnings after Thursday's close: AGO, ALKS, ANH, BBI, BYI, CAR, CBG, CEGE, CVTX, DAR, DIS, FLR, FTI, GNW, HANS, HGSI, IRF, MVSN, NDN, NKTR, NVDA, ONXX, PCLN, PDLI, PSA, PXP, QCOM, SAPE, SD, SWKS, TS, UTSI, VRSN
Seeking Alpha editor Rachael Granby contributed to this post.
Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.