What would happen if Fed decides not to taper? The FOMC is expected to slice $10-20B from its $85B-a-month bond-buying program at its policy meeting today, but what if it doesn't? U.S. bond yields could drop back towards 2% "really fast," says Bill Smith, CEO of SAM Advisors, while "equity markets would rally." The dollar would also be hit, says BNP Paribas' Vassili Serebriakov, while BK Asset Management's Kathy Lien reckons that the volatility that non-tapering would cause could threaten the economy.
Cloud subscriptions boost Adobe. Adobe's (NASDAQ:ADBE) shares jumped 5.9% premarket despite the company's FQ3 earnings and its FQ4 guidance missing expectations. Adjusted EPS was $0.32 as profit dropped 59% to $83M, while revenue fell 7.9% to $995.1M. However, investors were impressed with accelerating growth in Adobe's online Creative Cloud service, which added 331,000 subscribers to take it to 1.03M members. The company said that "the overwhelming majority" of its customers are shifting from perpetual to term-based licenses, validating market acceptance of Creative Cloud.
Top Stock News
Shares rise ahead of the Fed. Global equities were mainly higher at the time of writing as markets awaited the word from the FOMC later in the day. The dollar index and 10-year Treasury yields were flat, gold and silver were lower, and crude oil was up.
BlackBerry launches latest smartphone. Struggling to return to relevancy amid huge uncertainty about its future, BlackBerry (NASDAQ:BBRY) has launched its new Z30 flagship smartphone in Malaysia, where BlackBerry Messenger remains popular. The touchscreen device includes a five-inch display, a bigger battery and a 1.7 gigahertz processor. Sales in the U.K. and the Middle East are due to begin next week, although the company didn't provide details about pricing and U.S. availability.
P-E firms battle as Energy Future heads towards bankruptcy. An almighty fight has been brewing between private-equity firms over who will get paid what in the expected bankruptcy filing of Texas power company Energy Future Holdings, which owes over $40B to creditors. One group of debtees includes Apollo Global (NYSE:APO) and another involves Blackstone Group (NYSE:BX). Meanwhile, Energy Future's owners, KKR (NYSE:KKR), TPG and Goldman Sachs (NYSE:GS), which bought the utility in 2007 in a $45B deal, hope to keep some equity.
Electronic Arts names sports chief new CEO. Electronic Arts (NASDAQ:EA) has appointed Andrew Wilson, the head of EA Sports, as CEO to replace John Riccitiello, who resigned six months ago. While the performance of several EA divisions has been volatile, Sports has continued to fare well, thanks in large part to the strength of the Madden and FIFA franchises.
Walgreen to give workers payments to buy own healthcare coverage. Walgreen (WAG) is today expected to become the latest major employer to make big changes to its health program, with the company set to give employees money so that they can buy their own coverage on an exchange. The reasons include rising healthcare costs and expenses related to complying with the new healthcare law. Earlier this month, IBM and Time Warner said they will provide staff with funds to move them from company administered programs to exchanges.
Shuanghui nears investor approval of Smithfield deal. China's Shuanghui International is reportedly on track to receive the approval of over 50% of Smithfield's (NYSE:SFD) investors for its $4.7B acquisition of the U.S. pork producer. Reaching that level would allow Shuanghui to close the deal by Thursday next week. A shareholder vote is due to take place on Tuesday, giving activist investor Starboard, which opposes Shuanghui's offer, little time to find an alternative bidder.
Jana Partners reveals stake in Safeway. The mystery buyer of shares that's making Safeway (NYSE:SWY) skittish appears to be Jana Partners, which has disclosed that it owns 11.4M shares and 3.53M options with October strike dates. The firm's total position of 6.2% in the grocery store operator gives it a significant voice. Safeway has adopted a poison pill in response to the accumulation of shares. Shares jumped 10.5% yesterday but fell 1.3% in AH trading.
Sharp to raise almost $1.7B. Sharp (OTCPK:SHCAF) intends to raise up to 166.5B yen ($1.68B) through a public offering of shares and via third-party placements in a move that will bolster the finances of the electronics company, which has been trying to recover from a severe crisis for over a year. Sharp also increased its guidance for FH1, saying it expects an operating profit of ¥30B vs a prior forecast of ¥15B and a loss of ¥168.90B a year earlier. The fundraising adds to investments that Sharp has received from Samsung (OTC:SSNLF) and Qualcomm (NASDAQ:QCOM).
AT&T to expand reach in Latin America via deal with America Movil. AT&T (NYSE:T) plans to unveil a partnership with America Movil (AMOV, AMX) today that will extend the U.S. carrier's reach for business customers in Latin America to 15 countries, including Argentina, Chile and Colombia. Before this, AT&T's focus in the region was mainly on Mexico and Brazil. AT&T has a long-standing relationship with America Movil and analysts have speculated that the firms could team up to expand in Europe.
Top Economic & Other News
BOE united in keeping policy on hold. The Bank of England's Monetary Policy Committee voted unanimously to keep interest rates at 0.5% and against more bond-buying at a meeting earlier this month. With data showing that the U.K.'s recovery is taking hold, "no ((NYSE:MPC)) member judged that further stimulus was appropriate at present." That's a change from August, when some in the MPC felt there was a "compelling" case for loosening policy. The pound spiked vs the dollar and was +0.4% at $1.5965 at the time of writing, while the FTSE was +0.15%.
CBO: U.S. risks fiscal crisis despite cuts. Notwithstanding $2.1T in spending cuts that Congress passed in 2011, entitlement spending will continue to rise over the next 25 years - "unless substantial changes are made" - and could at some point cause a fiscal crisis, the Congressional Budget Office said yesterday. One of the main problems is that an aging population will put strains on Medicare and Social Security, and cause public debt to balloon.
Number of poor rises slightly. The number of U.S. residents living below the poverty line edged up to 46.5M last year from 46.2M in 2011, although the national rate was unchanged at 15%. Median household income fell a bit to $51,017 from $51,100. The poverty line for 2012 is defined as an income of $23,492 for a family of four. Around 16.1M children and 3.9M seniors were living in poverty.
China's housing market continues to froth. New-home prices in China increased in 69 out of 70 tracked cities in August, rising 8.3% on year across the country. In Guangzhou, prices jumped 19%, in Shenzen 18%, and in Shanghai and Beijing 15%. Despite fears about a bubble, the government seems unworried by the inflation, noting that on month, prices increased 0.8% vs 1.7% in March. "The government is unlikely to take strong action nationwide to curb the property market, as that may damp economic growth," says JPMorgan's Zhu Haibin.
Alpha-Rich Stock Movers and Great Calls
1) Last Thursday, Helix Investment Research showed how Aware's (NASDAQ:AWRE) shutdown of an unprofitable business would allow the company's core business to shine, with 20% upside. The stock is +8.5% since. Read article »
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Alpha-Rich Stocks To Watch
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In Asia, Japan +1.4% to 14505. Hong Kong -0.3% to 23117. China +0.3% to 2192. India +0.8% to 19962.
In Europe, at midday, London +0.15%. Paris +0.5%. Frankfurt +0.5%.
Futures at 6:20: Dow +0.1%. S&P +0.15%. Nasdaq +0.3%. Crude +0.7% to $106.15. Gold -0.6% to $1301.60.
Ten-year Treasury Yield flat at 2.85%.
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