- Fed stays put. The Fed Open Market Committee left target rates unchanged at 0-0.25% by unanimous vote, saying conditions are still "likely to warrant exceptionally low levels of the federal funds rate for an extended period." The Fed acknowledged an ongoing pickup in economic activity, but warned things are likely to remain weak for a while. It noted "substantial" resource slack will continue to dampen cost pressures, and it continues to believe "inflation will remain subdued for some time." It also pared its expectations for buying agency debt and agency MBS to $175B compared to a former maximum of $200B, to wrap up by the end of Q1. Here's a side-by-side comparison of Wednesday's statement with the previous one. Stocks surged after the statement, but a late-day selloff sent major indexes back to breakeven.
- Dodd's drastic detour on bank regulation. Senate Banking Committee Chairman Christopher Dodd is reportedly readying legislation that would strip the Fed and FDIC of almost all their bank-supervision powers, creating in their place a new agency in charge of supervising all banks and bank-holding companies. Dodd's proposal would also create a council of regulators, overseen by the White House, to monitor systemic risks to the financial system. The suggestion is in stark contrast to approaches taken by the House and favored by the Obama administration, which have pushed to expand the Fed's powers. Dodd's model is likely to face heavy resistance, particularly from the banking industry, which is ironic since Dodd has been criticized for being too cozy with Wall Street bankers.
- Skype deal almost done. The private-equity investors that agreed to buy 65% of Skype from eBay (NASDAQ:EBAY) for about $2.1B are on the verge of settling their dispute with Skype's founders in a deal that will give them 10% of Skype and a presence on its board, in exchange for giving up rights to the peer-to-peer technology they control and a significant amount of cash. An official announcement could come as soon as this morning.
- Senate shuffles taxes. The Senate passed legislation Wednesday that would give tax breaks to big companies impacted by the recession; increase taxes on multinational firms; extend and expand the homebuyers tax credit; and lengthen unemployment benefits. The proposed tax increases are aimed at offsetting the cost of the breaks, which business leaders worry may be a harbinger of more tax increases to come.
- Chambers sounds all clear. Cisco's (NASDAQ:CSCO) net profit dropped 19% on lower sales (see data below), but CEO John Chambers gave an optimistic outlook on the economy and said businesses were ready to resume spending on technology. On Cisco's Q3 earnings call, Chambers told analysts the recovery "is well underway" and that economic improvements were "gaining momentum" worldwide. He also predicted Cisco's revenue would grow in Q4 after a year of contraction.
- Junk default rate hits post-Depression high. The global speculative-grade default rate rose to 12.4% in October, surpassing the record set in 1991 for the highest proportion of defaults since the Great Depression, Moody's said in a report this morning. Moody's believes the default rate may peak in November at 12.5%, noting the total number of defaults declined to eight in October, the lowest count this year.
- Big bonuses are back. Wall Street incentive pay is set to rise by about 40% according to a closely-watched survey to be released today, as stronger markets collide with the backlash over bonuses. Johnson Associates predicts incentive-based payouts will surge by as much as 60% from 2008, led by employees in rebounding businesses like fixed income and equities. In contrast, the firm predicts declines of 15-30% at hedge funds, private-equity firms and prime-brokerage operations which have seen a marked drop in AUM.
- Consumer bankruptcy strikes new high. Consumer bankruptcy filings hit 135,913 in October, an 8.9% jump from September, and 27.9% higher than a year ago, according to a study by the American Bankruptcy Institute. "The debt overhang from literally a decade or more of really high consumer spending and low savings rates has put families in a particularly vulnerable spot," ABI's Samuel Gerdano said. The rise outpaced a 7% month-on-month increase in business filings.
- Downgrade dominance declines. S&P said it downgraded only one more nonfinancial firm in October than it upgraded (24-23), a marked improvement considering the downgrade/upgrade ratio from Sept. 2008 to Aug. 2009 was 835-115. S&P said the large drop "supports our belief that aggregate credit quality, although weak, is stabilizing," and noted that the number of companies with a negative ratings outlook or on watch for downgrade has declined steadily. Meanwhile, more than $4B in new corporate bonds were offered Wednesday, including a $2B sale by DuPont (NYSE:DD).
- BOE boosts bond buying: The Bank of England kept its target bank rate at 0.5%, as expected, but raised its bond buying program to £200B from £175B, which it expects to complete in about three months. "Banks’ funding conditions have improved, though financial conditions remain fragile," the Bank said, and noted "a number of indicators of spending and confidence, however, suggest that a pickup in economic activity may soon be evident."
- Private-sector jobs still sliding. ADP's October employment report showed private U.S. payrolls declined by 203,000, while revising September's loss to 227K from 254K - the seventh straight month of declining job losses. ADP's report comes two days before the government's official nonfarm payroll data, and has been reasonably well correlated with NFP data in recent months. Consensus estimates suggest 150–175K job losses in October and an unemployment rate of 9.9%.
- Online job seeking rises slowly. Monster's index of online job advertising inched up to 120, vs. 119 in Sept and 150 a year ago. Healthcare and public administration demonstrated solid growth, but retail and hospitality hiring retracted. "The rise in the October Index, along with an improvement in the annual rate, indicate a mild expansion in the underlying employer demand for workers," Monster said. "While the decline in consumer confidence has likely contributed to reduced job demand in the retail and hospitality sectors, employers are actively recruiting in the healthcare and public sectors, resulting in stability of the overall Index."
Earnings: Thur. Before Open
- Allied Capital (NYSEARCA:ALD): Q3 EPS of $0.02 misses by $0.05. Revenue of $M in-line. Shares -1.3% premarket. (PR)
- Biovail (BVF): Q3 EPS of $0.44 beats by $0.04. Revenue of $212M in-line. (PR)
- Cardinal Health (NYSE:CAH): FQ1 EPS of $0.54 beats by $0.11. Revenue of $24.8B (+5.9%) vs. $24B. (PR)
- Canadian Natural Resource (NYSE:CNQ): Q3 EPS of C$1.21 misses by C$0.04. Revenue of C$2.82B (+2.7%) vs. C$2.99B. (PR)
- CenturyTel (NYSE:CTL): Q3 EPS of $0.90 beats by $0.09. Revenue of $1.87B (+188.3%) in-line. (PR)
- CIGNA (NYSE:CI): Q3 EPS of $1.13 beats by $0.10. Revenue of $4.52B (-6.9%) in-line. (PR)
- CVS Caremark (NYSE:CVS): Q3 EPS of $0.65 beats by $0.01. Revenue of $24.6B (+17.7%) in-line. Shares +1% premarket. (PR)
- Delta Petroleum (DPTR): Q3 EPS of -$0.35 misses by $0.24. Revenue of $23.9M (-66.8%) vs. $21.9M. "We are extremely disappointed with the results of the Gray well, but exploration drilling carries with it significant risks." Shares -12.8% premarket. (PR)
- DirecTV Group (DTV): Q3 EPS of $0.37 misses by $0.02. Revenue of $5.47B in-line. (PR)
- Dr Pepper Snapple (DPN): Q3 EPS of $0.54 beats by $0.05. Revenue of $1.43B (-4%) in-line. Sees full-year EPS of $1.92-1.96 vs. $1.97. ""While the economy is showing some signs of recovery, it's still too early to see this translate into higher beverage sales. For the quarter, liquid refreshment beverage trends remained negative." Shares +0.7% premarket. (PR)
- Dynegy (NYSE:DYN): Q3 EPS of -$0.10 misses by $0.13. Revenue of $673M (-61.7%) vs. $877M. (PR)
- Frontier Oil (NYSE:FTO): Q3 EPS of -$0.26 misses by $0.11. Revenue of $1.1B (-45.4%) in-line. (PR)
- King Pharmaceuticals (KG): Q3 EPS of $0.29 beats by $0.02. Revenue of $463M (+19.3%) vs. $445M. (PR)
- Lamar Advertising (NASDAQ:LAMR): Q3 EPS of -$0.05 beats by $0.11. Revenue of $167M (-13%) vs. $164M. (PR)
- Macerich (NYSE:MAC): Q3 FFO of $0.97 beats by $0.05. Revenue of $201M (+49.8%) in-line. (PR)
- Manulife Financial (NYSE:MFC): Q3 EPS of C-$0.12 misses by C$0.32. Revenue of C$13.75B. (PR)
- MGM Mirage (NYSE:MGM): Q3 EPS of $0.02 beats by $0.10. Revenue of $1.71B (-12.7%) vs. $1.47B. Las Vegas Strip RevPAR fell 21%. Amends credit facility to refinance existing debt and provide more debt of up to $1B. Shares +5.7% premarket. (PR)
- MetroPCS Communications (PCS): Q3 EPS of $0.21 beats by $0.12. Revenue of $895M (+30.4%) vs. $869M. (PR)
- MF Global (MF): FQ2 EPS of $0.01 misses by $0.03. Revenue of $493M (-40.9%) vs. $273M. (PR)
- Nasdaq (NASDAQ:NDAQ): Q3 EPS of $0.42 in-line. Revenue of $691M (+3.3%) vs. $355M. (PR)
- Petrohawk Energy (NYSE:HK): Q3 EPS of $0.14 beats by $0.02. Revenue of $238M (-22%) vs. $305M. (PR)
- Plains Exploration & Production (NYSE:PXP): Q3 EPS of $0.30 misses by $0.23. Revenue of $313M (-56.5%) vs. $376M. Shares -0.6% premarket. (PR)
- Sara Lee (SLE): FQ1 EPS of $0.24 beats by $0.08. Revenue of $2.59B (-7.4%) vs. $3.16B. Shares +0.2% premarket. (PR)
- Sirius XM Radio (NASDAQ:SIRI): Q3 EPS of $0.00 beats by $0.02. Revenue of $630M (+2.8%) vs. $609M. Ends quarter with 18,515,730 subscribers, +102,295 from Q2. Shares +3.9% premarket. (PR)
- Spectra Energy (NYSE:SE): Q3 EPS of $0.30 beats by $0.04. Revenue of $933M (-13.6%) vs. $986M. (PR)
- Teradata (NYSE:TDC): Q3 EPS of $0.38 beats by $0.09. Revenue of $425M (-3.2%) in-line. (PR)
- Thomson Reuters (NYSE:TRI): Q3 EPS of $0.43 beats by $0.03. Revenue of $3.21B (-3.6%) in-line. "While the weak year-to-date net sales experienced in recent quarters are now flowing through into revenues, we expect this dip to be shallow and limited to the next few quarters." (PR)
- Time Warner Cable (TWC): Q3 EPS of $0.76 beats by $0.01. Revenue of $4.5B (+3.6%) in-line. (PR)
- Watson Wyatt (WW): FQ1 EPS of $0.84 beats by $0.12. Revenue of $401M (-5.8%) vs. $394M. Sees FQ2 EPS of $0.81-0.86 vs. $0.89 (PR)
- Wendy's Arby's Group (NYSE:WEN): Q3 EPS of $0.06 in-line. Revenue of $903M vs. $916M. Shares +3.8% premarket. (PR)
Earnings: Wed. After Close
- Allstate (NYSE:ALL): Q3 EPS of $0.99 misses by $0.02. Revenue of $7.6B (+4%) vs. $8.5B. Shares -2.1% AH. (8-K)
- Amdocs (NYSE:DOX): FQ4 EPS of $0.53 beats by $0.04. Revenue of $707M (-14%) vs. $679M. Sees Q1 EPS of $0.51-0.55 vs. $0.50, on revenue of $705M-725M vs. $676M. Shares +6.2% AH. (PR)
- Cisco Systems (CSCO): Q3 EPS of $0.36 beats by $0.05. Revenue of $9B (-13%) vs. $8.7B. Shares +2.8% AH. (PR)
- Corrections Corp. of America (NYSE:CXW): Q3 EPS of $0.39 beats by $0.07. Revenue of $426M (+6%) vs. $423M. Shares -2.7% AH. (PR)
- Eagle Bulk Shipping (NASDAQ:EGLE): Q3 EPS of $0.06 beats by $0.03. Revenue of $42M (-19%) in-line. Shares -5.7% AH. (PR)
- Evergreen Solar (ESLR): Q3 EPS of -$0.40 misses by $0.32. Revenue of $78M (+251%) vs. $74M. Shares +2.1% AH. (PR)
- Goldcorp (NYSE:GG): Q3 EPS of $0.19 beats by $0.03. Revenue of $692M (+25%) vs. $614M. Shares +2.1% AH. (PR)
- Goodrich Petroleum (GDP): Q3 EPS of -$0.87 misses by $0.70. Revenue of $24M (-61%) vs. $52M. Shares -7% AH. (PR)
- Health Care REIT (NYSE:HCN): Q3 FFO (normalized) of $0.77 in-line. Revenue of $145M (+4%) vs. $143M. Sees full-year EPS of $3.10-3.12 vs. $3.13. Shares +1.6% AH. (PR)
- ION Geophysical (NYSE:IO): Q3 EPS of -$0.06 misses by $0.03. Revenue of $102.4M (-53%) vs. $102.6M. Shares -8.4% AH. (PR)
- Microchip Technology (NASDAQ:MCHP): FQ2 EPS of $0.29 beats by $0.08. Revenue of $227M (-16%) vs. $218M. Sees FQ3 EPS of $0.33-0.35 vs. $0.24, on revenue of $236M-245M vs. $224M. Shares +1.6% AH. (PR)
- Murphy Oil (NYSE:MUR): Q3 EPS of $0.98 misses by $0.01. Revenue of $5.2B (-37%) vs. $4.4B. Sees Q4 EPS of $0.75-0.90 vs. $1.18. Shares -2% AH. (PR)
- News Corp. (NASDAQ:NWS): FQ1 EPS of $0.22 beats by $0.04. Revenue of $7.2B (-4%) in-line. Shares +3% AH. (PR)
- ON Semiconductor (ONNN): Q3 EPS of $0.16 beats by $0.06. Revenue of $473M (-19%) vs. $455M. Shares +4% AH. (PR)
- Prudential Financial (NYSE:PRU): Q3 EPS of $1.59 beats by $0.26. Revenue of $6.6B (+4%) vs. $6.65B. Shares +0.4% AH. (PR)
- Qualcomm (NASDAQ:QCOM): FQ4 EPS of $0.48 misses by $0.04. Revenue of $2.7B (-19%) vs. $2.8B. Sees Q1 revenue of $2.55B-2.75B vs. $2.84B. Shares +1% AH. (PR)
- Sunstone Hotel Investors (NYSE:SHO): Q3 FFO of $0.14 in-line. Revenue of $176M (-20%) vs. $180M. Shares +2% AH. (PR)
- THQ (THQI): FQ2 EPS of -$0.08 beats by $0.40. Revenue of $101M (-39%) vs. $92M. Shares +11.5% AH. (PR)
- Whole Foods Market (WFMI): FQ4 EPS of $0.20 beats by $0.02. Revenue of $1.8B (-2%) in-line. Same-store sales down 0.9%. Shares -7.7% AH. (PR)
Asian markets were mixed Thursday. Europe is lower at midday, and futures are flat.
- Asia: Nikkei -1.3% to 9717. Hang Seng -0.6% to 21479. Shanghai +0.8% to 3155. BSE +0.9% to 16064.
- Europe at midday: FTSE -0.5% to 5082. CAC -0.4% to 3656. DAX -0.3% to 5426.
- Futures: Dow -0.1% to 9778. S&P -0.1% to 1046. Nasdaq -0.25%. Crude -0.6% to $79.90. Gold +0.1% to $1,089.20. 30-year Tsy +0.45% to 118-20. 10-year +0.25%. 5-year +0.19%. 2-year +0.05%. Euro -0.2% vs. dollar. Yen +0.3%. Pound -0.3%.
4:00 Monster Employment Index
5:00- Retail same-store sales
7:00 BOE Rate Decision
7:45 ECB Rate Decision
8:30 Initial Jobless Claims
8:30 Productivity and Costs
8:30 IMF Macroeconomic Conference, Day 1
10:30 EIA Natural Gas Inventory
- Notable premarket earnings: ALD, BVF, CAH, CDE, CI, CNQ, CTL, CVS, DNR, DPS, DPTR, DTV, DYN, FTO, GNA, HK, KG, KIM, LAMR, MAC, MF, MGM, NDAQ, OCR, PCS, PXP, RRI, SE, SIRI, SLE, TDC, TWC, WEN, WW
- Notable postmarket earnings: ATML, ATVI, BID, CBS, CIM, CROX, EOG, HANS, IGT, IPI, JDSU, LEAP, NVDA, PSA, SBUX, SD, SUN, SWKS, TIE, TS, VRSN
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