Investors gloomy about Europe. U.S. and European markets closed heavily down yesterday and Asian markets are off this morning as investors grow increasingly wary about Europe's debt crisis. Germany's Merkel tamped down speculation that France and Germany are angling to roll out a "shock and awe" plan this weekend, which was rumored to include upping the eurozone bailout fund to €2T ($2.8T) from €440B and recapitalizing banks. China's slowing growth (see below) also hurt stocks.
BofA swings to a profit. Bank of America (NYSE:BAC) swung to a Q3 profit of $6.2B ($0.56/share), vs. a $7.3B loss a year ago, topping consensus estimates of $0.28/share. Revenue rose 6.4% to $28.45B, $2.5B ahead of consensus. Shares were recently -2.1% premarket as investors digest the complex report, which included $4.5B in "positive fair-value adjustments" and a $1.7B profit on "debit valuation adjustments." In its earnings release, BAC noted it "reduced the size of our balance sheet by $42B from Q2, nearly doubled our Tier 1 common equity ratio since early 2009, and continued to have strong liquidity levels."
China growth slows. China's Q3 GDP rose 9.1% Y/Y, shy of expectations for 9.3%, and down from 9.5% in Q2. Though the numbers are relatively healthy, it marks the country's slowest growth since 2009 and raises concerns that the eurozone debt crisis and general global malaise are taking their toll on China's momentum. Economists are divided on if and when China might now decide to loosen its economic policies.
IBM beats but fails to reassure. IBM (NYSE:IBM) beat earnings expectations and raised its full-year EPS outlook for the third quarter in a row, but shares traded down in yesterday's after-hours session. Investors were disappointed that sales fell short of estimates, and worried management's forecast for Q4 is too rosy given the company's challenges in Systems & Technology and a possible slowdown in general IT spending. In premarket trading, IBM -4.3% (4:45 ET).
Glaxo may bid for Human Genome Sciences. GlaxoSmithKline (NYSE:GSK) may bid $25/share for Human Genome Sciences (HGSI), according to media reports citing their partnership in developing the FDA-approved lupus drug Benlysta. With Merck (NYSE:MRK) and Biogen (NASDAQ:BIIB) also sniffing around the company, Glaxo "could decide now would be an opportune time to make a move on HGS." In AH trading, HGSI +19% to $13.40.
Bearish comments turn Green Mountain red. Green Mountain Coffee (NASDAQ:GMCR) closed down 10.4% yesterday after David Einhorn said he's bearish on the single-serve coffee kingpin, adding that he has a position in the stock. Einhorn is critical of Green Mountain's accounting work, considers its K-Cups to be too expensive, and thinks the company's deal with Starbucks (NASDAQ:SBUX) will prove less lucrative than some expect.
CFTC to vote on commodities speculation. The CFTC is scheduled to vote today on curbing speculative trading in oil, gold and other commodities. The controversial proposal, part of the Dodd-Frank overhaul, has been watered down from an earlier, tougher draft, but is still anathema to financial firms and industry traders that could be forced to scale back their business. Having lost the legislative battle, Wall Street will almost certainly turn to the judicial system in hopes of getting some or all of the regulation overturned.
Australia may ease policy. The minutes of the RBA's Oct. 4 policy meeting, released this morning, suggest Australia's central bank may cut interest rates as soon as November. According to the minutes, a recent rise in unemployment coupled with slowing economic growth means inflation is likely near the bank's target of 2-3%. If the inflation outlook is confirmed by additional data, it would "increase the scope for monetary policy to provide some support to demand, should that prove necessary."
Underwater borrowers may get lifesaver. State and federal officials are reportedly working on a plan that would provide refinancing assistance to some underwater borrowers, provided they aren't behind on their mortgage payments. Sources say the proposal, which was raised last week, is complicating talks between officials and major lenders accused of improper foreclosure practices. Proponents believe the plan will help boost the economy, but frustrated bank execs see it as a particularly costly solution.
Lack of liquidity spooks traders. Hedge-fund traders and other professional investors are finding that a lack of liquidity is making it increasingly difficult to trade individual stocks without causing large price swings. The challenge extends even to such actively traded stocks as Apple (NASDAQ:AAPL) and Netflix (NASDAQ:NFLX), and the result is that many large traders are pulling back from the market rather than risk being hit by liquidity-related volatility.
Credit card late payments rise. Credit card late payments inched up in September, according to five of the country's top six credit card issuers. Though the increases were less than a percentage point each, it's the first time since Feb. 2009 that so many major companies reported a rise in late payments and could be a harbinger of renewed consumer trouble ahead.
Boeing sees more Dreamliner cancellations. One day after China Eastern scrapped 24 Dreamliner orders, Boeing (NYSE:BA) warns of more cancellations. Chinese airlines often act in tandem, and the China Eastern cancellation likely reflects a belief "the recovery in the United States and Europe won't come soon." Also today, China Southern Airlines (NYSE:ZNH) said the delivery of its first Dreamliner will likely be delayed by at least another seven months, but that it remains committed to its orders despite frustration over the delays.
Chevron coming soon to an Asia-Pacific drill site near you. Chevron (NYSE:CVX) plans to start its first offshore southern China drill before year-end, following in the path of Husky (OTCPK:HUSKF) and BG Group (OTCQX:BRGYY) who have found gas reserves there recently. Chevron is betting heavily on natural gas in the Asian-Pacific - where energy demand growth is expected to outdo the U.S. and euro-zone.
Asia: Japan -1.6%. Hong Kong -4.2%. China -2.3%. India -1.6%.
Europe at midday: London -0.9%. Paris -1.7%. Frankfurt -0.3%.
Futures at 7:00: S&P -0.03%. 10-yr +0.22%. Euro -0.3% vs. dollar. Crude -0.2% to $86.45. Gold -1.01% to $1659.65.
Tuesday's Economic Calendar
7:45 ICSC Retail Store Sales
8:30 Producer Price Index
8:55 Redbook Chain Store Sales
10:00 NAHB Housing Market Index
10:00 Hearing: 'The Small Business Jobs Act of 2010' (Geithner)
1:15 PM Bernanke: 'The Effects of the Great Recession on Central Bank Doctrine'
6:30 PM Fed's Lockhart: Economic Outlook
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