Today's Market: Death Of Cable TV, Industrials Lower Guidance, And China Tries To Rein In Its Bull Market

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Includes: CHTR, CMCSA, DISH, GE, HON, T, VZ
by: Matthew Smith

Summary

VZ is offering a package that includes 36 base channels, two channel packs and broadband access for $65/month.

GE & HON announced strong EPS results this quarter, but revenues which lagged due to US Dollar strength.

Chinese regulators are tightening margin lending and making it easier for investors to engage in short selling.

China hates bubbles, and just when the rest of the world began to look at the Chinese stock markets as potentially being overheated, Chinese regulators stepped in with new regulations. Although Shanghai finished up on today's session, expect all Chinese markets to trade sharply lower on Monday as the market has a chance to react to tighter margin lending, warnings from Chinese regulators and major exchanges making it easier to short stocks on the country's major exchanges. This is an effort to increase the supply of shares available to the market and allow investors to cool off for a while. The hope in China is that they enacted these move prior to everything getting overheated, but the fear for the rest of the world is that China may have overreacted and could kill their bull market.

One other issue that readers should be aware of is that Bloomberg terminals went down earlier today, which caused outages at major trading floors across the globe. So some charts might reflect this lack of activity during the early morning hours and it is the Bloomberg outage which caused it.

Chart of the Day:

While China's market has been on a tear over the last year, it is still a good bit off from the highs hit in 2007 prior to the financial crisis. Monday shall be a very interesting day, our guess is that the Shanghai market falls 4-6% on this latest news.

Source: CNBC

We have economic news today, and it is as follows:

  • CPI (8:30 a.m. EST): Est: 0.2% Act: 0.2%
  • CPI - Ex Food & Energy (8:30 a.m. EST): Est: 0.1% Act: 0.2%
  • Consumer Sentiment (10:00 a.m. EST): Est: 95.0 Act: 95.9
  • Leading Indicators (10:00 a.m. EST): Est: 0.3% Act: 0.2%

The Asian markets are lower today:

  • All Ordinaries - down 1.17%
  • Shanghai Composite - up 2.23%
  • Nikkei 225 - down 1.17%
  • NZSE 50 - down 0.34%
  • Seoul Composite - up 0.17%

In Europe, markets are lower today:

  • CAC 40 - down 1.49%
  • DAX - down 2.15%
  • FTSE 100 - down 1.04%
  • OSE - down 1.74%

Verizon Unbundles Pay TV

I do not live in a Verizon (NYSE:VZ) service area, but this morning I find myself wishing that I did because of the company's new pay TV plans which unbundle the TV programming package. The new plans stop short of a-la-carte models consumers have long demanded, but they certainly go a long way in not only giving consumers more choice but also more control over how much they pay per month.

What Verizon has created is an offering which comes with a base package of 36 channels, two genre-based channel packs and broadband access for $65/month. Consumers can pick any two genre-based channel packs they want and after having those packs for 30 days are free to switch out the channel packs for other genres if they would like to. This would be great for consumers who like only one sport or a certain show that comes on in the fall, as the flexibility allows them to shift their package back and forth to get access to that content. Also, channel packs can be added to the overall bundle for $10/pack per month.

Verizon, which is the sixth largest pay TV provider in the US through its FiOS service, is looking to make its offerings more attractive in the wake of fierce competition from web-based streaming services and value package offerings such as Dish Network's (NASDAQ:DISH) new Sling TV package. If this begins to attract consumers to Verizon, one would have to expect competitors such as Comcast (NASDAQ:CMCSA) (CMCSK), Time Warner Cable (TWC) and Charter Communications (NASDAQ:CHTR) to respond with similar packages. If fellow telecom company AT&T (NYSE:T) launches a nationwide plan along these lines, all of the cable companies would have to fall in line as they would not want to lose the broadband customers.

Industrial Revenues Lag, Earnings Beat

Two industrial giants, General Electric (NYSE:GE) and Honeywell (NYSE:HON) announced their quarterly results, and while both companies exceeded analysts' estimates on the EPS figure, both missed revenue estimates as currency headwinds grew stronger during the latest quarter. While there are some parallels to be draw with the latest quarter's results, we think that it is important to also point out that the multinational industrial companies will continue to face many of the same headwinds, mainly sluggish growth overseas coupled with the drag on results created by the strong US dollar.

The strong US dollar is the reason why Honeywell lowered its guidance for the upcoming year, saying that revenues would come in at $39 billion rather than the $39.6 billion previous expected. While revenues were guided down, EPS guidance was increased as stronger margins are expected to boost the bottom line; full year EPS are now expected to be between $6 and $6.16 per share.

General Electric's currency hit this quarter was $950 million.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: T & VZ have previously been recommended.