U.S. Stocks Seen Lower; Earnings Take the Stage (TheStreet.com)
It's a lower open, but probably an up day. S&P futures are only down marginally, by 8.7 points, while Nasdaq futures are lower by 21 points. Most of this is to do with fears over earnings of Texas Instruments, but then again, E*Trade and Yahoo! report after the bell, and may well beat dismal expectations. If that happens, there will be a surge at the close.
Overnight Dollar Libor Declines to 1.28 Percent, BBA Says (Bloomberg)
Good news! At long last ... LIBOR has fallen below the federal reserve's target for the first time since October 3rd. The rate dropped 23 basis points.
Nikkei, Sensex extend gains, Hang Seng retreats (Marketwatch)
Asian markets were mixed but mostly down overnight; the Nikkei gained 3.3%, China's Shanghai Composite Index slipped 0.8%, and the Hang Seng slid 1.8%. The drop in shares in Hong Kong was mainly down to China Mobile reporting lower than expected earnings, and conglomerate Citic Pacific facing a $1.9 billion foreign exchange loss. The reality is, the U.S. will probably emerge from the credit crunch in pristine condition when compared with how Asia's economies will suffer. Expectations for growth are so high over there that few companies this earnings season can possibly jump over the pole. India's Sensex was up 4%, but that was down to a one percentage point rate cut (to 8%) and possible restrictions on short selling. Well, we all know how that works out in the end.
Oil Declines as Dollar's Gain Dims Commodities' Appeal as Hedge (Bloomberg)
Those who claim the era of a high U.S. dollar and falling oil prices are over ought to think again: oil is down to $73.12 a barrel, while the dollar is at a one month high vs. the euro. Unicredit analyst Jochen Hirtzfeld says: "We think OPEC will cut production by about 1 million barrels, stabilizing prices.'' Yeah, right. And Goldman though oil was stable at $150 in May.
U.S. Moves Toward Stimulus as Bernanke, Bush Shift (Bloomberg)
There's another stimulus package on the way. Details are as yet unclear, but Bernanke wants to "open the idea" of a second round of cash infusions to the economy, since the credit crunch is "hitting home." Paulson claims there's enough money now set aside for the government to buy stakes in financial firms that are hit by the credit freeze.
Sun Eclipsed By Poor Results--Again (Forbes.com)
The sun never seems to shine on Sun Microsystems, despite the enormous validity of hardware today. Sun said yesterday that it expects to report revenue of around $3 billion, compared with estimates of $3.2 billion. "Sun and its customers are seeing the impact of a slowing economy," according to chief exec Jonathan Schwartz. Given that tech is beating the street broadly across the board, this doesn't resonate well. Sun is a badly run company, and has been for decades. That's all.
Fannie and Freddie's Regulator Suggests U.S. Backs Their Debt (WSJ)
This was a story all over the wires yesterday, mainly because nothing was happening other than that the markets were going up. Nevertheless, here it is: James Lockhart, director of the Federal Housing Finance Agency, has basically announced that Fannie and Freddie won't go under, because the federal government won't let them. "The U.S. government will be behind them short, medium and long term," said Lockhart. While he shouldn't be saying these kinds of things, this is hardly news to anyone.
French banks may need more cash despite aid (Reuters)
... Another day, another bailout. French banks are getting a 10.5 billion euro ($13.9 billion) cash injection, although analysts are saying they may need more than that -- which isn't saying much. In truth, they probably will not need any more funding. Credit Agricole and BNP Paribas (which by the way has a huge Asian presence) are up 13%, and 8%, respectively on the funding announcement.
Earnings Roundup: PFE, DD, FITB, USB, SGP, BLK (CNBC.com)
Pfizer beat the street by 2 cents a share; Schering-Plough beat the street with $551 million in earnings; Dupont beat the street by around 10%; U.S. Bancorp missed by around 25% of analysts' expectations. Drug companies don't mean so much here, as they tend to be pretty recession proof: AMEX however, bodes well (see next article).
AmEx: 24% profit drop, better than forecasts (CNN Money)
Difficult to see if this is good or bad news. AMEX said it earned $815 million, or 70 cents a share, beating the street's expectations by more than 20%. While this shows a big contraction in consumer credit, it also shows the contraction we're forecasting may be smaller than we think.