Market Primer: Wednesday, October 23: Fed Taper Outlook Looking Cloudy
Delayed US nonfarms payrolls data on Tuesday further supported the case for the Federal Reserve to continue with its $85 billion per month bond buying plan.
The report showed that US employers added just 148,000 new jobs in September, below analysts’ expectations. The figure added to growing speculation that the bank won’t reduce its stimulus spending until 2014 and sent US share markets soaring as investors looked to get returns before the taper begins.
In other news around the markets:
- Apple released its latest product lineup on Tuesday to unimpressed investors. The company’s latest products include an iPad Air and an iPad Mini, however the presentation didn’t have the impact that Apple was hoping for. Apples shares slipped 0.3 percent on Tuesday and several of the company’s Taiwan based suppliers fell up to 2 percent.
- New details about JP Morgan Chase & Co’s settlement negotiations with the US government show that the firm will likely pay closer to $9 billion, rather than the $13 billion originally reported. The majority of the deal is expected to be tax deductible, which would relieve JP Morgan from about $4 billion of its settlement.
- Healthcare.gov, a website aimed at helping the American public access Obamacare has been plagued with glitches since it was rolled out. Although President Obama has announced that a “tech surge” would be launched this weekend, Chairman of the House Oversight and Government Reform Committee Darrell Issa has begun his own investigation by asking tech companies like Google and Microsoft to divulge their involvement in fixing the website.
- Australia’s higher than expected CPI data has solidified the Reserve Bank of Australia’s neutral stance and caused most to believe the bank will not make any rate cuts for the remainder of 2013. Although the data does not suggest the prospect of a rate increase, it makes further rate reductions less likely.
Asian markets stumbled on Wednesday, the Japaanese NIKKEI was down 1.95 percent and the South Korean KOSPI lost 0.99 percent. China’s Shanghai composite was down 1.25 percent and the Shenzhen composite lost 2.03 percent.
European markets also slipped, the UK’s FTSE was down 0.44 percent and the eurozone’s STOXX 600 lost 0.59 percent. The Spanish IBEX lost 1.43 percent and Italy’s MIB was down 1.13 percent.
Brent futures lost 0.67 percent and WTI futures were down 0.87 percent. Precious metals were also lower with gold down 0.81 percent and silver down 0.79 percent. Industrial metals were on the rise with Tin posting the largest gains, up 1.86 percent.
The euro traded at $1.37 on Wednesday and the pound lost some ground against the dollar, down 0.50 percent. The yen gained 0.82 percent against the dollar and the Australian dollar lost 0.81 percent against the greenback.
Notable earnings released on Tuesday included:
- The Travelers Company Inc. (NYSE: TRV) reported third quarter EPS of $2.35 on revenue of $6.45 billion, compared to last year’s EPS of $2.22 on revenue of $5.70 billion.
- Delta Airlines Inc. (NYSE: DAL) reported third quarter EPS of $1.41 on revenue of $10.49 billion, compared to last year’s EPS of $0.90 on revenue of 9.92 billion.
- United Technologies Corporation (NYSE: UTX) reported third quarter EPS of $1.55 on revenue of $15.46 billion, compared to last year’s EPS of $1.37 on revenue of $15.04 billion.
- Lockheed Martin Corporation (NYSE: LMT) reported third quarter EPS of $2.57 on revenue of $11.35 billion, compared to last year’s EPS of $2.21 on revenue of $11.87 billion.
Stocks moving in the pre-market included:
- Corning Inc (NYSE: GLW) gained 24.43 percent in pre-market trade after rising 6.45 percent over the past week.
- Bank of America Corporation (NYSE: BAC) lost 1.24 percent in pre-market trade after falling 0.14 percent on Tuesday
- Citigroup Inc (NYSE: C) lost 0.81 percent after slipping 0.53 percent on Tuesday.
- JP Morgan Chase and Company (NYSE: JPM) fell 0.73 percent in pre-market trade after losing 1.20 percent on Tuesday.
Earnings reports expected on Wednesday include:
- Caterpillar, Inc. (NYSE: CAT) is expected to report third quarter EPS of $1.70 on revenue of $14.40 billion, compared to last year’s EPS 0f $2.54 on revenue of $16.44 billion.
- Boeing Company (NYSE: BA) is expected to report EPS of $1.54 on revenue of $21.65 billion, compared to last year’s EPS 0f $1.35 on revenue of $20.01 billion.
- Bristol-Myers Squibb Company (NYSE: BMY) is expected to report third quarter EPS of $0.44 on revenue of $4.02 billion, compared to last year’s EPS 0f $0.41 on revenue of $3.74 billion.
- Motorola, Inc (NYSE: MSI) is expected to report third quarter EPS of $1.02 on revenue of $2.13 billion, compared to last year’s EPS 0f $0.84 on revenue of $2.15 billion.
- The Cheesecake Factory Incorporated (NASDAQ: CAKE) is expected to report third quarter EPS of $0.52 on revenue of $469.16 million, compared to last year’s EPS of $0.49 on revenue of $453.82 million.
Wednesday’s economic calendar is dominated by central banking news with the Bank of Canada’s interest rate decision and the Bank of England’s monetary policy meeting minutes both due out. Other notable economic releases include China’s manufacturing PMI and New Zealand’s trade balance.
For a recap of Tuesday’s market action, click here.
Tune into Benzinga’s pre-market info show with Dennis Dick and Joel Elconin here.
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