Market Primer: Tuesday, October 15: Tuesday Could Be 'Deal Day'
US Senators struck an optimistic tone following talks on Monday, leading many to believe that a deal to reopen the government and avoid default was right around the corner.
Senate Majority Leader Harry Reid hinted at the possibility of a deal on Tuesday saying, “We hope that with good fortune… that perhaps tomorrow will be a bright day”.
In other news around the markets:
- Two day talks between Western leaders and Iran begin on Tuesday, where the two sides will discuss Iran’s disputed nuclear program. Although both sides have admitted that a breakthrough will take time, US officials have said they are prepared to quickly lift economic sanctions if Iran agrees to address concerns about its nuclear work.
- According to European Central Bank officials, Greece will need to undergo yet another round of painful austerity cuts in order to meet its budget targets next year. The country’s bailout funds are likely to run out in mid-2014 which will leave Athens with a near 6 billion euro financing gap. ECB executive board member Jorg Asmussen publically admitted the size of Greece’s funding gap and called on international creditors to do more to plug the hole.
- The Reserve Bank of Australia released its October monetary policy meeting minutes on Tuesday. The report had few surprises with the central bank’s members keeping the option for another rate cut open, depending on the country’s data.
- German Chancellor Angela Merkel wrapped up eight hours of talks with the Social Democrats by scheduling another meeting with the party for Thursday. The Social Democrats are considered Merkel’s most likely coalition partner, but Monday’s meeting revealed that negotiation would not be easy. Merkel has also considered a partnership with the Greens, but since the Social Democrats are one of the country’s largest parties, Merkel will likely try to move forward with their support.
Asian markets were mostly up on Tuesday morning. The Japanese NIKKEI gained 0.12 percent, the South Korean KOSPI rose 0.75 percent and the Hang Seng Index was up 0.48 percent. However China’s Shanghai composite lost 0.11 percent and the Shenzhen composite was down 0.34 percent.
European markets were quiet with the UK’s FTSE up 0.32 percent and the eurozone’s STOXX 600 mostly flat. Italy’s MIB was up 0.19 percent and the Swiss SMI lost 0.10 percent.
Energy futures were down, Brent futures lost 0.09 percent and WTI futures were down 0.19 percent. Precious metals also suffered with gold down 0.31 percent and silver down 0.67 percent. Industrial metals were mixed with aluminum down 0.61 percent but zinc up 0.60 percent
The dollar gained some strength from the prospect of a budget deal on Tuesday. The euro gained 0.04 percent against the American currency and the pound to dollar ratio was unchanged at $1.59. The yen gained 0.15 percent against the greenback.
Notable earnings released on Monday included:
- Stanley Furniture Company (NASDAQ: STLY) reported a third quarter loss of $0.17 per share on revenue of $24.00 million, compared to last year’s loss of $0.14 per share on revenue of $23.98 million.
- Wintrust Financial Corporation (NASDAQ: WTFC) reported third quarter EPS of $0.71 on revenue of $196.40 million, compared to last year’s EPS of $0.66 on revenue of $195.52 million.
Stocks moving in the pre-market included:
- PepsiCo Inc (NYSE: PEP) gained 4.19 percent in pre-market trade after increasing 2.57 percent over the past week.
- Bank of America Corporation (NYSE: BAC) gained 0.70 percent in pre-market trade after rising 1.13 percent on Monday.
- Goldman Sachs Group (NYSE: GS) was up 0.34 percent in pre-market trade after climbing 3.38 percent over the past 5 days.
- Teradata Corp (NYSE: TDC) lost 12.93 percent in pre-market trade after a week of choppy trading took the stock down 1.65 percent.
- Carnival Corp (NYSE: CCL) continued to struggle through a difficult year and lost 0.72 percent in pre-market trade.
Earnings reports expected on Tuesday include:
- Yahoo! Inc. (NASDAQ: YHOO) is expected to report third quarter EPS of $0.33 on revenue of $1.09 billion, compared to last year’s EPS of $0.35 per share on revenue of $1.09 billion.
- Intel Corporation (NASDAQ: INTC) is expected to report third quarter EPS of $0.54 on revenue of $13.47 billion, compared to last year’s EPS of $0.58 on revenue of $13.46 billion.
- Johnson & Johnson (NYSE: JNJ) is expected to report third quarter EPS of $1.32 on revenue of $17.42 billion, compared to last year’s EPS of $1.25 on revenue of $17.05 billion.
- Coca-Cola Company (NYSE: KO) is expected to report third quarter EPS of $0.54 on revenue of $12.06 billion, compared to last year’s EPS of $0.51 on revenue of $12.34 billion.
- Citigroup Inc. (NYSE: C) is expected to report third quarter EPS of $1.06 on revenue of $18.83 billion, compared to last year’s EPS of $1.06 on revenue of $13.95 billion.
Tuesday will be another quiet day for economic news; notable economic releases expected include US trade balance, the German ZEW economic sentiment index, British PPI, French CPI and Japanese industrial production.
Happy trading and good luck!
For a recap of Monday’s market action, click here.
Tune into Benzinga’s pre-market info show with Dennis Dick and Joel Elconin here.
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