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US stock market, economy and companies update (October 04, 2012)

Contributed by Trade The News

- There has been a moderate spate of risk appetite this morning as decent weekly jobless claims data keep the focus squarely on employment ahead of tomorrow's September employment report. Euro strength has followed in the wake of the ECB rate decision and President Draghi's press conference, although Draghi had few dramatic comments to make at the event. The August factory orders fell by the most since January 2009, however much like last week's durable goods data, the numbers were significantly impacted by the slump in demand for transport equipment. Excluding transportation, orders rose 0.7%, reflecting the pop above 50 in the ISM manufacturing data for August. WTI crude has recovered slightly from yesterday's big slide from $91.80 to $88. The front-month contract has ticked back above $89.

- Same-store sales data for September were mixed, and consumer demand appeared to be somewhat weaker than in the first half of the back-to-school season. Apparel names met or beat expectations, with the notable exception of Cato, which saw a surprising 4% decline in comps. TJX was a real standout, with a nice 6% gain. Department names were a different story, with nearly the entire sector missing expectations. Kohls saw a significant y/y decline in comps. Both Walgreen and Rite Aide had negative comps, with Walgreen's big decline driven by an 11% decline in front-end SSS. Target was the rare department name that topped expectations.

- ECB President Draghi offered some more color on the OMT program this morning in his post-rate decision press conference. There have been concerns that given the program's focus on the short end of the bond curve, potential candidates such as Spain might ramp up issuance of short-term debt. Draghi dismissed these concerns, highlighting the high interest costs carried by shorter-term debt. He specified that the ECB has no single special target that would trigger intervention under OMT such as a specific spread or yield but is rather looking at a range of indicators. Draghi clarified that the program is not available for nations already under a full bailout program, and is only for countries that still have full market access. Portugal, which is gingerly re-entering the public debt market, is still not eligible but may be once again soon. In a separate item out this morning, there were reports that the eurozone was mulling a plan to provide 'first loss insurance' program for Spain bonds under which the ESM would guarantee up to the first 30% of new bonds issued to Spain at an estimated to cost the ESM €50B. There have been other reports that European officials are denying these reports. EUR/USD has gained steadily in the US session, rising from around 1.2940 to test 1.3000 as of writing.

- Hewlett-Packard fell further this morning after its terrible guidance from yesterday morning, putting cumulative losses over the last two sessions at more than 17%. HP's FY13 earnings guidance was way under consensus estimates, as CEO Whitman warned that the firm's turnaround would take longer than expected. In addition, the slowdown in China is also hurting the firm. Whitman warned that FY13 would be a "fix and rebuild" year. In other equity news, Hotel chain Marriott nicely topped consensus expectations in its Q3 report, sending shares of MAR up a modest 2%. Facebook disclosed that its userbase has topped the one billion mark. Shares of Avery Dennison are down around 4.5% after terminating an agreement with 3M.

***Looking Ahead***
- 14:00 (US) Minutes of FOMC Meeting
- 17:00 (CO) Colombia Sept Producer Price Index M/M: No est v 0.5% prior; Y/Y: no est v 0.1% prior
- (JP) Bank of Japan (BOJ) Interest Rate Decision: Expected to leave the Target Rate unchanged at 0.10%

***Economic Data***
- (UK) Bank of England (BOE) leaves both Interest Rates and Asset Purchase Target unchanged at 0.50% and £375B respectively
- (US) Sept Challenger Job Cuts: 33.8K v 32.2K prior; Y/Y: -70.8% v -36.9% prior
- (EU) ECB leaves main 7-day Refi Rate unchanged at 0.75%
- (US) Oct RBC Consumer Outlook Index: 48.4 v 50.4 prior
- (US) Initial Jobless Claims: 367K v 370Ke; Continuing Claims: 3.281M v 3.275Me
- (MX) Mexico Sept Consumer Confidence: 94.0 v 96.3e
- (CA) Canada Sept Ivey Purchasing Managers Index Seasonally Adj: 60.4 v 59.4e;
- (US) Aug Factory Orders: -2.2%e v +2.8% prior
- (US) Weekly EIA Natural Gas Inventories: +77 bcf v +68-73 bcf expected