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US stock market, economy and companies update (October 16, 2012)

Contributed by Trade The News

- Equity indices in the US and Europe are at or near their highs of the session thanks to good news on many fronts. In Europe, there have been reports that Spain will apply for a precautionary credit line from the ESM rather than a full bailout, allowing it to minimize new conditions from the troika and still enable the ECB to unleash the OMT bond buying program. There are questions about whether Germany would support this approach or not. In the US, a handful of strong earnings reports are boosting sentiment, while Johnson and Johnson's results are helping boost the DJIA. In Asia, there were reports that Japanese PM Noda would yet again ask his cabinet to outline a stimulus plan in November. The reports out of Europe helped goose the euro higher overnight, with EUR/USD popping above 1.3000 to test as highs as 1.3060 before the cross encountered technical resistance and reversed course.

- DJIA component Johnson and Johnson reported excellent Q3 results and raised its FY12 forecasts this morning. Earnings and revenue rose firmly y/y and JNJ saw solid gains in worldwide pharma and medical device sales, albeit with a harsh 7% negative impact from FX. JNJ is up 1.5%. Coca-Cola met expectations, and saw revenue up 6% on an FX-neutral basis. Note that Coca-Cola's margins remain under pressure. Healthcare giant UnitedHealth's profits were much better than expected, thanks mostly to a big improvement in margins and higher enrollment. Note however that on the conference call, the CEO warned that the company sees strong headwinds in 2013. Shares of both KO and UNH are flat on the day.

- Goldman's Q3 report was very good, as revenue doubled on a y/y basis and EPS crushed expectations. However these excellent headline numbers contrasted with sluggish growth in ROE, and signs of weak client activity and risk aversion in its trading and investment banking businesses. Also note that Goldman raised its dividend 9%, the second big dividend increase this year. Shares of Goldman Sachs are flat on the day as investors focus more on the unimpressive metrics than the impressive revenue. Citigroup CEO Pandit stepped down from his position this morning without warning. He will be replaced by Michael Corbat, effective immediately. Reports suggest that Pandit's was due to disagreements with board members regarding strategy and performance measures. Shares of Citi were up 2% at one point, before giving up some gains.

- In other financial sector earnings, regional banking name PNC Financial saw solid growth in profits and revenue, however analysts were concerned about slowing loan growth. Total loan growth was up more than 18% y/y, however it was more or less flat with last quarter, reflecting weak conditions. In addition, profits were padded by the sale of its stake in Visa. PNC is down 4%. Asset manager State Street's revenue declined on a y/y basis thanks to much lower trading revenue, although investment management fees were healthy. STT is up 4%.

- Following in the footsteps of its larger integrated competitors, Murphy Oil said that it would spin off its downstream unit to shareholders as an independently traded company. Murphy also said it would review strategic options for other business units. The board also authorized a special dividend of $2.50 per share and a common stock buyback program worth up to $1 billion. Shares of MUR are up more than 6%, at their highs.

***Looking Ahead***
- 11:00 (US) Fed to buy $4.50-5.50B in Notes
- 11:00 (US) BOE to announce maximum size of ECTR auction for Wed, Oct 17th
- 11:30 (US) Treasury to sell $25B in 52-Week Bills
- 11:30 (US) Treasury to sell 4-Week Bills
- 12:00 (US) Fed's Lockhart to Introduce Argentine Ambassador in Atlanta
- 12:00 (US) Fed's Raskin in Boston
- 12:30 (DE) German Chancellor Merkel with Sweden PM Reinfeldt
- 16:30 (US) Weekly API U.S. Crude Oil Inventories
- (US) Second US Presidential Debate

***Economic Data***
- (IS) Israel Q2 Final GDP Annualized: 3.4% v 3.4% prelim
- (US) ICSC/GS weekly chain store sales w/e Oct 12th w/w: 0.2% v 0.2% prior; y/y: 2.7% v 2.8% prior
- (PL) Poland Sept Employment M/M: -0.1% v -0.1%e; Y/Y: % v 0.0%e
- (PL) Poland Sept Avg Gross Wages M/M: -1.2% v -0.1%e; Y/Y: 1.6% v 2.7%e
- (CA) Canada Aug Int'l Securities Transactions: C$6.9B v C$8.5Be
- (CA) Canada Aug Manufacturing Sales M/M: 1.5% v 0.3%e
- (US) Sept Consumer Price Index M/M: 0.6% v 0.5%e; Y/Y: 2.0% v 1.9%e
- (US) Sept CPI Ex Food & Energy M/M: 0.1% v 0.2%e; Y/Y: 2.0% v 2.0%e
- (US) Sept Consumer Price Index NSA: 231.407 v 231.300e; CPI Core Index: 230.580 v 230.244 prior
- (US) Redbook Retail Sales w/e Oct 12th: +1.8% y/y; Oct MTD: -1.5% m/m; Oct MTD +1.7% y/y
- (US) Aug Total Net TIC Flows: $91.4B v $74.0B prior; Net Long-term TIC Flows: $90.0B v $48.0Be
- (US) Sept Industrial Production: 0.4% v 0.2%e; Capacity Utilization: 78.3% v 78.3%e
- (US) Oct NAHB Housing Market Index: 41 v 41e