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Reports US

US stock market, economy and companies update (October 17, 2012)

October 17, 2012, Wednesday, 15:43 GMT | 11:43 EST | 20:13 IST | 22:43 SGT
Contributed by Trade The News

- US indices are barely more than flat this morning as mixed earnings reports outweigh the good housing data and the good news from Europe. Yields on Spanish and Italian debt are down sharply this morning after Moody's refrained from cutting its sovereign rating on Spain, powering solid gains in European equities. The euro moved up on the Moodys announcement but hasn't gained too much again this morning, with EUR/USD above the 1.31 handle. US housing data once again topped expectations, with the September housing starts numbers beating expectations. Analysts were very happy to see some strength in single-family activity (starts up 11% and permits up 6.7%), complementing continuing gains in multi-family homes. However BoA's flat performance and poor showings from Intel and IBM are weighing on indices.

- Bank of America's quarterly results were respectable if not outstanding. Earnings and revenue contracted from levels seen a year ago, although the bank managed not to lose money (on an adjusted basis), and after the big DVA adjustment its revenue topped expectations. However, BoA's troubles remain legion: in ongoing buybacks of bad loans from private investors and the GSEs, it could lose $6 billion more than its current reserves. Moreover, earning were reduced by $0.28 for the $2.4B payout for the Merrill Lynch settlement. Shares of BAC are around unchanged in mid-morning trade, well off their worst levels. US Bank turned in a solid performance in Q3, and shares of USB are up 2%. MT Bank beat expectations on very strong earnings, sending shares of MTB up 5%.

- IBM easily met analysts' expectations, however there were concerns that its software and its tech services revenue declined on a y/y basis. IBM is down more than 4%. Intel comfortably topped consensus expectations - which themselves were set after the firm slashed its outlook back in September. Executive repeated their September comments, warning that they are seeing softness in both business and consumer markets. In addition, the company's internal inventories are growing even as its customers' inventories are shrinking. Shares of INTC are down 2.5%, but off their worst levels.

- Pharma and healthcare-related names are sinking this morning for a variety of reasons. Shares of Abbott Labs are down 2.3% after the firm's Q3 revenue narrowly missed expectations, although the strong dollar was mostly responsible for this. Note that the sales pace for Abbott's blockbuster Humira, while still up 10% y/y, slowed noticeably from last quarter. Shares of STJ are down 5.7% after the company's Q4 guidance disappointed and its Q3 earnings fell on a y/y basis. Quest Diagnostics missed revenue targets and trimmed its FY12 outlook. Shares of DGX are down nearly 4%.

- Among consumer names, Pepsico had a mixed report: revenue fell 5% on a y/y basis, an outcome attributed to the ongoing restructuring process that led to unprofitable businesses being shut down. Earnings were good, and the firm reiterated its FY12 outlook. Shares of PEP are around unchanged. United Rentals is up more than 10% after reporting very strong earnings. Stanley Black & Decker missed bottom-line expectations and cut is FY12 guidance, and shares of SWK are down 5%.

- On the deal front, Exxon said it had a deal to acquire Canadian oil and gas company Celtic Exploration for $2.6B, helping it to grow its output and expand its asset base in western Canada. Exxon will pay C$24.50 for each share of Celtic, a 35% premium to Celtic's prior closing price. The deal is being compared to CNOOC's $15B bid for Nexen and Malaysian state oil company Petronas' $5.0B deal for Progress Energy.

***Looking Ahead***
- 11:00 (IC) Iceland Central Bank (Sedibanki) releases Minutes
- 11:00 (US) Fed to sell $7.0-8.0B in notes
- 14:00(BR) Brazil Sept Caged Formal Job Creation: 170.0Ke v 100.9K prior
- 15:00 (CO) Colombia Aug Trade Balance: -$235.0Me v -$214.1M prior; Imports: No est v $5.2B prior
- 21:00 (CH) China Q3 Real GDP Q/Q: 2.0%e v 1.8% prior; Y/Y: 7.4%e v 7.6% prior; GDP YTD: 7.7%e v 7.8% prior
- 21:00 (CN) China Sept Industrial Production Y/Y: 9.0%e v 8.9% prior; YTD: 10.0%e v 10.1% prior
- 21:00 (CN) China Sept Retail Sales Y/Y: 13.2%e v 13.2% prior; YTD: 14.0%3 v 14.1% prior

***Economic Data***
- (IS) Israel Oct Inflation Forecast: 2.0% v 2.4% prior
- (IS) Israel Sept Money Supply Y/Y: 11.8% v 6.0% prior
- (BR) Brazil Oct FGV Inflation IGP-10 M/M: 0.4% v 0.6%e
- (US) MBA Mortgage Applications w/e Oct 12th: -4.2% v -1.4% prior
- (ZA) South Africa Aug Retail Sales M/M: 2.0% v 0.5%e; Y/Y: 6.4% v 4.5%e
- (PL) Poland Sept Sold Industrial Output M/M: 6.1% v 7.8%e; Y/Y: -5.2% v -3.9%e
- (PL) Poland Sept Producer Prices M/M: 0.5% v 0.3%e; Y/Y: 1.8% v 1.7%e
- (RU) Russia Sept Real Retail Sales M/M: -0.4% v -0.6%e; Y/Y: 4.4% v 4.2%e
- (RU) Russia Sept Unemployment Rate: 5.2% v 5.3%e
- (US) Sept Housing Starts: 872K v 770Ke; Building Permits: 894K v 810Ke