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US stock market, economy and companies update (October 26, 2012)

Contributed by Trade The News

- US equities held up ok this morning despite some pretty terrible earnings reports out of major names, including Apple. The advanced look at US Q3 GDP was very good, with the +2.0% figure topping expectations. Big contributors to the better number were government consumption and residential fixed expenditure, with only a slight pickup in consumer demand. The final October University of Michigan confidence reading mostly sustained the strength seen in the preliminary reading, with the index still at its highest level since 2007. But much like the last two sessions, early strength has evaporated rapidly and equity indices have moved into negative territory. Front-month crude remains right around the $86 handle EUR/USD is right around 1.2940, flat on the day. In Europe, the troika has given Greece until Sunday night to meet their demands and come up with a plan to secure funding.

- Investors have been disappointed with Apple's somewhat weak Q4 report, and shares of AAPL are down around -1.4% this morning. Headline Q4 earnings and revenue numbers missed expectations, the firm's Q1 guidance was conservative as usual and missed expectations by wide margins. There was grumbling about the firm's lower margins, although the firm said that the lower margin performance was due mostly to the large number of product launches and refreshes seen over recent months. Multiple analysts cut their price targets on the name overnight. Adding to the downbeat picture, Apple executives warned that iPhone 5 demand continues to exceed supply and warned that they could not say when supply would equalize with demand.

- Amazon is a unique company: last night the firm reported its first loss in years, a loss that was much steeper than expected (although revenue was still up 27% y/y). In addition, the firm's Q4 revenue guidance was weaker than expected as competition for the key holiday season heats up. Nevertheless, shares of Amazon opened higher this morning and were testing +5% in the first hour of trade before turning around. The company continues to invest heavily on warehouses, data centers and products like the Kindle Fire.

- Pharma giant Merck met expectations in its Q3 report thank to favorable tax treatment and some lower costs. However these issues concealed flagging sales of blockbuster products and weaker margins. Specifically, sales of Singulair tumbled 55% to $602M. Shares of Merck are flat on the day.

- Tire manufacturer Goodyear's headline numbers missed expectations on a big 12% y/y decline in unit volumes. Both revenue and earnings fell by double-digits on a y/y basis, and the firm warned that unit volumes would fall further in Q4. Shares of GT are down nearly 9% this morning.

***Looking Ahead***
- (CO) Colombia Central Bank Interest Rate Decision: Expected to leave the Overnight Lending Rate unchanged at 4.75% (**Note: Speculation that they might cut rates again)
- 11:00 (US) Fed to purchase $1.50-2.50B in Notes

***Weekend***
- Note that European clocks will fall back an hour. The US will move its clocks back next weekend (Nov 4th)

***Economic Data***
- (BR) Brazil Oct FGV Construction Costs M/M: 0.2% v 0.2%e
- (IN) India Forex Reserves w/e Oct 19th $295.2B v $294.9B prior
- (US) Q3 Advanced GDP Q/Q Annualized: 2.0% v 1.8%e; Personal Consumption: 2.0% v 2.1%e
- (US) Q3 Advanced GDP Price Index: 2.8% v 2.1%e; Core PCE Q/Q: 1.3% v 1.3%e
- (BR) Brazil Sept Total Outstanding Loans (BRL): 2.237 T v 2.211T prior; Y/Y: 1.1% v 1.2% prior; Private Banks Lending: 1.203T v 1.197T prior
- (BR) Brazil Sept Tax Collections (BRL): 78.2B v 78.1Be
- (US) Oct Final University of Michigan Confidence: 82.6 v 83.0e
- (MX) Mexico Central Bank lefts Overnight Rate unchanged at 4.50%; as expected