Big blues as market turns back to earnings
Recapping the day's news and newsmakers through the lens of CNBC.
IBM shares plunged after it shocked investors with disappointing results. The key was plummeting business in China, where hardware sales were off about 40 percent. Some experts think China's government may be exerting pressure on domestic firms to buy Chinese-made hardware. Firms like Cisco and Apple have recently reported surprisingly weak results in China. However, it may turn out that Chinese buyers are merely on hold as they await their government's new economic reform plan, due in about a month.
Shares of Goldman Sachs were also a big earnings loser after the firm reported revenue well below analysts' forecasts. The bank did beat earnings estimates, but only by slashing expenses. A big part of the problem: a 44 percent decline in revenue in the unit that deals with fixed income, commodities and currencies. The trading unit's revenue was also down, doing worse than at rivals including Citigroup, Bank of America and JPMorgan.
But there were some big positive movers on results: Verizon reported better-than-expected results, with wireless subscriptions up by 927,000. And Google was nearing in on the $1,000 per share mark after earnings that topped expectations.
Reason to be optimistic, about D.C.?
Did anything good come from the government shutdown? Well, an optimist can hope for improvements in tax policy, spending and entitlements. A less-discussed element of the deal requires creation of a House-Senate committee to create a long-term budget plan by mid-December. The key is a fast-track process that would allow a budget resolution to pass with a simple majority, curbing the power of the filibuster. Pessimists say, hey, don't hold your breath.
"This is our best opportunity to enact a deal to reform our entitlements and tax code, restore investments and put our debt on a sustainable downward path as a share of the economy."—Loren Adler, the research director at the Committee for a Responsible Federal Budget
"How can we seriously expect any new conference committee to resolve the same difficult decisions that faced the (2011) Super Committee, the National Commission on Fiscal Responsibility and Reform (a.k.a. Simpson-Bowles) and have faced the House and Senate that resulted in this government shutdown in the first place? We can't."—Jason Fichtner, senior research fellow at the Mercatus Center at George Mason University
"I'm assuming that [a Grand Bargain] probably won't happen because it's been tried so many times with all the different gimmicks: Select Committee, Super Committee, Gang of ... 'insert your number.'"—Republican Sen. John McCain.
China's two percent
The best place to sell luxury goods is centers of wealth like New York, London and the UAE, but don't forget China. A new report says 2 percent of China's population accounts for a third of the world's consumption of luxury goods like private jets, jewelry, fancy watches and designer handbags. And the report says China's role as a luxury market will continue to grow. Smart retailers are now accepting China's UnionPay credit card and teaching employees Mandarin. The worry: China is not minting millionaires as fast as it used to, and gift-giving is falling off, partly as a result of a corruption crackdown.
The new gold
Gold is losing its luster as a safe haven. It can no longer be counted on to rally when risks rise. In fact, gold fell 3.35 percent during the government shutdown. So what's the alternative? Increasingly, professional traders are turning to the CBOE Volatility Index, or VIX, traded on the Chicago Board Options Exchange. The VIX zags when the S&P 500 zigs, making it a good hedge against stock losses. Rising volume in VIX trades during recent crises underscore its rising popularity for offsetting risk.
"As the world becomes more virtual, the value of a physical commodity as a store of value or hedge against turmoil is falling. Here in the U.S., volatility indices like the VIX are now really where people are looking if they want some sort of 'Armageddon trade.'"—Scott Nations, president and CEO of NationsShares
—By Jeff Brown, Special to CNBC.com