Bulls, Bears Sharply Divided on US Market Outlook
U.S. stock futures weakened through the morning as the euro has been weaker (breaking $1.30), dollar stronger. Most European bourses down about 1 percent. (Update: All 3 major US indices plunged at the open.)
European banks were trading notably lower: ING down 8 percent, Barclays , Deutsche Bank and UBS down two to four percent.
- Bulls argue that the U.S. economy is improving and that U.S. stocks will outperform.
- Bears argue that we are caught in a trap, with weak economic growth now combining with rising interest rates in Europe — rising because of the funding needs of sovereign countries and the risk of lending to them.
Peter Boockvar at Miller Tabak had the most succinct comment: "If this is the reward for bailing out entire countries, why bother?...What the market is telling the European Union loud and clear is that they have no faith that these countries can grow nominal GDP equal to or greater than the cost of funding, thus creating a debt death spiral as more debt on top of already high debt suffocates."
1) the buzz on retail sales for November is getting stronger (the opposite of what happened in October)...RetailMetrics is now expecting same store sales to rise 3.5 percent..."Black Friday Weekend was a success for Retailers," the firm said.
2) while a large part of the word is struggling with sub-par growth, India's economy grew 8.9 percent in Q3, vs. an expected gain of 8.2 percent. The Q2 GDP was revised to 8.9 percent from 8.8 percent.
3) Barnes & Noble reported a fiscal Q2 loss of $0.22 (vs. $0.08 consensus) on disappointing revenues. Same-store sales at its retail stores fell 3.3 percent, but website sales continued to be strong, rising 59 percent.
The bookseller also said that orders for its new NOOKcolor e-book reader "significantly exceeded expectations" since its launch in mid-November, and that the device will be the primary driver of retail store sales increases in the current quarter. Meanwhile, it forecasts Q3 profits of $0.90-$1.20 (below estimates of $1.29) and now sees a wider-than-expected loss for the year.
4) At an analyst and investor conference, Lowe's reaffirmed its full-year outlook of $1.37-$1.40, but below $1.41 consensus on comps of up 1 percent to 2 percent.
5) Seagate falls 4 percent after announcing discussions to sell itself to private equity failed as the "indications of the valuation range were not in the best interest of the company and shareholders." The hard drive maker previously revealed it had begun discussions of a sale to a private equity firm back in October, with reports naming TPG as the interested party.
Seagate also says demand for hard drives has improved in the current quarter and expects revenues of $2.7 billion this quarter (inline with Street expectations). Meanwhile, its board has authorized at $2 billion stock buyback plan
6) Merck named current president Kenneth Frazier as its new CEO, as many had expected. On January 1, he will replace Richard Clark, who will remain chairman of the drugmaker.
7) Swiss power group ABB paying $4.2 billion (including $1.1 billion in debt) for electirc motor maker Baldor Electric. Price is $63.50, a nearly 41 percent premium.
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