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Last Call: Going Over the Fiscal Cliff

Thursday, 8 Nov 2012 | 9:33 PM ET

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"There were voices on the Democratic side that were saying 'well let's go over the fiscal cliff' - well that's a bucket of crazy, no one wants to go over the fiscal cliff, that's ridiculous."

-Rep. Peter Roskam (R) Illinois, House GOP Chief Deputy Whip to CNBC's Larry Kudlow

Market Musings With CNBC Market Guru Robert Hum

Recap: Dow -121.41 (-0.94%) at 12811.32, S&P -17.02 (-1.22%) at 1377.51, Nasdaq -41.71 (-1.42%) at 2895.58

Major averages slump for a 2nd straight day as stocks extend losses in final hour.

Dow, S&P 500, Nasdaq close at 3-month lows after biggest 2-day drop in a year.

S&P 500 joins the other major averages in closing below its 200-day moving average for the first time since June.

Broad move lower as all 10 S&P 500 sectors end day lower, 8 of 10 sectors fall more than 1%.

Bonus Musings Headed into the End of a Rough Week

Stocks eye another week of losses: Dow down 3 straight weeks for first time since May, Nasdaq down 5 straight weeks for first time since June 2011.

Can stocks reverse a recent trend or will they go deeper in the red for the week?

S&P 500 has been down 7 straight Fridays, while both Dow, S&P 500, and Nasdaq threaten to have worst week in 5 months.

Earnings Central

Groupon plunges on revenue miss.

Nordstrom misses on top and bottom lines.

Disney earnings inline, revs light.

NVIDIA beats estimates, initiates dividend.

Lionsgate eps & revs. Beat.

Kayak Software eps & revs beats.

AMR October traffic down, pulled down by U.S.

The Word On The Street

CEO Drumbeat for Tax Reform Grows Louder/CNBC – Justin Menza: "…On Thursday, ratings agency Standard & Poor's warned there was a 15 percent chance the U.S. could go off the fiscal cliff — when automatic tax hikes and spending cuts kick in at the end of the year. According to estimates from the non-partisan Congressional Budget Office, going off the cliff could take $600 billion out of the economy and cause a recession. Qualcomm CEO Paul Jacobs wants corporate tax reform to be part of any solution. "Maybe that's too much to hope for," he said on Thursday, "but if that happened maybe some of that $60 billion we have offshore can come back home and go to work." Jacobs said that Qualcomm could use some of that cash to invest and create more jobs in the U.S. Grover Norquist, Americans for Tax Reform president, is also calling for lower taxes on businesses. "The Europeans have a top marginal tax rate of 28 percent on their businesses and we have 35 percent on our businesses," Norquist noted. Disney's CEO, Robert Iger, said that higher corporate tax rates make the economy less competitive and constrain economic growth. Iger advocates not only reducing the rate but also closing some of the loopholes. He called on politicians to "deal with (the fiscal cliff) immediately and deal with it productively. Don't threaten the country and our economy."

CBO: 'Fiscal Cliff' Could Trigger Recession/WSJ – Corey Boles: "The fiscal cliff would drive the U.S. economy back into recession next year and result in a jump in the jobless rate to 9.1% by the end of 2013, a new report from the Congressional Budget Office said. The CBO said economic output would drop by 0.5 percentage point in 2013 if Congress fails to act to avert the tax increases and spending cuts put in motion by an earlier deficit agreement. But the CBO added the U.S. economy would in the longer run return to better growth rates and lower employment. The CBO, the independent budget arm of Congress, said the unemployment rates will fall to 5.5% by 2020. The agency has previously forecast that the U.S. economy could fall into recession next year if nothing is done to avert the fiscal cliff."

S&P: 15 Percent Chance US Goes Off 'Fiscal Cliff'/Reuters: "Standard & Poor's on Thursday said it sees an increasing chance that the U.S. economy will go over the "fiscal cliff" next year, though policymakers will probably compromise in time to avoid that outcome. Analysts at the credit ratings agency now see about a 15 percent chance that political brinkmanship will push the U.S. economy — the world's largest — over the fiscal cliff."

Disney Earnings Meet Expectations, Revenue Misses/CNBC with Wires: "Walt Disney reported quarterly earnings on Thursday that matched analysts' expectations, while revenue fell short. Disney recently announced it would by Lucasfilm and the "Star Wars" franchise, with plans to revive the series with a new trilogy starting in three years. In an interview on CNBC's "Closing Bell," Disney CEO Bob Iger said he didn't expect the purchase to contribute to earnings until then. Lucasfilm generates some $800 million a year in revenue, analysts estimate. The entertainment company's shares fell more than 2 percent in after-hours trading following the report."

Groupon's Wall of Worry/WSJ –Rolfe Winkler: "Andrew Mason has successfully beaten back dozens of copycat rivals. But that may ultimately count for little, considering that Groupon's Internet coupon model is hitting a wall. Most troublesome is that third-quarter revenue of $569 million didn't rise from the second quarter and fell well short of the company's own target of $580 million to $620 million. Groupon stock fell more than 15% after the market closed on Thursday, putting the company's value at around $1 billion after subtracting cash on the balance sheet. The company had a net loss in the third quarter."

Priceline to Buy Kayak in $1.8 Billion Deal/Joan Solsman & Kristin Jones: "Priceline.com agreed to buy Kayak Software just a few months after the travel search site's initial public offering, in a cash-and-stock deal that values it at $1.8 billion. The transaction, which would be Priceline's biggest ever, offers $40 a share in cash and stock for Kayak, a 29% premium to its closing price Thursday and 54% higher than its IPO price. Kayak shares were up 26% to $39.18 in after-hours trading, while Priceline shares were down 2.5% at $612.50."

Does Priceline's $1.8bn Kayak Deal Add Up?/Tom Gara: "After less than four months as a publicly-traded company, online travel site Kayak is being acquired by its rival Priceline, the most valuable company in the industry. The $1.8bn deal adds another fast growing brand to the Priceline family, which includes sites like Booking.com, Rentalcars.com, Agoda.com. But Priceline must be thinking there is some serious value to be unlocked in combining Kayak's business with its own, because for a $1.8bn purchase price, it isn't buying a lot of earning power. … Priceline could be thinking it can trim back some of those expenses by joining forces, wrangling better prices from media owners as a bigger player, and maybe doing some combined marketing work advertising Kayak alongside other parts of the family. "

Competition Is Behind McDonalds' Falling Sales, But McRib May Redeem/WSJ: "Same-store sales at McDonalds fell for the first time since 2003 in the last quarter. The tough numbers come as others in the food business report numbers ranging from concerning (Chipotle) to encouraging (Wendy's) to very good (Yum Brands). So what is happening at Mickey D's? … But hope remains! And hope, as any true patriot knows, comes from a near-mythical sandwich that will soon return to the lineup beneath the Golden Arches: McDonald's said it expects its annual promotion of the McRib in the U.S., coming later this year, will help it return to growth for the fourth quarter as a whole."

NYC Issues Odd-Even Gas Sales as Shortages Persist/CNBC with AP: "New York Mayor Michael Bloomberg and officials in the Long Island counties of Nassau and Suffolk will begin an even-odd gas rationing plan at 6 a.m. Friday to ease persistent gasoline shortages in the wake of storm Sandy. … Bloomberg said only 25 percent of the city's gas stations are open at today's briefing, estimating the shortage could last another few weeks."

Do You Feel Lucky?/WSJ – Sanette Tanaka: In Vegas, home sellers love listings with 7's, but in Asian neighborhoods, beware of 4's. When pricing in residential real estate is purely a numbers game.

CEO Who Said He'd Fire Employees if Obama Was Reelected Gives Them Raises Instead/Forbes: "Well, now that Obama has been reelected, how has Siegel responded? The billionaire, who is also famous for attempting to build the biggest home in America, a 90,000-square-foot, $100 million mansion, has flip-flopped. He was interviewed by BloombergBusinessWeek yesterday and said that right after the election he had given all his employees a raise. Asked first if he'd be laying any of them off, he said, "I don't know," but then he added, "I'm going to work my hardest to keep the company going and expand the best I can. We'll see what happens. Meanwhile I gave everybody in the company a raise this week—the average was 5%." Why did he do that? "I wanted to help them handle the additional burdens the government will put on them." There. It's President Obama's fault."

Bedsocks all the rage for cash-strapped BRRRRitons/Reuters: Cash-strapped consumers in austerity Britain trying to hold down rising heating bills are rushing out to buy socks designed to be worn in bed, according to UK manufacturer HJ Hall. HJ Hall said it would normally sell around 3,000 pairs of bedsocks a month between October and February, but this October sold more than 9,000 pairs. 86 percent of the people it polled said they were buying the socks to delay putting on the heating."

Economic Data

830 Oct Import prices

955 Nov pre. Consumer Sentiment

1000 Sep Wholesale Trade

*End October Reading

Earnings

Before the Bell: Energizer, JC Penney

Key Guests

Travis Kalanick, Uber CEO (640a)

C.R. Cloutier, MidSouth Bank CEO (650a)

Ralph Schlosstein, Evercore Partners CEO (700a)

Dinakar Singh (715a)

Jeff Smisek, United Continental Holdings CEO (730a)

Julius Genachowski, FCC Chairman (815a)

Rep Frank Pallone, D-NJ (840a)

Jeffrey Boyd, Priceline.com CEO (1000a)

Patti Hart, Pinnacle Systems IGT CEO (1000a)

Steve Hafner, Kayak CEO (1000a)

John Donahoe, eBay CEO (1015a)

Ben Huh, Cheezburger CEO (1145a)

Nihal Mehta, LocalResponse CEO (100p)

James Dimon, JPMorgan Chase CEO (400p)

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