US Stocks Seen Lower on 'Fiscal Cliff' Concerns
U.S. equities have come under pressure since last week's election as investors worry that if no deal is reached to prevent the automatic spending cuts and tax increases that hit at the end of the year, the economy could slip into recession.
"We've got a generation of zombie consumers that are haunting the landscape in the United States," Stephen Roach, Yale University senior fellow, said on CNBC Tuesday. "What the consumption weakness shows you is the economy doesn't have a cushion, so when you hit an economy without a cushion with sharp fiscal consolidation we'll go immediately into recession."
U.S. small-business sentiment ticked up to 93.1 in October as uncertainty about future business conditions reached a record high. "We haven't been above 95 during this entire recovery" that started in July 2009, said William Dunkelberg, NFIB's chief economist.
In Europe, the Eurogroup of finance ministers, which met in Brussels on Monday, decided to give Greece two more years to make budget cuts. However, they postponed a decision on a further tranche of aid for Greece until November 20. Meanwhile, International Monetary Fund Managing Director Christine Lagarde and Eurogroup Chair Jean-Claude Juncker
over the deadline for Greece to lower its debt levels.
Turning to U.S. corporate news, Home Depot reported third-quarter earnings, excluding charges of 74 cents per share, 4 cents ahead of Street estimates. Revenue came in at $18.1 billion as same-store sales rose 4.2 percent worldwide. The company also raised its outlook as the housing market continues to improve.
Fashion house Michael Kors Holdings forecast profits for the holiday quarter that missed Wall Street's high expectations despite its projections for another quarter of strong revenue growth.
Saks, meanwhile, forecast that Hurricane Sandy will lead to flat same-store sales in the current quarter. Stores affected by the storm account for more than half its sales.
Steven Sinofsky, the executive most widely tipped to be the next chief executive of Microsoft, has left the software giant.
Cisco will report earnings after the closing bell.
Earlier on Tuesday, Vodafone posted a 1.4 percent fall in organic service revenue in the second quarter, due to a sharp slowdown in its southern European business. The British company wrote down the value of its business in Spain and Italy by 5.9 billion pounds ($9.3 billion) and lowered its full-year outlook.
The U.S. Treasury Department's monthly budget for October will be issued at 2 p.m. on Tuesday. Economists polled by Briefing.com forecast a $113 billion deficit, against a September deficit of $98.5 billion.
The Treasury is set to auction $32 billion in 13-week notes and $28 billion in 26-week notes on Tuesday, with the results available in the afternoon. A total of $85 billion in 13-week, 26-week and 52-week bills will be issued by the end of this week.
On Tap This Week:
TUESDAY: Treasury budget; Earnings from Cisco
WEDNESDAY: Weekly mortgage apps, PPI, retail sales, business inventories, FOMC minutes, 13-F filings, Facebook lockup lifts; Earnings from Abercrombie & Fitch, Staples, Tyco, Limited Brands, NetApp
THURSDAY: PI, jobless claims, Empire state mfg survey, Philadelphia Fed survey, oil inventories, Fed bank of Chicago annual conf., credit card default rates reported; Earnings from Target, Wal-Mart, Viacom, Gap, Dell
FRIDAY: Treasury international capital, industrial production, e-commerce retail sales; Earnings from Foot Locker, JM Smucker, Ann
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