Buying in tech stocks could lift the market again Wednesday, but Merrill Lynch earnings hang in front of the opening bell like a dark cloud. Or should we say Merrill's report of losses. The firm is scheduled to report third quarter numbers between 7:30 and 8 a.m., and analysts are forecasting a loss of $0.45 per share.
Merrill has warned it would take a $5 billion writedown of securities, mortgages and loans in the quarter. But Merrill stock has been plagued by rumors that the writedown will be larger, as much as $5 billion more than already revealed.
The firm has declined comment on the speculation. On Tuesday, after its stock once more fell on the rumors, a spokeswoman said, "We're reporting tomorrow and we can't say anything." The stock finished higher after a bout of late buying just before the close.
Merrill holds a conference call at 10 a.m. This talk has been stubbornly persistent. There's nothing Wall Streeters love more than gossip about a rival and this rumor has taken on a life of its own. This is also one story traders seem to think has a ring of truth to it. Versions of the story include one that Merrill will warn on the fourth quarter.
In another, Merrill would announce a series of new writedowns. split between the third and fourth quarters. And what street rumor would fail to include intrigue about the executive suite - is there a secret coup against the ceo? Stay tuned. Either way, we could see some interesting action ahead of the opening.
The Nasdaq for a second day Tuesday outperformed the Dow and S&P with a big 45 point or 1.6% run up. The Dow closed 109 points or 0.8% higher and the S&P was also 0.9% higher, up 13.26 points. Google, Research in Motion, Amazon.com and Apple were all strong performers. Materials was the best performing S&P sector, up 1.52%, followed by tech, up 1.38% and telecom, up 1.33%.
Amazon.com reported a sharp jump in quarterly profits to $80 million after the bell, but its stock immediately slumped 10% erasing the day's gains. Earlier in the day, Amazon shares cracked the $100 mark for the first time in seven years. Reuters reports that analysts were concerned about operating margins and that worry helped ding the stock. But remember too, Amazon is a retailer with an internet premium and some investors may see its price as too rich.
A big focus tomorrow will be CNBC's Dylan Ratigan's 11 a.m. roundtable with President Bush's economics team on "The Call." The White House Economic Summit includes Ed Lazear, Chairman of the Council of Economic Advisors, Commerce Secretary Carlos Gutierrez, Al Hubbard, director of the National Economic Council, and Jim Nussle, director of the Office of Management and Budget.
Also on the agenda Wednesday are existing home sales. "I think people watch that somewhat. I think people expect them to stink," said John Sprow, senior portfolio manager with Smith Breeden. "If they were bad that's to be expected. What matters much more is that we have remittances coming in from those subprime mortgages over the next couple of days." He said the numbers will be watched carefully for default and prepayment rates. Sprow heads up Smith Breeden's credit department. (corrects spelling)
More on housing will come when Fed Governor Randall S. Kroszner speaks at 10 a.m. before the House Financial Services Committee on legislative proposals on reforming mortgage practices
Treasury Secretary Hank Paulson speaks on India at the Council on Foreign Relations about his upcoming trip at 1230 p.m. European Central Bank President Jean-Claude Trichet speaks on the future of Europe.
Besides Merrill, Wednesday's earnings reports also include Boeing,Conoco Phillips, Glaxo Smithkline,Norfolk Southern, Genzyme, and Anheuser Busch.Amgen,Pulte Homes and EMC spinoff VMWare report after the bell.
Google holds its analysts day and CNBC Silicon Valley Bureau Chief Jim Goldman will be covering it. Wal-mart's investor conference continues and ceo Lee Scott speaks in the middle of the day.
Crude oil fell $0.75 or 0.9% to $85.27 per barrel. Oil inventory data is released at 1030 a.m. New York time. Oil is up 4.4% for the month, and 40% for the year to date.
California Wild Fires
Wild fires continue to disrupt commerce and keep thousands from their homes in southern California. CNBC will continue to cover the toll of these fires on California's population and its economy.