Trader Talk

Futures Drop on ECB, Jobless Claims

S&P 500 futures dropped five points, and European equities dipped, as the European Central Bank announced it was leaving interest rates unchanged at 1.5 percent. The Bank of England left it at 0.5 percent, but left open that it may restart its own quantitative easing program. Some disappointment there was no rate cut.

Futures lost another 5 or so points about 8:30 a.m. ET after ECB President Trichet cut the growth forecast for Europe in 2011 and 2012: Gross domestic product (GDP) revised lower to 1.4 percent to 1.8 percent in 2011, weaker than the June view of 1.5 percent to 2.3 percent. The 2012 GDP was lowered to 0.4 percent to 2.2 percent, versus a prior view in June of 0.6 percent to 2.8 percent.

At the same time, weekly jobless claims came in weaker than expected, also contributing to the downdraft in futures.

There are lots of political landmines floating around:

1. The Federal Reserve's Ben Bernanke will speak at 1:30 p.m. ET, President Obama at 7 p.m.

2. Italy is making progress on its austerity program. The cabinet signed off on constitutional amendment that would require the government to run a balanced budget from 2014 on; exceptions would have to be approved by a vote in parliament (this is a big hole).

The upper house of the Italian parliament has already approved a package of tax cuts and spending cuts aimed at balancing the budget by 2013; it has now been sent to the lower house for approval.

3. As if we needed more soundbites, the U.S. congressional deficit-cutting "supercommittee" convenes for the first time at 10:30 a.m. ET. The 12-member committee—an equal number of Democrats and Republicans—is supposed to find at least $1.2 trillion in deficit reductions by Nov. 23. If they can't agree, automatic spending cuts kick in, beginning in 2013.


1. Research firm Gartner says PC shipment growth will slow to 3.8 percent in 2011 and 10.9 percent in 2012. That doesn't sound too bad, but previous projections were for growth of 9.3 percent in 2011 and 12.8 percent in 2012. We all know that tablets are replacing PCs: "More worrisome for the long term is that Generation Y has an altogether different view of client devices than older generations and are not buying PCs as their first, or necessarily main, device," Gartner said.

2. Despite narrower margins, Men’s Wearhouse beats estimates ($1.11 a share vs. $1.04 a share consensus) on better-than-expected sales. Same-store sales at its namesake men’s apparel stores jumped 11 percent. Guidance for the current quarter is also strong, with earnings of 64 cents a share to 66 cents a share expected vs. 64 cents a share consensus.

3. Hovnanian reported a narrower-than-expected loss (loss of 47 cents a share vs. loss of 50 cents a share consensus) even as revenues were short of expectations and as the homebuilder’s deliveries fell 20 percent from a year ago. CEO Ara Hovnanian remains downbeat: "We see very few indicators that any recovery in the housing market has begun."

4. Presenting at a conference, Corning cut its LCD volumes for the third quarter, now expecting just flat sequential volumes at its wholly-owned business. At its joint venture with Samsung, however, LCD volumes are expected to plunge 30 percent, sharply lower than its prior expectation for a decline at a single digit rate. The LCD maker also cautions of softer retail demand in the second half of the year.

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