Trader Talk

Still All About Europe and China

September Producer Price Index hotter than expected, up 0.8 percent, but has little effect on U.S. stock futures ; it's still about Europe.

Europe weaker: a) in its annual credit report on France, Moody's reiterated France's triple-A rating with a stable outlook, but noted: "The deterioration in debt metrics and the potential for further contingent liabilities to emerge are exerting pressure on the stable outlook..." France pledged to defend its triple-A debt rating. French banks such as Societe Generale and BNP Paribas are down 7 percent in European trading; and b) the ZEW survey of German investor confidence was weaker than expected, reviving fears of a recessionin Germany.

China weaker: China's third-quarter gross domestic product came in a bit weaker than expected , up 9.1 percent year-over-year (consensus 9.3 percent). Still a tremendous number, but the fact that is was down from 9.5 percent in the second quarter and 9.7 percent in the first quarter has some nervous. Industrial production numbers were good. The Shanghai Composite Index closed down 2.3 percent.


1. More regulation of trading: Can you read the tea leaves? a) the Commodity Futures Trading Commission is ready to vote in favor of "position limits" the cap the number of futures, swaps, and options contracts a trader can hold; and b) the European Union is set to implement a permanent ban on naked credit default swaps (CDS), which would prevent traders from taking positions using CDS unless they owned the underlying securities.

2. Exchange traded funds (ETFs) under scrutiny. A Senate Banking Subcommittee is having a hearing tomorrow to examine the role that ETFs play in the market. Noel Archard, managing director of iShares, the largest ETF provider in the world, will be testifying, as well as Harold Bradley, chief investment officer at the Kauffman Foundation.

3. Parker Hannifin beat and raised guidance. The company is a diversified manufacturer — it gets nearly half of its profits overseas. Up 6 percent pre-open.

4. Bank of Americareported earnings of 56 cents a share, including items, with consensus of 19 cents a share. Beat on topline as well. Everyone seems to agree that the bank's earnings were almost impossible to fully decipher, but everyone seemed to agree that: a) there was expectations it would be an ugly quarter; b) it was weak (almost all units had top line revenue declines), but not as bad as expected; and c) the rep and warranty issue everyone was so concerned about wasn't prominently featured, so that is a bit of a relief.

5. Coca-Colabeats estimates by a penny. Revenues topped expectations on higher prices and strong international volumes — up 19 percent in India, up 11 percent in China, and up 8 percent in Mexico. Organic volumes in North America grew just 1 percent. ?

6. Johnson & Johnson beats estimates ($1.24 a share vs. $1.21 a share consensus). Just like Coca-Cola, stronger overseas growth (helped in part by the weaker dollar) saved the quarter for the health-care product manufacturer. Sales in the U.S. across the company’s big divisions were down. The company raises the low end of its previous full-year outlook to $4.95 a share to $5 a share vs. $4.96 a share consensus.

7. UnitedHealth tops estimates ($1.17 a share vs. $1.12 a share consensus) even as revenues were just shy of Street expectations. The health-care provider benefited from a growing membership base in both its commercial and Medicare programs, helping offset the rise in the number of doctor visits and its medical costs growing 7 percent in the quarter. Guidance for the year is raised to $4.40 a share to $4.45 a share (vs. $4.32 a share consensus) on stronger-than-expected revenue growth.

8. Crocs loses more than one-third of its values after the footwear maker warned on third-quarter results. Citing "softness in (its) consumer direct channel in kiosk and outlet locations" and weakness in Europe, earnings for the current quarter are seen between 31 cents a share and 33 cents a share (below 40 a share consensus) and revenues are expected between $273 million to $275 million (below $280 million consensus). Lower direct sales have reduced margins too, and the troubles aren’t going away. Fourth-quarter revenues are seen growing "in the low teen range," far below the 23 percent growth the Street has been expecting.

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