Trader Talk

Europe Ratchets Up Expectations

S&P futures popped a couple points as September housing starts were notably higher than expected (658,000 vs. about 595,000 SAAR), while building permit were below expectations. Still, futures remain down fractionally, despite Apple's disappointing numbers .

Today, Europe ratchets up expectations. A day after German Chancellor Angela Merkel tried to talk down expectations at the EU Summit Oct. 23, France's President Nicolas Sarkozy, quoted in the Financial Times, said they would be taking "important, very important decisions in the coming days."

The battle lines are fairly clearly drawn: Germany wants bigger haircuts for Greek bondholders, the French want a "bazooka" in the form of a greatly expanded European Financial Stability Facility (EFSF), and both want banks to recapitalize — but preferably by raising private capital and not by government injection of money, which may jeopardize France's sovereign debt ratings.

Sarkozy and Merkel will reportedly be talking today.


1. Spain was downgraded two notches last night by Moody's (below Fitch and Standard & Poor's), but European bourses are higher. ?

2. AMR reports a wider-than-expected loss (loss of 48 cents a share vs. loss of 39 cents a share consensus). Although fares and its passenger revenue per available seat mile were up in the quarter, managing heightened fuel costs continued to troublesome for the airline. The firm noted that although crude oil prices fell, jet fuel prices remained high, with fuel prices rising 41 percent compared to a year ago.

3. United Technologiestops estimates ($1.47 a share vs. $1.44 a share consensus) on better-than-expected revenues. Orders were up across its main businesses: up 19 percent at its Otis elevator division; up 11 percent at its Carrier HVAC division; and up 3 percent at its Pratt & Whitney engine segment. The company raises its outlook for the year to $5.47 a share, above $5.44 a share consensus. ?

4. Textron handily beats estimates (45 cents a share vs. 31 cents a share consensus) as it effectively managed costs. The Cessna corporate aircraft and Bell helicopter maker also saw deliveries rise in the quarter, helping revenues rise 14 percent, in line with expectations. Guidance for the full year is raised to $1.05 a share to $1.15 a share (vs. $1.07 a share consensus). ?

5. Freeport-McMoRan rises 3 percent after reporting better-than-expected earnings ($1.10 a share vs. $1.02 a share consensus). That came even as gold and copper production was hampered by strikes at its Indonesia mine. Revenues also missed estimates, remaining flat from a year ago, thanks to a steep plunge in copper prices during the quarter. CEO Richard Adkerson cautioned that "the near-term economic outlook is uncertain." ?

6. Abbott Laboratories beat estimates by a penny as sales grew more than expected thanks in large part to a 21 percent jump in emerging markets sales. Shares are rising 8 percent on news that the company will split into two independent and publicly traded firms. One firm (which will keep Abbott’s name) will consist of the firm’s medical products business, while the other will focus on pharmaceutical research.

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