Japan's Market, Deflation Offset Interest Rate News

A smattering of good news on the interest rate front, and a few good earnings reports, are being offset by a 7 percent drop in Japan's stock market, and continuing worries on deflation.

The good news is that Libor rates are again dropping. The dollar is rallying big again, this is continuing to put pressure on commodities, but the stress is also showing up in corporate profits. Kimberly Clark, for example, said that because of the dollar rally, currency will be a drag on fourth quarter sales comparison instead of a benefit.

While oil is again below $70, copper has become the poster child for the deflationary/end of speculation play. Copper is trading firmly below $2 a pound ($1.93); two months ago it was $3.50.

Speaking of commodities, BHP Billiton down 8 percent as it said "volatility and uncertainty" would continue in China.


1) On the good news front, McDonald'strading up on a terrific report ($1.05 vs. $0.98 expected), said October sales trends remain strong. Global comps were up 7.1 percent, U.S. up 4.7 percent. They appear to be taking shares from some of the casual dining places.

2) Boeingwas a bit light on earnings ($0.94, a decline of 33 percent, vs. $0.98 expected). Earnings were impacted by the ongoing machinists' strike and "supplier production challenges" on their wide-bodied planes. They cannot update how full year earnings will look due to the ongoing strike.

3) AT&T was also a bit light ($0.67 cents, ex-items, vs. $0.71 expected) revenues above expectations. Apple reported terrific iPhone sales, and that was also a big help to AT&T's wireless unit: they signed up a net 2 million more customers last quarter.

4) Wachoviahad a big loss ($2.23, vs. expectations of a gain of $0.02). To give some idea of how utterly lost the analyst community is on financials, consider that the range of 12 analyst estimates was from a loss of $0.54 to a gain of $0.53. And they still were far off, even the outliers.

  • Economic Stimulus Gets Fresh Push in Washington
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  • More Interest Rate Cuts Seen in Australia
  • Key Lending Rates Drop in US
  • 5) Drilling giant Baker Hughes echoed Schlumberger when it said that they expect capital expenditures in North America by big oil companies to decline due to tight credit and oversupply of natural gas. They do expect spending outside of North America to continue to expand, although more modestly than recent years.

    6) Housing: MBA says mortgage rates fell to 6.28 percent from 6.47 percent; we have been moving between 6 and 6.5 percent. The bad news is that purchases fell 10.9 percent to the lowest level since October 2001.

    7) Finally, Samsung has withdrawn its offer to buy SanDisk, saying "we are no longer interested in acquiring SanDisk at $26 a share" (currently trading at $14.76). Meaning...they would buy it somewhere below $26?

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