Portugal Expected to Nix Austerity, Seek Bailout

Traders are expecting the Portugese parliament to reject a government austerity measure, which means the minority Socialist government is likely to collapse and that Portugal will follow Greece and Ireland in seeking an EU bailout. We'll know about 11am ET.

Meanwhile, the debt is getting really expensive: Ireland yield for 10 percent paper was over 10 percent; in fact even the 2-year paper is yielding over 10 percent. Portugal is 8.125 percent for 5 year paper. (See Credit Default Swaps for PIIGS Nations/Europe.)

It was a bit strange that Bank of America did not immediately announce that they would do even a nominal dividend raise on Friday. Now we know why: the government won't let them. They still hope to increase the dividend in the second half of the year. Several other banks have been silent: Capital One has not raised their $0.05 dividend; Regions Financial has also not raised their $0.01 dividend.

The Egyptian stock market reopened after a 7-week closure, and, as I predicted yesterday, closed almost immediately after the main index dropped 9.9 percent. Under circuit breaker rules adopted last month, the exchange closes for the full day when the main index drops 10 percent. Try again tomorrow.


1) Jabil Circuit jumps 8 percent after beating Q2 estimates ($0.54 vs. $0.51 consensus) and providing strong guidance. Revenues for the circuit board manufacturer exceeded forecasts, jumping 31 percent in the quarter.

Earnings guidance for the current quarter of $0.55-$0.59 is above estimates of $0.53 on a stronger-than-expected revenue outlook. The company cautioned that it did not yet know to what extent the Japan earthquake will disrupt its supply chain.

2) General Mills falls 2 percent after reporting inline Q3 earnings. Higher volumes helped boost sales overseas, where revenues rose 8 percent. That was offset by a 1 percent decline in U.S. sales.

The foodmaker's full-year earnings outlook of $2.46-$2.48 is a bit disappointing (vs. $2.48 consensus) as rising commodity costs remain a big concern. Those costs are expected to increase 4 percent-5 percent this year, and will likely rise more next fiscal year.

3) PulteGroup rises 5 percent after being upgraded to Goldman Sachs' conviction buy list. The analyst expects the builder to be profitable this year (although the Street is currently expecting a loss of $0.20) and notes that the stock has "significantly underperformed" over the past year.

4) Helicopter and corporate jet maker Textron is upgraded to overweight at JPMorgan. The broker is encouraged by the accumulation of orders at the firm as macroeconomic conditions improve and as the commercial helicopter market "appears to be turning."

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