MARKET UPDATE
Stocks are indicated for a morning of at least some added selling with DJIA futures and S&P futures trading down between 2% and 3%. The good news is that when you factor in overseas selling with some markets down 10% that is in-line with the drops in futures combined with yesterday’s massive drop. G.E. is also offering at least some stability in what would otherwise be a rocky road.
Bonds are going to be a tough call today as traders have been going deep into the short term treasury bills in a flight to quality trade. But today is the auction for many of the credit default swaps from Lehman as counterparty and this could be the first “price discovery” of troubled assets in weeks.
The WSJ has reported that the government is now considering a program to guarantee billions in bank debt and insuring all U.S. bank deposits for a temporary period.
As demand is under fire, oil is down more than $4.00 early on and trading under $83.00. Spot gold prices were up almost 1% at $919.00 per ounce as traders are looking for anything that can be a hedge or safe harbor against the turbulent stock market.
ECONOMIC & MACRO EVENTS
These are today’s top economic data:
8:30 AM EST Trade Balance (AUG)
8:30 AM EST Import Prices (SEP)
At 10:00 AM EST, President Bush will speak regarding the financial market crisis. At 2:00 PM EST the G7 finance ministers and central bankers meeting begins in Washington D.C. Bond markets close early today at 2:00 PM EST ahead of the Columbus Day holiday. At 6:45 PM EST tonight, Hank Paulson will hold a post-G7 finance minister meeting press conference.
BULLISH EVENTS
General Electric Co. (GE) is actually showing some stability after earnings. Its $0.45 EPS was in line with estimates and its recent guidance, and that $170 billion order backlog may be larger than any company globally. This report is being deemed a win because it is one of the few solid reports not full of fears and panic.
IBM (IBM) is showing that some companies can still raise cash in these troubled times. It issued $4 billion in debt and is showing that the credit market terms may not be ideal but are at least somewhat available for strong companies. Shares are down 5% but have improved from the lows.
Wells Fargo & Co. (WB) has won in its bid to acquire Wachovia. Citigroup walked away from the deal but will seek some damages. This is being deemed as a win for Wells Fargo as it is getting to make a massive purchase and shareholders are getting the full compensation with the upside of a much stronger buyer.
Wachovia (WB) shares are up about 20% pre-market now that the Wells Fargo deal is a shoe in since Citigroup walked away. This leaves upside for shareholders as they will now own shares of a much healthier bank.
Cemex SAB de CV (CX) traded up nearly 7% after the Mexican cement giant came out and said that its business model is intact and its capital structure is unchanged. Cemex also reaffirmed it has "slightly" exceeded its third-quarter forecast and that it remains in compliance with its financial covenant tests.
BEARISH EVENTS
American International Group (AIG) fell about 10 % in overseas trading after reports that the insurer has boosted its borrowing from the government by $9 billion to a total of $70.3 billion to meet its trading partners demands for cash.
Host Hotels & Resorts Inc., (HST) is showing that lodging is in for tough times. The REIT reported third-quarter net income fell 44% on 2.4% lower revenue numbers. Shares are indicated down 3% pre-market.
Barclays plc (BCS) is trading lower by more than 10% after the company is considering raising capital as part of the government’s bailout package in the UK.
Shares of homebuilder Centex Corp. (CTX) are under pressure after the builder said it was suspending its quarterly dividend to raise cash and to maintain liquidity through hard times. What is amazing is that it even had a dividend when you consider the sector it is in.
Biogen Idec Inc. (BIIB) shares are down about 2% after it suspended its trial of baminercept, a drug designed to treat rheumatoid arthritis after it failed to show disease improvement in 14 weeks.
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