Opening View: Barack Obama Clenches Historical Presidential Victory

Time Warner (TWX), Ambac Financial (ABK), and MBIA, Inc. (MBI) poised to open lower on earnings news

by Andrea Kramer (akramer@sir-inc.com) and Joseph Hargett (jhargett@sir-inc.com) 11/5/2008 8:13 AM


Dominating headlines this morning is Illinois Senator Barack Obama's historic victory for the Oval Office. On January 20, the Democrat will become the first African-American President of the United States of America. The candidate's triumph was seemingly clenched after he took key battleground states such as Pennsylvania and Ohio early in the evening, followed by a win in Virginia – a state that has historically turned red since 1964. "The road ahead will be long," Obama opined in a victory speech in Chicago. "Our climb will be steep. We may not get there in one year or even one term, but America... we as a people will get there."

However, the deteriorating economy facing the President-elect hasn't gone unnoticed by Wall Street, with futures turning lower ahead of the bell. Analysts at UBS predicted those most likely to be hurt by Obama's conquest are pharmaceuticals – already declining across the pond – and managed-care firms, as well as upscale consumer retailers, coal-related issues, domestic energy services companies, integrated oil stocks, and Bermuda-based insurers.

Turning to equities in focus, Time Warner (TWX: View sentiment for TWXsentiment, chart, options) this morning reported a stronger-than-expected third-quarter profit (excluding items) of 31 cents per share, beating the Street's estimate of 27 cents per share. Revenue, however, docked at $11.7 billion, compared to analysts' predictions for $11.86 billion in sales. The media mogul lowered its full-year operating profit outlook due to severance charges at its Time Inc. publishing unit and restructuring charges at New Line Cinema. The company also projected full-year adjusted operating income before depreciation and amortization to grow around 5%, down from its prior outlook of 7% to 9% growth.

Elsewhere, bond insurer Ambac Financial (ABK: View sentiment for ABKsentiment, chart, options) said its third-quarter loss widened to $2.43 billion, or $8.45 per share, from a $360.6-million, or $3.53-per-share, loss a year earlier. The company blamed the widening deficit on credit derivatives, increased losses related to second-lien residential mortgage-backed securities (RMBS) insurance transactions, and market losses on RMBS within the financial services investment portfolio. ABK announced its operating loss was $7.81 per share, compared to the 74-cents-per-share loss the Street had forecast.

Finally, Ambac's sector peer MBIA, Inc. (MBI: View sentiment for MBIsentiment, chart, options) also disappointed investors this morning. The company reported a widened third-quarter loss of $806.5 million, or $3.48 per share, from a loss of $36.6 million, or 30 cents per share, a year ago. The company blamed the dismal results on its second-lien residential mortgage exposures, and net-realized and unrealized losses attributable to its Asset Liability Management business. After-tax operating loss for the third quarter docked at $514.8 million, or $2.22 per share, compared with after-tax operating income of $192.6 million, or $1.56 per share, in the same period of 2007. Analysts, on average, expected a loss of 81 cents per share.

Checking in on currencies and commodities, the U.S. Dollar Index has shed 0.09% to trade at 84.72, as the greenback loses ground against most of its foreign rivals. Meanwhile, December-dated gold has continued its journey higher, adding on $3.70, or 0.5%, to flirt with the $761-an-ounce level. Finally, after toppling $70 per barrel yesterday, the front-month crude contract has pared some of its gains, trading at $68.90.

Earnings Preview

Also on the earnings front today, Duke Energy (DUK), General Motors (GM), Activision Blizzard (ATVI), and Whole Foods (WFMI) are slated to release their quarterly figures. Keep your browser at SchaeffersResearch.com throughout the day for more.

Economic Calendar

The economic calendar offers up a peak at October's nonfarm payroll report with the release of the ADP employment report for October, while the Institute for Supply Management's services index for October is also slated for release. Thursday offers up weekly initial jobless claims and the preliminary third-quarter productivity report. And Friday ends the week with a bang, as the Street will be graced with October's hourly earnings, nonfarm payrolls, and unemployment rate, as well as September's pending home sales, wholesale inventories, and consumer credit.

Market Statistics

Equity option activity on the CBOE saw 1,454,047 call contracts traded on Tuesday, compared to 1,035,673 put contracts. The resultant single-session put/call ratio slipped to 0.71, while the 21-day moving average held at 0.82.

Volatility indices

NYSE and Nasdaq summary

**The volume data shown above is from the Nasdaq and NYSE exchanges only. It does not include regional volume activity, which means that other daily volume quotes you see may be higher.**

Dow, S&P and Nasdaq futures

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