U.S. stock futures are broadly higher this morning, indicative of a potentially positive start to the regular session of trading. Investors around the globe are cheering China's $586-billion stimulus package, as many believe that the move will help create demand for commodities, despite fears of a global recession. According to officials, the plan is designed to loosen credit conditions, cut taxes, and support major infrastructure spending. "It should compensate for some of the weakness in the economy that is generated by the poor outlook for exports - but we do not see it compensating all the weakness," said economists at UBS. In equity news, American International Group (AIG) reported a $24.47-billion loss for the third quarter, and signed a new deal with the U.S. Treasury. Elsewhere, Coca-Cola Enterprises (CCE) was upgraded and Nortel Networks (NT) released its quarterly earnings report.
Checking in on currencies and commodities, the U.S. Dollar Index has declined 0.83% to 85.21, as the greenback is weakening versus the euro following China's bailout plan. Commodities, meanwhile, are up solidly on China's move and the weakening U.S. dollar. Specifically, gold futures have added $18.40, or 2.49%, to $752.40 an ounce in London, while crude-oil futures have added $3.33, or 5.5%, to trade at $64.37 per barrel in electronic trading.
It could be an interesting day for ailing insurance provider American International Group (AIG: sentiment, chart, options) following the company's new deal with the Fed and its $24.47-billion third-quarter loss. Starting with the Fed, the U.S. Treasury and the Federal Reserve have restructured their support for AIG, with the Treasury investing $40 billion under the Troubled Asset Relief Program. Meanwhile, the Fed will create 2 new lending facilities to help AIG sell some of its mortgage-related assets. The Fed will also reduce its credit line to AIG and reduce the interest rate.
Elsewhere, AIG reported a third-quarter loss of $24.47 billion, or $9.05 per share, versus earnings of $3.09 billion, or $1.19 per share, last year. The company said it was negatively affected by restructuring, financial dislocation in global markets, and catastrophe losses. Excluding $15.1 billion in capital losses, AIG would have reported a $9.24-billion quarterly loss.
In other earnings news, Nortel Networks (NT: sentiment, chart, options) said it swung to a third-quarter net loss of $3.4 billion, or $6.85 per share, compared to net income of $27 million, or 5 cents per share, last year. Revenue fell 14% to $2.32 billion, as a result of a "challenging economic environment, competitive pressures and reduced spending by carrier customers." The company also warned that its results for the year would come at the bottom of its previous guidance, and said it plans to cut an additional 1,300 jobs and will extend its hiring freeze through 2009.
Finally, Coca-Cola Enterprises (CCE: sentiment, chart, options) was upgraded to "overweight" from "neutral" at J.P. Morgan this morning. The brokerage firm stated that "while no company we cover faces as many issues as [Coca-Cola Enterprises], no company looks as cheap, either." The brokerage firm continued, "with the stock down by almost 2/3 year-to-date, we think more bad news is priced in." J.P. Morgan also lowered its 2009 earnings estimate for the company to $1.20 from $1.30, but added it sees "potential for upside" if raw material costs decline or if the packaged-beverage industry bounces back.
Earnings Preview
Also on the earnings front today, DISH Network (DISH), Focus Media Holdings (FMCN), ISIS Pharmaceuticals (ISIS), Sirius XM Radio (SIRI), Six Flags (SIX), Starbucks (SBUX), and Virgin Media (VMED) are slated to release their quarterly figures. Keep your browser at SchaeffersResearch.com throughout the day for more.
Economic Calendar
The economic calendar is devoid of data until Wednesday, when the weekly report on U.S petroleum supplies is set for release. On Thursday, only the weekly report on initial jobless claims and the September trade balance are on tap. Friday ends the week with the release of October's import/export prices and retail sales, September's business inventories, and November's preliminary University of Michigan consumer sentiment index.
Market Statistics
Equity option activity on the CBOE saw 918,608 call contracts traded on Friday, compared to 710,915 put contracts. The resultant single-session put/call ratio fell to 0.77, while the 21-day moving average remained at 0.81.
**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.**
Overseas Trading
Overseas trading looks strong this morning, as all 11 of the foreign indices that we track are in positive territory. The cumulative average return on the collective stands at a gain of 3.49%. In Asian trading, regional indices are broadly higher as China's $586-billion economic stimulus package raised hopes that Beijing's move will support commodity prices amid fears of a prolonged recession. Commodity-related stocks soared on the news, with Rio Tinto adding 7.9%, despite announcing that it is reducing ore production from its Pilbara mines by about 10% because of reduced demand. Elsewhere, BHP Billiton rose 7%, PetroChina jumped 8.2%, and Aluminum Corp. of China soared 19%.
Traders also cheered the Chinese stimulus package across the pond in Europe, sending the commodity sector skipping sharply higher. Standouts include ArcelorMittal, which climbed 16.9%, Rio Tinto, which rose 15.8%, and BP, which advanced 4.3%. Outside of commodities, Spain's Banco Santander fell 4.2% after it became the latest European lender to raise capital, with the bank aiming to raise 7.19 billion euros through selling shares.
The U.S. Dollar Index (DX/Y) fell to 86.119 on Friday, compared to 86.280 late Thursday, as the greenback retreated against the majority of its foreign counterparts. The buck fell in the wake of the Labor Department's announcement that unemployment hit a 14-year high in October. More specifically, the economy lost 240,000 jobs in the latest month – 30,000 more than economists expected – pushing the unemployment rate to 6.5%.
The futures contract on the 30-year bond (US/1 – 116'12) lost 14/32 on Friday, as Treasurys took a hit amid the aforementioned unemployment data. Furthermore, bond investors began bracing themselves for the government's auction of the first part of its $55-billion debt refunding package, slated for sale today. Meanwhile, many analysts believe the Federal Reserve will cut interest rates again, with economists at Goldman Sachs expecting policy makers to reduce the key lending rate to 0.5% from 1%.
Commodity Corner
Gold futures managed a gain on Friday, tacking on $2.00, or 0.3%, to close at $734.20 an ounce. The malleable metal's intraday high came in at $744.90 an ounce. Gold benefited from the dollar's drop against the euro and the British pound in the wake of the Labor Department's disappointing October jobs report. The precious commodity managed to finish the week up 2.2%, its first weekly gain since October 10.
Crude oil gained a meager 27 cents on Friday, closing at $61.04 per barrel. Earlier in the session, black gold dropped to $59.97, leading some analysts to speculate that crude is oversold and may hit the "mid-60s next week." Last week, December-dated crude dropped $6.77, or 10%, from the previous Friday's closing price of $67.81 per barrel. While some analysts speculate that crude could advance this week, some believe that the breach of the $60 level "leaves the market vulnerable to further losses toward $50 per barrel."
Unusual Put and Call Activity:
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