Wall Street looks to be buckling under pressure this morning, as traders are dealing with everything from merger and acquisition activity, to earnings, to economic data, to a collapsing Eastern European government. At last check, U.S. stock futures on the Dow Jones Industrial Average (DJIA) are down 46 points at 9,607, about 45 points below fair value. In equity news, Cisco Systems Inc. (CSCO) is headlining M&A news after announcing a $3 billion acquisition, while Constellation Brands Inc. (STZ) released its quarterly earnings report. Elsewhere, Challenger Grey & Christmas reported that planned layoffs are at an 18-month low. Finally, the Romanian government collapsed this morning, after the Social Democratic Party pulled out of the ruling coalition in protest against the firing of the interior minister, according to media reports. In currencies and commodities, the U.S. Dollar Index is up 0.44% at 77.05 in pre-market activity, as the greenback benefits from a return to safe-haven buying. Gold futures are being pressured lower by the strengthening dollar, with the December contract slipping $3.70 to $1,005.50 an ounce. Finally, crude oil for November delivery is also weaker this morning, shedding 51 cents to $70.09 per barrel in electronic trading. Returning to merger and acquisition activity, Cisco Systems (CSCO) announced that it will acquire video communications firm Tandberg (TADBF) for $3 billion. Cisco has agreed to pay 153.5 Norwegian kroner, or $26.61, per share for the company, marking a premium of about 11% to the stock's close on Wednesday. Tandberg's board has unanimously approved the terms, the companies said. Cisco expects the deal to add to its adjusted earnings in fiscal 2011.
Also in M&A, ViaSat Inc. (VSAT) said that it will buy privately held WildBlue Communications Inc. for $568 million in cash. ViaSat said that it expects the transaction to close in its fiscal fourth quarter, which ends April 2.
In earnings news, Constellation Brands Inc. (STZ) reported a second-quarter profit of $88.7 million, or 45 cents per share, up sharply from a net loss of $22.7 million last year. On a non-GAAP basis, STZ would have earned 54 cents per share, besting Wall Street's expectations for earnings of 41 cents per share. Sales for the quarter came in at $1.09 billion, down from $1.24 billion last year. Looking ahead, the company sees full year earnings of 97 cents to $1.07 per share, or $1.60 to $1.70 per share on a non-GAAP basis.
Finally, brokerage firm JPMorgan Chase is on the warpath this morning. The firm downgraded BMC Software (BMC) to "underweight," cut NVIDIA Corp. (NVDA) to "underweight," and lowered Leap Wireless International (LEAP), MetroPCS Communications Inc. (PCS), and Saks Inc. (SKS) to "neutral." JPMorgan also upgraded PMC-Sierra Inc. (PMCS) to and Big Lots Inc. (BIG) to "overweight."
Earnings Preview
On the earnings front, Accenture Plc (ACN) and Immucor Inc. (BLUD) are slated to release their quarterly reports today. Keep your browser at SchaeffersResearch.com throughout the day for more.
Economic Calendar
The economic calendar is packed today, with August's personal income and spending reports, weekly initial jobless claims, August's construction spending index, pending August homes sales, September auto sales, and the Institute for Supply Management's manufacturing index for September all slated for release. We round out the week with a bang tomorrow, as September's hourly earnings, average workweek, nonfarm payrolls, and unemployment rate will be accompanied by August's factory orders report.
Market Statistics
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,392,525 call contracts traded on Wednesday, compared to 1,011,310 put contracts. The resultant single-session put/call ratio arrived at 0.73, while the 21-day moving average rose to 0.60.
**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.**
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Overseas Trading
Overseas trading is in poor shape this morning, as only two of the 10 foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a loss of 0.47%. In Asia, most markets closed lower, with Japanese shares falling after the Bank of Japan's tankan survey showed corporations planned to cut capital outlays more than expected. Although the survey showed sentiment among Japan's large manufacturers is improving, their capital expenditure plans for this fiscal year were weaker than they were in the previous survey, which is a slight negative for the stock market, said Yumi Nishimura, market analyst at Daiwa Securities SMBC. Shares of Toyota Motor lost 1.7%, while Canon and Sony slid 2.8% each. In Singapore trading, StarHub tumbled 6.5% after the company lost exclusive rights to English Premier League content as well as ESPN STAR Sports channels to rival Singapore Telecommunications. SingTel's shares added 1.5% despite concerns it might have overpaid for the content. SingTel, which holds a stake of more than 30% in Bharti, was also supported by news that the Indian company's proposed MTN deal had been scrapped.
In Europe, deal-making helped steady shares on the first day of the fourth quarter, with Tandberg shares soaring on Thursday following an offer from Cisco Systems, as economic data continued to disappoint. Weaker European economic data out Thursday included a drop in German retail sales, a rise in the euro-zone unemployment rate, and a decline in U.K. manufacturing activity. Legal & General shares jumped 3.5% in London on Thursday amid speculation that it could be in line for a takeover bid from National Australia Bank. Automaker Fiat shares jumped 7.6% in Milan. Morgan Stanley analysts said in a note that it sees 93% upside to its new 16.80 euros target price for the Italian automaker following its Chrysler deal. It lifted the price target from 8.30 euros. In the insurance sector, shares of reinsurer Munich Re jumped 3.4%. It will resume its suspended share buyback program and repurchase up to 1 billion euros of stock.
The U.S. Dollar Index (DX/Y) fell 0.68% to trade at 76.60 on Wednesday, as the index careened toward its third consecutive monthly loss. A weaker-than-predicted report on manufacturing provided a bit of early strength for the greenback, but rising optimism over the global economic outlook sapped the dollar's safe-haven demand. Against this backdrop, the euro rose to $1.463, and the dollar slipped to 89.78 yen. The U.S. currency lost about 3% versus the yen during September, and more than 6% on the quarter. Versus the euro, the dollar gained roughly 1.7% in September, and rising about 3.9% on the quarter.
The futures contract on the 30-year bond (US/1 – 121'12) rose 8/32 on Wednesday, as Treasurys advanced toward yet another monthly gain in the wake of mixed economic data and comments from multiple Federal Reserve officials. Early employment data from ADP pressured the bond market, but a drop in the Chicago purchasing managers' index returned buying pressure to Treasurys. Furthermore, comments from Federal Reserve Vice Chairman Donald Kohn, Atlanta Fed President Dennis Lockhart, and Philadelphia Fed President Charles Plosser that the Fed would need to be highly accommodative in its monetary policy for the time being also lent support to the bond market. According to Lockhart, "it may well be some time before comprehensive exit need be under way."
Commodity Corner
Crude futures reclaimed the psychologically significant $70-per-barrel level on Wednesday, thanks to an unexpected drop in gasoline supplies. The Energy Information Administration (EIA) said that domestic gasoline inventories declined by 1.6 million barrels in the week ended Sept. 25, as demand for the commodity escalated 3.8% and imports fell 17% from a week prior. Analysts, on average, had expected gasoline supplies to increase by 1.2 million barrels. Meanwhile, crude inventories added 2.8 million barrels last week, largely matching the Street's expectations. By the close, November-dated crude soared $3.90, or 5.85%, to finish at $70.61 per barrel. For the month, the commodity added a modest 0.1%.
Gold futures also toppled a critical level on Wednesday, rallying past $1,000 an ounce on the heels of a weaker dollar. In addition, the malleable metal got a boost from continuing geopolitical tensions in the Middle East and a rally in the oil pits. Against this backdrop, gold for December delivery added $14.90, or 1.5%, to end at $1,009.30 an ounce. For the month, gold gained 5.8%.
Unusual Put and Call Activity:
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