It could be quite a busy day on Wall Street, as traders are preparing for the latest on U.S. monetary policy out of the Federal Open Market Committee (FOMC). The group will emerge from its meeting at about 2:15 p.m. Eastern time this afternoon. Heading into this event, U.S. stock futures on the Dow Jones Industrial Average are up 56 points at 9,773, or about 50 points above fair value. Most analysts expect the Fed to leave interest rates alone, but investors will be closely scrutinizing the language of the accompanying statement. Outside the Fed, we have data on the U.S. services sector, the ADP employment report, and a report detailing scheduled layoffs, as well as a continued flood of corporate earnings, including already released results from Time Warner Inc. (TWX), Comcast Corp. (CMCSA), and Garmin Limited (GRMN). In currencies and commodities, the U.S. Dollar Index is off 0.34% at 76.12 in pre-market activity. Meanwhile, the December gold futures contract has rallied $6.50 to trade at $1,091.50 an ounce. Finally, crude oil for December delivery is up 76 cents at $80.36 per barrel in electronic trading. In earnings news, Time Warner Inc. (TWX) said its third-quarter profit fell 38% to $661 million, or 55 cents per share, as revenue dropped 6% to $7.14 billion. The company blamed continued weakness in its AOL, publishing, and filmed entertainment units for the decline. On an adjusted basis, TWX earned 61 cents per share, besting Wall Street's expectations for a profit of 53 cents per share. The company said that it still expects to spin off AOL by the end of the year, and that it sees full-year earnings coming in at $2.05 per share.
Elsewhere, Comcast Corp. (CMCSA) reported that third-quarter net income rose to $944 million, or 33 cents per share, from $771 million, or 26 cents per share, in the year-ago period. The latest quarter includes a one-time income tax benefit of 9 cents per share and 4 cents per share in financing expenses. Revenue increased to $8.8 billion from $8.55 billion. Wall Street analysts expected earnings of 25 cents per share on revenue of $8.8 billion.
Finally, Garmin Limited (GRMN) announced that third-quarter earnings jumped to $205 million, or $1.07 per share, from $182 million, or 82 cents per share, in the same period last year. Adjusted earnings were $1.02, easily besting the consensus estimate for 69 cents per share. Sales were $781 million, down from $870 million a year ago. Analysts were looking for sales of $698 million. "While revenues fell year-over-year, the rate of decline moderated at 10% but our margin improvements more than offset that decline," said Chief Executive Min Kao.
Earnings Preview
The earnings calendar is still packed, and includes Automatic Data Processing (ADP), Baker Hughes Inc. (BHI), Devon Energy Corp. (DVN), Liz Claiborne Inc. (LIZ), Pulte Homes Inc. (PHM), Transocean LTD. (RIG), Cisco Systems Inc. (CSCO), Evergreen Solar Inc. (ESLR), News Corp. (NWS), QUALCOMM Inc. (QCOM), and Whole Foods Market Inc. (WFMI). Keep your browser at SchaeffersResearch.com throughout the day for more.
Economic Calendar
The real economic fun arrives today, as the Challenger, Christmas & Grey job cuts report for October, the October ADP employment report, the Institute of Supply Management (ISM) services index for October, weekly U.S. petroleum supplies, and the Federal Open Market Committee's (FOMC) decision on monetary policy are all on the docket. Tomorrow, preliminary third-quarter productivity will be joined by weekly initial jobless claims. We end the week with a bang on Friday, as September's wholesale inventories, September's consumer credit report, and the coup de grâce October's nonfarm payrolls, unemployment rate, average work week, and hourly earnings.
Market Statistics
Equity option activity on the Chicago Board Options Exchange (CBOE) saw 1,367,727 call contracts traded on Tuesday, compared to 942,971 put contracts. The resultant single-session put/call ratio arrived at 0.69, 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 swinging for the fences this morning, as all 10 of the foreign indexes that we track are in positive territory. The cumulative average return on the collective stands at a gain of 1.34%. In Asia, stock markets climbed, with many rebounding on the back of commodity shares amid soaring gold prices. Sumitomo Metal Mining Co. shares rose 2.6%, outperforming the broad market in Tokyo, as did Newcrest Mining and Lihir Gold in Sydney, finishing up 3.2% and 4.4%, respectively. Shandong Gold Mining rose 2.1% in Shanghai and Zhaojin Mining Industry Co. added 4.2% in Hong Kong, with Zijin Mining Group Co. rising 1.5% in Shanghai and 5.7% in Hong Kong. The Australian market was unable to sustain early gains, after September retail sales came in lower than expected, dropping 0.2% from August. Woolworths dropped 0.8% and Wesfarmers gave up 0.6%, though Westpac Banking Corp. gained 1.4% as its full-year results were marginally ahead of expectations.
Turning to Europe, shares rallied, as a fresh onslaught of results from Societe Generale, Bank of Ireland, Adidas, and Marks & Spencer were cheered by investors. Results from Societe Generale, up 3.3%, helped the banking sector, with the French bank stating that its third-quarter profit more than doubled. Also, Bank of Ireland shares shot up 12.4%. First-half profit fell 73% to 162 million euros, as total income fell 14%, to 1.73 billion euros, but its underlying loss exceeded analyst forecasts. Autos were also retaking some lost ground. Renault shares rose 3.7% after Japanese automaker Nissan, in which it holds a 44% stake, said that its first-half profit dived 92.9% but raised its outlook. Volkswagen shares rose 1.6% and Daimler shares were up 3.1%. Of other firms updating investors in Europe, shares of sportswear maker Adidas climbed 2.3% after it reported that third-quarter net income attributable to shareholders fell 30% to 213 million euros, just ahead of analysts expectations.
The U.S. Dollar Index (DX/Y) rose 0.14% to 76.39 on Tuesday. The greenback gained ground versus the euro, as investors grew increasingly cautious following signs of weakness at some major European banks. Meanwhile, continued job cuts from U.S. employers prompted a return to safe-haven assets, which benefited the dollar. Furthermore, currency traders played their hands close to the vest ahead of potentially big currency moves following monetary policy meetings later this week by the U.S. Federal Reserve, the Bank of England, and the European Central Bank. Against this backdrop, the euro fell to $1.4687, while the dollar rose to 90.34 yen.
The futures contract on the 30-year bond (US/1 – 119'02) fell 24/32 on Tuesday. Treasury prices largely declined on the session, pushing yields up, as several companies, including Diageo Plc and IBM , debt sale plans sapped demand from the government bond market. Meanwhile, shorter-dated debt reversed earlier gains as traders positioned for any changes the Federal Open Market Committee might make to its statement on monetary policy later today.
Commodity Corner
Crude futures extended their journey higher yesterday, thanks to revived demand-related optimism. Oil traders were encouraged by data showing that domestic factory orders escalated at a faster-than-expected pace in September, which some interpreted as signaling a rebound in fuel demand. Echoing that sentiment, the latest MasterCard SpendingPulse report indicated that U.S. retail gasoline demand rose 3.3% last week, compared to the same period a year ago. Elsewhere, Organization of Petroleum Exporting Countries (OPEC) member Venezuela said it saw no need for the cartel to boost crude output at its upcoming meeting in December. Against this backdrop, crude oil for December delivery advanced $1.47, or 1.88%, to settle at $79.60 per barrel.
Gold futures skyrocketed to a new closing high yesterday, after the International Monetary Fund (IMF) sold 200 metric tons of gold to the Reserve Bank of India for $6.7 billion, or about $1,045 an ounce. In fact, the precious metal rallied despite the U.S. dollar's newfound strength, as the greenback gained ground ahead of the Federal Reserve's policy meeting. By the close, December-dated gold added $30.90, or 2.93%, to finish at $1,084.90 an ounce – a record closing high.
Unusual Put and Call Activity:
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