Earnings Season Begins

October 17, 2011

Markets are opening weak this morning. The Empire Manufacturing index, a measure of manufacturing in the NY area, fell to 8.5 vs. expectations of -4.0. Industrial production and capacity utilization were both in line at 0.2% and 77.4% respectively. The markets have been whistling through the European debt grave yard the past two weeks, however, German Chancellor Angela Merkel put a wet blanket on the outlook by saying “dreams that are taking hold again now that with this package everything will be solved and everything will be over on Monday won’t be able to be fulfilled.” Her assistant said the search for an end to the crisis “surely extends well into next year.”

The blizzard of earnings releases started this morning with Citigroup (C) beating, Wells Fargo (WFC) missing, and Charles Schwab (SCHW) missing. Halliburton (HAL) beat, Gannett (GCI) missed, and Hasbro (HAS) missed. Kinder Morgan (KMI) announced plans to acquire El Paso Corp (EP) for $21.1 billion. The deal will create the largest natural gas pipeline in the US and represents the largest pipeline takeover ever.

Apple (AAPL) has sold 4 mil iPhone 4s units in the first three days of availability. This compares to 1.7 million units when the iPhone 4 was launched. Apple is now the #2 smartphone maker, with a 27% market share. Google’s (GOOG) Android OS leads the market with a 44% share, while Research in Motion’s (RIMM) share has dropped to 20%.

APAC markets were strong last night as the Hang Seng rose 2%, Nikkei 1.5%, S&P/ASX 1.7%, Kospi 1.6%, and Shanghai 0.4%. India’s Sensex was down slightly.

The CFTC reported that fund managers increased net long positions on 18 futures and options contracts by 0.2% last week as recession fears eased slightly. The agency is expected to vote on a plan this week that would limit the size of positions taken by commodity traders.

The SEC has been struggling to write a rule which would require companies to disclose their use of “conflict materials” from African countries. Conflict materials are those mined from countries where armed conflict and human rights abuses exist. The problem? The SEC can’t seem to figure out a way to write the rule so it meets the requirements of the Dodd-Frank Act without creating a compliance nightmare for manufacturers. Dodd-Frank, it knows no limits.

The dream of Detroit is over. The Tigers lost over the weekend to the Rangers, ending their season, while the Lions finally fell out of the ranks of the undefeated, falling to the 49ers. The best part of the game was the fireworks between coaches Jim Harbaugh and Jim Schwartz, who almost went to blows after the game.

Have a great day

Ned