Corporate America Under Pressure

Published by Filipe R. Costa on Fri, 26/10/2012 - 10:20
Corporate America

Daily Market Commentary for October 26: US companies continue to concern investors as they present worse than expected 3Q earnings and review their guidance downwardly. Apple and Amazon disappointed.

Investors are concerned as earnings presented have been more on the negative side and CEO’s are more pessimistic about the near future. Europe is a problem for US companies as exports and activity for US companies operating in Europe has been decreasing. With the US consumer now more confident in the economy as we have seen in recent Michigan consumer sentiment surveys, it seems that they will have to lead any recovery as companies are not confident and not really investing in new projects. With so much uncertainty about the future: a never-ending European crisis, the fiscal cliff, and an election; companies prefer to delay their projects but at the cost of reduced earnings prospects. The latest durable goods report was strong in terms of growth from the last period but weak when we look at capital goods. For now, it seems that everything is in the hands of the US consumer.

Markets continue in downtrend and the Dow has recently approached the 13,000 level, not seen since long ago and unthinkable after the FED started QE3! Gold is also on a bearish trend, currently trading at $1,702 but I’m not that bearish now because I’m not seeing the Dow losing much more and a rally will lead gold higher too. For now, this blood bath may be a good entry point, always with caution.

Later in the day we will know how the US economy fared last quarter with the GDP due to be announced. A better than expected number will certainly help markets recover. A worse than expected number will add to the current fear. Many analysts are downgrading their views due to the earnings they’re seeing. I really don’t risk here but I don’t believe the number can be much better than the 1.9% estimated. I prefer to be on the sidelines and enter the market just after the number is released.

Name Last price Close Since QE3 Price % 5-Day % YTD %
Nikkei 225 25/10/2012 9055.25 1.06 1.13 0.81 7.10
FTSE 100 25/10/2012 5805.05 0.40 0.00 -1.89 4.18
EUR/USD - US$ per Euro 25/10/2012 1.2939 0.28 -0.20 -0.99 -0.12
EUR/GBP - £ per Euro 25/10/2012 0.8028 0.20 -0.73 -1.39 -3.65
GBP/USD - US $ per £ 25/10/2012 1.6118 0.07 0.55 0.38 3.79
Gold (LBM) $ 25/10/2012 171490 -1.00 0.60 -1.64 9.45
S&P 500 25/10/2012 1412.97 -1.64 0.30 -3.04 12.35
Dow Jones Industrial Average 25/10/2012 13103.7 -1.72 0.20 -3.29 7.25
DAX (Xetra) 25/10/2012 7200.23 -1.95 0.10 -3.19 22.07
IBEX 35 25/10/2012 7779.2 -2.66 -0.16 -3.96 -9.19
CAC 40 25/10/2012 3411.53 -3.73 -0.44 -3.50 7.97
Nasdaq 100 Index 25/10/2012 2657.66 -4.80 0.08 -3.15 16.68
FTSE MIB 25/10/2012 15528.5 -5.43 -1.13 -4.06 2.91
Crude oil (Brent) Composite 25/10/2012 10760 -6.39 1.08 -3.15 0.18
Crude oil (Light Sweet) Composite 25/10/2012 8618 -11.11 0.48 -6.40 -12.95