Wednesday October 26 Daily Market Primer

Stocks fell yesterday, as mixed earnings reports knocked the market off  its trajectory, with consumer discretionary shares leading the way.  Home Depot fell 3.5%.   The malaise continued in Asia and Europe on Wednesday, and the US market has opened down .5%.  Oil broke down below $50 as plans for an coordinated supply response to lower prices seem to be waning.  Oil investors seem to be betting on an rebound (Investors Bet, below).

	LAST	CHANGE	% CHANGE
DJIA	18,169.27	-53.76	-0.30%
Nasdaq	5,283.40	-26.43	-0.50%
S&P 500	2,143.16	-8.17	-0.38%
Global Dow	2,448.59	-3.81	-0.16%
Japan: Nikkei 225	17,391.84	26.59	0.15%
Stoxx Europe 600	340.46	-2.61	-0.76%
UK: FTSE 100	6,931.39	-86.25	-1.23%
CBOE Volatility	14.06	0.60	4.46%
Australia: S&P/ASX 200	5,359.80	-83.00	-1.52%
China: Shanghai Composite	3,083.88	42.71	1.40%
India: S&P BSE Sensex	27,836.51	-254.91	-0.91%
France: CAC 40	4,517.95	-22.89	-0.50%
Germany: DAX	10,661.96	-95.35	-0.89%
Italy: FTSE MIB	17,199.61	-30.42	-0.18%
Spain: IBEX 35	9,140.00	0.30	0.00%
Italy: FTSE MIB	17,199.61	-30.42	-0.18%
Spain: IBEX 35	9,140.00	0.30	0.00%
U.S. 3 Month	0.35	0/32
U.S. 2 Year	0.86	-1/32
U.S. 5 Year	1.299	-3/32
U.S. 10 Year	1.779	-5/32
U.S. 30 Year	2.524	-15/32
Germany 2 Year	-0.636	-1/32
Germany 10 Year	0.088	-17/32
Crude Oil	49.04	-0.92	-1.84%
Brent Crude	49.78	-1.01	-1.99%
Natural Gas	3.242	-0.074	-2.23%
S&P GSCI	369.18	-3.93	-1.05%
E-mini S&P 500	2129.25	-8.75	-0.41%

When is $46.9 billion in revenue and $9 billion in net income (in one quarter) and a 38% gross margin not enough?  When you are Apple, which disappointed on fiscal Q4 last night after the bell.  The stock dropped over 3% on the news and is down almost 4% now, taking the S&P and Dow with it.  iPhone 7+’s are in especially short supply, they just didn’t make enough to satisfy demand.  Philadelphia cable giant Comcast reported this morning and beat by a penny, but the stock is still down.  Beleaguered Deutsche Bank is looking for a way to pay bonuses in something other than cash.  UK home prices are dropping.  Trump is ahead, but only in Florida.  Philippines President Duterte is continuing to blast the US on his Asian tour.

Here’s the news:

Bonuses

Deutsche Bank AG, Europe's biggest investment bank, is exploring ways to change how it pays bonuses as it continues efforts to shore up its balance sheet. According to people familiar with the matter, executives are looking at options including replacing cash payouts with shares in the company. The bank, which reports earnings tomorrow, continues to be under pressure from investors concerned about it capital levels. Shares in Deutsche Bank were 0.8 percent higher at 6:00 a.m. ET. 

Trump leads in Florida poll

Republican presidential nominee Donald Trump held a two-point lead in Florida, according to the latest Bloomberg Politics poll, which includes third-party candidates. In a hypothetical two-way race, Trump's lead over Clinton drops to one point, highlighting the importance of the independent vote. On the campaign trail, Trump has seized on news that Obamacare costs are due to rise next year.

More bad Brexit news

London house prices are forecast to drop 5.6 percent next year as uncertainty about Britain's future dampens the market, according to the Centre for Economics and Business Research. Optimism over U.K. stock prices is also fading, with the cost of hedging against price swings rising to the highest since early June. On the policy front, the big question continues to be whether Mark Carney will stay on as governor of the Bank of England after he refused to clarify his position during a Q&A session in the U.K. parliament yesterday. Meanwhile, the Resolution Foundation has predicted that there will be an 84 billion-pound ($102 billion) weakening in the U.K.’s public finances over the next five years and Goldman Sachs Group Inc. analysts figure the pound is 10 percent too expensive.

Markets drop

Overnight, the MSCI Asia Pacific Index slipped 0.1 percent while Japan's Topix index gained o.4 percent, lifted by positive earnings reports. In Europe, the Stoxx 600 was down 0.8 percent at 6:20 a.m. ET as Bayer AG and builder Vinci SA reported disappointing earnings. S&P 500 futures were 0.4 percent lower in the wake of Apple Inc.'s disappointing results.

Apple reported its first annual revenue decline in 15 years. The tech giant reported earnings of $1.67 a share as revenue fell 8.9% to $46.9 billion amid declining iPhone sales. Apple shares are down by more than 3% ahead of the opening bell.

Chipotle is optimistic on next year. The fast-casual burrito chain announced diluted earnings of $0.27 a share, missing Wall Street's estimate of $1.56 by a wide margin. The company expects a rebound next year, however, forecasting that comparable-restaurant sales will rise in the "high single digits." Chipotle shares are down by about 3% in premarket action.

Nintendo slashes its outlook. The video-game maker cut its operating profit outlook for the fiscal year through March to 30 billion yen ($288 million) from its July estimate of 45 billion yen as the boost from "Pokémon Go" was offset by the strong Japanese yen.

AT&T's new streaming service is coming. DirecTV Now will offer more than 100 channels for just $35 a month. The service debuts in November.

Disney might be interested in Twitter again. That's according to a report from Betaville suggesting "market gossip" from "well-informed types" says Disney is once again considering an acquisition of the social-media company.

There's a new easiest place in the world to do business. New Zealand has moved ahead of Singapore as the easiest place to do business, according to rankings compiled by the World Bank. The United States ranked eighth on the list.

Oil is sliding. West Texas Intermediate crude oil is solidly below $50 a barrel as sellers continue to pile on following Tuesday's Interfax report suggesting Russia may not be on board for a production cut. The energy component trades down 1.5% at $49.36 a barrel.

Stock markets around the world are lower. Australia's ASX (-1.5%) led the losses overnight, and Britain's FTSE (-0.9%) is the laggard in Europe. The S&P 500 is on track to open lower by 0.4% near 2,136.

Apple Drops
Apple posted its first annual revenue decline in 15 years but projected a return to growth in the current quarter behind strong sales of its new iPhone 7. The tech giant’s formula for success proved less effective in the past year amid lukewarm sales of iPhone 6S models and slowing growth in smartphone sales world-wide, especially in China, Apple’s biggest growth market in recent years. For its fiscal fourth quarter, ended Sept. 24, Apple reported its third consecutive decline in revenue and profit. But CEO Tim Cook touted the response to the iPhone 7, released in September, as well as improvements in the company’s services business as evidence of enduring strength. Still, Apple’s revenue outlook for the December quarter isn’t quite good enough for investors who have sent the stock up by 10% since Apple unveiled the iPhone 7 last month.

The Battle for the Sunshine State
The struggle for the White House and the Capitol took center stage this week in one familiar battleground—Florida—as Donald Trump and Hillary Clinton swept across the state. Mr. Trump has spent more money advertising on television in Florida than anywhere else and devoted the last three days to a tour that took him to seven of Florida’s 10 media markets. Long a presidential swing state, Florida also features a Senate race that could determine which party controls that chamber, and four of the most competitive House races, which could be key to the GOP keeping control there. In other political news, we report that GOP congressional campaign ads are pitching candidates as a check on a Clinton White House, while the NRA has spent big in its bid to aid Mr. Trump.

ECB calls for gradual approach to HFT regulations

The European Central Bank is seeking a gradual implementation of high-frequency trading regulations, suggesting that stringent rules could hurt the financial markets. "More constraining measures ... seem, in light of our study, not yet necessary and should be used with care as their negative impact on market liquidity, efficiency and resilience might be detrimental to financial stability and market resilience," the ECB wrote in a bulletin Tuesday.

Reuters (25 Oct.) 

Investors bet on rising oil prices

October has seen the fastest pace for increased positions on rising crude prices, even before OPEC meets next month, according to the Commodity Futures Trading Commission and Intercontinental Exchange. "While much of the oil market paints a picture of a commodity struggling under the weight of a huge surplus, statistical balances suggest that conditions have improved markedly," said Barclays commodity analyst Kevin Norrish.

Reuters (25 Oct.) 

Earnings reports come fast and furious. Boeing, Coca-Cola, Comcast, Mondelez, Northrop Grumman, and Southwest Airlines are among the companies reporting ahead of the opening bell. Buffalo Wild Wings, Cheesecake Factory, Tesla, and Texas Instruments highlight the names releasing their quarterly results after markets close.

US economic data is moderate. Markit US Services PMI and new-home sales will cross the wires at 9:45 a.m. ET and 10 a.m. ET. The Department of Energy's oil inventories are due out at 10:30 a.m. ET. The US 10-year yield is unchanged at 1.76%.

Goldman hopes you won't notice how many people it is laying off.

The biggest stocks are hitting all-time highs.

Private jets for corgis, plus other secrets of Putin's inner circle.

The euro-area economy is beating expectations.

'Solar winds' spur a geomagnetic storm that may affect power grids.

And why unconventional monetary policy works in theory.

National Intelligence Director Says Data Suggests ‘Nonstate Actor’ Was Behind Cyberattack

Voters to Decide How Much to Demand for Public Subsidies

IPO Market Is Finally Looking Up Again

Deal Making Preserves Coors Clan as American Beer Dynasty

AT&T CEO Says Time Warner Deal Not About Raising Prices

11:15 p.m. ET. That's when, more or less, the networks called the U.S. presidential race back in 2012, according to a new note from HSBC. We're getting into countdown mode now, so of course it's natural to wonder what time the race will be called this year. If Hillary Clinton is running strong early on in key states such as Pennsylvania, North Carolina, and Florida, it could be an early night. In the meantime, voting has already begun. Absentee ballots and in-person voting are underway in states including Florida, Ohio, and Nevada. Based on limited data about those ballots so far, people are already making assessments of how the two sides are doing. According to political analyst Jon Ralston, there's some potential for a pro-Democratic "wave" in Nevada, for instance, though he says it's too early to say that conclusively. On the flipside, Michael McDonald, a professor at the University of Florida, sees signs of trouble for the Democrats in Ohio. Texas, which is a state that could be 'in play' this year, is seeing gigantic increases in early voting in major counties, which you can check out at the Texas Tribune. Florida is another state in which early voting may be going well for Clinton. So if you're a total junkie (and even if you're not) there's plenty of hard data to look at well before Nov. 8.

Source: Bloomberg, BI, WSJ, CFAI Fin. Newsbrief