The Day Ahead: Europe, Earnings Front and Center

 | Oct 19, 2011 | 8:45 AM EDT
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In the Headlines

U.S. stock futures were trading mixed on Wednesday morning.

Despite conflicting reports about German and French officials' plans to bolster the European rescue fund -- and despite the first Apple (AAPL) earnings miss since 2004 -- NYSE futures indicated a higher open. Nasdaq futures, meanwhile, were pointing moderately lower.

It's another busy day for earnings news, with the next round of widely held names reporting.

European stocks were off earlier highs, but trading in positive territory before Wall Street's open. A Moody's downgrade of Spanish debt didn't put a dent in optimism about possible expansion of the European Financial Stability Facility.

The euro notched gains vs. the dollar early Wednesday.

In Asian trade, most indices finished higher Wednesday after unconfirmed reports of European rescue-fund expansion. However, Shanghai bucked the trend, ending 0.25% lower, as some widely held stocks slipped on continued concerns about an economic slowdown.

Economic Docket

In U.S. economic news, the Mortgage Bankers Association said weekly loan applications fell 15% last week.

The Labor Department's consumer price index for September will be released at 8:30 a.m. EDT. Analysts see an increase of 0.3%, below August's increase of 0.4%, perhaps giving some comfort to those on the lookout for signs of inflation.

Also at 8:30 is a report on September housing starts from the Commerce Department. Economists see the number coming in at 595,000 units, a lower number, of course, than we'd see during boom times.  

At 2 p.m. is the Federal Reserve's Beige Book, an anecdotal compilation of economic activity from the Fed's 12 regions. There are no official forecasts on this report, which is published eight times a year, but pundits expect it to reveal moderate growth recently.

Commodities Corner

Gold advanced $0.40 in electronic trade, to $1,653.20 per ounce. The precious metal is showing a decline for the week, so far, after gains in the past two weeks.

Earnings News

S&P 500 component Abbott Laboratories (ABT) delivered better-than-expected third-quarter results before the bell, and said it would split into two separate companies. Abbott shares bolted $3.78, or 7.2%, to $56.20 on the news.

DJIA component United Technologies (UTX), maker of various products including airplane engines, helicopters, elevators and escalators, reported third-quarter results. Earnings were $1.47 per share, three cents ahead of views. Revenue also beat, coming in at $14.88 billion, vs. expectations of $14.55 billion. In recent quarters, the company's Otis Elevator unit has given results a lift, spurred by construction business in China.

Fellow blue chip Travelers (TRV) said third-quarter earnings missed expectations, at $0.79 per share, below views of $0.87. The insurer said revenue was slightly ahead of expectations, at $5.67 billion. Analysts had expected $5.64 billion.

Morgan Stanley (MS) reported third-quarter earnings of $1.14 per share on revenue of $9.89 billion. It had been expected to deliver income of $0.30 per share on revenue of $7.42 billion. Going into Wednesday's session, Morgan Stanley shares had advanced 23.1%. If the upside trade holds, it would mark the first monthly gain since February. Shares were down $0.13 to $16.50 in premarket trading.

After the bell is eBay's (EBAY) third-quarter report. It's expected to show earnings per share of $0.48 on sales of $2.91 billion. In recent quarters, results have been driven by the company's PayPal unit. EBay shares have had trouble clearing resistance at around $35.

Wynn Resorts (WYNN) is also due out later today. The hotel and casino operator is seen reporting income of $1.18 a share on revenue of $1.29 billion. Macau results will almost certainly be eyed, as Asia has been the growth engine for casino stocks in recent years.

DJIA component American Express (AXP) also delivers results after the bell. Analysts expect earnings of $0.96 a share and revenue of $7.58 billion. That would be a year-over-year earnings increase, but a dip in revenue.

Early Movers

Premarket gainers Wednesday included Intel (INTC), jumping $0.92, or 3.9%, to $24.32 following better-than-expected quarterly results after Tuesday's close. The stock has been unable to clear resistance between $24 and $25 since April 2010.

Apple shed $21.37, or 5.1%, to $400.87 ahead of the open. The stock skidded in after-hours trade Tuesday following the shock of the earnings and revenue miss. Some analysts have called Apple a buy below $400, so there may be some bargain hunting in the stock once the shock wears off.

Analyst Actions

Speaking of analysts, Wells Fargo downgraded network gear maker Juniper Networks (JNPR) following a disappointing outlook issued late Tuesday. Wells bumped Juniper to "Market Perform" from "Outperform." Juniper shares fell $0.11 to $21.30 ahead of the opening bell.

LinkedIn (LNKD) was initiated at Lazard with a rating of "Neutral." LinkedIn went public at $45 in May. It closed Tuesday at $87.62, but continues to trade well below its opening-day high of $122.70.

There's a new company making its debut on the Nasdaq today. Zeltiq Aesthetics, which makes technology called CoolSculpting, designed to reduce the fat bulges known as "love handles," priced 7 million shares at $13 apiece. That was below the proposed range of $14 to $16. The stock will trade under the symbol "ZLTQ."

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