The Day Ahead: Europe Is Still Dominating the Headlines

 | Oct 24, 2011 | 8:13 AM EDT  | Comments
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In the Headlines

Wall Street appeared ready to start the week with a higher open, as European officials said Angela Merkel and Nicolas Sarkozy are making progress toward a debt crisis plan.

A bullish earnings report from Dow component Caterpillar (CAT) also gave futures a boost.

Major European indices were trading in positive territory. Banks in France, Germany and the U.K. were trading higher, although Greek financials showed losses.

The euro rose vs. the dollar before Wall Street opened for business.

Asian stocks moved sharply higher Monday on encouraging news from Europe. Also helping matters was the HSBC monthly survey on Chinese manufacturing, which showed better-than-expected growth.

The dollar slumped vs. the yen. Forex analysts and traders are prepared for intervention from the Bank of Japan, known to step in when the nation's currency is deemed too strong.

There are no significant government or think-tank economic reports due out today, although the pace picks up later in the week.

Commodity Corner

West Texas Intermediate rose $0.50 per barrel, to $87.90 ahead of Wall Street's open.

Gold was up $22.20 in early Nymex trade, to $1,658.30 per ounce. The precious metal has notched declines this month and last.

Merger Monday

In Monday deal news, Mattel (MAT) agreed to buy privately held Hit Entertainment for $680 million in cash. Hit's brands include well-known properties such as Barney, Thomas & Friends and Bob the Builder.

Google (GOOG) rose $0.60, 0.10%, to $591.09 in the premarket, on weekend reports that the company may join forces with private equity investors in a bid for Yahoo! (YHOO). Antitrust concerns would likely prevent Google from making an outright bid.

YHOO shares advanced $0.47, 2.92%, to $16.59 ahead of Monday's open.

Earnings

In Monday earnings news, Caterpillar (CAT) bulldozed over third-quarter earnings views, reporting income of $1.71 per share. Wall Street had expected $1.55 per share. Revenue also beat, coming in at $15.72 billion vs. views of $15.03 billion.

The company also raised earnings guidance and issued bullish comments about 2012.

Shares jumped $3.71, 4.25%, to $91.10 on the news.

Diversified manufacturer Eaton (ETN) climbed $0.25, 0.59%, to $42.50 ahead of the bell, following third-quarter earnings of $1.07 a share, in line with views. Sales of $4.12 billion were below estimates of $4.18 billion. The company reaffirmed the midpoint of its full-year profit view.

Kimberly-Clark (KMB) said adjusted third-quarter earnings were in line with views, and revenue came in at ahead of expectations, at $5.38 billion.

Analysts had expected income of $1.26 a share on sales of $5.31 billion. The stock is working on its fourth quarter in a row of upside trade. Consumer staples have been in favor, along with other defensives, in weak and choppy market conditions.

Clothing maker VF Corp. (VFC) reported first-quarter earnings of $2.69 a share on revenue of $2.61 billion. That beat bottom-line views, but was slightly low on the top line. However, the company boosted its full-year earnings view.

After the bell is an eagerly awaited report from S&P 500 component Netflix (NFLX), whose shares plummeted nearly 52% in September following a poorly received price increase and a public relations misstep as it attempted to split its streaming and DVD services.

Netflix is expected to report third-quarter earnings of $0.95 a share on revenue of $811.79 million.

Analyst Actions

Citigroup initiated coverage on home improvement big-box stores. Lowe's (LOW), which recently said it would close some underperforming stores and curtail expansion plans, was initiated with a rating of Neutral. Lowe's shares were up $0.04 in early trade, a gain of 0.18%, to $22.17.

Home Depot (HD) got started with a rating of Buy.

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