The Day Ahead: Watching Earnings and Europe

 | Oct 25, 2011 | 8:30 AM EDT
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In the Headlines

U.S. equities futures were headed moderately higher, reversing earlier losses, as traders awaited tomorrow's news from Europe.

It's also another busy day in the earnings department, with some DJIA components and other closely watched big-caps reporting.

European indices were mixed ahead of the eagerly anticipated eurozone summit tomorrow. While there is still optimism about officials reaching an agreement, some investors were fretting about possible disagreements over the size of losses to banks holding Greek debt.

In Asia, traders were also marking time ahead of an announcement from Europe. Shanghai stocks added to Monday's rally, gaining 1.7%. Hong Kong's market also ended to the upside, with some analysts attributing some of the region's gains to better-than-expected economic data from China that were released on Monday. Japan's Nikkei ended lower, with financials among the biggest decliners.

Economic Docket

In U.S. economic data, the Case-Shiller Home Price Index report for August is due out at 9 a.m. EDT. Economists expect to see another decline. We'll get more housing data an hour later, as the Federal Housing Finance Housing Agency releases its own housing price index for August. There are no forecasts on this, but nobody really expects to see prices increasing.

At 10 a.m., the Conference Board releases its October consumer confidence index. Economists have noted for quite some time that while consumers tell pollsters they are feeling glum (perhaps because their home prices keep falling), they haven't stopped going to the mall. Analysts see consumer confidence rising slightly from last month, but remaining weak.

West Texas Intermediate, which spiked Monday on Chinese economic data, as well as expectations for further U.S. quantitative easing, notched more gains early Tuesday. U.S. oil futures were up $2.69 in electronic trade, to $93.96 per barrel.

Gold also built on yesterday's gains, advancing $11.60 per ounce, to $1,663.90.

Earnings News

DJIA component DuPont (DD) reported better-than-expected third-quarter results, earning $0.69 per share, excluding items, topping views of $0.56. Revenue also beat, coming in at $9.2 billion, ahead of expectations of $7.89 billion. The company also raised its yearly earnings outlook. DuPont shares were up $0.70, or 1.52%, to $46.79 in the premarket.

Fellow blue-chip 3M (MMM) also reported before the opening bell, missing estimates. Earnings were $1.52 per share on revenue of $7.5 billion. Analysts had expected income of $1.61 a share and revenue of $7.78 billion. The company said the "business environment remains challenging." It cited LCD TVs and other electronics as a weak spot, and said European business was disappointing. It lowered its full-year earnings guidance. 3M skidded $4.44, a loss of 5.4%, to $77.74 ahead of the bell.

The big brown truck rolled up to deliver United Parcel Services' (UPS) third-quarter results this morning. The S&P 500 component earned $1.06 per share, with revenue coming in at $13.16 billion. That was a one-penny beat on the bottom line, and a meet on the top line.

After the bell, Amazon (AMZN) reports its third quarter, with Wall Street eyeing per-share income of $0.24 on sales of $10.93 billion. Analysts are seeing growth in e-commerce and digital media categories. The $0.24 per share number would be a drop from the year-ago quarter. Some analysts expect the new Kindle Fire, which is sold at a loss, to put a dent in margins. Amazon was up $0.64, 0.27%, to $238.25 before Tuesday's open.

Another digital media company was one of the morning's biggest premarket decliners. Netflix (NFLX) plummeted $42.59, 35.84%, to $76.25, on yesterday's news that customers were fleeing the company, and that further global expansion may come at a loss.

Among early gainers, Freeport-McMoRan (FCX) continued its rally ahead of Tuesday's open, gaining $0.65, 1.65%, to $40.15. The company said Monday that a strike at a copper plant in Peru hadn't affected operations.

DJIA component AT&T (T) was downgraded at Bernstein, getting a demotion to Market Perform from Outperform. The analyst cited the telecom's unfunded pension liabilities, as well as the stock's valuation. AT&T fell $0.11, 0.38%, to $28.77 in premarket trade.

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