The Day Ahead: It's Ugly Out There

 | Nov 21, 2011 | 8:33 AM EST
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In the Headlines

News from Europe and the U.S. drove global stocks sharply lower Monday. Wall Street futures pointed to a significantly lower open, on the heels of downside trade on overseas indices.

In the U.S., the Congressional Super Committee is expected to say that no debt deal was reached by today's deadline. Despite the non-event in Washington hurting overall sentiment, some market analysts are saying events in Europe are the bigger culprit behind today's downside action, because markets had not priced in optimism over a solution.

Moody's warned about France's borrowing costs, which spurred a fresh round of worry. Meanwhile, markets continued to react to Friday's remarks from the new European Central Bank president, Mario Draghi. He seemed to oppose extensive ECB intervention in the region's debt crisis.

In addition, on Monday, Germany's central bank slashed its growth forecast for the nation, saying demand from other European countries could subside. A spike in Spanish bond yields also caused hand-wringing.

All of that added up to steep losses on European indices ahead of Wall Street's opening bell. The euro slumped vs. the dollar early Monday.

Asian stocks closed today's session lower, with downside trade spurred by eurozone fears. Data showing a Japanese trade deficit weighed on the country's exporters, sending the Nikkei down by 0.32%.

Economic Docket

In the U.S., the Super Committee's failure will likely be the biggest economic-related news in the headlines. There are not many economic reports on the schedule for today, although the National Association of Realtors is set to release data on existing home sales at 10 a.m. EST. Sales are expected to decline for the second month in a row.

Commodities and Deals

Gold dropped $23.10 per ounce before Wall Street's open, to $1,702.

Crude oil was down $1.19 in early Nymex trade, to $97.45 per barrel.

Deal news today includes Gilead Sciences' (GILD) purchase of Pharmasset (VRUS) for $11 billion, or $137 per share, in cash. Pharmasset is in clinical trials with three drugs to treat Hepatitis C.

Earnings News

Earnings news today included a fourth-quarter report from chicken and beef processor Tyson Foods (TSN). This S&P 500 component reported earnings of $0.26 a share, with revenue coming in at $8.4 billion. Analysts had expected income of $0.32 a share on revenue of $8.2 billion. The shares have been approaching their May 52-week high of $20.12. Heading into Monday's open, the stock was working on two months in a row of upside trade.

After-the-close is the eagerly awaited fourth-quarter report from DJIA component Hewlett-Packard (HPQ). It's the first quarter reflecting results from new CEO Meg Whitman. The company is expected to report earnings of $1.13 per share on revenue of $32.05 billion. Among items of interest to investors and analysts is the company's PC business. The company had discussed selling or spinning off that business unit amid data showing deterioration in the overall market. However, it ultimately decided to keep making PCs.

Analog Devices (ADI) also reports later today. The chipmaker is expected to earn $0.63 a share, with revenue coming in at $727.43 million. Those would mark year-over-year declines on the top and bottom line.

Early Movers

Price movers early Monday included DJIA component Alcoa (AA), falling $0.19, 1.96%, to $9.50. Shares are down 37%, year-to-date.

Salesforce (CRM) continued its slide, after gapping down Friday on a disappointing outlook. Shares of the enterprise software maker skidded $2.98 in early trade, a loss of 2.63%, to $110.45.

Analyst Actions

Analyst actions before the start of Monday's trade included a JP Morgan upgrade of Wal-Mart (WMT) to Overweight from Neutral. The analyst cited price valuation, U.S. sales trends and company-specific factors. Wal-Mart shares fell last week, but are showing a gain of 0.9% so far in November.

Columnist Conversations

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