Morning Update 10/26/2012
Apple reported earnings after the US close. Revenue beat expectations, but earnings missed. The stock broke $600 after the miss. As of this writing, Apple was at $604 in after-hours trading.
In other earnings news, Proctor & Gamble rose 2.9 percent after its earnings came in better than expected. Cliffs Natural Resources plunged 11 percent as the largest US iron ore producer missed estimates. With the VALE news yesterday, markets are continuing to see weakness in the iron ore sector. Look for weakness in Australia iron ore stocks. Iron ore prices are down to economic weakness in China and Europe.
Casino stocks rallied as Wynn Resorts reported results that beat forecasts and doubled its dividend.
Pandora dropped to $8.20 as reports intensified that Apple will start an Internet radio service. Possibly as soon as the first quarter of next year.
Best Buy fell to $15.17 as the company continues ro resist a takeover offer from its founder. Company said 3rd quarter profit will be “significantly” below last year’s as store sales continue to decline.
In the options market, investors have placed the largest number of bets ever on the S&P VIX. Calls that the VIX will increase have tripled to 4.38 million and puts climbed 52 percent to 2.14 million. Increased volatility usually means lower stock prices ahead. Calls outnumber puts 2 to 1.
US Treasuries declined after an anemic 7-year note auction. Demand came in at the lowest level since May 2009. The budget deficit and upcoming fiscal cliff are there no matter who wins the Presidency. Most traders anticipate higher yields for Treasuries as investors stop loaning the US government money at excessively low rates for long periods.
The yen continued its weaknesses and closed near the lows of the day. The Aussie and Kiwi were both slightly higher, but well of the highs of the day. The euro was weaker against the dollar. As stocks weakened going into the end of the day, the USD strengthened as risk appetite came off. Risk assets still aren’t able to rally and hold onto their gains.
The Kiwi retreated off its highs as New Zealand’s new central bank chief signalled a willingness to sell the currency if it appreciates too much. New Zealand is faced with slowing inflation and a rising currency curbing exports and prompting some manufacturers to close plants.
Crude oil rose the first time in six days, but not by much. Crude oil for December rose by $.32 to settle at $86.05. All eyes are on US GDP data to be released today.
Natural gas fell after the EIA reported the weekly storage report came in above the 5-year average. There’s still plenty of natural gas in storage and cold weather hasn’t set in the key consuming regions of the northeast and midwest.
Corn and wheat fell in Chicago as overseas buyers are choosing to buy EU wheat. Shipping costs from France are cheaper. Once EU inventories go down in the second part of the season, buyers will have to turn to US wheat. Russia and Ukraine have curbed exports, so buyers have to look elsewhere.
Gold rose as a report showed that the central banks of Brazil and Turkey have been buying gold. A report also showed stronger than expected buying out of India. Gold was last trading at $1711 and silver at $32.14. The $1700 is a key psychological support level.
Please check back for the latest updates and Happy Trading!
