Pre-Market Primer: Companies Sit on Mounds of Cash; Stocks Retake Lost Territory

By Vincent Trivett  OCT 24, 2012 8:50 AM

After a huge sell-off, stocks are bouncing back a bit. Also, Greece just released details of a brutal austerity program.

 


MINYANVILLE ORIGINAL After yesterday's brutal selloff, stocks are set to retake some lost territory today. 

Dow (INDEXDJX:.DJI) futures gained 0.33% to 13,084.00, S&P 500 (INDEXSP:.INX) futures rose 0.43% to 1,412.80 and Nasdaq (INDEXNASDAQ:.IXIC) climbed 0.42% to 2,671.75.
 
Facebook (NASDAQ:FB) rose 18.2% after its latest earnings statement eased investor concerns about its weakness in mobile ads.  Ads delivered to mobile devices resulted in $150 million of the company's $1.26 billion in revenue in the September quarter. Facebook beat Wall Street's estimates on revenue and exceeded adjusted earnings per share expectations by a penny, earning $0.12 per share.
 
Netflix (NASDAQ:NFLX) shares tumbled 17% after reporting an 88% drop in net profit. Netflix earned just $0.13 per share, but forecast smaller-than-expected subscriber growth.
 
This morning, Boeing (NYSE:BA) reported better-than-expected earnings of $1.35 per share. Boeing raised its 2012 guidance to a range of $4.80-$4.95 per share.

AT&T (NYSE:T) also beat expectations by two coppers with $0.62 per share. Revenue of $31.5 billion fell short of forecasts. The carrier had smartphone sales of $6.1 million helped by 4.7 million Apple (NASDAQ:APPL) iPhone sales. 
 
Experts say that new home sales in the United States rose to a seasonally adjusted annual rate of 385,000 in September, up from 373,000 in the month earlier. 
 
US manufacturing PMI stayed still at 51.5 this month, according to economists. Readings above 50 indicate expansion of the sector. 
 
The Federal Reserve will release an announcement at 2:15 p.m. EDT detailing the results of its policy meeting that took place yesterday and today. Since the third round of quantitative easing was just announced, market-watchers aren't expecting any new policy initiatives from the Fed today.
 
Things are not so sunny in Europe. Markit's composite PMI survey showed that the eurozone economy weakened this month. The index fell to a 40- month low of 45.8. 
 
Germany's IFO survey showed that the country's business confidence is at its lowest level since 2009. The survey fell to 100 this month from 101.4 in September.
 
Greece just revealed the details of the austerity program demanded by its creditors. The new program includes:
  • Laying off 25,000 government workers by the end of 2014; 5,000 will be sacked each quarter and placed into a labor pool until austerity's end.
  • Raising the retirement age to 67.
  • Keeping the emergency 5% tax hike in place until 2018.
  • Firing almost all associate university professors, cutting their numbers from 15,226 to 2,000.
  • Doling out 25% more traffic tickets starting in March.
  • Tax increases on deposits.
  • Lowering the number of tax brackets to three or four from eight.
Meanwhile, the troika of the International Monetary Fund, European Central Bank, and European Commission are demanding new controls over Greece's fiscal policy including approval from the EC before borrowing money and aid for reforming its notoriously corrupt tax collection agency.
 
Some good news came out of China today. The HSBC flash manufacturing index came in at a three-month high of 49.1. Though this is better than last month's 47.9, it still shows that the country's manufacturing sector is in decline. 
 
This earnings season is undeniably a lousy one -- 61% of the 127 S&P 500 companies that reported through last week missed revenue expectations. But it is becoming apparent that US corporations are simply not investing. JPMorgan Chase (NYSE:JPM) analysts say that cash reserves for S&P 500 companies have risen 14% to $1.5 trillion.
 
Twitter: @vincent_trivett
No positions in stocks mentioned.

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