Political Hee-Hawing Increases Market Volatility
Today's financial recap and tomorrow's financial outlook.
Renowned activist investor Bill Ackman stated that he was shorting Herbalife's (NYSE:HLF) stock after doing extensive fundamental research on the company and calling it a "pyramid scheme." He said he had been shorting the company's stock for more than seven months. After triggering a volatility circuit breaker intraday, the stock fell more than 12%. Later in the day, Herbalife's CEO stated that Ackman's actions were blatant market manipulation and that Ackman did not consult Herbalife's executives during his research.
During the summer, NYSE market maker Knight Capital (NYSE:KCG) suffered a technical malfunction that caused its trading algorithms to erroneously buy and sell stock at high frequencies, causing a $420 million loss. After the fact, a number of competing firms such as Jefferies (NYSE:JEF) and TD Ameritrade (NYSE:AMTD) provided funding for the company in exchange for convertible debt securities. Today, Knight Capital accepted a bid of $3.75 per share from competing market maker Getco to fully acquire the company, a premium of 13.6% over Tuesday's closing price.
FedEx (NYSE:FDX) reported earnings this morning, citing a negative effect from Hurricane Sandy, but would have otherwise beat. Forward guidance was more negative than Street estimates. General Mills (NYSE:GIS) also reported slightly better earnings and revenues, along with boosting its forecast for fiscal year 2013 earnings. However, the stock fell 1% on the day.
Tomorrow's Financial Outlook
Tomorrow will be a busy day for US economic data as data that was supposed to be released next week will be pushed up to this week. Tomorrow's data will include weekly jobless claims, the second revision of third-quarter GDP, existing home sales, Philadelphia Fed manufacturing, and leading economic indicators. Notably, third-quarter GDP is expected to accelerate to 2.8% from the prior estimate of 2.7%. A volatile change is unlikely.
In Japan, the Bank of Japan will issue its monthly rate decision; it is expected that the bank will increase its inflation target to 2% from 1% after liberal Shinzo Abe took power during the recent elections. In Europe, the eurozone will report consumer confidence and the UK will report retail sales.
In earnings news, KB Home (KBH), CarMax (KMX), Darden Restaurants (DRI), Nike (NKE), Red Hat (RHT), Carnival (CCL), and ConAgra (CAG) will report.
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