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T3's Take 3: IBM, Harley-Davidson Get Smashed Up on Weak Earnings


Today's financial recap and tomorrow's financial outlook.


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US Markets

US equities traded lower today, weighed down by another round of mixed earnings. Today, the focus was on IBM (IBM), which fell 5.8% on a weak report and guidance. IBM announced a significant revenue miss due to currency headwinds and weakness in China.

Motorcycle maker Harley-Davidson (HOG) joined IBM in the loss column with a 13.9% loss due to weak guidance.

The S&P 500 finished down 0.1% at 2030.77. 

The iShares NASDAQ Biotech ETF (IBB) closed down 3.2%, pushing down the NASDAQ, which fell 0.5%. 

Verizon (VZ), and United Technologies (UTX) also released quarterly earnings before the open this morning. Verizon beat on earnings and revenue, while United Tech beat on earnings.

Both stocks rallied.

In economic news, US housing starts were well above expectations, coming in at 1.206 million. 

The dollar was mixed against major currencies, gaining against the yen, pound and Australian dollar, while slipping against the euro and Canadian dollar. Bond yields were up slightly.

World Equity Markets

Asian markets were mixed again today. 

The Shanghai Composite rallied during its last hours of trading and finished up 1.1%, shaking off yesterday's disappointing Chinese economic data.

Hong Kong's Hang Seng didn't see the same rebound as its mainland counterpart  and fell 0.4%.

Japan's Nikkei regained some of yesterday's losses on gains in financials and telecom.The MUFG Financial Group and SMFG rose nearly 2% each. Telecom companies KDDISoftBank, and NTT Docomo rallied on analyst upgrades. Oil players JX Holding and Fuji Oil fell 0.9% and 0.3% on the drop in oil prices. 

The Korean Kopsi gained 5%. 

European markets were mixed as well. Investor concerns about China, oil prices, and earnings reports weighed on equities. The German DAX finished down 0.2%, while the French CAC fell 0.6%. Shares in Dutch company TNT Express jumped 10% on a report that FedEx (FDX) will gain unconditional EU antitrust approval for its $5 billion take over of the company. 

Yum! Brands Separates

Yum! Brands (YUM) announced it will split its Chinese operations from its US business. Activist investors put pressures on the firm to separate.

The new company will be known as Yum! China, and will operate as a franchisee with exclusive rights to the names of KFC, Pizza Hut, and Taco Bell

The split will mark the largest restructuring in the company since it split from Pepsi Co nearly 20 years ago. 

Hedge fund manager Keith Meister stated that the Asian market segment would benefit from a more focused company, arguing that the move could boost Yum!'s value by $1 billion. Meister has a 5% stake in the company and was added to the board of directors on October 16.

Yum! Brands is facing increased competition in China from local fast-food restaurants. Meister claims that the risks in China's fast-food market are different from those in the US. YUM restaurants were company owned, making it difficult for its restaurants to adapt. Meister believes that since the restaurants will be franchised,they will be better equipped to compete in the Chinese market. 

Yum shares closed up 1.8%. 

Wednesday's Financial Outlook

US economic news for tomorrow will include MBA mortgage applications, and DOE oil reports.

Overseas economic data will feature Japan's all industry activity index & foreign bond buying, British public finances, and Bank of Canada's rate decision.

Baker Hughes (BHI), Biogen (BIIB), Boeing (BA), Coca-Cola (KO), Credit Suisse (CS), and General Motors (GM) will report earnings before the open tomorrow. American Express (AXP), eBay (EBAY), Las Vegas Sands (LVS), and SanDisk (SNDK) will release their earnings reports after the close. 

No positions in stocks mentioned.
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