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Apple Supplier Bankruptcy Weighs on Broad Market

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

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The first round of Brazil's presidential election went a bit differently than many had expected. Incumbent Dilma Rousseff took 41.5% of the vote, only edging out competitor Aecio Neves by less than 7%. Many of the pre-election polls had Rousseff with a lead of at least 9%. Additionally, if Rousseff had taken more than 50% of the vote, she would win the election by default and negate the need for a runoff later this month. Now, investors think it is possible that between Neves and Silva (the other competitor), there is a shot Rousseff will lose the runoff vote on Oct 26. The Brazil Ibovespa (IBOV) rose 7.4% in the opening moments and ended up closing the day +4.61%.

News that GT Advanced Tech (GTAT) was filing for Chapter 11 bankruptcy shocked the markets. GTAT, which makes sapphire screens for Apple (AAPL) and does work for solar companies as well, closed down 92.4% to $0.84 after opening the day at $11.06. It will seek to continue operations after obtaining financing while in default. Although no reason was provided by the company, many investors presumed that a secured line of financing from Apple that was called. Questions were also raised that because this company was unable to obtain financing, it might highlight a potential tightening of credit conditions, and many companies have been using easy credit to return cash to shareholders in the form of dividends or share repurchases.

US equities opened the day higher, but traded down for much of the session. News overnight indicated that protests in Hong Kong were dieing down to a small degree, which caused some relief in the country's stock markets. The rest of China was still closed for the holidays. The S&P 500 (SPX) balked at breaking the 50dma at 1975, and began trading down shortly after the GTAT news was announced. The benchmark index traded as low as -0.50% on the day before finding some support. It ended up the day down 0.166%. The small cap Russell 2000 (RUT) was a notable underperformer after showing relative strength the prior three sessions.

The US dollar index (DXY), following its largest single day gain in three years on Friday (+1.28%), gave back most of that today with its largest single day of losses since January 23 (-1.09%). The Yen, Euro, and Pound all rose as the selling was centered around the US dollar.

Tomorrow's Financial Outlook

The only two economic reports of note tomorrow in the US are the August JOLTS job openings and consumer credit. The JOLTS report is viewed by economists as the best gauge of the true underlying labor market strength, although it rarely moves market prices. Two dovish FOMC members, Dudley and Kocherlakota, will give speeches in the afternoon.

Overnight the Reserve Bank of Australia (RBA) will make its monthly rate decision. Recently, its neighbor the Reserve Bank of New Zealand (RBNZ) has made several strongly worded statements that it will begin to lower the price of its currency through the sale of FX, many have believed that the RBA will be forced down a similar path because it is not in favor of cutting rates further. The results of this meeting should be watched carefully. Also scheduled for release tomorrow is the UK September GDP estimate and industrial production.

Yum! Brands (YUM) is the only major US company scheduled to report earnings tomorrow.

Twitter: @Minyanville

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No positions in stocks mentioned.

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