Stock Market Today

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Global markets were broadly lower Wednesday, and U.S. indices were down 2%-3% at hour of publishing.

Economic Reports

Retail Sales - September

Retail sales were widely expected to slip in September, especially after last week's individual Chain Store Sales reports. In fact, that data along with recent auto market failures told us that aggregate sales would fall off dramatically. Sales collapsed 1.2% off of August levels, and excluding autos, sales fell 0.6%. This data immediately pressured stock futures this morning and is clearly the key driver in the early going.

Producer Price Index (PPI) - September

Economists are waiting on inflation to ebb on the heels of economic deceleration (read crashing), but September's PPI data showed no signs of such decline. While the Headline PPI fell 0.4% on energy price decline, Core PPI, which excludes energy, was hotter than expected. Core PPI increased 0.4%, versus expectations for a 0.2% rise to match its move in August. In our weekly copy, we noted that prices should stick stubbornly as executives hope to preserve profits. Bernanke has also spoken inflation embedding itself, and here's a sign of that. Eventually though, as economic activity slows, the falloff of commodities should work its way through to companies increasingly hungry for sales and thus willing to cut price. Unfortunately, they'll also cut labor in the process.

Empire State Manufacturing Survey - October

The New York regional measure of activity fell off a cliff, to negative 24.6, versus expectations for a measure of negative 10.5 and compared to a level of -7.4 in September. No surprise here either, as this globally exposed region was sure to fail as economic illness spread.

San Francisco Fed Chief Yellen's Comments

Yellen addressed a group last night and said that the U.S. economy appeared to be in recession. No kidding...

Mortgage Bankers Association Weekly Report

Weekly mortgage activity increased in the week ended October 10th. Application activity increased about 5.1% over the prior week, but was down 17% from the prior year. While fixed long rates rose through last week, lower rates earlier in the week spurred a spree of activity. This is expected to disappear in the forward week.

Pending News

Business Inventories for the month of August are due at 10:00 AM, with Bloomberg's consensus sitting at +0.5%. The Fed offers the Beige Book Survey at 2:00 PM, and Ben Bernanke will address the public today as well.

Overseas, Commodities, Currency and Treasury Markets

European Central banks pumped another $250 billion of capital into markets on Wednesday. More specifically, the ECB, Bank of England and Swiss Bank issued $250 billion in 7 day dollar funds matching heavy demand for dollar liquidity.

Oil prices are ebbing again, as traders refocus on global economic slowing, and ahead of the EIA's Inventory Report, which in recent weeks has shown builds in stocks. At hour of publishing, WTI Crude was down $2 to $76.50. OPEC revised its oil demand forecast for 2009, based on the impact of financial market turmoil. The forecast has been reduced by 100K barrels a day, to now reflect an expectation for growth of 800K barrels in '09.

Canada reelected its conservative leadership, led by Stephen Harper. Tonight marks the final presidential debate the U.S. In recent days, both John McCain and Barack Obama have offered more detailed mortgage market plans, and for obvious reasons, the debate is expected to focus on the economy. We wonder if this turmoil had unfolded a year earlier, how Mitt Romney might have fared in the Republican primary.

Company Specific News

"My how the mighty have fallen." J.P. Morgan (NYSE: JPM) no longer looks impervious to economic pain. Profits fell 84% at JPM, but the company still posted a profit, versus expectations for a loss. Still, JPM noted softness resulted from mortgage investments, leveraged loans and mortgage loans; in other words, the usual suspects. JPM has been the great beneficiary of the struggles of its peers, gaining deposits and banking business on the cheap. Wells Fargo (NYSE: WFC) also benefited from the failures of others, as it attributed its earnings outperformance today to market share gains on the failures of rivals.

People still drink Coke in recession. Despite Pepsico's (NYSE: PEP) recent earnings failure, Coca-Cola (NYSE: KO), posted profit growth of 14%, beating estimates thanks to emerging markets growth.

The Health Care segment fell along with the whole market last week, but should it have? Some argue that all depends on who is elected president, but economic strife is going to impact every industry in some way, even health care. If candidates want to reduce the cost to the consumer/patient, then somebody has to bear it. That somebody is going to be the health care industry, insurance and/or the government. Abbott Labs (NYSE: ABT) is doing just fine though, as it reported a 51% rise in Q3 profit. ABT also raised its full year EPS forecast.

Intel (Nasdaq: INTC) reported last night, and posted a profit rise of 12%. Strategists are looking for technology to take a hit to sales shortly, and Intel's CEO warned of signs of stress. So, despite beating its number, INTC shares are only up 1% in early trading, off of depressed levels. Intel traded about $10 higher this time last year.

(Article interests: AMEX: DIA, AMEX: SPY, Nasdaq: QQQQ, NYSE: NYX, AMEX: DOG, AMEX: SDS, AMEX: QLD, AMEX: XLF, AMEX: IWM, AMEX: TWM, AMEX: IWD, AMEX: SDK)


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