Over the weekend, German Chancellor Angela Merkel won the
general election for her third consecutive term. Merkel's Christian
Democratic Union won 41.5% of votes, but fell five seats short of a
majority in the German Parliament. This means that the CDU party
will have to form a coalition with the opposing Social Democratic
party. Merkel's victory was the second largest since Germany's
Parliament was formed following the end of the Cold War. European
equities were modestly lower today. A eurozone survey of
preliminary manufacturing conditions in September fell to 51.1 when
estimates had forecast a rise to 51.7.
US equities began deteriorating in the pre-market and continued
lower throughout the morning, reaching an intraday low shortly
before European markets closed at 11:30 a.m. ET. Banks were the
standout underperformer of the day, falling by 1.36% as a group.
Consumer services and goods were also weak. Interest-rate-sensitive
utilities were the leading sector, with tech stocks not far behind.
A few investors pointed out that continued tensions over a
potential government shutdown may have contributed to the sell-off.
A number of regional Federal Reserve bank presidents gave speeches
today. Dovish presidents Dudley and Lockhart both pressed for a
more accommodative policy, given the recent sluggishness in the
economy. Dallas Fed President Richard Fisher, who is typically the
most conservative member of the FOMC, said that the Fed jeopardized
its credibility by choosing not to reduce asset purchases last
week. In addition, he said that he had pushed the committee to
reduce its purchases as the market had fully prepared for that
Tech stocks were led by
) release of
opening weekend iPhone sales
. Apple reported that iPhone sales reached 9 million in the opening
weekend, more than the highest estimate of 7.75 million. Apple also
updated its guidance for the fourth quarter, saying that revenue
and gross margins would come in at the high end of their ranges. It
is uncommon for Apple to release updated guidance during the
quarter as the company is usually very conservative. The stock
closed up 5%.
In other tech news,
) received a tentative buyout offer from a consortium of buyers led
(OTCMKTS:FRFHF) for $9 per share or $4.7 billion. This comes after
BlackBerry's announcement on Friday that it was cutting 4,500 jobs,
which sent shares down 20% to near $8. BlackBerry shares closed
slightly below $9 in today's trading.
Tomorrow's Financial Outlook
Tomorrow kicks off a wild week of economic data. In the morning,
the Case-Shiller July home price indexes will be released. Prices
are estimated to have risen 12.4% from the prior year, despite a
downturn in home sales. The Conference Board's consumer confidence
index will be reported later in the morning. Two weeks ago, the
University of Michigan's preliminary consumer confidence survey
showed a sharp decline to an index reading of 76.8 from 82.1 a
Two other Federal Reserve presidents are set to give speeches
tomorrow. Cleveland's Sandra Pianalto and Kansas City's Esther
George will give speeches at 9:30 a.m. ET and 1:00 p.m. ET,
In global market-moving news, the IFO Institute will release
forward economic expectations for Germany, and Canada will release
July retail sales.
The homebuilders will start reporting earnings tomorrow, which will
give market-watchers a sense of how the housing market has been
acting after interest rates have risen significantly.
) will report in the pre-market.
(CCL) will also report.
Disclosure: Minyanville Studios, a division of Minyanville
Media, has a business relationship with BlackBerry.