The markets are closed Monday, and likely on Tuesday as well,
due to the approaching Hurricane Sandy. The decision to close all
market activity on Monday reversed the earlier partial shutdown
call that would have kept open electronic trading activities even
as it closed down all trading floors. This is the first
unscheduled market shutdown since September 2011.
All scheduled economic releases on this week's calendar are
expected to come as originally planned, though some of the
earnings announcements have been delayed. Most of the major
economic reports are coming out later this week, with the October
non-farm payroll report coming out Friday morning. The consensus
expectation is for the jobs report to show gains of 120K this
month, with a modest uptick in the unemployment report. More so
than market impact, this jobs report will likely have far more
resonance in the political field given the charged electoral
backdrop. The ADP report on Thursday will give us a preview of
the government jobs report. We will also get the October
manufacturing ISM survey on Thursday.
On the earnings front, this week's busy reporting schedule is
unlikely to change the overall weak tone of the reporting season
thus far. Including results this morning from
Loews Corp
. (
L
) and
CNA Financial
(
CNA
), we have third quarter results from 273 companies in the
S&P 500 or 54.6% of the index's total members. Total earnings
for these companies are down 2.4% from the same period last year
and only 61.5% of the companies are beating earnings
expectations. Total revenues are down 2.1%, but only 30.7% of the
companies are able to beat revenue expectations. Combining the
results the 273 companies whose results are known already with
the 227 reports still to come gives us a composite growth rate
for the third quarter of a 1.1% decline (the composite revenue
growth rate is 2.4%).
The predominantly negative tone of company guidance has
started showing up in estimate revisions, but overall estimates
for the fourth quarter and beyond still remain elevated at this
stage. Total earnings are expected to grow 6.1% in the fourth
quarter and in excess of 11% of in 2013. These growth
expectations have come down from a few months back, but they
still have more room to fall. The market weakness of recent days
is largely a reflection of this uncertain and downbeat corporate
earnings picture.
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