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Look to energy names for global demand clues
Profit growth expectations for S&P 500 energy companies have fallen more than any other sector - from a forecast of 13.8 percent on July 1 to the current 1.8 percent, Thomson Reuters data showed. With various names due to report next week, including Exxon Mobil (XOM.N), Chevron (CVX.N), ConocoPhillips (COP.N) and National Oilwell Varco (NOV.N), there are hopes that executives will suggest that the fall in oil and share prices has overstated the outlook for these names. The energy sector over the last 20 weeks has spiraled from being the market leader to now ranking as its most distant laggard, according to a Relative Rotation Graph study, which analyzes the relative performance of the constituents of an index. The S&P energy sector up about 6 percent from Oct. 15, while the S&P 500 is up 5.5 percent from its Oct. 15 low and the benchmark index on Friday posted its best weekly gain since early January 2013.
Deutsche Bank lawyer found dead by suicide in New York
A senior Deutsche Bank regulatory lawyer has been found dead in New York after committing suicide, New York City officials said on Saturday. Calogero Gambino, 41, was found on the morning of Oct. 20 at his home in the New York borough of Brooklyn and pronounced dead on the scene, according to New York City police. Gambino was an associate general counsel and a managing director who worked for the German bank for 11 years, according to the Wall Street Journal, which first reported his death. He had been closely involved in negotiating legal issues for Deutsche Bank such as a probe by regulators of banks over allegations they manipulated the Libor benchmark interest rate as well as currency markets.
China's auto market growth may halve to 7 percent this...
Growth in China's auto market, the world's biggest, will halve to 7 percent this year weighed down by a slowing economy, the head of an industry body said on Saturday. "Personally, I think growth this year can reach 7 percent," Dong Yang, secretary general of the China Association of Automobile Manufacturers (CAAM), told reporters on the sidelines of an industry conference in Shanghai. The auto industry would reflect that but typically lags the economic cycle by a bit." CAAM had forecast China's auto market, which grew by 13.9 percent last year, to expand at 8.3 percent in 2014.
Areva-Siemens raises claim to $4.4 billion over Finnish...
The French-German consortium Areva-Siemens (AREVA.PA)(SIEGn.DE), the supplier of Finland's much-delayed Olkiluoto-3 nuclear reactor, has increased its claim against Finnish utility Teollisuuden Voima (TVO), TVO said late on Friday. TVO and Areva have traded accusations about who is to blame for delays and extra costs, and the International Chamber of Commerce's (ICC) arbitration court is processing a dispute on cost overruns between the two sides. Areva-Siemens in September said the start date of the reactor, which is planned to be Finland's fifth and biggest nuclear unit, will be pushed back to late 2018 - almost a decade later than originally planned.
India's finance minister favors interest rate cut: paper
India's Finance Minister Arun Jaitley favors a cut in interest rates to trigger demand in the construction sector, a newspaper report said on Saturday, but the central bank has signal it will not ease policy until it is confident of lower inflation. "Currently, interest rates are a disincentive. Now that inflation seems to be stabilizing somewhat, the time seems to have come to moderate the interest rates," Jaitley said in an interview with the Times of India. Last month, the Reserve Bank of India, sent a strong signal that it would refrain from cutting interest rates until the central bank was confident that consumer inflation can be cut to a target of 6 percent by January 2016.
Exclusive: Ford to overhaul Lincoln brand, this time with...
Ford Motor Co's (F.N) new chief executive, Mark Fields, is giving the automaker's long-moribund Lincoln brand what his predecessor Alan Mulally never could: a little love and a lot of cash. Lincoln, a storied Detroit brand which Ford has owned since 1922, has been in a swoon for the past two decades, leaving dealers and customers wondering if Ford management had left the brand for dead. Now, with the renewed backing of Executive Chairman Bill Ford and the company's board, Fields has committed the automaker to a multiyear, multibillion-dollar overhaul of Lincoln that includes a significant investment in a new premium vehicle platform that will underpin several future Lincoln vehicles, four sources told Reuters. Ford could spend $5 billion or more over the next five years to revive Lincoln, revamp its product portfolio and reposition it as a true competitor to such global luxury leaders as Daimler AG's (DAIGn.DE) Mercedes-Benz and BMW AG (BMWG.DE), the sources said.
Fannie Mae settles shareholder lawsuit for $170 million
Fannie Mae has reached a $170 million settlement of a lawsuit accusing it of misleading shareholders about its finances, risk management and mortgage exposure before it was seized by the U.S. government ...
U.S. appeals court rules for GM over Spyker's Saab sale
Circuit Court of Appeals in Cincinnati on Friday said Spyker failed to show GM intentionally interfered with the Dutch company's effort to sell Saab to Zhejiang Youngman Lotus Automobile Co, leading to Saab's bankruptcy. GM had sold a majority of Saab to Spyker in 2010.
Ex-Bank of New York Mellon employee pleads guilty to...
A former Bank of New York Mellon Corp (BK.N) employee on Friday pleaded guilty to insider trading based on tips from a former Merck & Co Inc (MRK.N) employee about potential pharmaceutical mergers. Federal prosecutors in New York said David Post, 41, a product manager at the bank, received nonpublic information from a former Rutgers Business School classmate about three companies: Idenix Pharmaceuticals, Ardea BioSciences and ViroPharma Inc [VIRO.UL].
Port squeeze threatens US retailers' holiday stocking plans
The delays are affecting retailers including JC Penney Co (JCP.N), Macy's Inc (M.N), Kohl's Corp (KSS.N) Nordstrom Inc (JWN.N), American Eagle (AEO.N), Ralph Lauren (RL.N) and Carter's (CRI.N), according to three people with direct knowledge of the situation. Retail giant Wal-mart Stores Inc (WMT.N), recently diverted 300 shipment containers to Oakland to avoid the congestion, one person said. Wal-Mart declined comment. The problem stems from a shortage of trucking equipment, called chassis, but the National Retail Federation in a statement said protracted labor negotiations were an issue, too.
After big miss, will activists circle Amazon?
Virtually any underperforming company can come under attack from an activist investor. Hedge funds ponder whether Amazon will be the next big target.
Cramer: Pay & play next week
It's not the iPhone, or anything inside, that's caught "Mad Money" host Jim Cramer's eye to recommend buying this stock and selling others
Google's Pichai to oversee major products and services
Google Inc Chief Executive Officer Larry Page has put Sundar Pichai, one of his key lieutenants, in charge of the Internet company's products. The India-born executive will have oversight over products such as search, maps, Google+, commerce, advertising and infrastructure, according to a Google spokesman. Six executives who previously reported to Page, including the heads of research, social media and search, will now report to Pichai, according to Re/code, which first reported the change on Friday, citing an internal memo. YouTube, Google's popular video website, will be unaffected by the new structure and will continue to report directly to Page.
Housing bright spots
As new U.S. home sales rise to new highs, home prices are sharply declining. CNBC's Diana Olick discusses how this is impacting the overall housing market.
Are stocks prettier than junk? Bull market hinges on the...
There is no magic formula for predicting the stock market, no lodestar signal that can tell you when it’s better to be in or out. But there are important relationships among interest rates, risk appetites and market performance that stay pretty stable for stretches of time and give a sense of how to divine stocks’ prospects. The chart here plotting the yield on the main junk-bond index against the free cash flow yield on the stocks in the Standard & Poor’s 500 is one I might choose if allowed only a single cheat sheet for handicapping the market. When stocks have a higher free cash flow yield than the junk-bond index, equities tend to enjoy a tailwind, and vice versa. As the charts here show illustrates, most of the upside achieved by stocks occurred while junk yields were lower than corporate free cash flow yields. Not too many folks directly invest by such a rule. But high-yield bonds and equities are adjacent to one another on the spectrum of assets than run from safe to risky. So when one outruns another in a particular direction for a fair distance, money in aggregate seems to shift to bring them back into line. Junk-bond yields fall when benchmark Treasury yields drop and as investors become more confident and demand less of a yield premium to hold relatively riskier corporate paper. A company’s free cash flow is a measure of unencumbered profit, the amount of operating cash flow left over after capital expenses are covered. Essentially a company’s discretionary earnings, it’s the incoming cash that management can use to pay out dividends, buy back stock, repay debt or make acquisitions. For the past few years, the so-called junk-bond market has been where all the strong forces animating post-crisis finance are centered. Central banks are keeping rates on low-risk debt near zero as they flush new money into the system. This has reduced borrowing costs, allowed riskier companies to refinance more expensive debt and sent trillions of dollars hunting for reasonable yield income. The strength of the junk market is typically measured by tracking the “spread” between junk yields and Treasuries. Yet the absolute yield level of junk debt also has implications for how the market values stocks relative to corporate cash flows. As the chart shows, junk yields were crashing from generational highs in 2009 as the crisis subsided, the system was flushed with cheap money, as free cash flows recovered with the economy. This supported the initial phase of the rebound in stocks into 2011. Then, the European sovereign crisis and U.S. debt ceiling drama upset corporate credit markets, pressuring stocks until junk yields settled back down late that year. What’s most interesting and relevant to me is how this relationship played out beginning two years ago. Note that around November 2012, after stocks pulled back by 7% from their high following the presidential election, the free cash yield nosed above junk yields – which were being pressured lower by a stabilizing economy and, arguably, the Federal Reserve’s launch of its QE3 bond-buying program. Stocks’ free cash yield stayed above junk yields most last year even as the S&P 500 soared close to 30%. I’ve called the market’s run from the November lows the “liftoff phase” of the bull market , with risk appetites reviving, corporate profits rising and shareholder-friendly financial-engineering back in favor. [In that July article, it was noted that the 2014 level of the S&P 500 would be a decent spot to ask if this dynamic was changing; the all-time high on Sept. 19 was within a few poihts of that threshold.] The yield relationship stayed in this happy setup into late summer of this year, as junk yields plumbed record lows. As the high-yield market hit turbulence beginning in August, junk-debt yields turned higher and have spent more time above cash-flow yields than not. This helps explain the nasty gut check the stock market has undergone, compromising one handy advantage equities have enjoyed for the majority of the strongest periods of this bull market. This could, if the relationship holds, be a remaining headwind for stocks. A case can be made that junk yields have already seen their lows, given that the credit cycle is maturing and corporate defaults have probably passed their trough. Not to mention the expectation that benchmark Treasury yields don’t appear to have terribly much downside potential. Again, there’s no magic here. In the years leading up to the 2007 market top, stocks got far more expensive relative to corporate debt than they are now, and they certainly could again. But for now, unless and until a growth acceleration begins making equity investors more bold, the trajectory of stocks could depend quite a bit on how much of a cushion fixed-income folks begin demanding to take on credit risk. At some point, it won’t be surprising if bullish stock investors repeat the frustrated phrase President Bill Clinton spat out when he was told the debt market would revolt against his spending plans: “You mean to tell me [my success]…hinges on the Federal Reserve and a bunch of fu—-ng bond traders?”
Market shook off overstated Ebola fears: Pro
Digging into the market rally, with John Spallanzani, GFI Group.