EmailWe're inclined to think that many market participants would be just fine if October 19 was removed from the trading calendar in the same way that floor 13 has been skipped by hotels. October 19 has a bad vibe about it and the latest go-around was no exception as the market dropped 1.7% on Friday.
The selling was broad-based and -- dare we say it -- fundamentally based with disappointing earnings results triggering the selling interest.
The market is attempting to regroup this morning, although some cautious guidance from Caterpillar (CAT) is helping to keep things in check.
Earnings results will be coming fast and furious this week with 155 S&P 500 companies expected to report for the September quarter. Last week featured "only" 80 S&P 500 companies.
Third quarter earnings are projected to be down 1.8%, according to the latest data from Thomson Reuters. That is a slight improvement from the prior week (thanks to the financials), yet it would be the first earnings decline since the third quarter of 2009. Revenues are forecast to decline 0.2%.
Caterpillar is the early headliner today. Texas Instruments (TXN) and Yahoo! (YHOO) will lead things after the close.
The good news from Caterpillar is that it topped the third quarter Capital IQ consensus estimate by $0.30 despite coming up shy on its top line ($16.45 bln vs. consensus $16.92 bln). The bad news is that it provided FY12 and FY13 guidance that is below current consensus estimates.
For FY12, CAT expects earnings to range from $9.00-9.25 per share (consensus $9.46) and revenues to be $66 bln (consensus $68.07 bln) versus a prior guidance range of $68-70 bln. For FY13, CAT is forecasting revenues to be in the range of down 5% to up 5% year-over-year, which equates to $62.7-69.3 bln (consensus $71.87 bln).
The revisions were attributed to global economic conditions that are weaker than it had previously expected.
The S&P futures dipped a few points following CAT's report and are now trading slightly below fair value, suggesting the cash market will start the session on a flattish to somewhat lower note.
Better-than-expected earnings from Freeport McMoRan (FCX), a smattering of M&A activity, and word that a regional election in Spain favored the party of Prime Minister Mariano Rajoy have reportedly lent some support this morning.
In all likelihood, the primary underpinning is an expectation that there will be an effort to buy on Friday's large dip. On a related note, the safe-haven 10-year Treasury note is down 11 ticks with its yield at 1.81%.
This will be a telling week in terms of earnings reporting since the financial sector will fade in terms of headline importance. Thus far, the earnings reporting period, even with the financials, has left plenty to be desired.
