On Track for Fifth Session of US Equity Gains

Economic Data

- (US) MBA Mortgage Applications w/e Oct 17th: +11.6% v +5.6% prior

- (US) Sept CPI M/M: 0.1% v 0.0%e; Y/Y: 1.7% v 1.6%e

- (US) Sept CPI Ex Food and Energy M/M: 0.1% v 0.1%e; Y/Y: 1.7% v 1.7%e

- (US) Sept CPI NSA: 238.031 v 238.030e; CPI Core Index: 238.677 v 238.625

- (CA) Canada Aug Retail Sales M/M: -0.3% v 0.0%e; Retail Sales Ex Auto M/M: -0.3% v +0.2%e

- (MX) Mexico Aug Retail Sales Y/Y: 4.4% v 2.7%e

- (CA) Bank of Canada (BOC) left interest rates unchanged at 1.00%, as expected

- (US) DOE Crude: +7.1M v +3Me; Gasoline: -1.3M v -1.5Me; Distillate: +1.05M v -1.5Me

US equities are gaining again this morning after a round of benign earnings reports. As of writing, the DJIA is up 0.06%, the S&P500 is up 0.20% and the Nasdaq is up 0.22%.

Inflation continues to stubbornly avoid showing up in the official CPI data. There were no surprises in the September CPI reading. The core index has posted changes of zero or 0.1% in each of the past four months, and nothing in the details of this morning's report suggests that trend is likely to change in October.

There are dramatic headlines out of Ottawa this morning, where one or more gunman reportedly opened fire and shot a soldier a short time ago. There were reports of a possible second shooter, and shots have been heard inside of parliament. Separately, the Bank of Canada left rates unchanged at its decision, but boosted inflation and GDP forecasts. The BoC has cancelled its press conference due to the shooter situation. After rising steadily over the first three weeks of October, USD/CAD has reversed and is around 1.1206 currently.

Full results of the European bank stress tests are due on Sunday and both the press and traders are having a field day with leaks. Note that the ECB's asset quality review (AQR) and the European Banking Authority's stress tests run concurrently. One Spanish source reported 11 of the 130 banks being tested by the ECB failed the review. PIMCO's Bodereau said he expects 18 banks to fail the ECB review. The euro may be suffering from the stories: EUR/USD has been forced back toward the lows seen last week, around 1.2658.

EMC's third quarter earnings fell short of expectations, although y/y gains were solid. Separately, EMC announced it would consolidate its ownership of the VCE joint venture, acquiring stakes from existing partners Cisco and VMware. VCE sells data center equipment that melds computing, storage, networking and virtualization into a single product. Terms of the deal were not disclosed, although its worth noting that Cisco owns 35% of VCE and EMC owns 58%.

Yahoo saw modest revenue gains in the third quarter, while both earnings and revenue topped consensus expectations. Display revenue was constrained, although it broke out mobile ad revenue for the first time, saying it was more than $200M. The company said it made $6.3 billion on Alibaba in the quarter. On the call, CEO Mayer said the company was examining alternatives for the Alibaba funds, without offering more details. YHOO is up 5.8% this morning.

Shares of defense names General Dynamics and Northrop Grumman are up 3% and 1.5%, respectively. Both names were well ahead of expectations on solid y/y growth. NOC raised its FY14 guidance modestly. Shares of Boeing were down as much as 2% after earnings despite its higher guidance and very good headline results. Analysts were raising concerns about signs the costs of the 787 Dreamliner were creeping higher.

Looking Ahead

- 15:00 (UK) BOE's Weale at event in Cambridge

- 21:35 (JP) Japan Manufacturing PMI: 52.0e v 51.7 prior

- 21:45 (CN) China HSBC Manufacturing PMI: 50.2e v 50.2 prior