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A quiet day for the economy, while Investors focus on earnings

Tue, Nov 3 2009, 13:46 GMT
by ecPulse.com analysis team

ecPulse.com

A quiet day for the U.S. economy, since no major fundamentals will be released today; meanwhile investors continue to focus on stock markets and company earnings, where so far companies continue to report rather strong earnings despite the current weak economic conditions. Stock markets managed to finish yesterday’s session in green, as data from the manufacturing sector boosted confidence among investors.

Yesterday, the ISM manufacturing index signaled that activity in the manufacturing sector continued to expand for a third consecutive month, since it seems that the manufacturing sector was able to shake off the worst slump since the early 1980s, which had indeed hammered activity in the manufacturing sector amid the worst recession since the Great Depression.

Meanwhile, the only data scheduled to be released today is factory orders for the month of September, where expectations signal that they will increase by 0.8%; following the prior reported drop of -0.8% back in August. The expected rise comes inline with recent improvements in manufacturing and industrial activities in general.

Investors are going to be focused on company earnings, where yesterday we witnessed strong results released by Ford Motors Co, which reported a net income of $0.26 during the third quarter; beating median estimates for a net loss of -$0.201 a share. Ford signaled that the results were due to the restructuring plan, which helped Ford in cutting costs and utilizing its resources in a better way.

Moreover, more companies will release their results for the third quarter of this year; where Kraft Foods Inc, Mastercard Inc, Viacom Inc, and Sun Microsystems Inc are among those that will release their results today, and according to other results, we should expect those companies to be able to beat estimates or at least come inline with them.

Investors took the news of CIT Group Inc filing for bankruptcy under Chapter 11 yesterday harshly, which was proved rather disappointing as CIT was so close to agreeing on a deal that would have prevented bankruptcy, yet CIT’s bondholders failed to agree on a debt-exchange offer that would have cut CIT’s debt by more than $5 billion.

Concerns will arise over the failure of CIT Group, though the company expects to be able to reorganize and go back to normal before this year ends; however, the fact that common share holders as well as preferred stock holders will lose most or even all of their money means like the government, especially since the government provided aid for CIT Group in order to help the company from falling!

The failure of CIT Group means that we not out of the woods yet, and that casualties might continue in the financial sector, though we won’t see any big names falling anymore; since allowing Lehman Brothers fall, was a one time mistake by both the Feds and the government, and I’m very sure that such a mistake will never happen again. Yet conditions are still rather challenging and that means that the worst financial crisis since the Great Depression still hasn’t ended yet…

Published on  Tue, Nov 3 2009, 13:47 GMT