Oct 5-9: Earnings Season Opens, Debt Dries Up

DJIA 17084 // S&P 2015 // NASDAQ 4830 // 10-YR TRE 2.10%
EURO 1.136 // OIL 49.49 // GOLD 1155 // BIT 244

Alcoa kicked off the Q3 earnings season with, as many expected, some pretty dismal numbers: for the second quarter in a row, the aluminium manufacturer missed sales and earnings estimates. Contributing factors cited were a slowdown in Chinese demand and a supply and energy glut. Alcoa has recently announced it will be splitting apart its Upstream and Value-Add businesses. (Zacks.com)

36x

The number of times larger that US student lending debt ($1.2 trillion) is than debt (bonds) issued by schools themselves ($32.7 billion) (WSJ)

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EQUITIES:

Demotion on Wall Street: Bond Traders Take a Back Seat, WSJ

"For the first time in at least half a decade, head count of traders and salespeople on equity desks in the first half of the year topped head count on bond-trading desks 17,300 to 17,100, according to research firm Coalition Ltd ... Overall revenue in fixed income remains larger, with $39 billion in fixed income traded by 10 of the biggest global banks over the first six months of the year, compared with $24.6 billion for equities."

CREDIT & GOVERNMENT DEBT

Central Banks Dump US Debt, WSJ

"In a dramatic shift in the $12.8 trillion US Treasury market, foreign official net sales of US Treasury debt maturing in at least a year hit $123 billion in the 12 months ended in July .. It was the biggest decline since data started being collected in 1978. A year earlier, foreign central banks had purchased $27 billion of US notes and bonds."

INDICATORS

Economists See US on Cusp of Full Employment, WSJ

"The US will be in a state of full employment within the first half of 2015, according to 56% of economists surveyed by the Wall Street Journal .. 'Full employment' is a term economists use to signify an economy in balance, where there is no longer cyclical economic weakness, but also no pressure pushing the inflation rate higher. The term doesn't signify an economy in which everyone has a job, let alone a good one ... Even as the unemployment rate has fallen in recent years, other signs of weakness have lingered. In particular, the share of Americans participating in the workforce declined. The rate declined in September to 62.4%, the lowest share since 1977."

M&A

Debt Markets Hold Key to Dell's Bold EMC Bid, WSJ

"Michael Dell is pressing ahead on a $50 billion-plus acquisition of data-storage giant EMC ... Following record or near-record debt issuance in recent years that supported the M&A surge, credit investors have lately become more fickle. In late September, JP Morgan cut a planned high-yield bond sale backing Altice's purchase of Cablevision for $1.5 billion, making up the difference by selling more debt on the loan market. Leveraged loans are viewed as safer than bonds because they are secured by corporate assets."

Vocabulary, People & Companies:

• EMC Corporation
• Going private
• Leveraged loans
• Full employment

Upcoming Calendar:

• Mo Oct 11: Columbus Day - equity market open, bond market closed; INFY 
• Tu Oct 12: NFIB Small Business Optimism index; CSX, JPM, JNJ
• We Oct 13: PPI-FD, Retail sales; BAC, DAL, NFLX
• Th Oct 14: Consumer price index, Jobless claims; UNH, MAT, GS
• Fr Oct 15: Industrial production, Consumer sentiment; GE, HON

Predictions from last time: 1/3 All-Time: 26/51

• $25B merger: CORRECT
• Oil falls: WRONG
• Bitcoin $242-238: WRONG

Weekly Predictions:

1. Honeywell beats
2. CPI falls
3. Another $25B merger