Economic Calendar

Tuesday, September 18, 2012

U.S. Stocks Fall on Europe Woes After Last Week’s Rally

U.S. stocks fell, pulling the Standard & Poor’s 500 Index down from the highest level since 2007, as European finance chiefs deadlocked at debt-crisis talks and New York-area manufacturing slumped.
Bank of America Corp. (BAC) and Morgan Stanley slid more than 2.4 percent after two weeks of gains. Alcoa Inc. (AA) tumbled 2.6 percent as commodity shares plunged. Cliffs Natural Resources Inc. (CLF) lost 7 percent after its rating was cut by JPMorgan Chase & Co. (JPM) Apple Inc. (AAPL) gained 1.2 percent as pre-orders of its iPhone 5 topped 2 million units in one day. Office Depot Inc. (ODP) rose 5.3 percent after Starboard Value LP took a stake in the company.
Traders work on the floor of the New York Stock Exchange during afternoon trading on Sept. 14, 2012. Photographer: Mario Tama/Getty Images
Sept. 17 (Bloomberg) -- Bloomberg's Deborah Kostroun reports on the performance of the U.S. equity market today. U.S. stocks fell, after the Standard & Poor’s 500 Index rallied to its highest level since 2007, as European finance chiefs deadlocked at debt-crisis talks and New York area manufacturing slumped. (Source: Bloomberg)
Sept. 17 (Bloomberg) -- Bloomberg’s Trish Regan, Matt Miller and Adam Johnson report on today’s ten most important stocks including Bloomin' Brands, Office Depot and Apple. (Source: Bloomberg)
Sept. 17 (Bloomberg) -- Tim Hartzell, chief investment officer at Sequent Asset Management LLC, discusses Federal Reserve policy, U.S. stocks and investor sentiment towards Europe. He talks with Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)
Sept. 17 (Bloomberg) -- David Kotok, chief investment officer at Cumberland Advisors Inc., talks about Federal Reserve monetary policy and investment strategy. Kotok speaks with Adam Johnson and Trish Regan on Bloomberg Television's "Street Smart." (Source: Bloomberg)
The S&P 500 slid 0.3 percent to 1,461.19 at 4 p.m. in New York. The Dow Jones Industrial Average dropped 40.27 points, or 0.3 percent, to 13,553.1. About 5.7 billion shares traded hands on U.S. exchanges today, 5.4 percent below the three-month average.
“It looks like we need to take a small breather after the sizable rally that we’ve had,” Randy Frederick, managing director of active trading and derivatives at Charles Schwab Corp., said in an interview from Austin, Texas. His firm has $1.83 trillion in client assets. “There’s the potential for a small pull-back, but I think we will move back into the bull territory later in the week unless there’s an unexpected negative news event.”

EU Concern

The S&P 500 rallied last week to the highest level since December 2007 as the Federal Reserve’s plan to buy mortgage securities fueled demand for riskier assets. Commodity, financial and industrial shares had the biggest gains among 10 groups in the benchmark gauge, helping to extend its two-week advance to 4.2 percent. The index is about 7 percent away from its all-time high set in October 2007.
Stocks fell today as European Union finance ministers failed to agree on a timetable for a more unified banking sector and clashed over terms of bailout requests and the role of the European Central Bank at a meeting Sept. 14 in Cyprus. Citigroup Inc. became the latest bank to cut its growth forecast for China. At least 13 banks and brokerages have reduced their 2012 economic growth forecasts for the world’s second-largest economy this month.

Empire Manufacturing

U.S. equities also declined as the Federal Reserve Bank of New York’s general economic index dropped to minus 10.41, the lowest since April 2009, from minus 5.85 in August. The median forecast of 53 economists in a Bloomberg survey called for minus 2. Readings less than zero signal contraction in the so-called Empire State Index that covers New York, northern New Jersey and southern Connecticut.
“To me the only question is if the stock market is going to correct its current overbought condition by going sideways, or if it is going to correct back to the 1,400-1,422 support,” Jeffrey Saut, chief investment strategist at Raymond James & Associates in St. Petersburg, Florida, wrote in an e-mail today. His firm oversees $350 billion.
Financial and commodity shares had the biggest declines among 10 groups in the S&P 500. The Morgan Stanley Cyclical Index (CYC) tumbled 1.2 percent after rallying for four straight days. The Dow Jones Transportation Average slipped about 1.5 percent and the S&P Supercomposite Homebuilding (S15HOME) Index lost 1.9 percent after rallying 8.5 percent last week.
The KBW Bank Index declined 1.7 percent as 23 of its 24 companies slipped. Bank of America, which climbed 20 percent in the past two weeks, tumbled 2.6 percent to $9.30 for the second- biggest drop in the Dow. Morgan Stanley (MS) declined 2.4 percent to $17.80. Wells Fargo & Co. (WFC) fell 2.2 percent to $35.33 after Stifel Nicolaus & Co. cut the fourth-largest U.S. bank by assets to hold from buy.

Commodities Slide

Alcoa, the largest U.S. aluminum producer, fell the most in the Dow, sliding 2.6 percent to $9.58, as the S&P GSCI Spot Index of 24 commodities fell 2.2 percent, the most since July.
Cliffs Natural Resources slipped 7 percent to $42.36 for the biggest decline in the S&P 500. JPMorgan downgraded the stock to neutral from overweight.
Netflix Inc. (NFLX) fell 5.8 percent to $57.02. The world’s largest video-subscription service was rated underperform in new coverage at Macquarie Capital USA Inc.
Boeing Co. (BA) lost 1.9 percent to $69.92. Oppenheimer & Co. analyst Yair Reiner said shares of the world’s largest maker of cargo aircraft may fall, citing GEnx engine issues after one cracked on a Boeing 787 Dreamliner during testing in Charleston, South Carolina, on July 28, spewing hot metal parts.

Apple Rises

Apple gained 1.2 percent to a record $699.78 and exceeded $700 in extended trading for the first time ever. Pre-orders of its iPhone 5 topped 2 million units in one day, more than double the sales record set by the previous model of the device. Because demand for the iPhone 5 exceeds the initial supply, some pre-orders will be delivered to customers in October, rather than September as previously planned, Apple said today in a statement.
Office Depot rose 5.3 percent to $2.60. Starboard Value, a New York-based investment firm, took a 13.3 percent stake in the company, becoming its largest shareholder, and said the retailer must improve its financial results.
Gilead Sciences Inc. (GILD) rose 6.1 percent, the most in the S&P 500 (SPXL1), to $65.80 after JPMorgan analyst Geoff Meacham said the company’s AIDS drug, called Stribild, may emerge as a market leader based on a survey of 52 HIV specialists.

Obama Rally

As politicians debate whether Americans are better off than they were four years ago, the stock market is saying yes. With 50 days before the national election, the S&P 500 has rallied 82 percent and touched a four-year high since President Barack Obama took office.
The advance puts the gauge closer to the all-time high than any of the world’s biggest stock markets, data compiled by Bloomberg show. The benchmark index of American equity is trading at 14.9 times reported earnings, the biggest discount to MSCI’s global measure since March 2010.
“We are in a healthier state right now,” Chris Hyzy, who helps oversee about $325 billion as chief investment officer of U.S. Trust in New York, said in a Sept. 12 phone interview. “Next year, we think the growth clip in the United States and the globe is going to be better than expected. Over the next three years, we are bullish.”
To contact the reporters on this story: Nikolaj Gammeltoft in New York at; Amanda Gould in New York at
To contact the editor responsible for this story: Lynn Thomasson at


Apple IPhone 5 Pre-Orders Top 2 Million, Doubling Record

By Ryan Faughnder and Adam Satariano - Sep 18, 2012 2:12 AM GMT+0700

 Apple Inc. (AAPL) said advance sales of its iPhone 5 topped 2 million units in one day, more than double the record set by the previous model of the device.
The new iPhone 5 during an Apple special event in San Francisco. Photographer: Justin Sullivan/Getty Images
Sept. 17 (Bloomberg) -- Christopher Grisanti, founding partner at Grisanti Capital Management, talks about investment strategy and the outlook for Apple Inc. Grisanti speaks with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "Market Makers." (Source: Bloomberg)
Sept. 17 (Bloomberg) -- Brian White, an analyst at Topeka Capital Markets, talks with Bloomberg's Betty Liu about the pre-orders for Apple's iPhone 5. They speak on Bloomberg Television's "In The Loop." (Source: Bloomberg)
Sept. 17 (Bloomberg) -- Apple Inc. said pre-orders of its iPhone 5 topped 2 million units in one day, more than double the sales record set by the previous model of the device. Betty Liu reports on Bloomberg Television's "In The Loop." (Source: Bloomberg)
Sept. 17 (Bloomberg) -- Dominic Chu reports on Apple's stock valuation. He speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)
Sept. 17 (Bloomberg) -- A handful of people have begun camping out in front of Apple Inc.'s Fifth Avenue store on New York in anticipation of iPhone 5, which goes on sale in retail stores on Sept. 21. (Source: Bloomberg)
People camp out in front of an Apple store in New York on Monday. Photographer: Peter Foley/Bloomberg
Because demand for the iPhone 5 exceeds the initial supply, some of the smartphones will be shipped to customers in October, Cupertino, California-based Apple said today in a statement. Most orders will be delivered on Sept. 21, the same day the handset arrives in U.S. retail outlets, Apple said.
“Clearly it’s a blowout,” said Brian White, an analyst at Topeka Capital Markets in New York, in an interview. He had anticipated sales of 1.3 million to 1.5 million units in the first 24 hours and up to 12 million by the end of the month. “These estimates look conservative.”
Apple gained 1.2 percent to $699.78 at the New York close and traded as high as $700.44, a record, in extended trading.
The iPhone is Apple’s best-selling product, making up about two-thirds of its profit. The company’s entry into the smartphone market in 2007 resulted in sales of 244 million iPhone units as of June and helped Apple become the world’s most valuable company. The new model, unveiled last week in San Francisco, has a bigger screen, light-weight body design, faster chip and new software features.

Shattered Record

“IPhone 5 pre-orders have shattered the previous record held by the iPhone 4S and the customer response to the iPhone 5 has been phenomenal,” said Philip Schiller, Apple’s senior vice president of global marketing, in the statement.
Apple is vying with Samsung Electronics Co. and other smartphone manufacturers for customers in a global market that grew 79 percent to $219.1 billion last year. Samsung, which releases several handsets a year using Google Inc. (GOOG)’s Android operating system, was the world’s biggest seller of smartphones in 2011. By contrast, Apple releases only one iPhone a year, resulting in pent-up demand.
AT&T Inc. (T), the largest U.S. phone company, said its customers ordered a record number of the iPhone 5. Subscribers ordered more of the new model than any previous iPhone both on its first day of advance sales and during the weekend, AT&T said in a statement today, without providing details.
With so much demand, production bottlenecks may curb how many iPhones Apple can sell, said Ben Reitzes, an analyst at Barclays Capital Inc. The new touch-screen glass technology for the iPhone 5 is one of the biggest potential sources of supply constraints, he said.
“We still believe Apple is facing significant production constraints,” Reitzes said in note to clients today. Manufacturing delays could postpone some purchases until later this year or early 2013, he said.
From October to December, Apple may sell 50 million iPhones, said Mike Walkley, an analyst at Canaccord Genuity Inc. The new iPhone hits stores this week in the U.S., Australia, Canada, France, Germany, Hong Kong, Japan, Singapore and the U.K. It goes on sale in 22 more countries on Sept. 28.
“It’s pretty clear there was a lot of pent-up demand for the new phone,” Walkley said in an interview.
To contact the reporters on this story: Ryan Faughnder in New York at; Adam Satariano in San Francisco at
To contact the editor responsible for this story: Tom Giles at


Apple Reaches $700 as IPhone 5 Shatters Sales Record

By Adam Satariano and Ryan Faughnder - Sep 18, 2012 3:47 AM GMT+0700

Peter Foley/Bloomberg
People in line at the Apple Inc. store on Fifth Avenue in advance of the sale of the iPhone 5 in New York, on Sept. 17, 2012. The iPhone 5 is expected to go on sale at stores on Sept. 21.
Apple Inc. (AAPL) surpassed $700 in late trading after announcing record first-day orders for the latest iPhone, fueling optimism that the company will keep generating the revenue growth that transformed it from a niche computer manufacturer into the world’s most valuable business.
Apple Inc. shares surpassed $700 in late trading after announcing record first-day orders for the latest iPhone. Photographer: David Paul Morris/Bloomberg

Shares climbed as high as $700.44 after reaching a record $699.78 at the close in New York. The stock has advanced 73 percent this year.
The iPhone 5, which features a bigger screen, faster chip and a lighter body, sold 2 million units in first-day orders, more than double a record set by the previous model, Apple said. Since its 2007 debut, the device has become Apple’s top-selling product, accounting for about two-thirds of profit. Signs of robust demand reinforced expectations that Apple will withstand accelerating competition from Samsung Electronics Co. (005930) and Google Inc. (GOOG) in the $219.1 billion smartphone market.
“It leaves me in awe,” said Rex Ishibashi, chief executive officer of Callaway Digital Arts Inc. (2326), which develops games for the iPhone. “It’s reflective of how important these devices and these digital technologies have become in our lives.”
Apple’s surge gathered steam Sept. 14, after it began taking orders for iPhone 5. Apple’s website said new orders wouldn’t ship until Sept. 28, a week after the handset is due in stores, an indication that supply may be running thin.
“The initial batch is sold out,” Shaw Wu, an analyst at Sterne Agee & Leach Inc., said in an interview. He raised his sales estimate for the quarter ending in September to 26 million units, from 23 million. “We think that could turn out to be conservative.”

Exxon, Microsoft

Apple surpassed Exxon Mobil Corp. to become the biggest company in the world by market capitalization last year after overtaking Microsoft Corp. (MSFT) as the most valuable technology company in 2010. Before his death in October, co-founder Steve Jobs mastered a strategy of pushing Apple beyond its core business of selling computers into new markets, including digital music and mobile phones. Each new family of products helped the company boost revenue while inducing investors to snap up more shares.
Revenue increased to $35 billion in the June quarter from $1.73 billion in the last quarter before Jobs returned to Apple in 1997. Apple’s shares crossed the $600 threshold in July, after passing $500 in February and $400 last year.
IPhone sales last quarter alone reached $16.2 billion, 33 percent higher than Google Inc.’s total and almost as much as Microsoft Corp.’s $18.1 billion in revenue.

58 Million

As many as 58 million units of the iPhone 5 may sell by the end of the year, according the average estimate of analysts surveyed by Bloomberg. That could generate as much as $36.2 billion in sales for Apple.
Apple has grown adept at keeping existing customers and drawing new ones through incremental improvements to the hardware and software of its products while also cultivating a developer community that cranks out thousands of applications for use on the company’s phones and computers, said Dan Morris, chief investment officer at Morris Capital Advisors, whose largest holding is Apple.
The company’s shares are also getting a boost from a legal victory in August, when a jury said Samsung copied the iPhone. The outcome of the California trial may result in a ban on certain Samsung phones in the U.S., and it ratchets up pressure on Apple competitors to make their products less like the iPhone and iPad.

TV Challenges

Gains in coming months will hinge on the success of future products, such as a smaller version of the iPad tablet, which according to people with knowledge of the matter, will be released in October. Apple is also trying to make headway with products that let users view TV shows and movies on Apple devices. Yet the company has struggled to come to terms with communications providers over how products will be crafted, and media companies have been reluctant to cede control over content and customer relationships.
“That may be a tough market for them,” Morris said.
For now, the share rally is poised to continue, according to analysts who, on average, are predicting that Apple will rise to about $773 in the coming 12 months, data compiled by Bloomberg show.
To contact the reporters on this story: Adam Satariano in San Francisco at; Ryan Faughnder in New York at
To contact the editor responsible for this story: Tom Giles at


Oil Drops Most in Eight Weeks as Price Falls $3 in Minute

By Moming Zhou and Margot Habiby - Sep 18, 2012 4:18 AM GMT+0700 Oil declined more than $3 in less than a minute as October options were about to expire, ending the day with the largest drop in eight weeks.
Futures tumbled to $94.83 at 1:54 p.m. from $97.88 in the same minute on a surge in volume. The price slipped earlier after the Federal Reserve Bank of New York’s general economic index, known as the Empire State Index, reached a three-year low, indicating possible weakness in demand.
Oil declined more than $3 in less than a minute in late trading as October options were about to expire, ending the day with the largest drop in eight weeks. Photographer: Plamen Petkov/Bloomberg
“Today it’s the price making the news, not the news making the price,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “In the larger scheme of things, I would go with the idea that this is profit-taking run amok.”
Oil for October delivery fell $2.38, or 2.4 percent, to settle at $96.62 a barrel on the New York Mercantile Exchange. Prices are down 2.2 percent this year. The decline was the largest since July 23. Prices traded above $98 before the slump that started shortly after 1:50 p.m.
Crude options for the October futures expired today. The futures expire on Sept. 20.
Brent for November settlement fell $2.87, or 2.5 percent, to $113.79 a barrel on the London-based ICE Futures Europe exchange.
The most active October options in electronic trading on the Nymex were the $98 puts, which gained $1 to $1.38 a barrel with 2,920 lots trading.

Volume Surge

Trading volume stayed below 300,000 before picking up after 1:50 p.m. and rising to 633,000 at 3:44 p.m. The low early volume, due to the Jewish New Year holiday Rosh Hashana, contributed to the drop, said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. The three-month average volume is 536,000.
“Transactions in a low volume just sort of set this up,” he said. Speculation that the U.S. government would release oil from Strategic Petroleum Reserve also boosted prices, he said.
Jay Carney, the White House spokesman, said in e-mailed comments that there is “no change” in oil reserve releases. He said on Aug. 30 that the Obama administration is continuing to look at all its options to make sure high oil prices don’t crimp the global economy.
“I think it’s a combination of options expiration and Rosh Hashana,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “My guess is that someone had an order they had to fill before options expired and there’s light volume because of the holiday.”

CME Group

CME Group Inc., owner of the Nymex, said it did not suffer any technical issues as oil, gasoline and heating oil dropped on the exchange, said Chris Grams, a spokesman for CME. Gasoline and heating oil declined more than 2 percent.
The U.S. Commodity Futures Trading Commission in Washington will look into the decline and trading surge.
“When price and volume move so fast and so dramatically, it raises our antennas immediately,” Commissioner Bart Chilton said. “We need to get a quick visual on what happened and why. In this sort of circumstance, I always want to know what the cheetah traders -- the high-frequency traders -- were doing.”
Commissioner Scott O’Malia said the CFTC is contacting CME and IntercontinentalExchange Inc. to learn more.
Oil fell in trading before the late decline as manufacturing in the New York region contracted more than forecast in September and as the dollar gained against the euro.
The Federal Reserve Bank of New York’s general economic index, known as the Empire State Index, tumbled to minus 10.41, the lowest level since April 2009. Readings less than zero signal contraction. The index covers New York, northern New Jersey and southern Connecticut.

‘Geopolitical Risk’

“The underlying economy has yet to be helped by all this economic stimulus,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “We’re probably going to need a new catalyst or else we’re probably going to consolidate for several days. There’s enough geopolitical risk to keep the market from breaking down.”
The euro fell as much as 0.4 percent to $1.3084 after finance chiefs deadlocked at euro-area debt-crisis talks. A stronger dollar reduces oil’s appeal as an investment alternative. Oil advanced as much as 0.5 percent in intraday trading on concern that protests in the Middle East would lead to supply disruptions.
“Today’s price action appeared to highlight an unusually nervous market environment in which the oil complex has become heavily reliant upon intangible forces such as economic stimulus measures and Middle East tensions for sustainable price strength,” said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois-based consulting company, in a note to clients.
To contact the reporters on this story: Moming Zhou in New York at; Margot Habiby in Dallas at
To contact the editor responsible for this story: Bill Banker at


Today, Mitt Romney Lost the Election

By Josh Barro Sep 18, 2012 5:02 AM GMT+0700 You can mark my prediction now: A secret recording from a closed-door Mitt Romney fundraiser, released today by David Corn at Mother Jones, has killed Mitt Romney's campaign for president.
On the tape, Romney explains that his electoral strategy involves writing off nearly half the country as unmoveable Obama voters. As Romney explains, 47 percent of Americans "believe that they are victims." He laments: "I'll never convince them they should take personal responsibility and care for their lives."
So what's the upshot? "My job is not to worry about those people," he says. He also notes, describing President Obama's base, "These are people who pay no income tax. Forty-seven percent of Americans pay no income tax."
This is an utter disaster for Romney.
Romney already has trouble relating to the public and convincing people he cares about them. Now, he's been caught on video saying that nearly half the country consists of hopeless losers.
Romney has been vigorously denying President Obama's claims that his tax plan would raise taxes on the middle class. Now, he's been caught on video suggesting that low- and middle-income Americans are undertaxed.
(That one is especially problematic given the speculation about what's on Mitt's unreleased pre-2010 tax returns.)
Corn tells us there are more embarrassing moments on segments of the video he hasn't released yet. Romney jokes that he'd be more likely to win the election if he were Hispanic. He makes some awkward comments about whether he was born with a "silver spoon" in his mouth.
But those are survivable. The really disastrous thing is the clip about "victims," and the combination of contempt and pity that Romney shows for anyone who isn't going to vote for him.
Romney is the most opaque presidential nominee since Nixon, and people have been reduced to guessing what his true feelings are. This video provides an answer: He feels that you're a loser. It's not an answer that wins elections.
(Josh Barro is lead writer for the Ticker. E-mail him and follow him on Twitter.)
Read more breaking commentary from Bloomberg View at the Ticker.