NEW$ & VIEW$ (5 NOVEMBER 2012)

Obama and Romney Deadlocked, Polls Show

Obama and Romney enter the final sprint before Election Day essentially deadlocked nationally in what looks set to be one of the closest presidential elections in U.S. history.

U.S. EMPLOYMENT

There were good and not so good news in Friday’s employment report.

U.S. job growth has accelerated, but the bad news is that people who already have jobs aren’t getting raises or more time on the clock.

The Labor Department Friday reported that hours worked were flat for the fourth straight month. Meanwhile, average hourly earnings for all employees on private payrolls fell by 1 cent to $23.58 in October. Over the past 12 months, earnings have risen a scant 1.6%. That’s not enough to keep up with inflation. The consumer price index was up 2% in September from a year earlier.

It’s even worse for blue-collar workers. Average hourly earnings of private-sector production and nonsupervisory employees edged down by 1 cent to $19.79, only a 1.1% increase over the past year. (WSJ: Number of the Week: Stagnant Wage Growth)

NBF Financial’s wage bill calculation is not encouraging:

 

image

 

Declining oil prices may help in the coming crucial months:

 

Retail gasoline prices declined to $3.50. Futures plunged 12 cents last week suggesting retail prices are on track to decline to $3.30 nationally. That would equal to a huge 15% drop since September and bring them 4% below last year at this time.

image

 

I am currently in South Carolina and I have seen regular gas below $3.00/g yesterday!

Major oil companies said in their recent conf. calls that oil demand is weakening meaningfully.

UNINTENDED CONSEQUENCES:

Health Law Spurs Shift in Worker Hours

Some low-wage employers are moving toward hiring part-time workers instead of full-time ones to mitigate the health-care overhaul’s requirement that large companies provide health insurance for full-time workers or pay a fee.

imageSeveral restaurants, hotels and retailers have started or are preparing to limit schedules of hourly workers to below 30 hours a week. That is the threshold at which large employers in 2014 would have to offer workers a minimum level of insurance or pay a penalty starting at $2,000 for each worker.

CHINESE EXPORTS TO REMAIN WEAK:
 
Buyers stay away from Canton Fair
China’s largest industrial bazaar is barometer of global demand

Weak global demand for Chinese exports was on display at China’s largest industrial bazaar where suppliers of everything from electronics to Christmas decorations said both the number of buyers and orders were 10 per cent lower than the previous fair in the spring. (…)

The dearth of buyers and the funereal mood among suppliers add to evidence that the slowdown in Chinese exports looks set to last since the orders by retailers from the US, Europe and the Middle East are for 2013. (…)

This autumn, business was so bad it was a hardly a contest. When orders from European buyers materialised at all, said a saleswoman at Wenzhou Yangyang Garments, they “are now for 300 to 500 items. Three years ago, it was 3,000 to 5,000.” The company, which makes jackets in artificial leather, exports half of its $60m in annual sales to Europe and about $20m to Latin America. (…)

And from The China Daily:

The fair has also seen a fall in its turnover of $32.68 billion, a 9.3-percent decrease compared to the spring session.

Orders from the traditional market of European countries and Japan dropped considerably, while those from emerging markets showed minor declines.

Back to the FT:

Fingers crossed China Confidential, the Financial Times’ China economics newsletter, reported in its most recent issue that its research from seven provinces showed China’s government-led “investment engines are starting to churn faster . . . [with] the resumption of stalled rail, highway and other projects across the country expected to continue through 4Q 2012.”

Lightning  Spanish Jobless Claims Rise

Applications for unemployment benefits increased by 128,242, or 2.7%, in October.

Lightning  Italian GDP to Shrink as Unemployment Gains, Istat Says

Gross domestic product will shrink 2.3 percent in 2012 and 0.5 percent in 2013, Rome-based Istat said today in an e-mailed report. In May, Istat projected a 1.5 percent contraction this year and a 0.5 percent expansion next. Household consumption will fall 3.2 percent in 2012 and 0.7 percent in 2013, Istat said today.

Swiss Property in ‘Risk Zone’ for First Time Since 1991  The UBS Swiss Real Estate Bubble Index entered the “risk zone” for the first time since 1991, putting pressure on the Swiss National Bank to take measures to curb the country’s property boom.

The index rose to 1.02 point in the three months through September from 0.82 point in the previous quarter, UBS AG  said in a statement today. A reading above 1 indicates “risk.” (…)

The SNB’s decision to impose a ceiling on the franc as demand for the currency surged has made the Swiss property market more attractive for foreign investors seeking a haven for their money. At the same time, the euro’s weakness has discouraged people living in Switzerland from buying assets in other countries.

EARNINGS WATCH

Earnings Beat Rate Gets Better

Typically you see the percentage of companies beating earnings estimates drop as earnings season progresses, but that hasn’t been the case so far this season.  As shown in the charts below, the earnings beat rate currently stands at 61.3% for the 1,463 US companies that have reported since October 9th.  This is the highest reading we’ve seen since October 16th when just 35 companies had reported.  If earnings season were to end today, the beat rate would be higher than the readings seen in the previous three quarters.  

Factset update:

At this stage of the earnings season, the percentage of companies reporting earnings above expectations is in-line with recent averages, while the percentage of companies reporting sales above estimates is substantially below recent and historical averages.

Overall, 350 companies have reported earnings to date. Of these 350 companies, 70% have reported actual EPS above the mean EPS estimate and 30% have reported actual EPS below the mean EPS estimate.

In aggregate, companies are reporting earnings that are 4.8% above expectations.

In terms of revenues, 40% of companies have reported actual sales above estimated sales and 59% have reported actual sales below estimated sales. If 40% is the final number, it will mark the lowest percentage of companies reporting sales above estimates for a quarter since Q1 2009 (36%).

In aggregate, companies are reporting sales that are 0.3% above expectations.

The blended earnings growth rate for the third quarter is    -0.5% this week, above last week’s growth rate of -1.3%. Upside earnings surprises from companies in the Energy sector were mainly responsible for the increase in the blended earnings growth rate during the week.

(…) the Financials and Energy sectors are the largest contributors to the increase in earnings growth for the index since the end of the quarter, due to upward revisions to estimates and upside earnings surprises reported by a number of companies in each of these sectors.

Of the 74 companies that have issued EPS guidance for the fourth quarter, 56 have issued projections below the mean EPS estimate and 18 have issued projections above the mean EPS estimate. Thus, 76% of the companies that have issued EPS guidance to date for Q4 2012 have issued negative guidance. This percentage is well above the long-term average (61%), but consistent with the percentage recorded in the previous quarter at this same point in time (78%).

Since the end of the third quarter (September 30), analysts have reduced earnings growth expectations for Q4 2012 (to 6.4% from 9.5%), Q1 2013 (to 3.7% from 5.4%), and Q2 2013 (to 8.2% from 9.4%).

In addition, analysts are calling for slightly higher revenue growth rates in Q4 2012 (2.6%), Q1 2013 (1.2%) and Q2 2013 (3.6%) relative to the current growth rate for Q3 2012 (-0.9%)




 

2 thoughts on “NEW$ & VIEW$ (5 NOVEMBER 2012)

  1. Mr Ouellet, I would be careful of superficial markings of the polls. The WSJ/NBC poll has not released internals yet. However CNN has released a similar 49-49 projection of the race but once you do a little digging it has a D+11 sample! That is higher than what the Democrats garnered in 2008. If the WSJ/NBC sample is similar then it too will be bogus.

    There is no way the Democrats garner D+8 this cycle.

Leave a Reply to DONNA Cancel reply

Your email address will not be published. Required fields are marked *