TRade the news Market Internals update at 12:00ET

Dow +44 S&P -1 NASDAQ -20

***Economic Data***

– (IS) Israel Aug Unemployment Rate: 5.6 v 5.7% prior
– (US) MBA Mortgage Applications w/e Oct 21st: +4.9 v -14.9% prior
– (US) Sept Durable Goods Orders: -0.8% v -1.0%e; Durables Ex Transportation: 1.7% v 0.4%e
– (BR) Brazil Sept Total Outstanding Loans (BRL): 1.929T v 1.889T prior; Private Banks Lending: 1.106T v 1.089T prior
– (GE) Germany Oct CPI North Rhine Westphalia M/M: -0.3% v +0.3% prior; Y/Y: 2.3% v 2.8% prior
– (CA) Canada Aug Teranet/National Bank HPI M/M: 0.9% v 1.3% prior; Y/Y: 5.4 v 5.3% prior; HPI Index: 149.46
– (US) Sept New Home Sales: K v 300Ke
– (US) Weekly DOE Energy Inventories: Crude: K v +500Ke; Gasoline: M v -1.5Me; Distillate: -2Me; Utilization: % v 83.4% w/w
– (UK) BOE bought £1.7B in 2022-2036 Gilts in reverse auction; Bid-to-cover: 2.71x v 2.14x prior

– Markets continue to be knocked around by headline after headline out of the EFSF negotiations in Europe this morning. Officials continue to negotiate down to the wire over higher haircuts for Greek debt and other measures, although the latest reports suggest the negotiations are deadlocked over haircut size and potential insurance on the bonds. US equity indices dropped into the red mid morning, with the Nasdaq as the laggard. Note that Amazon’s big miss has heavily weighed on the latter. Spot gold is sustaining the big move up seen during yesterday’s session, trading around $1,716. Crude has given up some of its gains from yesterday, with the front-month contract dropping back to the $91 handle after trading as high as $94. Treasury prices are a little lower ahead of a $35B 5-year auction scheduled for later this afternoon.

– Investors are voting with their feet against Amazon this morning, sending shares of the firm down 10% after it missed both top- and bottom-line expectations and saw margins shrink by a very great amount. Of course CEO Bezos had more or less telegraphed the potential results during the launch of the Fire tablet, warning that the firm would happily take hits in order to bolster what it saw as a key play. Broadcom beat Q3 profit expectations although its guidance for Q4 was a little soft, thanks to well-known industry weaknesses. AMZN is down 12%, while BRCM is down 4%. Shares of Sprint are down 10% despite reporting a smaller than expected loss in its Q3.

– Healthcare services provider McKesson crushed expectations in its Q2 and hiked its FY12 guidance, thanks in part to excellent growth at its healthcare solutions distribution business. PBM firm Medco more or less met estimates in its Q3 and offered somewhat soft initial FY12 revenue guidance. Medco warned that revenues would be much softer in FY12 thanks to an increasing proportion of generic drugs, beginning with the Nov 30th launch of generic form of Lipitor. MHS is up 8% and MCK is up 5%.

– On the consumer front, Dr. Pepper Snapple and casual dining name Brinker both more or less met expectations in quarterly reports, with end demand levels holding up well. Brinker said it continues to see positive sales and traffic growth. EAT gained as much as 6% in the premarket before dropping to -2% hand-in-hand with markets, while DPS is -4%. Electronics retailer Radioshack got slammed in post-market trading yesterday afternoon after the firm’s profits tanked on a big decline in margins and awful sales comps. Executives said there was weakness in sales of T-Mobile handsets, TV boxes and GPS devices. RSH is down 12%. Money transfer name Western Union was right in line and said its business remains positive. WU is in the red after making some slight gains earlier.

– Industrial names continue to report strong results. Ford beat Q3 expectations, especially on the top line, although profits slipped a bit on a y/y basis thanks to higher commodity costs. Ford slightly trimmed its US industry production outlook, although its own Q4 production guidance was very strong. Most critically, the firm further delayed the launch of its dividend, disappointing investors. Shares of Ford are down 6%. Boeing was way ahead of Street profit estimates and hiked its FY11 guidance. The firm’s margins are strong and its net new orders are robust. Northrop Gumman and Lockheed Martin both beat Q3 expectation. NOC tweaked its FY11 outlook a bit higher. General Dynamic only just met expectations. Nevertheless, the fates of all three are tied to 2012 defense budget, which looks to involve even deeper cuts than have already been announced. Lockheed warned its FY12 outlook was flat on lower US defense spending. GD and NOC are down 1%, while LMT is down 3%.

– In the oil patch, ConocoPhillips roundly exceeded expectations on huge gains in both E&P and R&M income. Executives said that while commodity prices were higher, E&P production was lower due to suspended operations in Bohai Bay and Libya. Independent integrated name Hess missed profit and revenue expectations due to a slew of one-time items. After gaining 2% in the premarket, COP is back in the red, while HES is back down 2% after making a run for positive territory. In other oil news, there were press reports that India’s Reliance Industries is said to be interested in acquiring Valero.

– EUR/USD hit fresh six-week highs of 1.3975 earlier in the US session after the German lower house voted 503 to 89 in favor of a motion to strengthen the EFSF via leverage, lending support to Chancellor Merkel’s position in the ongoing EFSF scrum. But jitters about the state of play in the negotiations shook up traders as the media reported that negotiations over bank haircuts for Greek debt were deadlocked and an unnamed EU official commented that involuntary haircuts could not be ruled out. Needless to say, “involuntary” haircuts would immediately trigger massive CDS payouts on Greek debt. USD/JPY was hovering just below the 76 handle after posting a marginally new all-time low of 75.71.

***Looking Ahead***

– 11:00 (US) Fed to sell $8.00-9.00B in Notes
– 13:00 (US) Treasury to sell $35B in 5-Year Notes
– 11:00 (EU) ECB member Mersch
– 12:00 (FR) France Sept Net Change Jobseekers: +23.5Ke v -2 prior; Total Jobseekers: No est v 2.755M prior
– 13:00 (FR) France President Sarkozy
– 13:15 (EU) EU Leader Summit
– 14:00 (UK) BOE member Posen
– 16:00 (NZ) New Zealand Central Bank (RBNZ) Interest Rate Decision: Expected to leave the Official Cash Rate unchanged at 2.50%

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