US Market Update: Focus Shifts to Sept Payrolls



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US Market Update: Focus Shifts to Sept Payrolls

03.10.2012 17:55 Wednesday
***Economic Data***
- (US) MBA Mortgage Applications w/e Sept 28th: 16.6% v 2.8% prior
- (US) Sept ADP Employment Change: 162K v 140Ke
- (BR) Brazil Sept PMI Services: 52.8 v 48.1 prior
- (US) Sept ISM Non-Manufacturing: 55.1 v 53.2e
- (US) Weekly DOE Crude Oil Inventories: +8.53M v +500Ke; Gasoline: -1.41M v +500Ke; Distillates: -322K v +1Me; Utilization: 88.9% vs. 86.1%e

- Once again markets are focused on jobs, following a strong ADP report. The September payrolls number is due on Friday, with a consensus expectations for a gain of around 112K and an 8.2% unemployment rate. There has been little evidence that the ADP number, which tracks gains at small companies with less than 50 employees, is very predictive of the Labor Department's final data, and markets are barely in positive territory this morning. The September ISM services index rose back to highs last seen in May, including a very high new orders component. In Europe, officials to issue vague, non-committal rhetoric about whether Spain needs or wants a bailout. EUR/USD is mostly flat ahead of Thursday's ECB decision, although the dollar continues to gain rapidly against the yen, pushing out to fresh two-week highs as new Japanese cabinet officials and more weak data in Asia continue to weaken the yen. USD/JPY jumped from around 78.20 overnight to test above 78.55 as of writing.

- Monsanto's Q4 results were just a poor as predicted, as the firm racked up a loss in its slowest seasonal quarter of the year. Monsanto's FY13 guidance was poor. Monsanto said FY12 EPS growth was +25 but the company forecast mid-teens EPS growth for FY13. Family Dollar reported solid profits and revenue for its Q4 and offered a very broad guidance range for FY13. Shares of FDO gained more than 4% before coming off morning highs, while MON remains down a solid -3%.

- On the deal front, PCS agreed to merge with Deutsche Telekom's T-Mobile unit. The deal is effectively a reverse merger, with the smaller MetroPCS buying T-Mobile. MetroPCS will declare a 1-for-2 reverse stock split and make a cash payment of $1.5 billion to its shareholders. The combined company will be called T-Mobile, will have 42.5M subscribers and pro forma revenues in 2012 of $25B. Shares of PCS are down 10% on the news, while competitor Leap Wireless is down even more, at -15%.

- The two successor companies to notable consumer name Kraft Foods began trading today. The first retains the Kraft foods names and brands, and focus on the North American foods business. The second, Mondele-z International, holds the global snacks business, including the former Cadbury businesses, plus certain other global brands including Dairylea and Philadelphia. The two tickers will be KRFT and MDLZ.

- In other news, Sarepta Therapeutics spiked as much as 170% after the company's experimental treatment for a type of muscular dystrophy met primary endpoints in a Phase II trial. The drug helped boys' ability to walk in a study. After 48 weeks, those on Sarepta's medicine were able to walk on average almost 90 meters farther than those taking a placebo.

***Looking Ahead***

- 21:00 (US) First U.S. Presidential Debate in Colorado