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24Oct2016 Pre-Market Commentary: Wall Street Moves Higher Ahead Of Corporate Earnings And Friday's GDP Report, Texas Tea Slips Lower, US Dollar Not As Strong As Friday, Gold Skyrockets Upwards

Written by Gary

US stock future indexes pointed to a higher open (SPY +0.4%) as market investors awaited corporate earnings this week with eyes also on Friday's publication of the third quarter U.S. gross domestic product. The US dollar hovers near 8-month highs on rate hike expectations, while crude has slipped lower. Gold Shot Up to 1271 this morning.


Here is the current market situation from CNN Money

European markets are higher today with shares in Germany leading the region. The DAX is up 0.90% while France's CAC 40 is up 0.90% and London's FTSE 100 is up 0.03%.

What Is Moving the Markets

Here are the headlines moving the markets.

Time Warner CEO says only AT&T approached with offer

(Reuters) - Time Warner Inc Chief Executive Jeff Bewkes said on Monday that AT&T Inc was the only company to make a takeover approach for the media group.

Stock futures rise as flurry of deal activity boosts confidence

(Reuters) - U.S. stock index futures were higher on Monday as a flurry of deal activity boosted investor confidence.

China's HNA Group to buy 25 percent stake in Hilton

(Reuters) - Chinese aviation and shipping conglomerate HNA Group said on Monday it agreed to buy an about 25 percent stake in Hilton Worldwide Holdings Inc from Blackstone Group LP for $6.5 billion.

T-Mobile beats profit estimates, raises customer additions forecast

(Reuters) - T-Mobile US Inc reported a better-than-expected quarterly profit and raised its forecast for customer additions for full-year as heavy discounting helped attract subscribers.

TD Ameritrade to buy Scottrade in two-step deal with TD Bank

(Reuters) - TD Ameritrade Holding Corp said on Monday it and Toronto-Dominion Bank would buy privately held Scottrade Financial Services Inc [SCTRD.UL] in a deal valued at $4 billion, combining two of the biggest U.S. discount brokerages.

Belgian PM says cannot unblock EU-Canada trade deal for now

BRUSSELS (Reuters) - Prime Minister Charles Michel said he had told European Council President Donald Tusk on Monday that Belgium could not agree to sign an EU-Canada trade deal because he had failed to secure the agreement of regional authorities.

AT&T-Time Warner deal sparks calls for scrutiny in Washington

WASHINGTON (Reuters) - AT&T Inc's proposed $85 billion takeover of Time Warner Inc generated skepticism among both Democrats and Republicans on Sunday, making it more likely that regulators will closely scrutinize the effort to create a new telecommunications and media giant.

Burger King/Tim Hortons owner's profit beats on new menu items

(Reuters) - Restaurant Brands International Inc , owner of Burger King and Tim Hortons, reported a better-than-expected quarterly profit, helped by new menu items and lower costs.

Oil prices fall as Iraq resists joining output cut

LONDON (Reuters) - Oil prices fell on Monday as Iraq said it wanted to be exempt from an OPEC deal to cut production, though losses were capped by Iran saying it would encourage other members to join an output freeze.

Goldman Cuts S&P500 Earnings Forecasts For The Next Three Years

With Q3 earnings season looking unexpectedly strong after the first 2 weeks of reporting, which granted have focused on the otherwise strong banks and tech companies with energy and retail still to come, with some 80% of companies beating expectations and hope returning that this may be the quarter when the 1+ year long earnings recession find ends, moments ago Goldman's David Kostin poured cold water over the S&P's earning prospects when earlier this morning the strategist announced that he is "trimming our S&P 500 earnings forecasts" for the next three years.

To wit:

We cut our S&P 500 earnings estimates for each of the next several years. Our revised operating EPS forecasts now equal $105 (2016), $116 (2017), and $122 (2018) reflecting annual growth of 5%, 10%, and 5%, respectively. Low interest rates and peaking margins constrain profit growth in Information Technology, Financials, and Telecom and drive the reduction in our index-level EPS forecast.

Our earnings model projects 5% sales growth and 8.5% margins for the S&P 500 in 2017 with margins peaking next year and starting to decline in 2018.

We maintain our S&P 500 price targets of 2100 for year-end 2016, 2200 at the end of 2017, and 2300 at the end of 2018, implying price changes from the current market level of -3%, +2%, and +6%, respectively.

From a valuation perspective our unchanged year-end 2016 target of 2100 represents a forward P/E multiple of 18x our 2017 top-down operating EPS estimate of $116 and 17x our 2017 top-down adjusted EPS estimate of $123, ranking at the 85th percentile relative to the past 40 years.

Key issues for investors in 2017: (1) secular stagnation and (2) peaking margins.

Summary of Goldman Sachs US Portfolio Strategy forecasts, 2015-2019E

Frontrunning: October 24



The CEO Behind AT&T's Huge Time Warner Deal (BBG)

AT&T-Time Warner deal sparks calls for scrutiny in Washington (Reuters)

Wall Street's $40 Billion AT&T Pledge Offers Fees and Risks (BBG)

Bernie Sanders: Obama Administration "Should Kill" The AT&T-Time Warner Deal (Deadline)

Oil prices under pressure as Iraq resists joining output cut (Reuters)

Europe's Stocks Rise With Bonds on Earnings, Ratings, Politics (BBG)

Battle for Mosul can shape or break Iraq further (Reuters)

Suriname Said to Win Better Terms in $550 Million Overseas Sale (BBG)

Calais migrants: France begins to clear 'Jungle' camp (BBC)

Venezuela congress presses for Maduro trial in rowdy session (Reuters)

Bankers Prepare for Brexodus From London (BBG)

In battleground Florida ...

Fed Risks Lehman Crisis As US Recession Storm Gathers

The Telegraph's Ambrose Evans Pritchard reports that "the risk of a US recession next year is rising fast" and that "the Federal Reserve has no margin for error".

AEP is quite well connected and very well informed on such matters and hence the need to consider what he is saying and more importantly prepare:

"Liquidity is suddenly drying up. Early warning indicators from US 'flow of funds' data point to an incipent squeeze, the long-feared capitulation after five successive quarters of declining corporate profits.

Yet the Fed is methodically draining money through 'reverse repos' regardless. It has set the course for a rise in interest rates in December and seems to be on automatic pilot."

"We are seeing a serious deterioration on a monthly basis," said Michael Howe ...

Watergate's Bob Woodward: "Clinton Foundation Is Corrupt, It's A Scandal"

It's one thing for the right-wing press to accuse the Clinton foundation of cronyism, corruption, and scandal (especially if the facts, and internal admissions by affiliated employees, confirm as much) - it tends to be generally ignored by the broader, if left-leaning, media. But when the Watergate scandal's Bob Woodward, associate editor at the liberal Washington Post, says very much the same, Hillary Clinton's campaign has no choice but to notice. This is precisely what happened today when journalist Bob Woodward told a Fox News Sunday panel that the Clinton Foundation is "corrupt" and that Hillary Clinton has not answered for it.

Here, courtesy of RealClearPolitics, is the transcript of today's exchange:

CHRIS WALLACE, FOX NEWS SUNDAY: Then there are the allegations about the Clinton Foundation and pay to play, which I asked Secretary Clinton about in the debate, and she turned into an attack on the Trump Foundation.

But, Bob, I want to go back to the conversation I was having with Robby Mook before. When -- when you see what seems to be clear evidence that Clinton Foundation donors were being treated differently than non-donors in terms of access, when you see this new -- new revelations about the $12 million deal between Hillary Clinton, the foundation, and the king of Morocco, are voters right to be troubled by this?

BOB WOODWARD, THE WASHINGTON POST: I -- yes, it's a -- it's corrupt. It's -- it's a scandal. And she didn't answer your question at all.

A Warning for Sky-High Bonds in Europe's PMI

Small shifts can matter a lot for markets. October's flash eurozone PMI reading could be one of them.

China's Big Insurance Buy Leaves Lots of Risk

With China Oceanside's offer for U.S.-listed insurer Genworth Financial, a Chinese knight in shining armor has come to the rescue yet again. But it may not have made things safe for investors.

AT&T Dreams of a Hollywood Ending

AT&T is buying Time Warner to help it succeed in the future world of media consumption. In many ways, it already is living in that world, and it isn't doing all that well.

Project Syndicate: Are we out of ammunition to fight the next recession?

Economic policy makers should re-arm themselves for the next inevitable recession by normalizing interest rates and getting public debts in order, writes Michael Boskin.

The outlook for U.S. energy companies looks brighter ahead of earnings

Sustained recovery in oil prices and positive third-quarter results are likely to lift energy stocks.

Market Snapshot: Merger Monday sets U.S. stocks on track for gains

U.S. stock futures on Monday point to a higher open, getting a lift from AT&T's planned buyout of Time Warner and other deal news.

Earnings Summary for Today

Earnings Calendar provided by Investing.com.

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To contact me with questions, comments or constructive criticism is always encouraged and appreciated:

gary@econintersect.com

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