Ultimate Market Recap: Italy Frightens Markets, Cisco Offers Hope

Wednesday Morning’s Top Stories

Italy’s (NYSE:EWI) increasingly grim situation has market watchers worrying as clearing house LCH.Clearnet increased the requisite margins to trade Italian government bonds. On Tuesday, Italian Prime Minister Silvio Berlusconi said he would resign once his country’s austerity measures are approved. Italy is facing increasing debts and its structure is having difficulty dealing with the growing problems.

Trending Now: Italian Borrowing Costs Surge to Dangerous New Record.

China (NYSE:FXI) reported October consumer prices increased 5.5 percent from the previous year but decreased 0.6 percentage points from September; this was its greatest drop since February 2009. Industrial output growth declined to 13.2 percent.

Inflation has slowed to its biggest level in almost three years and many economists think China’s government will either loosen fiscal or monetary policy without slashing interest rates as inflation remains above four percent year target, according to a Bloomberg News survey.

Investing Insights: Here’s What Germany and China Really Think About Gold.

Goldman Sachs Group Inc. (NYSE:GS) will sell up to $1.54 billion of its stake in China’s ICBC. This represents the firm’s third sale in the five-year-old investment and in the second quarter, Goldman saw a $1.05 billion paper loss on it.

General Motors Co. (NYSE:GM) reported its third quarter earnings dropped to $1.7 billion ($1.03 per share) from $2 billion ($1.20 per share) from the previous year. Revenue increased to $36.7 billion from $34.1 billion. Analysts estimates had $0.94 earnings per share on $35.9 billion in sales.

GM said its adjusted earnings before interest and taxes will show “solid improvement” from 2010 but it doesn’t expect to break even thanks to Europe’s economic challenges. Dig Deeper:General Motors Earnings Cheat Sheet: Net Income Drops.

Yahoo! Inc (NASDAQ:YHOO), Microsoft Corp (NYSE:MSF) and AOL Inc (NYSE:AOL) have formed an advertising alliance to challenge Google (NASDAQ:GOOG).  The three companies will sell each other’s display ads early next year. These types of ads appear on Web pages and attract marketers looking to brand either their product or services; they come with high rates.

Wednesday Morning Hot Stocks

Goldman Sachs (NYSE:GS) is down more than 3% in early trading.  The bank announced it is reducing its sake in Industrial & Commercial Bank of China Ltd. in order to raise up to $1.54 billion.  The sale will cut Goldman’s stake in the Beijing-based bank to 2.2% from 2.9%.  JP Morgan (NYSE:JPM) and Morgan Stanley (NYSE:MS) are also down more than 3%.

Shares of Liz Claiborne (NYSE:LIZ) are heading lower after reporting a third quarter loss of $214.6 million ($2.27 per share), compared to a loss of $62.7 million (67 cents per share) last year.

Investor Insights: Will Cisco Continue to Outperform After Earnings?

Macy’s Inc. (NYSE:M) is falling more than 4% before the opening bell.  The company announced it earned $139 million (32 cents per share) in the third quarter, compared to $10 million (2 cents per share) last year.  Analysts were expecting about 16 cents per share.

After disappointing third quarter results, shares of Wendy’s (NYSE:WEN) are down more than 6%.  Loss widened to $4 million (one cent per diluted share) from $909,000 (loss of 0 cents per share) in the same quarter a year earlier.  Shares of McDonald’s (NYSE:MCD) and Yum! Brands (NYSE:YUM) are also trading lower. Dig Deeper: Wendy’s Earnings Cheat Sheet: Loss Made Worse, Company Falls Short of Estimates.

General Motors (NYSE:GM) is crashing more than 8% in early trading.  For the third quarter, net income for the company was $1.7 billion ($1.03 per share), compared to $2 billion ($1.20) per share) the year earlier.  “GM delivered a solid quarter thanks to our leadership positions in North America and China, where we have grown both sales and market share this year. But solid isn’t good enough, even in a tough global economy,” said Dan Akerson, chairman and CEO. “Our overall results underscore the work we have to do to leverage our scale and further improve our margins everywhere we do business.”  Shares of Ford (NYSE:F) are down more than 3%.

Investing Insights: Will Inflation Hurt These 3 Food Companies Earnings?

Wednesday’s Trending Stocks

As the Dow Jones Industrial Average sells off over 200 points in negative news out of Italy, and the S&P 500 Index is lower 2%, here are the stock buzzing among business headlines today:

  1. Rovi Corporation (NASDAQ:ROVI): Shares of Rovi Corporation are trading lower 33% today. Rovi Corporation provides digital home entertainment experience by delivering solutions to businesses to protect, enhance an distribute digital goods to consumers across multiple channels. The Company’s services and products include connected middleware, media recognition, interactive programming guides, copy protection and rich media.
  2. Ralph Lauren Corp (NYSE:RL): Shares of Ralph Lauren Corp are trading lower 6% today. Polo Ralph Lauren Corporation designs, markets, and distributes men’s, women’s and children’s apparel, accessories, fragrances, and home furnishings. The Company’s products are sold under a wide range of brands. Polo’s operations include Wholesale, Retail and Licensing.
  3. General Motors Company (NYSE:GM): Shares of General Motors Company are trading lower 8% today. General Motors Co. manufactures and markets new cars and trucks. The Company offers features for special needs drivers, OnStar vehicle protection, service, parts, accessories, maintenance, XM satellite radio, features for commercial owners, and more. General Motors offers its vehicles and services worldwide.
  4. Sodastream International Limited (NASDAQ:SODA): Shares of Sodastream International Limited are trading higher 1% today. SodaStream International Ltd. manufactures home beverage carbonation systems, which enable consumers to transform tap water into carbonated soft drinks and sparkling water. The Company develops, manufactures and sells soda makers and exchangeable carbon-dioxide (CO2) cylinders, as well as consumables, consisting of CO2 refills, reusable carbonation bottles, and flavors.
  5. Imperva Inc. (NYSE:IMPV): Shares of Imperva Inc. are trading higher 36% today.
  6. Maidenform Brands, Inc. (NYSE:MFB): Shares of Maidenform Brands, Inc. are trading lower 24% today. Maidenform Brands, Inc. is a global intimate apparel company with a portfolio of brands and products. The Company designs, sources, and markets a range of intimate apparel products, including bras, panties, and shapewear. Maidenform sells its products through multiple distribution channels, including stores, mass merchants, off-price retailers, Company-operated outlets, and its Web site.
  7. Weight Watchers International, Inc. (NYSE:WTW): Shares of Weight Watchers International, Inc. are trading lower 6.6% today. Weight Watchers International, Inc., is a provider of weight control programs. The Company operates through a network of company-owned and franchised operations. Members attend weekly Weight Watchers meetings to receive group support and education about healthy eating patterns, behavior modification and physical activity.
  8. Blue Nile, Inc. (NASDAQ:NILE): Shares of Blue Nile, Inc. are trading lower 30% today. Blue Nile, Inc. is an online retailer of diamonds and fine jewelry. The Company’s Web site showcases various independently certified diamonds and various styles of fine jewelry, including rings, wedding bands, earrings, necklaces, pendants, bracelets, and watches.
  9. STEC, Inc. (NASDAQ:STEC): Shares of STEC, Inc. are trading lower 14% today. STEC Inc. provides technology solutions, offering products based on dynamic random access memory, static random access memory, and Flash memory technologies. The Company designs, manufactures, and markets memory, storage, and connectivity products used in high performance computing, networking and communications, consumer electronics, and industrial applications.
  10. Computer Sciences Corporation (NYSE:CSC): Shares of Computer Sciences Corporation are trading lower 12% today. Computer Sciences Corporation provides consulting and information technology (NYSE:IT) services to industry and government. The Company provides consulting, systems design and integration, IT and business process outsourcing, applications software, and Web and application hosting. Computer Sciences operates locations around the world.

Market Recap

Markets closed down on Wall Street today: Dow -3.20%, S&P -3.67%, Nasdaq -3.88%, Oil -0.80%, Gold -1.65%.

On the commodities front, Oil (NYSE:USO) fell to $96.03 a barrel. Precious metals were also down, with Gold (NYSE:GLD) falling to $1,769.50 an ounce while Silver (NYSE:SLV) fell 3.27% to settle at $34.01.

Hot Feature: French, German Leaders Contemplate New Euro Zone

Today’s markets were down because:

1) Italy. Stocks sold off sharply right out of the gate this morning as Italy’s borrowing costs rocketed past the 7% level that drove Greece, Ireland, and Portugal to seek bailouts. The sell-off only intensified in the afternoon amid reports that European Union officials had no plans to rescue Italy, the euro zone’s third-largest economy. The news not only led to a slump in U.S. markets, but European markets as well, while the euro fell more than 2% against the dollar. 

2) Greece. After Prime Minister George Papandreou announced plans to step down over the weekend, handing over the reins to a unity government tasked with pushing through austerity measures required to secure bailout funds, the world turned its eyes instead to Italy, though apparently a bit too soon. It was all but settled earlier today that that House Speaker Filippos Petsalnikos would head Greece’s new coalition government, only for it to emerge hours later that  there was no successor due to feuding between the two main political parties. And unless the new government, which has yet to take shape, can push through budget reforms to secure emergency funding from the European Union and International Monetary Fund, Greece will run out of money next month and default on its debt.

3) Banks. Bank stocks were among the biggest losers in today’s market sell-off, with Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), and Morgan Stanley down more than 6%. JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), and Wells Fargo (NYSE:WFC) shares fell more than 4%.

BONUS: U.S. Wholesale Inventories Dropped First Time in Two Years.

After Hours Radar Stocks

Cisco Systems (NASDAQ:CSCO) is popping more than 4% after announcing earnings.  The company reported that product revenues increased 3 percent year over year, while service revenue jumped 12 percent.  Gross margin declined to 62.3 percent from 64.3 percent in the previous year; however, it represented an increase from the fourth quarter’s 62.6 percent. Research and Development expenses dropped 7 percent from the previous quarter, with Selling, General and Administrative expense down 2 percent.

It appears that David Einhorn was right.  Green Mountain (NASDAQ:GMCR) shares are crashing more than 30% after reporting a sales miss for the fiscal fourth quarter.  The company cited, “Changes in wholesale customer ordering patterns in our grocery and club channels despite steady consumer point-of-sale demand in those channels.”

After closing more than 6% lower Wednesday, shares of Activision (NASDAQ:ATVI) continue to edge lo

wer after the close.  The major concern from Q3 earnings’ release is the sequential decline in WOW subs to 10.3 million from Q2’s 11.1 million. While the company attributed the declines primarily to Asian subs, we expect Western subscriber growth to be further challenged when EA (NASDAQ:ERTS) launches Star Wars The Old Republic MMO in December.

Shares of Adobe Systems (NASDAQ:ADBE) and Blue Nile Inc. (NASDAQ:NILE) fell hard during regular trading hours.  Adobe declined 7% after announcing 750 job cuts amid a restructuring plan.  Shares continue to edge lower in late trading.  Blue Nile plummeted 33% after projecting fourth-quarter earnings below estimates.  Furthermore, the company’s CEO resigned.

HOT FEATURE: Nintendo and Sony Will Lose Gaming Revenue to These 2 Smartphone Giants.