>>> US Close Dow-1% S&P-0.90% Nasdaq-1.01% Russell-1.24%

Closing Market Summary: Cyclical Sectors Lead Stocks Lower

The stock market began the trading week on a cautious note as persistent global growth concerns weighed on investor sentiment. The S&P 500 surrendered 1.0% while the Dow and Nasdaq posted comparable losses.

Equities retreated through the first half of the Monday session and remained near their lows into the afternoon, which kept dip-buyers on the sidelines. The cautious posture in the market took place after the weekend featured the release of China's trade data, which showed a 10-yr high in the trade surplus, but exports fell 6.9% in October, representing the fourth consecutive monthly drop.

Nine sectors ended the day in negative territory with losses between 0.7% (consumer staples) and 1.5% (energy) while the utilities space climbed 0.3%. The rate-sensitive sector eked out a modest gain thanks to higher Treasury yields; however, intraday demand lifted the 10-yr note off its low as the session wore on. As a result, the 10-yr returned to its early-morning low with the 10-yr yield rising two basis points to 2.35%.

Generally speaking, today's retreat was broad based with cyclical sectors leading the decline. Heavily-weighted consumer discretionary (-1.3%) and financials (-1.2%) ended behind seven of the remaining eight groups with the financial sector trimming its November gain to 1.5%. As for the consumer discretionary sector, the group was weighed down by a 9.6% slide in Priceline (PCLN 1311.39, -138.51) after its below-consensus guidance overshadowed better than expected results.

Elsewhere among cyclical sectors, energy (-1.5%) represented an early pocket of strength, but the group retreated alongside the broader market while crude oil lost 1.0%, sliding to $43.87/bbl. The energy sector narrowed its November gain to 0.9%, masking a 13.2% surge in Apache (APA 53.94, +6.27) after Bloomberg reported that the company received and rejected an unsolicited $18-billion takeover offer.

Also of note, industrials (-0.8%) traded among the laggards into the afternoon, but the sector was lifted ahead of the broader market during the afternoon amid reports Canadian Pacific (CP 142.18, +7.87) is interested in Norfolk Southern (NSC 88.67, +8.80). Shares of NSC soared 11.0% while the Dow Jones Transportation Average narrowed its loss to 0.3% after being down more than 2.0%.

Today's participation was a bit ahead of average with more than 900 million shares changing hands at the NYSE floor.

Tomorrow, October Import/Export Prices will be reported at 8:30 ET while the September Wholesale Inventories report will cross the wires at 10:00 ET (consensus 0.1%).

  • Nasdaq Composite +7.6% YTD
  • S&P 500 +1.0% YTD
  • Dow Jones Industrial Average -0.5% YTD
  • Russell 2000 -1.5% YTD

WSJ : Why an Apache Deal Wouldn’t Open the Oil Floodgates

Why an Apache Deal Wouldn’t Open the Oil Floodgates

Interest in Apache probably won’t herald a wave of similar deals due to a lack of brave, deep-pocketed buyers.

There will be deals. Or will there?

Shares of oil-and-gas explorer Apache Corp. jumped by more than 10% Monday afternoon following a report by Bloomberg News of a takeover approach by an unidentified suitor. This added that the company had hired advisers to mount a defense strategy.

If so, the possible suitor isn’t all hat and no cattle. Based on available firepower, a large, integrated energy company would make most sense.

Still, the fact that none of Apache’s peers saw anything more than a brief price boost Monday morning suggests two things: that the bargains on offer among North American oil and gas producers aren’t quite compelling enough to kick off a round of consolidation and that the list of buyers is short.

For what it is worth, shares of Exxon Mobil were the weakest among its peer group midday Monday. And it has made some small acquisitions in the Permian Basin of Texas where Apache has the lion’s share of its production.

Given that company’s massive size, small deals don’t do much to move the needle. BP is another supermajor with the balance-sheet strength to do a deal easily. But an acquisition in the range of $30 billion in market value plus debt is within the realm of possibility for any of the supermajors—particularly if there is a big equity component.

The industry has been cautious up to this point amid a rout in crude prices. A deal for Apache at the current price would be eight times as large as the next-largest transaction in the U.S. exploration-and-production sector this year.

At current oil prices, though, adding a barrel of oil to reserves through the checkbook rather than the drill bit is becoming more attractive.

The enterprise value of a basket of large U.S. exploration-and-production companies tracked by Wolfe Research was equal to just under $4 a barrel of proven and probable hydrocarbon reserves. That is around half the recent peak for that measure.

Apache is about average on that measure, though the range of multiples is wide. Those vary in part based on the percentage comprised of petroleum or similar liquids versus natural gas. Nearly two-thirds of Apache’s proved reserves are liquids and realized prices per barrel of oil equivalent remain two to three times as high as that of natural gas even after the recent rout in crude prices.

With no end in sight to today’s oil-and-gas glut, it might be early for a big deal in the oil patch. But there are risks in waiting, too. As legendary oil man Jean Paul Getty supposedly said: “The meek shall inherit the earth, but not its mineral rights.”

WSJ : Hewlett-Packard’s Split: Which Is the Better Half?

Hewlett-Packard’s Split: Which Is the Better Half?

Analysts see growth challenges for HP’s enterprise side while favoring the cash flow of printer supplies.

Part of the idea behind splitting up Hewlett-Packard was to free the company’s enterprise technology business from the weight of a slumping PC-and-printer market. So Wall Street’s early preference for the latter company has proven to be a surprise.

The ink is still wet on the split. Last Monday, Hewlett Packard Enterprise began officially trading as an entity separate from the established company. That now goes by the name HP Inc.

The reception for Hewlett Packard Enterprise hasn’t exactly been warm. The stock is down about 5% since it opened last Monday. It has also lost more than 20% of its value from when trades began on a “when issued” basis on Oct. 19, according to FactSet.

That may seem surprising, given that many investors had believed freeing the company’s enterprise business from the stodgy PC and printer divisions would unlock value. Instead, the reverse has been true. The share price of HP Inc.—which houses those businesses—has risen about 12% from last Monday’s open.

So far, Wall Street has been signaling a clear preference. While the majority of brokers who have set coverage ratings on both companies are neutral on each, 48% of them rate HP Inc. as a “buy.” Only 19% rate Hewlett Packard Enterprise as such. And Hewlett Packard Enterprise is the only one to have garnered a sell rating.

That isn’t because analysts view PCs and printers as a growth market. Both companies are seen as facing strong challenges in the growth department.

But HP Inc. has superior cash flow, thanks to its highly profitable printer supply business. Then there is the fact that the enterprise side will be shouldering significant restructuring charges this fiscal year.

Views on the two companies may change as both report fiscal fourth-quarter results later this month. For Hewlett Packard Enterprise, that may present a new opportunity to make its sale.

>>> Energy closing prices

Energy closing prices
* December crude oil futures fell $0.45 (-1%) to $43.87/barrel
* December natural gas closed $0.07 lower (-3%) at $2.30/MMBtu
* RBOB Gasoline closed flat at $1.37/gallon
* Heating oil futures closed $0.01 lower at $1.48/gallon

FT : Head of German football association quits over World Cup scandal

--> And still nothing on Adidas, Nike...


The president of the German football association (DFB) resigned on Monday in a widening scandal over alleged financial irregularities linked to the award of the 2006 Fifa World Cup.
In a day of high drama, Wolfgang Niersbach entered a meeting of the DFB’s committee pledging to answer the mounting questions about the affair — and came out offering his resignation.

The 64-year-old has insisted he had no knowledge of the financial flows that are now being investigated by the DFB; by Fifa, world soccer’s scandal-hit governing body; and by Germany’s tax authorities. But he said he took “political responsibility” for a scandal that has shocked the country.
“I worked [at the DFB] absolutely cleanly and accurately. But things happened which have been disclosed only in recent days, which require me to resign in the sense of [assuming] political responsibility. The office of DFB president should not be burdened in this way,” he said.
Mr Niersbach, who worked at the DFB for 27 years, was involved in the process that led to Germany in 2000 securing the right to host the tournament. He later joined the organising committee chaired by German football star Franz Beckenbauer. He became DFB president in 2012.
The allegations concerning the 2006 World Cup come on the heels of wide-ranging judicial probes into Fifa in the US and Switzerland over the award of the 2018 and 2022 World Cups to Russia and Qatar.
The German scandal broke last month when Spiegel magazine published details of an unexplained €6.7m payment from the German organising committee to Fifa. It alleged that that bribes had “likely” been paid to secure the tournament for Germany, which narrowly defeated South Africa in the final ballot by 12 votes to 11.

The DFB then said the €6.7m, earmarked for a Fifa cultural programme, may not have been used as intended. But it denied that it had found any “evidence of irregularities” in the award of the 2006 tournament and promised to complete an investigation into the matter.
Mr Niersbach insisted then that he had heard of the alleged payment only this year. But Theo Zwanziger, Mr Niersbach’s predecessor as DFB president, later alleged that Mr Niersbach had known about the payment much earlier.
Spiegel last week published what it said was a DFB document from 2004 referring to the payment to Fifa, with handwritten notes on it allegedly made at the time by Mr Niersbach.
Last week, tax investigators raided the DFB offices in Frankfurt, as well as the homes of Mr Niersbach and two other people linked to the association.
The Frankfurt prosecutors’ office said it had opened an investigation into “suspected tax evasion in a particularly serious case” in connection with “the awarding of the 2006 World Cup and the transfer of €6.7m from the World Cup organising committee of the DFB to the world football association, Fifa”.

FT : Global warming 1.02C above pre-industrial levels


Global temperatures are on course to rise to the highest level since the industrial revolution this year as humans drive the climate into “uncharted territory”, UK scientists warned on Monday.
Average temperatures between January and September were 1.02C above pre-industrial levels and, with just three months left in the year, 2015 is shaping up to be a record-breaker.

“These are the highest temperatures we have seen in our record, which goes back to 1850,” said Dr Peter Stott, head of climate monitoring at the Met Office’s Hadley Centre climate change research office.
“It’s the first time I’ve seen such a big jump between one year and the next.”
A strong warming El Niño weather pattern this year explained part of the temperature rise but by no means all of it, researchers said.
“We’ve had similar natural events in the past,” said Stephen Belcher, the Hadley Centre’s director. “Yet this is the first time we’re set to reach the 1C marker and it’s clear that it is human influence driving our modern climate into uncharted territory.”
The findings were released weeks before delegates from nearly 200 countries are due to meet in Paris to finalise a global climate change agreement.
Governments have already agreed that global temperatures should not rise more than 2C from pre-industrial levels, a threshold scientists say should not be breached if the world is to avoid irreversible and risky changes in the climate.
Dr Stott said the fact that the 1C limit was likely to be broken this year did not mean the 2C marker was closer than previously thought.
But it was consistent with the steady rise in warming that climate scientists’ models predict will occur as greenhouse gas emissions from burning coal and other fossil fuels continue to grow.
“This year marks an important first, but that doesn’t necessarily mean every year from now on will be a degree or more above pre-industrial levels, as natural variability will still play a role in determining the temperature in any given year,” Dr Stott said.
“As the world continues to warm in the coming decades, however, we will see more and more years passing the 1C marker — eventually it will become the norm.”
The research came as Amber Rudd, the energy and climate change secretary, faced questions about a leaked letter to her colleagues showing how far the UK was from meeting EU-wide targets to boost renewable energy.
The UK is supposed to obtain 15 per cent of its energy from renewable sources such as wind and solar farms by 2020. That includes energy for heating and transport as well as electricity.
In her letter, reported in The Ecologist magazine, Ms Rudd suggests internal departmental forecasts not made public show that the UK is on track to get only 11.5 per cent of its energy from renewables by 2020, up from about 6.3 per cent today.
The 2020 target implies the UK will have to get about 30 per cent of its electricity from renewables by 2020 and Ms Rudd has emphasised that this goal is likely to be met with wind, solar and other renewable systems already accounting for almost 20 per cent of the country’s power generation.
An energy department spokesman said: “We do not comment on leaked documents.”
He added: “We continue to make progress to meet our overall renewable energy target.”
The head of energy at Greenpeace, Daisy Sands, said it was deplorable that the government was expecting to miss its EU targets while Ms Rudd was cutting subsidies for onshore wind and solar power plants.
“The government’s claim to leadership in the Paris climate negotiations requires us to have targets, but we must meet them too,” she said.

(Recode.net) Yahoo Hires McKinsey to Mull Reorg, as Mayer Demands Exec Pledge to

Yahoo Hires McKinsey to Mull Reorg, as Mayer Demands Exec Pledge to Stay

According to several people close to the situation, Yahoo has hired McKinsey & Co. to help the company decide which units to shutter, which to sell and which to invest more in.

The move comes as the company’s long-in-the-tooth spinoff of its Alibaba Group asset moves to completion. Sources said that the consulting firm was meeting with top execs to begin the process of figuring out how to organize the Silicon Valley Internet company’s core businesses going forward.

It’s all part of an effort by CEO Marissa Mayer to turn around the turnaround she has been attempting for more than three years.

In addition to the reflection on what should happen to revive the core, which largely remains an advertising business, Mayer has also over the last month asked her top execs to make three- to five-year commitments to Yahoo. Sources said she told senior staff at meetings in late August and early September that they had to either verbally or in writing make the promise to remain.

That move seems to have backfired a bit, resulting in several major departures recently, including European boss Dawn Airey, marketing and media head Kathy Savitt, development chief Jackie Reses and many others to other jobs. Curiously, Mayer tossed them all under the bus in Yahoo’s recent quarterly call, slyly suggesting to analysts all the departures had been planned and that her current team was Yahoo’s bestest ever.

They weren’t and it’s not, but why quibble with a cloddish attempt at spin in the face of more difficult times ahead?

Mayer may have more of that to do, as sources added those major talent departures are not over. Insiders expect at least two others reporting directly to her to leave soon. (Not counting Mayer’s longtime assistant, I would pick communications czar Jeff Bonforte or science & tech head Jay Rossiter to leave the island next, but that’s just my guess.)

Mayer recently held an offsite with top Yahoo staffers at a San Francisco hotel, where they got leadership tips from the new HR head and also got to see a number of new initiatives, including a massive effort called Project Index.

What’s that, you ask? Well, according to those who have seen it and heard Mayer talk about it, it’s apparently going to be the savior of Yahoo — a one-stop mobile search and “indispensable guide” in the life of a consumer. While it was once under the purview of Bonforte, development is now being led by Yahoo search head (and former Googler) Enrique Muñoz Torres.

While it was supposed to come out this year, sources said Index’s launch may be delayed.

Still, Mayer has told many people that Index will be a critical product for Yahoo, orienting the company toward search in a more significant way. That unit is certainly getting more resources, said many sources.

And which part of Yahoo loses those resources, as McKinsey begins its work, remains to be seen.

Yahoo shares are down more than 30 percent this year, as investors worry about its prospects post-Alibaba spinoff. Up next, I would assume, will be the circling of the private equity sharks, who are doubtlessly beginning to look for an opportunity there.

(I am still waiting for Yahoo’s slow-moving PR chief — wouldn’t you know it, she is staying put! — to get back to me from three years ago, so let’s assume no comment from the company. I also pinged McKinsey and no comment thus far.)