Market Talk

We’re getting ready to tie this year up in a bow and put it under the tree. Not much going on in the markets today, except for some M&A activity. Meanwhile, a couple of second-tier data points are, well, pointing to at least a decent year next year.

- Oracle (ORCL) CEO Larry Ellison wasted no time slamming H-P’s (HPQ) hiring last week of former SAP chief Leo Apotheker as new CEO. “I’m speechless,” he tells WSJ late Friday. “H-P had several good internal candidates…but instead they pick a guy who was recently fired because he did such a bad job of running SAP.” Harsh, to say the least, though not particularly out of character for Ellison, Digital Daily blogger John Paczkowski says.

- Goldman gets harsh on Microsoft (MSFT) and offers three strategies it should employ to help boost shares. Firm calls for huge dividend increase, a “coherent consumer strategy” and MSFT to become the global leader in cloud computing. “Oh, that’s all?” Paul Kedrosky quips. “Pulling this off would be like Microsoft learning Geller-ian magic tricks, the equivalent of being able to bend spoons with its brain.”

- Another economic downturn is “not only a possibility but a likelihood,” John Hussman says. “A significant correction in valuations and resolution of the growing backlog of delinquent debt may finally restore strong ‘investment merit’ to the US stock market, but only after a greater amount of pain and adjustment than most investors seem to anticipate.”

- Executive departures at Yahoo has put more scrutiny on CEO Carol Bartz, who she still has to convince Wall Street she has what it takes to turnaround the struggling Internet giant. But YHOO’s 3Q report, scheduled for Oct. 19, will provide clues into how she’s really doing, Kara Swisher notes. And as executive departures “garner a lot of attention,” Yahoo’s results are “the most important of all to watch,” she says.

- With the September jobs report due at the end of the week, Calculated Risk says keep an eye on the participation rate. Right now, it sits at a “very low” 64.7%. “A future decline would be considered bad employment news (even if the unemployment rate declined slightly),” blog says. “An increase in the participation rate, combined with a weak labor market, could lead to a jump in the unemployment rate. This is something to watch closely.”

- Another unsavory wrinkle in the US foreclosure epidemic as some big banks (BofA, JPMorgan, Ally’s GMAC) suspend foreclosure activity across close to half the nation amid reports of seriously flawed paperwork. Seems “the real estate/financing industry has brought the same machine-like technical prowess that they used to automate the process of underwriting mortgages to a similar automated foreclosure process,” Big Picture blogger Barry Ritholtz notes. “Is it any surprise that the results of this are similarly disastrous?”

- The bulls, like John Paulson, looked pretty smart in September.

- “But even if we agree that the Fed could depress long-term yields with these kinds of measures, it is a separate question as to whether it should,” James Hamilton says. “I remain of the opinion that while the Fed is understandably reluctant to embrace QE2, it may have little other choice.”

- Twitter promotes chief operating officer, Dick Costolo, to CEO amid company’s scramble to build its advertising business. He succeeds Evan Williams.

- New York Observer wants Dealbreaker, but Bess Levin wants her big pay day. Good for her, she deserves it. Now, Barry Ritholtz hopes to get in on the action.

So, the news is pretty much the same as yesterday, but the stock market is rising today, where it fell yesterday. The euro, incidentally, is at about the same place today as it was this time yesterday (although it fell overnight,) but the stock market is rising today, where it fell yesterday.

What gives? We break it down for you on the Markets Hub.

- Hewlett-Packard’s (HPQ) suit against former CEO Mark Hurd looks “very much like it was filed in a fit of passion after hearing that Hurd had signed on with Oracle,” Reuters blogger Felix Salmon says. “There’s no tactical or strategic rationale for this: it’s just petulance, really.”

- “Hurd’s knowledge of H-P’s server and data storage-systems business will undoubtedly come in handy at Oracle, which has been aggressively moving into that very space ever since its acquisition of Sun,” Digital Daily blogger John Paczkowski says. “In that sense, Hurd’s hiring is a real coup for Oracle. Who better to put the screws to a rival than a former CEO with a bone to pick?”

- There are currently 161 potential IPOs on file that are hoping to raise $56B. Staggering numbers but, as Josh Brown points out at The Reformed Broker, not necessarily as great as they appear. “Between LBO retreads and the previously bankrupt, it remains difficult to get excited about the initial public offering dealflow, robust as the pipeline seems to be in dollar terms on the surface.”

- Former OMB Director Peter Orszag makes his debut as a columnist for the New York Times by advocating an extension of the Bush-era tax cuts for two years for the middle class, and even for the upper class if that’s what’s needed to get a bill through Congress. “Higher taxes now would crimp consumer spending, further depressing the already inadequate demand.”

- The labor force had little to celebrate this Labor Day, Robert Reich says. Organized labor is down, and non-organzed labor is facing joblessness and underemployment. “Face it: The national economy isn’t escaping the gravitational pull of the Great Recession.”

- If the market has been overly bearish lately, paving the way for relief rallies and such, it’s not really showing. John Hussman notes the VIX, which remains in relatively placid territory. “It’s difficult to look at the evidence and conclude that investors are excessively bearish, much less terrified here.”

- FCIC hearings revealed how reliant Lehman was on daily, short-term funding to cover longer-term costs. “It was a recipe for disaster, a trailer park in search of a tornado,” Barry Ritholtz writes at The Big Picture.

- “The truth is that the trouble in housing is not, for the most part, a demand-side issue,” Ryan Avent writes. “The problem is the millions of homeowners stuck in houses they can’t afford to sell. These households represent a significant shadow supply of foreclosures-in-waiting. I agree that it would be silly for the administration to try to support housing prices by offering more goodies to potential homebuyers. But it doesn’t follow that letting prices go their own way will magically get housing markets moving again.”

- “Newspaper advertising revenues are on track this year to dive to a 25-year low of approximately $26.5 billion, or 47% of the record $49.4 billon in sales achieved by the industry as recently as 2005,” Alan Mutter notes.

- What’s up with Google’s logo today?

- If everyone’s so concerned about federal deficits, why the record low yields on US Treasurys, wonders FusionIQ CEO Barry Ritholtz. “Part of the answer is the lack of alternatives. Where else are you going to park yield-seeking money? Euro denominated issues? UK debt? Japanese bonds, emerging markets?” he ponders. “Amongst the motley crew of sovereign debt issuers, the US Treasury is the least ugly girl at the dance.”

- “I have and continue to believe this is a trader’s market in which valuations matter little,” Pragmatic Capitalism says. Ultimately, the macro trends are so fierce that the tides will sink or lift all boats.”

- Apple (AAPL) may be poised to update its iMac and Mac Pro computers sooner rather than later. The MacRumors blog tracks in-store pre-order availability and has taken note of depleted stock at several retail stores, suggesting updated models could be in the offing. MacRumors also points out the iMac was last updated in October, while the Mac Pro was last refreshed in March 2009.

- General tone from European analysts digesting the stress tests is “remarkably sanguine,” NYT’s DealBook says. The tests represent “a substantial step forward,” Goldman Sachs says, although notes if Tier 1 capital ratio was lifted to 7% from 6%, it would’ve tripled the number of failed banks from seven to 24.

- Oracle (ORCL) last week vehemently denied it has a five-year, $70B acquisition budget, which President Charles Phillips originally claimed in a Fortune Magazine article. But, as Digital Daily blogger John Paczkowski points out, it’s obvious Oracle doesn’t want competitors to know its strategic plans. “Hard to believe that a company as aggressively acquisitive as Oracle doesn’t have an M&A budget,” Paczkowski says. “But evidently that’s the party line here and by the sound of things Phillips clearly overstepped it.”

- Google (GOOG) introduces Google Apps for Government, a new edition of its package of Internet-based applications specifically designed to meet the policy and security needs of the public sector.

- When digesting the new home sales report, keep in mind the data point is notoriously noisy, Ritholtz says. June’s 24% monthly increase comes on the heels of May’s 33% drop. “Ignore the swings, look at the moving average to smooth out the volatility.”

- June new home sales surged 24% from a month earlier to 330,000. But don’t get too giddy, especially since the sales level represents the second lowest on record since 1963. “Bottom line, while the figure was better than expected, new home sales make up less than 10% of the overall industry with existing homes making up the balance,” Miller Tabak’s Peter Boockvar says. “It’s good to see a pick up in new home sales but an overall market that still has way to much inventory does not need too many new homes built.”

- IAC/InterActiveCorp (IACI) chief Barry Diller tells CNNMoney that his firm has jumped on the Facebook advertising bandwagon, another indication the social network is gaining traction on Madison Avenue. “My company, which spends a huge amount on advertising, we spend every nickel we can on Facebook,” Diller says. “They’re effective. The targeting of the audience is precise enough. The message and the audience are quite aligned.”

- Robert Dudley has quite the to-do list facing him at BP.

US stock futures premarket point to an early bounce when regular trading gets underway, encouraged by some weakness in the US dollar following the buck’s big run-up yesterday.

Stocks in Hong Kong and Shanghai were weak overnight, more mixed to slightly higher in other Asian markets. European markets currently posting gains.

Weekly jobless claims dropped 14,000 to 442,000 in the week ended March 20. Decline, in part, reflects changes the Labor Department made as part of its annual revision to the methodology used to calculate claims. Economists had expected only a 7,000 fall to 450,000.

Had the revisions not been made, Labor said initial claims would have come in at 453,000 for the week ending March 20 — not as good as 442,000, but at least that would’ve been down from previous week’s number.

Kansas City Fed’s March manufacturing index set for 11:00am ET. Cleveland Fed’s Pianalto scheduled to speak around 9:00am.

Best Buy’s (BBY) fiscal 4Q earnings rose 37% amid prior-year charges and rebounding sales. BBY also forecast earnings and revenue for the new year ahead of analysts expectations. Shares were recently up 7% premarket.

Oracle (ORCL) set to release fiscal 3Q after the close.

USD index at 81.64 after climbing above 82 yesterday. S&P futures up 5.20; 10-yr flat, yield at 3.83%.

(Kathleen Madigan contributed to this post.)

Tech stocks fueling today’s market action as big gains from Oracle (ORCL) and BlackBerry maker Research In Motion (RIMM) have propelled the major market indexes back into positive territory.

Oracle, seen as an industry barometer because it sells lots of software to a variety of businesses, said its quarterly profit rose 12% from a year ago and sales exceeded expectations. Results are good sign for the broader economy as corporate tech spending may finally be ready to rebound.

Analysts were pretty bullish about Oracle’s results. JPMorgan says better-than-expected results come “on the back of solid execution in the Americas, offset by softer international performance, though all regions showed marked improvement from the previous period.

FBR says profitability levels continue to impress. “Just when you think Oracle cannot deliver upside to margins, the company finds more leverage in the model, and this quarter was no different.”

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Following yesterday’s spirited sell-off in US stocks, futures are shaded higher. Positive earnings reports late yesterday from Research In Motion (RIMM) and Oracle (ORCL) help support the early tone, though gains in stock futures so far don’t signal a lot of conviction toward an early rebound.

Asian markets were mostly lower overnight, while stocks in Europe are posting gains. No economic data on the calendar; quarterly options and futures expiration could add a dash of volatility.

US dollar index is a little lower after yesterday’s big run-up; oil is rallying, gold still down. S&P futures up 5.60; 10-yr flat, yield at 3.48%.

 Oracle (ORCL) apparently isn’t afraid of due diligence, agreeing to buy Sun Microsystems (JAVA) for $7.4B, just two weeks after IBM’s talks to buy Sun collapsed.

The per-share price is $9.50 cash, which is 42% above JAVA’s close Friday. The companies valued the transaction at about $5.6B after factoring in Sun’s cash and debt. 

The frequently acquisitive ORCL sees the deal adding to non-GAAP earnings by “at least” 15c/share in the first full year after closing.

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