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WJR April 2004 Reports

 
April 30, 2004
 
Earnings season isn’t over, kind of like snow in Michigan isn’t over.  There may be more coming after this week, but it won’t much matter.  The bottom line of this earnings season is that while earnings were expected to grow about 19%, about three-quarters of the S&P 500 companies beat those estimates. 
 
Unfortunately, the market continues, as it always does, to look six months ahead.  The prospect of rising interest rates, a long Iraqi involvement, terrorism and fears of a slowdown in the Chinese economy have the market in the dumps.
 
A bunch of economic numbers are on the way that may change perceptions, for a day, anyway. At 8:30 we’ll get the March personal income and consumption numbers.  At 9:45, the final reading from The University of Michigan on April Consumer Sentiment.  Expect a reading of 94.  At 10 o’clock, the Chicago Purchasing Managers Index is expected to rise from 57.6 to 61.
 
Tokyo stocks traded overnight after a holiday Wednesday.  It wasn’t pretty, as the Nikkei was down 2 percent.  Our futures are pointing toward higher prices at 9:30.  At this point, adjusted for fair value, the S&P futures are up 4 points, Dow futures are up a bit more than 40, and the Nasdaq futures are about 5 ½  points above fair value.
 
April 29, 2004
 
There are a lot of factors whipping stock prices around this week, and the next two days could really be interesting.  News came yesterday that China’s Central Bank has told small banks to stop lending for a few days in order to cool off speculation in the Chinese economy.  That made a bad day worse for us yesterday and it looks like a weak start is on tap today.  It will be especially weak if you happen to be a gold bug.  Gold this morning is at 382 per ounce.  It was over 420 not long ago.
 
At 8:30, we’ll see if our economy lived up to its projected GDP expansion of 5% in the first quarter.  We’ll also get the weekly jobless claims figures.  Last week’s claims are expected to be down by about 10,000.
 
DaimlerChrysler reported a surprising 10% rise in operating earnings, due to good performance at Chrysler.  Overall, Daimler’s sales were up 3%, although revenue was down, due to the strength of the euro.  It is a German company, you know.  We may find out more about Juergn Schrempp’s future later today.
 
Elsewhere on the earnings front, Aetna beat by 3 cents, Dow Chemical by 7, Raytheon 3 cents better and boosting their 4th quarter guidance.  Autonation beat by 2 cents and raised future guidance.
 
The futures have worsened during the past hour, although a lot could change at 8:30 when the GDP and jobless claims numbers are announced.  At this point, adjusted for fair value, the S&P futures are down 3 ½ , Dow futures are down 19 points, and the Nasdaq futures are about 5 points below fair value.
 
April 28, 2004
 
The strong start we had in stock prices yesterday faded late in the day, reacting to news from Iraq.  However, news on the homefront concerning the economy and earnings continues to impress. 
 
Host Marriott beat their projected funds from operations number by a penny per share.  Anthem, the big health care company had operating earnings of $1.61 per share versus an expected $1.46. Bristol-Myers, Kerr McGee and Phelps Dodge also beat their numbers.   McDonald’s matched estimates.  On the downside, Comcast missed their number by 4 cents per share and announced that they are dropping their takeover bid for Disney, at least for now.
 
European stocks are down about three-quarters of a percent this morning on two disappointing reports from Unilever and Siemens.
 
The Janus Funds, one of those big mutual fund families embroiled in the late-trading scandal, has settled with federal and state regulators for $226 million dollars in fines, restitution, reduction of future fees and – here’s the sad part – of the $226 million, just 1.2 million for investor education.
 
Looks for slightly lower prices at the open.  Adjusted for fair value, the S&P futures are down about 3 points, Dow futures are down 21, and the Nasdaq futures are about 2 points below fair value.
 
April 27, 2004
 
Lockheed Martin rocketed past earnings estimates, making 65 cents pre share versus an expected 53 cents.  Verizon, Baker Hughes and DuPont also had better bottom lines than expected.  On the other side of the ledger, Pier One warned that April sales have been slow and EDS warned that second quarter results will be less than pretty.
 
InClone reported over 100 million dollars of revenue in the first quarter, which is about double the average of analyst expectations.  Imclone shares now trade for more than 73 bucks per share.  You might remember that Martha Stewart got in a bit of a sticky wicket after she sold her Imclone shares at 60.  Ah, but “buy and hold” investing is just so unfashionable.
 
At 10 o’clock, the Conference Board will tell us how Confident Consumers are this month.  The expected number is about 88.5, but surging gasoline prices and the Iraqi situation may have put a dent in our overall mood.
 
The futures have been positive all morning long, and if the stay where they are for the next hour, we should get off to a good start at 9:30.  Although they might appear to be weak, after you adjust for fair value, the S&P futures are up 3, Dow futures are up 21 points, and the Nasdaq futures are almost 5 points above fair value.
 
April 26, 2004
 
Big drug companies continue to team up.  This morning two French companies are getting together.  Sanofi, which is actually the smaller of the two, is buying Aventis.  That’s a 65 billion dollar cash and stock deal.
 
Most of the market-moving economic numbers will come out Thursday and Friday this week.  But in the meantime, we’ll be putting the wraps of the last big group of 1st quarter earnings reports.  So far this morning, Humana met their earnings target but lowered guidance for the rest of the year.
 
Locally, Lear Corporation beat estimates of a dollar seventeen by 13 cents.  However, they lowered guidance for the 2nd quarter, reportedly because of a ten cent charge that will show up in the second quarter that analysts expected in the first quarter.  Lear now expects full year earnings to come in between $5.85 and $6.25.  Analysts had been expecting $6.17.
 
Walmart’s weekly sales increase came in at the low end of their 4 to 6 percent estimate.
 
The futures are indicating that traders may just as well sleep in a bit this morning.  At this point, adjusted for fair value, S&P futures are up less than a point, Dow futures are up less than a point, and the Nasdaq futures are about 2 points below fair value.
 
April 23, 2004
 
At 8:30 this morning we’ll get the report on March Durable Goods orders.  They are expected to have risen 7 tenths of a percent.   That number or higher would be just one more indication of a strengthening economy.  That’s where traders decided to focus yesterday after they realized that Alan Greenspan was taking the rest of the week off.
 
Earnings reports continue to pour in, and boy oh boy, have they been good.  Microsoft reported a 17% surge in revenue for the quarter gone by.  That wasn’t so much of a surprise, but the bottom line beat estimates by a nickel per share.  Microsoft was up over 5% in European this morning.  Speaking of Europe, DaimlerChrysler shares are on fire this morning after announcing that they are no going to pour any more cash into Mitsubishi.  It was expected that Daimler might put as much as $7 billion into Mitsubishi, which is the only carmaker in Japan that can’t seem to make any money.
 
Other good earning reports this morning came from Corning, International Paper, Fortune Brands, Schlumberger and maybe a dozen other major companies.  The disappointment of the morning was from software maker PeopleSoft.
 
European markets are up across the board this morning. At this point, adjusted for fair value, S&P futures are up almost 2 points, Dow futures are up 13, and the Nasdaq futures are 9 points above fair value.
 
April 22, 2004
 
No testimony from Alan Greenspan today, although a few other Fed governors will be running around collecting honorariums and potentially throwing the market a curve.  The Fed’s Beige Book was released yesterday.  It’s a survey of regional economic conditions.  It reported, as Mr. Greenspan has testified during the past couple of days, that retail sales, manufacturing and employment have all picked up decidedly during the first quarter of the year.  Commercial real estate is about the only area still in significant distress.
 
Meanwhile, the earnings spigot is still wide open and the reports continue to amaze.  Last night Ebay reported earnings that were a nickel per share above expectations, and almost double profits from a year ago.  They also raised estimates, as did Marriott, which also beat estimates by a nickel.
 
AT&T beat lowered expectations, Starwood Hotels, Office Depot and Visteon also among the companies that did better than expected.
 
The only significant disappointment of the morning appears to be Maytag.  They missed their number by 4 cents per share, in contrast to their competitor Whirlpool’s good report yesterday.
 
Microsoft, Caterpillar and Amazon.com report in later today. Watch the Producer Price Index number and the first time jobless claims at 8:30.
 
At this point, adjusted for fair value, S&P futures are down about 5, Dow futures are down 55, although the Nasdaq futures are just a point below fair value.
 
April 21, 2004
 
Things were going along relatively well until about 3:15 yesterday afternoon.  At that point, the market got the message that Alan Greenspan’s shadow boxing with the imaginary threat of deflation was over and that short-term interest rates are on their way up.  Maybe not in May, but the days of one percent short term rates will likely melt away with the summer’s heat.
 
While the traders fixate on rates, companies continue the parade of blowout earnings.  This morning, Ford Motor reported 94 cents per share of profit versus a 44 cent estimate.  They raised their annual guidance, but not their estimate of the next quarter.  Motorola made more than twice the profit Wall Street expected last quarter.  That stock traded up almost 20% in the pre-market. Coca-Cola, JP Morgan, General Dynamics and Whirlpool also with good earnings reports this morning.
 
All that being said, Mr. Greenspan testifies again today and has the trader’s attention.  Accordingly, the futures are pointing toward a generally weaker open at 9:30.  Even though Motorola is a Big Board stock, it’s results are good news for tech stocks in general, and on the heels of that, the Nasdaq futures are about 4 points above fair value, However, S&P futures and Dow futures have been pointing down for a couple hours now.  S&P futures are off a point, and the Dow futures are 15 points below fair value.
 
April 20, 2004
 
It could be an interesting last hour of trading today.  Alan Greenspan starts his testimony to the Senate Banking Committee at 2:30 this afternoon.  So, if you allow about 15 minutes for his opening statement and about 15 more for the Senators to come up with a meaningful question, Mr. Greenspan’s comments could influence stocks prices starting at around 3 o’clock.
 
GM reported $2.25 in profit for the quarter versus $1.79 estimate. They raised their 2004 estimate to 7 bucks per share.  They had previously estimated six dollars to six fifty.  The average analyst estimate was $6.30.  Suffice it to say that GM stock and the Dow Jones Industrial average should get a boost out of that news.
 
Once again this morning, the only significant earnings miss came from the toy industry. Barbie’s signing the blues as Mattel reported 2 cents per share, versus an expected 9 cents.  Outside of that, we have another string of out-performances.  Pfizer made a penny more than expected on an almost 50% increase in revenue.  Altria, company formerly known as Philip Morris, beat estimates by 3 cents.  Washington Mutual, the big mortgage lender, made $1.18 versus an expected $1.05.  Dozens more have reported this morning and will throughout the day.
 
Most Asian markets gained ground overnight.  All major European markets are up at this hour, and we should get to a decent start as well.  Adjusted for fair value, the S&P futures are up about 2 points, Dow futures are up 30, and the Nasdaq futures are just a point above fair value.
 
April 19, 2004
 
Watch McDonald's stock this morning.  It's done very well during the past year or so.  However, word is just in that McDonald's Chairman and CEO, Jim Cantalupo, has passed away. That could impact the price of McDonald's shares this morning.
 
We’re in the heart of the first quarter earnings season, as another third of the S&P 500 companies will report this week.  Overlay that with two days of Alan Greenspan testimony and a couple of other Fed governors running around out there out on the rubber chicken circuit, and traders should have a lot to chew on this week.
 
Only one slight disappointment in this morning’s earnings reports; Hasbro met estimates, but came in a little light on revenue.  Outside of that, a bunch of companies beat estimates.  We’ll run ‘em down:  3M beat by 3 cents, Eli Lilly and Lexmark by 4 cents, Manpower by 6 cents, Wachovia by 8 cents and Fannie Mae made $2.03 per share, versus an expected dollar-ninety.
 
The March Index of Leading Economic Indicators will be announced at 10 o’clock.  Expect an increase of three-tenths of one percent.
 
The futures have started the morning weakly, but have been creeping back to even ever so slowly.  At this point, it looks like a very quiet market open.   Adjusted for fair value, the S&P futures are down about 3 points, Dow futures are down 2, and the Nasdaq futures, which have been a bit positive most of the morning, have just slipped back to about 2 points below fair value.
 
April 16, 2004
 
The earnings reports continue to roll.  We haven’t seen a lot of disasters, but sometimes meeting expectations isn’t quite good enough.  IBM reported this morning.  The hit their earnings number, but once again this quarter, currency translation helped results a lot.  That kind of help will be unavailable when the dollar stops falling.  IBM is trading lower in the pre-market.
 
Delphi beat their number by a penny or two, depending on how you read it.  The big news there is over 20 percent growth in non-GM business as the diversification efforts are paying off. Stryker reported three cents better than expected.
 
The misses of the morning are Sun Microsystems and Nokia.  Sun missed by a penny.  Nokia met estimates for last quarter, but warned that the summer might not be so hot. 
 
U of M’s April Consumer Sentiment Index is the big number of the day.  Just after the market opens this morning, expect a reading of 97.
 
It’s one of those mornings when the futures look to be positive, but don’t believe it.  Unless we get a nice surprise from the Housing starts number at 8:30 or the Capacity Utilization report at 9:15, we’ll be backtracking at 9:30.   Adjusted for fair value, the S&P futures are down a point and a half, Dow futures are down 19 and the Nasdaq futures are about 9 points below fair value.
 
April 15, 2004
 
Happy tax day! (I'm kidding, there's no such thing).
 
A bunch of good earnings should boost stock prices at the open, although we'll get the weekly jobless claims number at 8:30, which could dampen the enthusiasm if there's a big increase in first-time claims.
 
Last night, Apple beat estimates by 40%, earning 14 cents per share for the quarter.  Texas Instruments met estimates, but came in at the high end of the range of revenue estimates.  Citigroup beat by 3 cents, Johnson Controls by 2 cents and Pepsico matches expectations.
 
Gold has dropped under $400 per ounce for the first time in a while. 
 
In Tokyo, the Nikkei droppen over 2 percent overnight.  Right now, we're looking for higher prices at 9:30.  As of 7:55am, ajusted for fair value, S&P futures are up 2 1/2, Dow futures are up 22 and the Nasdaq futures are 6 points above fair value.
 
 
April 14, 2004
 
Yesterday turned ugly on inflation fears.  Seven stocks declined for every one that rose on the New York Stock Exchange, so there was much of any place to hide.  A big increase in retail sales has traders worried that short term interest rates will be rising sooner, rather than later.  Long term rates have already been spiking up during the past week.  Fed fund futures are already pricing in a 100 percent chance of an interest rate increase by the August Fed meeting.
 
In ten minutes we get another piece of the future interest rate puzzle.  The March Consumer Price Index is expected to rise 3 tenths of a percent overall, with the core rate, which excludes food and energy, rising 2 tenths of a percent.  Any number much higher than that will be more bad news for stock prices.
 
If you want more dough in your pizza, Domino’s may be your answer.  Domino’s will be going public in the near future.  Shares will reportedly trade under the ticker DPZ.
 
Overseas markets are down on the heels of our train wreck yesterday, and it looks like we’ll get off to a moderately lower start.  Adjusted for fair value, the S&P futures are down a point, Dow futures are down 19 and the Nasdaq futures are about 5 points below fair value.
 
April 13, 2004
 
By the end of the day, we’ll have a better idea of how 2004 is going for a variety of very big U.S. companies.  Things are going very well for Merrill Lynch, as well as most every big brokerage house.  Merrill reported that profits almost doubled from a year ago.  Here’s the interesting part; all the big brokers are making lots of money.  The analysts from those big brokers estimated Merrill’s profits of $1.07.  Merrill made $1.22. One might ask, if the analysts at the big brokers can’t come close to estimating earnings in their own industry, how are they making all that money?
 
Johnson and Johnson beat estimates by 3 cents per share.  Sales were up over 17%.  Pepsi Bottling and Dow Jones each beat estimates by 2 cents per share. Earnings reports are on the way later today from Intel.
 
At 8:30, the March Retail Sales report is expected to reflect about a 7 percent increase.
 
Asian markets were up overnight.  European stocks are doing well in spite of a disappointing sales number out of Phillips Electronics.  Our futures are pointing toward a brighter future for our market.  Adjusted for fair value, the S&P futures are up 2 ½ points.  The Dow futures are up 26 but the Nasdaq futures are about 2 points above fair value.
 
April 12, 2004
 
We made it through the long weekend without any large-scale bad news from Iraq, and the futures are pointing toward a little relief rally at 9:30.
 
Some good news and some bad news with estimated earnings this morning.  Kimberly-Clark says that they’ll earn 91 cents for the quarter.  That’s about 5 percent more than expected.  On the other hand, power supplier Entergy says that profits will be lower than expected.
 
More than a third of the S&P 500 companies will report earnings this week. Earnings are expected to be up about 17% from a year ago, but a lot of analysts are expecting 20% or more. Gannett just reported earnings of a dollar for their 1st quarter.  That’s up from 93 cents in last year’s first quarter. 
 
Stock mutual funds took in over 5 billion dollars last week. That’s the biggest surge since January.
 
Japanese stocks shot up over 1 percent over night. European stocks are up a half percent or so.  We should get off to a good start as well.  Adjusted for fair value, the S&P futures are up more than 4 points.  The Dow futures are up 38 and the Nasdaq futures are about 7 points above fair value.
 
April 8, 2004
 
It’s the last day of trading before the Holiday weekend, and three major factors will steer stock prices. Worries about the fighting in Iraq may make traders nervous about being long over the long weekend.  However, if the focus stays on current and future corporate earnings, we’ll be seeing much higher prices by the end of the day.
 
Yesterday’s market looked ugly if you just look at the index numbers, but losers only slightly outnumbered gainers.  Moreover, companies that reported and forecast earnings since the close yesterday have given us a lot of good news.
 
Dell raised their 1st quarter forecast.  Costco reported same store sales up 11% and Walmart sales are up 14%.  General Electric met estimates and said that they should return to double digit earnings growth by 2005.  Yahoo, which was downgraded by a major broker this week, blew away estimates, split their stock, raised their estimates and traded up 10% in the after hours market. Research in Motion also beat estimates and announced a split.  In short, there’s a lot of good news out there, and the futures reflect it.
 
Adjusted for fair value, the S&P futures are up 9 points.  The Dow futures are up 74 and the Nasdaq futures are 19 points above fair value.
 
 
April 7, 2004
 
Alcoa got earnings season off to a rather sloppy start last night.  Yes, revenue was up 11% and profit more than doubled.  However, earnings per share of 40 cents missed the 42 cent estimate.  That came on the heels of Nokia’s earnings warning yesterday and should help to get us off on the wrong foot this morning.  Nokia fell 19% yesterday alone and now trades at a price right about where it was 5 years ago.
 
Later today we’ll get the word from Genentech, Yahoo! and Research in Motion – that’s the company that makes those little Blackberry communication devices.
 
DaimlerChrysler is having their annual meeting in Berlin today.  Word is that they are encouraged about first quarter sales and they say that next year they should make lots of money.  Sellers have driven the stock down over one percent in European trading this morning, perhaps because they have heard that “wait till next year” line before.
 
It’s one of those mornings where the futures look stable to positive on their >
 
 
April 6, 2004
 
On a daily basis stock prices get pulled all over the place because of economic reports, tales of terrorism, corporate scandal and political goings on in Washington D.C.   All of these things are frustratingly unpredictable and uncontrollable.  But once every three months, it’s a good idea to remind ourselves that in the long run, it all boils down to two things: how much are corporations earning and how high are interest rates going to be.
 
Those corporate earnings reports start to roll later today when Alcoa announces their first quarter results.  We’ve had a sharp rally during the past two weeks as very few companies warned that their earnings will fall short of estimates.
 
Take Kellogg for instance.  Last night, after the market closed, Kellogg said that strong sales and the depreciating dollar will boost their quarterly earnings to somewhere around 52 cents per share.  Analysts were expecting 43 cents.
 
Markets were sharply higher in Asia overnight, but stocks are taking a little breather in Europe this morning.  We’re looking for a little pullback when the trading day and the earnings season get underway. Adjusted for fair value, the S&P futures are down 6.  The Dow futures are down 27 and the Nasdaq futures are about 13 points below fair value.
 
April 5, 2004
 
Friday’s unemployment report blew past even the most optimistic projections.  Over 300,000 non-farm jobs were added in March, and earlier numbers were revised higher.  Logic tells us that job creation will lag in an improving economy.  The question has been, how much of a lag should there be?  People get very impatient, you know, especially with all the yapping that goes on in an election year.  If we can string a couple more months of  increases together, the last pieces of a full economic recovery may be in place.
 
Not a lot of economic data coming in this short trading week.  At 10 o’clock today we’ll find out how the non-manufacturing sector of the economy is doing.  Look for an increase in the ISM services index to a level of 62 and a half.
 
JC Penney has finally gotten rid of the Eckerd drug store chain that they’ve had on the week-old donut rack for months now. CVS and Canada’s Jean Coutu will divvy up the Eckerd stores.
 

The futures are indicating a slightly positive picture at the open after Friday’s big rally.  Adjusted for fair value, the S&P futures are up less than a point.  The Dow futures are up about 6 points and the Nasdaq futures are about 2 points above fair value.

April 2, 2004

 
News about an apparently foiled bomb attack on a Spanish high speed train this morning may derail stock prices this morning.
 
But the regularly scheduled story that will give traders direction this morning will definitely be the monthly Unemployment Report.  It’s widely expected that the March Unemployment Rate held steady at 5.6%.  The number of new jobs created could range anywhere from zero to 200,000.  In recent months, economists have expected increases of 100,000 or more new jobs, only to see the survey numbers fall far short.  Anything over 120,000 will be regarded as a pleasant surprise.  Anything under 40,000 will be a big disappointment, especially considering that about 35,000 striking grocery workers in California returned to work last month.
 
2,500 workers who will see their jobs disappear soon are workers at Gateway Computer stores.  Gateway will be closing all 188 retail outlets next week.  Sun Microsystems will also be cutting 3,300 jobs and will take a charge of 475 million dollars.
 

The futures are almost irrelevant this morning, because everything will change at 8:30 when the unemployment numbers are announced.  But, for the record, things are mildly positive at this point. Adjusted for fair value, S&P futures are up 2, Dow futures are up 18, and the Nasdaq futures are just about even with fair value. 

April 1, 2004

 
There’s enough economic data coming this morning to make your head spin.
 
In about ten minutes, The February Producer Price Index will finally be released.  That’s right, February.  No April Fool’s joke.  The report has been delayed by three weeks due to some technical adjustments, but when it finally comes out, expect a 4 tenths of one percent increase.
 
Also at 8:30, first time claims for unemployment benefits are expected to be up by about 1,000.
 
Arguably the most important number of the day is the ISM index at 10 o’clock, which is expected in at 59.5.  That would still indicate expansion in the manufacturing sector, but at a slower rate than last month.
 
The “tankan” survey of Japanese businesses showed more confidence than we’ve seen there in five years.  Pier One beat their estimated earnings number by a penny this morning.
 
The futures are in “wait and see” mode this morning, in front of all those economic reports.  Adjusted for fair value, S&P futures are flat, Dow futures are up 1, and the Nasdaq futures are less than 2 points below fair value. 
WJR May 2004 Reports
WJR March 2004 Reports

Daily Reports @ WJR

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