Please note that Ron Humenny and Starfire Investment Advisers, Inc. are not affiliated with, are not compensated by and do not endorse Flagstar Bank or any of the sponsors of our daily WJR reports
April 28, 2006
How about all the oil-related outfits with suddenly lower-than-expected results? ExxonMobil, ConocoPhillips, the Edmonton Oilers all came up short during the past couple of days. Anadarko Petroleum missed this morning. Chevron reports a little later on. Surprising? Maybe, but oh so politically convenient.
Stock prices just didn’t know which way to turn yesterday. Ben Bernancke’s Congressional testimony gave the market an indication that the one-and-done scenario regarding future interest rate hikes may be about to happen. Stock prices soared on that comment.
But after that, the market was kind of like the dog who finally catches the car he’s been chasing – like okay, what do you do with it now?
Last night, Mircosoft gave us an earnings report that disappointed on a number of levels. They missed their number for last quarter’s earnings and guided lower for the rest of the year. Microsoft shares are looking about 8 percent softer in the pre-market.
At 8:30 we’ll get the first estimate of 1st quarter Gross Domestic Product. Expect a strong reading of around 5 percent. The Chicago PMI and the U of M confidence numbers also come out this morning, but that GDP number should set the early tone for the market.
April 27, 2006
The earnings reports continue to roll in, and they are almost all above expectations once again, but the futures are roundly ignoring that good news this morning. First of all, it’s become pretty obvious that last quarter was an outstanding quarter for profits. But second of all, China’s decision to raise its base interest rate to 5.85% sent a chill through markets around the world. That was their first rate hike in a year and a half. Add to that a 10 o’clock appointment that Ben Bernanke has with the Joint Economic Committee of Congress, and we’ll be walking on eggshells this morning.
One rather high-profile company missed their numbers about fifteen minutes ago. ExxonMobil reported profits of $1.37 per share on revenue of 88.9 billion. Analysts were expecting $1.47 on 100 billion in revenue. So like ConocoPhilips yesterday, revenue and profit at big oil is being reported to be not as strong as expected. Not that they can control this kind of thing, but it IS a time when big oil probably wouldn’t want to brag about terrific profits.
April 26, 2006
We should get some early relief early on from a couple of down days for stocks. But how well the market holds will likely depend on the oil inventory number at 10:30 and the Federal Reserve’s Beige Book mid-afternoon.
In front of all that, the March Durable Goods number is expected to reflect a 1.7 percent increase and at 10 o’clock, March New Home sales are expected to come in at an annualized rate of 1.11 million units, versus 1.08 in February.
On the earnings front, Boeing made 88 cents versus a 76 cent estimate. However, the news isn’t all rosy. Revenues were lower than expectations and that should hurt the stock by a dollar or so this morning. Elsewhere, oil services company Baker Hughes came in at a 93 cent profit versus the expected 76. Monster Worldwide also beat estimates. On the flip side, Sprint/Nextel missed by 2 cents.
April 24, 2006
The Nikkei Index in Japan lost almost 500 points overnight. That’s almost 3 percent, or put in perspective, the Nikkei’s worst day in almost 2 years. A weak U.S. dollar is taking the blame.
It’s the busiest earnings week of the quarter. We’ll get reports from a half-dozen of the Dow 30 stocks and over a third of the S&P 500 this week. Leading the charge this morning is Caterpillar. Caterpillar stock is up by over a third since the beginning of the year, and now we know why. Cat earned a dollar twenty during the quarter. Analysts expected only a dollar five. Revenue was up, and they raised their own guidance for the year, although not to a level higher than analysts were already expecting.
Xerox and Hasbro are two companies that are two companies that have disappointed investors in recent history, and here we go again. Both missed their numbers this morning. After the close of trading today, American Express and Sun Microsystems will report.
April 21, 2006
Ford Motor’s report was a little bit sunshine and a little bit rain this morning. Of course, the overall first quarter loss of 1.2 billion is a big number. But, if you strip out Way Forward and other supposedly one-time charges, Ford earned 24 cents per share. Unfortunately, Wall Street was expecting 26 cents. The good news is that revenue, although down 9 percent from last year, was a little higher than expected. In the long run, getting those revenues up – selling more cars at better margins – is where the earnings are going to meet the road.
3M beat estimates by 3 cents. Wyeth also came in better than expected, and McDonalds just reported earnings of 50 cents per share, which was a penny better than expected. In the oil patch Schlumberger and Halliburton are also out with good reports. Let’s hope you’ve owned some oil stocks this year so that you can afford your next tank of gas.
Speaking of oil, light sweet crude is down 64 cents, but is still over 73 bucks.
Google’s tremendous earnings report last night is giving the Nasdaq futures a little shot in the arm this morning.
April 20, 2006
Good news on just about all fronts this morning. General Motors results were certainly a big improvement from a year ago. Not much of the well-reported cost cutting has kicked in, but GM reported significantly improved numbers. In fact, the bottom line was better by a billion dollars, due in large part to $1,000 more revenue per vehicle sold. Yes, it sure helps the bottom line when you’re not giving your product away.
The only earnings miss of the morning was a one penny per share miss by Hershey. Outside of that, corporate earnings continue to impress. Nokia shares are up over 7 percent in Europe after they reported.
Here’s a partial list of winners this morning, just in case your favorite team played; beating estimates were Apple, Altria, Union Pacific, Merck, Lilly, EMC, Baxter and Schering Plough. Sound like big pharma is on the rebound.
Oil is down a few cents, but is still north of 72 bucks. Gold is up almost 8 bucks per ounce at $643.50.
April 19, 2006
Yesterday afternoon, the Federal Reserve released the minutes from the Open Market Committee’s March meeting. Concurrent with that release, Wall Street released a bunch of pent-up bullishness. Many of the Fed governors voiced the view that the end of rate hikes is near. Put that together with a tame Producer Price number and a bunch of good earnings reports, and the market turned in its best day in a year.
Watch the Consumer Price Index less than 10 minutes from now. Economists expect 2 tenths of a percent increase in the core rate and 4 tenths of a percent overall. Numbers lower than that will reinforce the bull run that looks to continue at 9:30.
The earnings continue to roll in and they are uniformly good. Johnson Controls, JPMorgan, St. Jude Medical, United Technologies, Pfizer, Coca Cola, Honeywell all reporting better than expected earnings, and there’s another dozen companies on that list that I could mention.
April 18, 2006
It will be a battle between earnings and oil today. We’ll see if confidence in strong earnings can overcome the fear of runaway gasoline prices. So far, if the futures are any indication, the earnings are winning out, but rising crude oil prices are giving them a run for their money. Light sweet crude is closing in on 71 dollars per barrel this morning at $70.80.
On the earnings front, Merrill Lynch continues to roll in profits. The brokerage firm made 44 cents versus an expected 35, and that's after some bigone-time charges. United Health beat estimates by 4 cents, National City Bank beat by 2 cents and homebuilder D.H. Horton issued in line earnings on higher than expected revenue, but they lowered their outlook for the remainder of the year. Johnson & Johnson had better profits than expected. However, revenue was up only a little over 1 percent.
At 8:30 we’ll get the March Producer Price Index. Expect a headline increase of 4 tenths of one percent.
April 17, 2006
Happy tax day everybody! Get those returns or extensions filed by midnight, with, of course, the cash that you owe. For the first time this year, your individual return extension is automatically good for six months, rather than four, giving you one less thing to do while you concentrate on your procrastination this summer.
Earnings start to roll in earnest this week. So far this morning, Citigroup reported earnings that appear to be a little better than expected. It’s a confusing report because of some new accounting rules that kicked in this quarter. However, Citigroup continues to grow, especially overseas.
Eaton reported better than expected results of $1.40 per share. They also raised their guidance for the rest of the year.
There could be some interesting movement in the shares of Hewlett-Packard this morning. Barron’s magazine had a very positive article on H-P over the weekend.
At 8:30, the New York Fed will release the results of a survey of the executives of 175 manufacturing companies in New York State. Expect a reading of 23.8. But outside of that, no big economic reports are due.
April 14, 2006
You have to go back to 2002 to remember the last time the 10 year Treasury Bond carried a yield north of 5 percent. But we closed at 5.05 percent yesterday as money continued to flow out of long term bonds. The 30 year is now up to 5.11 percent. Given strong March retail sales numbers and some fairly hawkish comments by a Federal Reserve governor, the bond market is now fully pricing in another short term hike in May and a 60 percent chance that short rates will be going to 5 ¼ percent in June. So look forward to higher payments on your variable rate debt, and higher rates on new fixed interest loans in the future.
If you’re struggling with your tax return this year, you’ll get two extra days to struggle. File your return or file for an automatic 6 month extension of time to file by Monday. That would be form 4868. Just make sure that the taxes you still owe for last year are paid by then, or the clock starts on interest and possible penalties.
April 13, 2006
The big earnings guns won’t roll out until next week. Today we’ll have a smattering of reports, including some March retail sales, which are expected to have risen about a half percent, after a revised decline of 1.4 percent in February. McDonald’s, this morning, reported strong March same-store sales.
At 9:45, the University of Michigan will give us their preliminary April Consumer Sentiment number, which is expected to hold almost steady at 89.
There’s one curious update on the earnings front this morning. Oil refiner Tesoro said that they are going to miss their projected earnings number. How a refiner falls short in this energy environment is a head-scratcher. But outside of that, the earnings warnings remain few and far between.
General Electric reported in line with expectations.
Don’t look now, but the 10 year Treasury is yielding over 5% this morning. That rate is of course indicative of the direction of mortgage rates. Some are now predicting 7% on the 30 year fixed rate mortgage by year’s end.
April 12, 2006
Without a lot of earnings or economic news out yesterday, traders had plenty of time on their hands. So they did what they do best – they worried. Worry about rising commodity prices, worry about the Iranian nuclear situation, worry about rising long term interest rates. Added together, it made for a pretty ugly day.
After the market closed, biotech firm Genentech reported earnings last night. Although the report easily beat estimates, Genentech stock, which is pretty much priced for perfection, may be under pressure this morning. Genentech made 46 cents per share in the quarter versus the expected 41 cents.
Circuit City beat estimates this morning by 3 cents and confirmed break-even guidance for the current quarter. Harley Davidson matched estimates with their report.
Overseas markets all fell overnight. Japan was off about 1 ½ percent.
April 11, 2006
It’s sort of like finding a 20 dollar bill in the pocket of a pair of old pants; not enough to solve your financial problems, but a pleasant surprise nonetheless. General Motors has gone deep into the pants pocket and pulled out its stake in Isuzu. Back in 2002, GM wrote down the value of its 7.9 percent ownership stake to zero. But now, surprise, surprise, surprise. GM is selling its interest to its strategic partners for 300 million dollars. As recently as 1998, GM owned almost half of Isuzu’s stock.
Alcoa got earnings season off to a great start last night, reporting earnings of 70 cents per share, which was about twenty cents higher than expected. Alcoa shares will trade higher this morning.
We’ll take a little breather today, with no major companies slated to report until tomorrow. No major economic reports on the calendar either.
Oil is up another 54 cents to $69.28 this morning. That has overseas markets under pressure.
A handful of Southeast Asian markets were closed overnight in observance of the Prophet Muhammad’s birthday.
April 10, 2006
After the market closes this afternoon, earnings season “officially” kicks off with the report from Alcoa. Expect them to check in with earnings of about 50 cents per share for the quarter gone by.
Very, very few companies have warned about earnings shortfalls this time around, and continued earnings growth is important for stock prices at this point. The S&P 500 companies currently trade at a price to earnings ratio of about 18 if you look at current earnings, but only about 15 if you base it on expected earnings. With interest rates rising, it’s not likely that the investors will be in any mood to increase those multiples. That means if stock prices are going to continue to score, companies better keep hitting home runs with their earnings.
The yield on the 10 year Treasury is hanging just barely below the 5% level. Light sweet crude is up to up to $68.10.
There’s every indication that stock prices will sit in neutral when the starting bell rings this morning. At this point, adjusted for fair value, the S&P futures are up nearly 2 points, the Dow futures are up 8 ½ , and Nasdaq futures are about a point above fair value.
April 7, 2006
Stock traders here an in Europe are in serious wait-and-see mode this morning. What they’re waiting on is the March Unemployment data which will be announced in just about ten minutes.
Expect that 187,000 new non-farm jobs were created in March. That would be down from 243,000 in February, but would be enough to hold the unemployment rate at 4.8 percent. A closely watched number will be the percentage increase in hourly wages. Three-tenths of a percent is the expectation. Anything higher might raise inflation fears, which may lead traders to fear that many more interest rate hikes are on the way.
Starbucks is looking to open higher once again this morning. Same store sales rose 10 percent versus the expected 7.6 percent.
Hong Kong and Japan traded higher overnight. We’ll get out early direction at 8:30 from the jobs report. At this point, adjusted for fair value, the S&P futures are just about even, the Dow futures are up 3 ½ , and Nasdaq futures are just a tenth of a point below fair value.
April 6, 2006
It’s interest rate decision day for the EU and for the Bank of England. Both are expected to hold rate steady. Mr. Bernanke, are you listening?
Retail sales reports are pouring out this morning. Walmart’s March same store sales were up 1.4 percent versus an expected 1.2. The late Easter made March unusually weak. Walmart is expecting April to be up somewhere around 4 to 6 percent. Costco rang up a 7 percent rise in sales in March and is also raising their membership fee by 5 bucks in May. Those fees, of course, find their way very directly to the bottom line.
Shares of Merck will be under pressure this morning after losing another Vioxx lawsuit last night. That’s three trials down, and at least 5,000 more to go.
3M raised their first quarter guidance this morning. Napster raised its revenue guidance. Although Sharper Image reported a 29% drop in sales, there’s been a notable absence of bad earnings news out there this week.
Light sweet crude is up near 68 bucks per barrel this morning.
Asian markets were up sharply overnight. European markets are mixed in front of the interest rate decision. At this point, adjusted for fair value, the S&P futures are down a little more than 2, the Dow futures are down 17, and Nasdaq futures are 2 ½ points below fair value.
April 5, 2006
Panera Bread keeps selling more and more and more. Why? They knead the dough. Sorry.
Panera’s same store sales were up 9.3 percent in March. They say sales were actually helped by this year’s late Easter. April sales, by the same token, may slump a bit on a comparative basis.
Earnings are on the way today from Bed Bath & Beyond, Monsanto and a few smaller companies. But in general, it’s quiet time. No big economic reports are on the docket, and 1st quarter earnings won’t start to roll until next week. Yes, we’ll get the weekly energy inventory data, which is expected to reflect a draw down of a couple million barrels of gasoline. However, outside of that, close your eyes, rest you head on your desk, and relax.
That’s exactly what the stocks overseas and our futures have been doing all morning long.
Overseas markets are very narrowly mixed. Most are up, but not by a lot. At this point, the S&P, Dow and Nasdaq futures are all virtually even with fair value.
April 4, 2006
Another big company is about to up for grabs this morning. Computer Sciences says that it is evaluating alternatives. They’re getting some help in that evaluation from Goldman Sachs, whom they’ve hired as adviser to the potential sale of the company. Computer Sciences will cut 5,000 jobs over the next two years, which is certainly consistent with a company that’s ready to start dating. Most of those job losses will be in Europe. Look for CSC, which was up over 3% yesterday, to move up 5% or more at the open.
It’s the fourth of the month and the second trading day of the quarter. One week until earnings reports start pouring out. Be on the lookout for pre-announcement that warn of earnings shortfalls. So far this quarter, it’s been pretty quiet.
The ISM manufacturing index a little later is expected to moderate to a reading of 58, still indicating expansion in U.. manufacturing.
Stocks in Hong Kong were up about a quarter of one percent overnight. Most every other overseas market is trading lower this morning. Our futures appear to be saying, “Hey, not so fast.” At this point, adjusted for fair value the S&P futures are up almost 2, the Dow futures are up 36, and the Nasdaq futures are 2 points above fair value.
April 3, 2006
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