April 30, 2007
Trading is lighter than normal in Europe this morning, as a lot of traders are taking today as part of a four-day weekend in front of May Day tomorrow.
No vacation on this side of the ocean, especially when it comes to earnings reports. Humana beat estimates by a couple cents per share. Verizon also did a few cents per share better than expected on an operating basis. Radio Shack blew away their number.
Although stock prices have continued to march higher, with the Dow Jones Industrials up 6% this month alone, a lot of market watchers worry that the housing mess and the ongoing loss of manufacturing jobs will crimp the consumer soon. At 8:30 we’ll find out how the consumer did in March. Personal income is expected to have risen six-tenths of a percent. Spending is expected to have risen a half percent. Numbers significantly short of that would not be good news for stocks.
April 27, 2007
You know, a lot of people I talked to a month or so ago were certain that the stock market was just about to take a major plunge. They may still be right – eventually, but the Dow Jones Industrial Average has now gone up 18 of the last 20 trading sessions. The last time that that happened – maybe I shouldn’t bring this up - was 1929.
Earnings reports will take a little breather today, with Chevron being the only big hitter reporting. Last night Microsoft beat expectations by 3 cents per share on better than expected sales of the Vista operating system. Look for Microsoft to open 6 or 7 percent higher at 9:30.
The overall market will take its direction this morning from the Gross Domestic Product report. In about 10 minutes, the 1st quarter GDP is expected to be announced at an increase of 1.8 percent. That would be down from 2 ½ percent last quarter. If you’re long the market, hope for a number that’s somewhere between 1.8 and 2 ½ percent.
At 10 o’clock, U of M is expected to announce that their final April Consumer Confidence number will hold steady at 83 ½.
April 25, 2007
The S&P 500 companies continue to under promise and over deliver on earnings news. While stock prices will celebrate the good news on last quarter’s earnings, those “under-promises” about next quarter will put a bit of a damper on the open.
Leading the pack was Amazon, with news last night that it made 26 cents per share on 28 percent sales growth. That beat estimates of 15 cents per share and should have Amazon trading about 15 percent higher at 9:30.
UPS and Colgate Palmolive matched estimates, but Pepsi, General Dynamics, Raytheon and Boeing also did better than expected last quarter. However, Boeing and Raytheon set earnings targets for the year that are lower than Wall Street had expected.
But speak of the devil, strong aircraft orders are expected to have driven the March Durable Goods number. Expect a 2.5% increase. That announcement comes in 10 minutes, along with the March New Home sales report.At this point, it looks like we’ll take another run at Dow 13,000 in the early going. Adjusted for fair value, the S&P futures are up more than 3 ½ points, the Dow futures are up 22, and the NASDAQ futures, on the strength in Amazon, are about 3 ½ points above fair value.
April 24, 2007
The earnings continue to roll in, and the news is almost uniformly positive.
Last night, Texas Instruments set things in motion, earning 35 cents per share versus the expected 31. TI stock is looking to open 9 and maybe 10 per cent higher. This morning, a bunch of major firms joined the chorus of better-than-expected earnings, including Lockheed Martin, who also boosted guidance, Whirpool, AT&T, Dupont, Coach and McGraw-Hill.
The miss of the morning will be printer-maker Lexmark. Lexmark stock should open 3 to 4 dollars lower. Raymond James also missed estimates.
April sales at Target will, well, miss the target. Rather than the expected 5 to 6 percent increase, Target now says 3 to 4 percent will be more like it.
At 10 o’clock we’ll get the Conference Board’s reading on April Consumer Confidence. Expect a reading of 105, down a couple points from last month.
April 23, 2007
It’s Monday. And of course, that means mergers, and there’s a big one this morning. Just when you thought you were getting to know your local banker, here awe go again. ABN Amro is being bought by Barclay’s Bank for 91 billion dollars. As part of the deal, Chicago based LaSalle Bank which operates here in Michigan, will be sold to Bank of America. So, assuming a better offer doesn’t show up, look for more local name and personnel changes soon.
In another significant deal this morning, MedImmune, the maker of the flu vaccine FluMist, is selling out to AstraZeneca for 15 million dollars in cash.
L3 Communications and Kimberly Clark both beat earnings estimates by 2 cents this morning. Arch Coal earned 20 cents versus the 15 expected. And Hasbro, which was expected to report a break-even quarter, actually earned 19 cents per share.
Amgen and Texas Instruments report a little later on, and although most markets overseas are a bit lower, we are looking to open a bit higher at 9:30.
April 20, 2007
A lot of stock watchers have predicted that large company stocks are about to start outperforming small company stocks. Problem is, they’ve been predicting that every year for the past five or six years, and they’ll been spectacularly wrong. Don’t look now, but the Dow Jones Industrial Average has been up 15 of the last 16 sessions, but the Russell 2000 has been down 3 days in a row. Not enough evidence to conclude, but keep an eye on that relationship. The worm may finally be turning.
Meanwhile earnings reports roll on and by and large, they are good. Xerox beat estimates by 3 cents per share, Honeywell beat by 4 cents and guided higher, Schlumberger beat by a nickel, Caterpillar by 14 cents and Pfizer by 11 cents per share. However, Pfizer did guide estimates lower for the remainder of the year. Google announced a 69% increase in profit after the market closed yesterday. Google stock is trading more than 4 percent higher in the pre-market this morning.
Oil is up almost a buck, but nobody seems to care. Overseas markets are higher, most by more than one percent. Our stock futures are on fire as well.
April 19, 2007
We’re at record levels on the Dow Jones Industrial Average again this morning, although yesterday’s rally was not the least bit universal. It was really just a handful of big names that drove the averages higher. And today, as they say, is another day.
You may recall the 400 point dip we took on February 27th after the Chinese stock market dove 9.5%. I’m not saying we’ll get anything of the same magnitude today, but we’ll start the day in a hole, as the Chinese stock market went down about 4 ½ percent overnight. The reason? Chinese Gross Domestic Product is clipping along as a growth rate of 11 percent. Compare that with our 2 or 3 percent. The fear is that the Chinese government will take additional steps to slow their economy.
Over on this side of the world, profits are not slowing at Merrill Lynch. They reported $2.26 per share versus the expected $1.97. Bank of America beat estimates by two cents, at $1.17. The earnings news is not up to snuff at Altria and surprise, surprise homebuilder DR Horton.
April 18, 2007
Research in Motion stock should open 2 to 3 percent lower this morning after a lot of Blackberrys in the Western Hemisphere went, well, black around 8 o’clock last night. Service is reportedly being restored this morning. So if you have non-working Blackberry this morning, and have accordingly been forced to actually pay attention to the people you’re talking to instead, don’t worry. You be able to get back to being extremely annoying very soon.
The market will be annoyed some tech stocks this morning. IBM gets a downgrade after they released a in-line earnings report but warned that business tech spending is slowing down. Motorola also reported earnings as expected, but lowered their estimate for the current quarter from 8 cents to 2 cents. However, Motorola may open fairly flat, as they benefit from the big trouble with the Blackberrys.
On the flip side, Intel which mysteriously also reported results exactly in line with estimates for last quarter, also reported that gross margins are back above 50 %. That should pump up the stock by 75 cents per share this morning.
April 17, 2007
It’s the day to pay. You can get an automatic extension of time to file your 2006 income tax return, but if you want to avoid interest charges and possible penalties, everything you owe from last year must be paid in today. Electronic filers can have their federal taxes automatically debited from their checking account, although the State of Michigan hasn’t quite figured out how to do that as of yet.
It’s also a big day for financial data. In ten minutes the March Consumer Price Index will be announced. Expect a six-tenths of a percent increase overall – but the most closely watched watched stat is the core rate. Two tenths of a percent is expected. Anything lower may turn the futures positive. Anything much higher will be trouble.
March Housing Starts will also come out at 8:30. Expect a decline to an annualized rate of 1 ½ million units,
Thus far in the quarter earnings reports have been pretty good. This morning, Coca-Cola beat estimates by three cents per share. Comerica reported $1.19 versus last year’s $1.18. That was a penny ahead. Johnson & Johnson reported $1.16 vs. the expected $1.05, Later today we’ll hear from IBM, Intel, Wells Fargo and more.
April 11, 2007
Earnings season got off to a decent start last night as Alcoa checked in with operating earnings of 79 cents per share. That beat the estimated 75 cents. Revenue was also higher than expected, and Alcoa shares will be higher at the open.
The big Citigroup job cut announcement we talked about yesterday was announced earlier this morning and it was pretty much as advertised. They’ll be cutting 17,000 jobs and moving another 9,500 to “low cost areas.” Do you think they think of Michigan as a “low cost area?” Most of the cutting and moving will happen overseas, because that’s where Citigroup generates half or more of their revenue.
Earnings reports will start to slowly build in number until they really start hitting next week. Today Bed, Bath & Beyond, Ruby Tuesday and a handful of others.
Ben Bernanke gives a speech at1 o’clock this afternoon and the minutes of the March 21st Fed meeting will also be released today.
April 10, 2007
Every quarter for the past 3 ½ years, corporate earnings have grown at a double-digit annual rate. The first quarter 2007 earnings season starts today and it is expected to mark the end of that pleasant streak. Earnings are expected to rise 4 to 6 percent on average. Alcoa kicks things off and is expected to report earnings of 75 cents per share. Alcoa is the best performing Dow stock so far in 2007.
There’s a report out this morning that names the metropolitan Detroit area as number one in the nation. Unfortunately, it’s a ranking of mortgage delinquencies, as over 6% of metro Detroit mortgagees are reportedly behind in their payments. Equifax reported that nationwide, 2.87% of mortgages are delinquent, as those teaser-rate loans taken out over the past few years continue to reset to higher rates.
Homebuilder DR Horton’s second quarter ales will fall well short of forecasts, as their cancellation rate is at 32%.
Citigroup will reportedly be cutting or reassigning 26,000 jobs. They’ll reportedly work hard to move the jobs that remain to India and smaller, lower-cost American cities.
Mylan labs just raised their 2007 earnings guidance.
Europe is open again, and is trading higher. We will start the engine in neutral this morning. Futures on all major domestic indexes are within a point or tow of fair value.
April 9, 2007
Stock prices rose every day they traded last week, on almost uniformly lousy economic news. Lousy factory orders, a loss of 16,000 additional manufacturing jobs and weak ISM numbers for manufacturing AND services, yet the market traded higher.
Then Friday, the market was closed, and the March Unemployment Report came in surprisingly strong, with 180,000 new jobs and a declining unemployment rate. So what are stocks doing? Well, just as the futures indicated Friday, they’re headed higher again this morning, and by midday, we may have totally wiped out the “mini-correction” of February 27th.
Dow Chemical will trade higher at the open. Dow will reportedly be the recipient of a 50 billion dollar buyout bid from a group of private equity firms and Middle-Eastern investors.
It’s always interesting to know what Warren Buffett is working on. It sounds like he’s been working on the railroads. Berkshire Hathaway has accumulated 10.9 percent of Burlington Northern. Berkshire also reportedly has big stakes in two of the other three U.S. railroads.
Earnings season starts tomorrow when Alcoa reports.
Asia was higher overnight. Europe was closed for Easter Monday. As mentioned, we are headed higher at 9:30. Adjusted for fair value, S&P futures are up 4 ½ points, the Dow futures are up 41 and the NASDAQ futures are more than 9 points above fair value.
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