March 13, 2008
It looks like we’re headed toward 2 percent for short-term money at 2:15 this afternoon when the Fed’s Open Market Committee announces their latest move. Key to the market reaction will be the accompanying statement as traders look for hints about the prospect for future rate cuts. It’s a bit like piloting a large freighter. You have to cut power to the engine well before you reach your destination to avoid smashing into the dock. Or smashing the dollar, if you will.
Traders will focus on the Fed, of course. But there’s a whole lot more going on today. Time Warner missed estimates by a penny per share this morning. Procter & Gamble and Colgate Palmolive both beat estimates by a penny per share. Locally, General Motors reported a 62 cent operating loss versus the $1.56 loss that Wall Street expected. Revenue was much better than expected and GM stock will trade higher this morning.
At 8:30 we’ll also get the advance number on 1st quarter Gross Domestic Product. Expect an increase of about 4 tenths of a percent. Fifteen minutes later, it’ll be April’s Chicago PMI Index. Expect 47.5, which would be a decrease from March’s 48.2. ADP jobs data, oil inventory data - there’s just a whole lot on the way.
Overseas markets are mostly lower. We’ll start relatively unchanged, and don’t expect a major move before 2:15. Adjusted for fair value, S&P 500 futures are down about 1 ½ points, the Dow futures are actually up a point, and the NASDAQ futures are about 1 ½ points below fair value.
It’s a two-day meeting for the Federal Reserve Open Market Committee starting this morning. It will be their last scheduled meeting for the next eight weeks, so whatever they decide, we’ll be living with it for a while.
We’ll have to wait until tomorrow for the interest rate decision. But today, there’s another batch of earnings announcements, and for the most part, they’re pretty good.
Beating their estimated earnings numbers for the quarter gone by are glass-maker Corning, CBS, Medco Health, Waste Management and Archer Daniels Midland.
Locally, it looks like Masco will trade lower after reporting earnings of a penny per share in earnings. Unfortunately, Wall Street expected a 21 cent per share profit. Masco also slashed their profit forecast for the entire year.
And from the “we’re sad, but not really surprised” file, monitoring firm RealtyTrac says that the number of U.S. homes facing foreclosure was up 112 percent in the first three months of 2008 versus a year ago.
Japanese stocks did not trade overnight. European markets are slightly lower. I don’t suspect we’ll see any dramatic moves before 2:15 tomorrow afternoon, but we’ll start today a bit lower. Adjusted for fair value, S&P 500 futures are down almost 3 points, the Dow futures are down 31, and the NASDAQ futures are about 7½ points below fair value.
The only thing that’s been as unpredictable as the performance of the Detroit Pistons over the past five days has been the performance of Ford Motor Company stock. Up 10 percent Thursday, down ten percent Friday – look for another 6 or 7 percent rise this morning. It’s our old buddy Kirk Krikorian stirring the pot this time. Krikorian’s Tracinda Corporation is offering $8.50 per share for up to 20 million Ford shares. That’s about 1 percent of Ford common.
Another big story is a possible three-cornered deal involving Wrigley, Mars and Warren Buffett’s Berkshire Hathaway. Berkshire will reportedly provide the financing and will take a stake in Wrigley, which will be acquired by Mars. Wrigley stock, which closed Friday afternoon at $62.45 per share is looking to open around 80 bucks this morning.
Verizon reported earnings in line with expectations this morning.
Light sweet crude oil topped $120 bucks earlier today on some supply disruption rumors. We’re at $119.11 right now.
Overseas markets are solidly in the green. We’re looking a touch higher at this point as well. Adjusted for fair value, S&P 500 futures are up almost 3 points, the Dow futures are up 9, and the NASDAQ futures are about 2 points above fair value.
It’s a day to sit back and reflect. After a torrent of earnings reports, the slate is pretty much empty today, and the only major economic number due in is the revised April Consumer Sentiment number from the University of Michigan, which isn’t expected to be revised very much.
All that being said, there’s a lot of earnings news from last night to digest. Microsoft beat estimates, but revenue was a little light and Microsoft says that earnings in the current quarter will fall short of estimates. On the flip side, telecom equipment maker Ericsson had much better than expected North American results and Ericsson stock was up over 20% in Sweden this morning.
American Express reaffirmed their full year guidance and the stock should trade higher.
The dollar rallied big time yesterday, knocking the price of oil a couple of dollars lower. But this morning, here we go again, oil is up 61 cents at $116.67 per barrel.
Japanese stocks rose over 2 percent overnight. Hong Kong lower, but Europe is higher. We should move higher at 9:30 as well.
Adjusted for fair value, S&P 500 futures are up 3 ½ points, the Dow futures are up 55, but not so good on the NASDAQ after the Microsoft report. The NASDAQ futures are about 1½ points below fair value.
Economic news has taken a beck seat to earnings news this week, but we’ll get a bit more of a balance this morning. At 8:30 the March Durable Goods number is expected to show a one-tenth of a percent increase, versus a 1.7 percent decrease last month. We’ll also get March New Home Sales and the weekly jobless claims that are expected to have risen 17,000 to the 372,000 level.
But there are still plenty of earnings to talk about, and again this morning, it’s a mixed bag.
Locally, Ford Motor checked in with a nickel per share in profit. Analysts expected a 15 cent loss, just like last year’s comparable quarter. Ford says it means that the turnaround plan is on track.
3M is also out with good news, A dollar thirty-eight versus a dollar thirty five. 3M also reaffirmed profit guidance and expects year-over-year growth of 10 percent.
Fortune Brands missed their number and Apple’s guidance wasn’t so great. The big disappointment came out of Starbucks. Now there are those of us who never understood people with outstanding credit card balances forking over 4 bucks for a cup of coffee. It looks like the cheaper alternative idea may be catching on. Starbucks says that 2nd quarter profit will look more like 15 cents versus 21 cents. Full year profit will miss their earlier guidance, which was already lower than Wall Street estimates. Starbucks stock traded mire than 12 percent lower after hours last night.
Asian markets were mixed. Europe is lower. Adjusted for fair value, S&P 500 futures are down almost 11 points, the Dow futures are down 75, and the NASDAQ futures are about 16 points below fair value.
The earnings continue to roll in, and this morning they are not all that good, especially in financial names.
AMBAC, the bond insurer, announced a 1.6 billion dollar loss. That’s over 11 dollars per share versus the expected loss of a dollar and a half. UBS shareholders are being asked to authorize another 15 billion dollars of dilution. UBS will be slashing their investment banking unit in a big way, after losing 37 billion in the sub-prime fiasco.
Drug-maker Schering Plough will cut 10 percent of its global workforce, that’s 5,500 jobs, after reporting 53 cents in operating earnings. That looks good versus the 37 cent estimate. Unfortunately the GAAP accounting profit (which includes all the nasty write-offs you’re trying to put behind you) is on 15 cents per share.
Boeing scaled back 2008 estimates but affirmed their 2009 view.
Have you looked at mortgage rates lately? The Mortgage Bankers Association says that mortgage applications were down 14 percent last week, as the typical rate on a 30 year fixed moved up a full 3 tenths of a percent.
The futures have held up fairly well in the >
Happy Earth Day. Now don’t take this the wrong way, but if your portion of the earth has a lot of oil inside of it, you’re probably a happy camper. We’re close to $118 per barrel this morning as prices keep playing a massive game of chicken with the summer driving season. We’ll see who blinks first.
The corporate earnings reports continue to roll in. Last night Texas Instruments met expectations on revenue and earnings. The outlook for the remainder of the year is where the problem lies. TI said that soft demand for the advanced chips that go into high-end cell phones will put pressure on full year results.
McDonald’s reported 81 cents in profit versus the expected 70 cents. AT&T, whose stock has dropped over 9 percent this year, matched estimates at 74 cents per share of profit. Kimberly-Clark beat estimates. Wyeth beat estimates with earnings of 94 cents versus the expected 90. The big disappointment so far is United Health Care, which missed estimates by 2 cents and cut their outlook for 2008 by 10 percent.
We’ll also hear from Yahoo and Lockheed Martin a little later on.
Overseas markets are mixed. We’re heading toward a very slightly lower start at 9:30. Adjusted for fair value, S&P 500 futures are down almost 3 points, the Dow futures are down 5, and futures on the technology-heavy NASDAQ, after the Texas Instruments forecast, are a full 11 points below fair value.
The Bank of England may have had an original thought at some point in the past, but today’s action to shore up the British banking sector tore a page right out of the United States’ playbook. British banks will be allowed to swap up to 100 billion dollars worth of mortgage-backed securities for British Treasuries for up to a one-year period, and that can be renewed annually for up to three years.
This week should be pretty much all about the earnings news, and so far this morning, the earnings news is not all that wonderful.
Eli Lilly’s sales were up 14% and profit doubled, but those earnings fell four cents per share short of expectations. Bank of America is out with a fairly major miss this morning, earning 23 cents per share versus the expected 41 cents.
Mitigating those reports just a little was the announcement from Merck. 89 cents of profit there versus an 86 cent estimate. Although revenue was a little light, Merck reaffirmed full year earnings guidance. Arch Coal also reported better than expected results.
Asian markets were very strong overnight, but Europe has turned lower. Our futures have recovered a bit on the Merck earnings, but are still pointing a bit lower.
Adjusted for fair value, S&P 500 futures are down 6 points, the Dow futures are down 55, and the NASDAQ futures are 5 points below fair value.
We’re heading toward significantly higher stock prices at 9:30 as corporate earnings news of the morning is either pretty good, very good, or at least not as bad as expected.
For the very good, Caterpillar reported a buck forty-five versus the expected dollar thirty-three in earnings. Honeywell beat estimates by a nickel and raised their 2008 estimate to the upper end of previous guidance.
Google stock is looking to open almost 80 dollars per share higher (that’s about 17%) on their report that paid clicks rose 20 percent last quarter. Most had expected only marginal gains there.
On the not-as-bad-a-it-could-have-been side of the ledger, Citigroup lost 5 billion dollars on another 12 billion dollars in write-downs. The one dollar two cent loss compares with a dollar and one cent profit from a year ago. However, some thought that the write-off would be 20 billion, and Citi stock is trading higher in the pre-market as the hope is that the worst is finally behind them.
Asia was mixed overnight, oil is lower, Europe is higher. We will be much higher is 9:30.
Adjusted for fair value, S&P 500 futures are up 19 points, the Dow futures are up 151, but the NASDAQ futures, on that Google news are a whopping 38 points above fair value.
It’s a story of the good the bad and the financials with earnings reports this morning, and there are a ton of them.
Here are the highlights: Baxter, United Technologies and Harley Davidson all better than expected. Pfizer disappointed again with earnings of 41 cents versus the expected 48 cents on an 18% decline in Lipitor sales. Generic competition is hurting there are that competition will not be going away.
The big financials are pretty much all disappointing this morning. Dallas, Texas-based Comerica made 73 cents versus the expected 80 cents. PNC bank and Key Corp also reported worse results than expected.
Merrill Lynch is taking another big writedown, this time a net 4.4 billion dollars. They reported operating losses of $2.20. That was 21 cents worse than expected. Merill will also become a smaller animal, cutting 4,000 jobs.
Throw it all together, and we’ll call it a standoff for the open.
Our big rally yesterday triggered a nice rise in Asian markets overnight. European markets are fairly flat.
It’s one of those mornings where the futures look pretty ugly on the sur>
April 16, 2008
This is a day that is absolutely packed with trading news. So far, the news is pretty good. It all kicked off with Intel’s earnings report last night. Intel matched estimates of operating earnings of 25 cents per share, but they gave a pretty upbeat assessment of the current quarter and that has lit a fire under the NASDAQ futures this morning. After the last five or six trading sessions, the NASDAQ could use some help.
Abbott Labs, JP Morgan Chase, Wells Fargo and Coca Cola are all out with better than expected earnings this morning. A little later we’ll get word from IBM.
There are a couple of potential flies in the rally ointment. At 8:30 we’ll find out about Consumer Inflation in March. Expect a headline rate of three-tenths of a percent, although the Producer Level Index was a pretty big disappointment yesterday. We’ll also find out about March Housing Starts at 8:30.
The price of oil is another potential problem. How about $114 plus this morning, as light sweet crude sets a new record.
Stocks in China were lower, Hong Kong was flat overnight, but the rest of the major overseas markets are seeing green, and absent some awful inflation news in eight minutes, we’ll be in the green as well.
At this point, we’re looking at just a slightly lower open. Adjusted for fair value, S&P 500 futures are up 8½ points, the Dow futures are up 59, and the NASDAQ futures are 21 points above fair value.
April 14, 2008
Here come the earnings! Alcoa and General Electric started this parade on a flat note last week and a lot of people on Wall Street are expecting it to rain on the rest of the earnings parade this quarter.
A bunch of technology and financial firms will report this week, and the first to check in this morning was Wachovia. How about a loss of 11 cents on an operating basis, versus an expected profit of 40 cents per share? Wachovia cut its dividend from 64 cents to 37½ cents and announced that it will sell common stock, preferred stock and possibly give away some toasters if they have to, in order to raise 7 billion in cash. Just two months ago, Wachovia had to raise 3½ billion in a preferred stock sale. Wachovia stock should open at least 10 percent lower this morning.
Speaking of big banks, no fewer than 4 big investment houses downgraded General Electric this morning.
At 8:30 this morning, the March Retail Sales Report is expected to show no growth in retail sales, after a six tenths of a percent decrease last month.
Asian markets were off pretty severely overnight, some 3 to 4 percent. European markets are about 1 percent lower. That is our direction as well. Adjusted for fair value, S&P futures are down 7, the Dow futures are down 54 and the NASDAQ futures are about 13 points below fair value.
April 11, 2008
We knew all week long that this morning’s earnings report from General Electric would be a “bellwether” for the market. GE usually meets estimates and beats the revenue estimate about 3 times out of every 4. Not this time.
General Electric, for all its many businesses, is in major part a financial services company and the credit crunch has taken its toll. Earnings for the quarter were only 44 cents per share versus the expected 51 cents. Revenue of 42 billion missed estimates by a billion and a half. Moreover, GE cut its estimate for full year earnings from $2.43 to $2.25.
On the bright side, GE’s CEO Jeff Immelt says that the slowdown is really only seen in the United States. Worldwide, economies are still doing well. The big question is whether our problems will be solved of whether our problems will spread. General Electric stock is trading big volume in the pre-market at levels about 10 percent lower than last night’s close.
The preliminary number on April Consumer Sentiment comes from the University of Michigan at 10 o’clock this morning and is expected to arrive at an even 69 which would be a slight decrease from March’s 69.5.
Frontier Airlines is still flying. In fact, they flew right into Chapter 11 bankruptcy protection this morning.
Hong Kong was up 2 percent. Japan was up 3 percent. But Europe has turned lower on the GE news and that’s where we’re headed as well. Adjusted for fair value, S&P futures are down 15, the Dow futures are down 103 and the NASDAQ futures are about 17 points below fair value.
April 10, 2008
Each and every day, things happen in England five hours before they happen here. However, if you’re looking at the British vs. American economies, they appear to be about six months to a year behind us. The Bank of England dropped interest rates a quarter point to 5 percent this morning. Look for more to come in the near future.
The next really significant earnings report comes from General Electric tomorrow. But a couple of forecasts have grabbed attention this morning. Retailers are hurting in the current economy, but not all of them, as the champagne consumer is now shopping on a beer-like budget. Walmart says that, excluding gasoline sales, March same store sales were up only seven-tenths of one percent, versus the expected one percent. However, earnings for the quarter will be better than expected. Costco’s sales, ex-gasoline, were up 3 percent, which topped expectations. Costco raised their earnings estimate for the year.
DuPont also raised earnings guidance as well this morning, crediting strength in their agricultural business.
Just as we saw at this time yesterday, the stock futures look a lot worse on the sur>
April 9, 2008
There’s some good news and some bad news on company-specific issues this morning. Let’s get the bad news out first; it now looks likely that the Detroit Tigers will get their first win before Boeing rolls out their new 787 Dreamliner, if only because Boeing has pushed the Dreamliner debut back another nine to twelve months.
UPS shares are trading about 3 percent lower in the pre-market as UPS cut its earnings estimate for the first quarter, citing higher fuel costs and a slowing economy.
Trading 3 percent higher, the pre-,market is Citigroup. Citi is reportedly close to dumping 12 billion of mortgage investments off to private equity investors, reportedly getting a bit less than 90 cents on the dollar.
Earnings are on the way from Bed Bath & Beyond and Circuit City.
The Bank of Japan hald interest rates steady at a half-percent, but downgraded their outlook for the Japanese economy. The Bank of England is expected to cut interest rates tomorrow.
Asia is lower, Europe a bit higher.
Our futures had been pretty positive until about a half hour ago, but are now reflecting a just a modestly higher open for stock prices. Although they look negative on the sur>
April 8, 2008
If your hobby is paying attention to useless statistics – here’s one for you – The average gain for the Dow Jones Industrial Average during the last four Tuesdays is over 300 points. Which, of course, means little or nothing about today’s market. However, the volatility is likely to continue. During the first three months of the year, the S&P 500 Index saw 1 percent up or down daily moves more than half of the time.
Earnings season officially kicked off with a bit of a shank last night. Alcoa announced earnings of only 44 cents per share, versus the expectation of 47 to 49 cents and warned of a tough year ahead. Also last night, Advanced Micro Devices warned that earnings for the quarter will fall short and that 10 percent of its workforce will be an out-of-workforce soon.
We’ll get existing home sales numbers today for February, which are expected to have dropped about one percent for January. Later today, the Federal Reserve Open Market Committee minutes from their March meeting will be released, which should be fairly interesting. The Fed’s decision to cut rates in March was not unanimous. Perhaps the minutes will reflect on the level of dissent.
Overseas markets are generally in 1 percent pullback mode. We’re looking at little red arrows as well. At this point, adjusted S&P 500 futures are down 8, the Dow futures are down 56, and the NASDAQ futures are 13 points below fair value.
April 7, 2008
The market shrugged off a pretty awful Jobs Report last Friday. This morning, as we embark upon the first quarter earnings season, we should get off to a very good start.
A couple of things are giving the market some buoyancy. Washington Mutual is reportedly about to receive a cash injection of 5 billion dollars, without the Federal Reserve having to ride to the rescue, ala Bear Stearns
The influential Barron’s magazine was very positive on a variety of stock names this weekend, including one staff columnist who suggested that Ford Motor stock could double from present levels.
Earnings season officially kicks off later today when Alcoa reports. Expect earnings for the 1st quarter of only 47 cents per share versus last year’s 79 cents. Earnings in general are expected to slow quite a bit from a year ago. But more importantly, traders will focus on companies’ outlook for next quarter and the rest of the year. It should be an interesting few weeks.
Major overseas markets are up across the board and we should head higher at 9:30. At this point, adjusted S&P 500 futures are up almost 11, the Dow futures are up 71 points, and the NASDAQ futures are 11 points above fair value.
April 3, 2008
Mr. Bernanke will once again be on Capitol Hill today, this time he’ll bring the CEO of Bear Stearns and the Chairman of JP Morgan along with him. They will hopefully be there to answer questions from the Senate Banking Committee. That, as opposing to sitting there listening to speeches, as Mr. Bernanke was forced to do yesterday in front of the Joint Economic Committee.
Meantime the Senate has been busy addressing the problems of the over-leveraged homeowner. Senate leaders have reportedly agreed on a $15 billion dollar measure. A full 6 billion of it will allow big money-losing corporations, you know, like the big homebuilders and the big investment banks, to carry-back those losses for tax purposes to offset taxes paid over the past four years, rather than the last two. Another 4 billion would go to local governments to buy foreclosed homes. Oh, and for the individual who is upside down with their mortgage? Or maybe the person already forced into bankruptcy? Well, there doesn’t seem to be anything in the bill for them. Oh yeah, there’s $100 million for credit counseling services. Maybe we should devote some cash to basic financial education, so people don’t get themselves into hock in the first place.
There’s not much coming on the earnings or the economic front today as we gear up for tomorrow morning’s Unemployment Report.
The futures look lower at first blush, but after adjustment for fair value, they’re actually pretty flat. At this point, adjusted S&P 500 futures are down almost a point, the Dow futures are up 2 points, and the NASDAQ futures are a point above fair value.
April 2, 2008
Fed Chairman Bernanke climbs the Capitol Hill this morning to testify before the House Joint Economic Committee. After he roughs them up a bit, he’ll head over to the Senate tomorrow. The topic of his prepared testimony is “the economic outlook.” Rumor has it that he’s written it in pencil – just in case.
Ruby Tuesday will report earnings today. Monsanto beat estimates. Best Buy reported in within the hour. They made $1.71 per share versus an expected $1.65.
The big economic number of the week is Friday’s Unemployment Report. However, we get a couple of warm-ups today. The Challenger Report told of only a moderate number of layoffs in March, about 53,000 to be exact. That’s pretty good news. The ADP employment report, released just about 5 minutes ago, was also better than expected.
Asian markets were up big-time overnight after our big rally yesterday. Europe is modestly higher. Our futures, which were is a fair >
April 1, 2008
We may be getting near the end of the big investment write-downs by the big investment banks. For one reason – well, we’re running out of banks!
This morning, Deutche Bank announced a write down of almost 4 billion dollars. That comes on the heels of last night’s announcement that Lehman Brothers will raise an extra 3 billion in capital through the sale of preferred stock. And, not to be outdone, UBS announced a 12 billion dollar first quarter loss on a writedown of over 19 billion dollars. UBS also announced that its Chairman will not stand for re-election.
At 8:30 the Institute of Supply Management’s March Index will be released. That Index, which is a measure of strength in manufacturing, is expected to decline to 47.5 from last months 48.3. Anything under 50 indicates a contraction in the manufacturing sector.
March car sales will also be announced today and are expected to decline about 13 percent from a year ago, with Chrysler expected to have fared the worst of the Big Three.
With the exception of China, overseas markets are higher pretty much across the board, with most major markets up between 1 on 2 percent. We should head higher at 9:30 as well.
Adjusted for fair value, futures on the S&P 500 are up about 10 points, the Dow futures are up 76, and the NASDAQ futures are 14 points above fair value.
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