April 30, 2012
We’ll have plenty of economic data and corporate earnings to muse about this week, all culminating with Friday’s big Jobs Report. However, this morning, there are also a couple of big deals in the news.
Energy Transfer Partners is buying Sunono for just over 50 dollars per share. That has Sunoco stock up about 20 percent pre-market.
In what qualifies as the interesting deal of the morning, Microsoft will contribute 300 million dollars. Barnes and Noble will contribute their Nook and College book business. What results is a new subsidiary, with Barnes and Noble owning a little more than 80%. What also results is skyrocketing price for Barnes and Noble stock, which is biod about 90% higher this morning.
Personal Income and Spending at 8:30 are expected to rise three-tenths and four-tenths of a percent respectively. At 9:45, the Chicago PMI is expected to slump a bit to 60.8 from March’s 62.2.
Not a lot of price movement overseas, and unless we get a surprise at 8:30, we’ll head a little lower at 9:30. At this point, adjusted for fair value, the S&P futures are down almost 5 points, the Dow futures are down 33, and the NASDAQ futures are about 10½ points below fair value.
It’s a big day for earnings AND economic reports, which should thankfully keep traders’ focus off of Europe – for a day, anyway.
So far, better than expected earnings are out from AT&T, United Technologies and 3M, which also raised guidance. The flop of the morning appears to be Radio Shack, which lost 8 cents per share versus an expected profit of a nickel.
However, the elephant in the earnings room today is Apple. They’ll report after just after 4 o’clock and Apple is expected to report a 57 percent increase in second quarter earnings. Apple shares closed last night priced about 10% lower than they were just two weeks ago. Of course that followed a roughly 50% rise in the share price in just the first 3 months of this year. The danger, of course, is that any earnings disappointment could see the stock retrace more of that parabolic move. Apple shares are about one percent lower in the pre-market today.
The Case-Shiller Home price index comes at 9, and then at 10 o’clock, the New Home Sales, Richmond Fed Index and the Conference Board’s Consumer Confidence Index roll out. Expect that Confidence took a dip in April to 69.7. That would be the second consecutive decline, as consumer expectations for future conditions keep eroding.
Asia mainly lower, Europe mostly higher. At this point, adjusted for fair value, the S&P futures are higher by almost 5 points, the Dow futures are up about 53, and the NASDAQ futures are about 7 points above fair value.
You can’t call it likely, but just the possibility that we’ll have a Socialist President in France after the May 8thrunoff election sent European markets and our futures into the dumpster this morning. European markets are lower by about 2 to 3 percent.
And, unlike last week, we’re seeing some disappointing earnings reports as well. Hasbro reported just four cents per share in operating profit. That was only half of the expected number. Conoco-Phillips also missed, with $2.02 in profit short by 6 cents. And Kellogg is out this morning with a warning about full-year earnings. Kellogg now says that they’ll earn around $3.24 cent this year, which is about 24 cents lower than expected.
Pfizer continues to monetize non-core assets. This morning, Nestle announced that they’ve outbid Danone to purchase of Pfizer’s baby food business for about 12 billion dollars. It’s a pretty rich price to pay at almost 20 times pre-tax profits. As you might expect, Nestle is bid almost 3 percent lower pre-market. Of course, the way the futures look now, there won’t be a lot of stocks opening higher.
No big economic reports are on the docket. At this point, adjusted for fair value, the S&P futures are lower by almost 14 points, the Dow futures are down 118, and the NASDAQ futures are about 22 points below fair value.
If you’re looking for the world’s best managers, you may want to start with the people who are managing analyst earnings expectations. As earnings reports turn from a trickle into a torrent this morning, it’s hard to find ANYONE checking in with lower than expected profits. Reporting in to the plus side are EMC, Bank of America, Morgan Stanley, Travelers, Boston Scientific, Verizon, Southwest Airlines, DuPont and Ebay. Ebay shores are indicated about 6 percent higher pre-market.
Microsoft and SanDisk report just after 4 this afternoon.
Weekly Jobless Claims at 8:30 are expected to hit 365,000. At 10 o’clock, The Existing Home Sales Report, the Philadelphia Fed Index and the Leading Economic Indicators roll out. Expect only a two-tenths of a percent increase in the Leading Indicators, down from seven tenths last month.
Human Genome gets a $13 buyout bid from its partner Glaxo this morning. That’s an 82% premium to yesterday’s close.
We had a pretty nice rally going in the futures until the European credit issues reared their Hydra-like heads within the past hour. Rumors circulated of a possible French credit downgrade. So, at this point, adjusted for fair value, the S&P futures are up less than 3 points, the Dow futures are only higher by 34, after being up 75 earlier and the NASDAQ futures are about almost a point below fair value.
Asian markets followed on after our big rally yesterday, with the Japanese and Chinese indexes gaining over 2 percent overnight. However, we’ll be digging out of a little wave of profit-taking at the open this morning.
Earnings continue to pour in, and once again, disappointing news is rather hard to find. Of the companies with better than expected earnings, you have IBM, Intel, CSX, Halliburton, PNC, Yahoo, Blackrock and Textron. Sifting through the detail, traders are bidding IBM lower on slightly lower than expected sales and Intel’s margins are not a wide as hoped. IBM is looking to open down 2 percent and Intel lower by 3 percent. But overall, it looks like another positive earnings season is well underway.
First Solar shares get an upgrade from one broker and a downgrade from another (for those of you who pay any attention to brokers) after yesterday’s announcement by First Solar of a plan to reduce staffing by 30 percent.
Major European indexes are lower, and we’ll give back a little at 9:30 as well. At this point, adjusted for fair value, the S&P futures are now down 5 points, the Dow futures are down 53, and the NASDAQ futures are about almost 7 points below fair value.
Asian markets were lower overnight with the notable exception of the Sensex Index in India. Interest rates in India were cut by a larger than expected one half of one percent overnight. That brings the Indian rate all the way down to 8 percent. There could be a little more monetary firepower left over here, especially if you compare that 8 percent with our short term rate of, oh, zero.
Doing quite a bit better than ‘zero’ was Goldman Sachs in the first quarter. Earnings of $3.92 beat the estimate of $3.55. Revenue was about 5 percent higher than expected and Goldman is raising their dividend, although Goldman stock is indicated slight lower pre-market. Johnson & Johnson checked in about a half hour ago with $1.37 per share in profit, which was 2 cents better than expected although revenue was a little light. Coca-Cola also beat by 2 cents, earning 89 cents per share versus the 87 cent estimate.
Intel will report in later on. It’s still early in first quarter reporting season, and while it’s true that analyst estimates have come in quite a bit from early projections, so far, corporate earnings disappointments have been few and far between.
At 8:30, the March Housing starts are expected to tick a little higher to an annualized rate of 705,000 units. Industrial production and capacity utilization numbers follow at 9:15.
European markets are higher this hour on the order of one to two percent. Happy tax day, everyone. The government is seeing green and so are the markets. Adjusted for fair value, the S&P futures are now up 5½ points, the Dow futures are up 55, and the NASDAQ futures are about 8 points above fair value.
We should get off to a slight higher start on Wall Street today, but as the week unfolds, keep an eye of Spain. Yields on Spanish 10 year debt rose above 6 percent this morning. Seven percent is widely acknowledged as the danger zone. There’s a lot of protest growing in Spain over a new rule prohibiting cash transactions above 2,500 euros. People are evidently upset that the Spanish Government might actually get serious about collecting taxes that have thus far gone unreported. Oh, the outrage!
Meanwhile, over here, toymaker Mattel is blaming soft sales of Barbie and Hot Wheels for a big shortfall in revenue last quarter. Mattel earned 6 cents per share versus the expected 7 cents. Citigroup reported $1.11 in operating profit, versus the one dollar estimate, but the stock was bid slightly lower pre-market, but is now bid just a bit higher.
At 8:30 we’ll get the March Retail Sales Report. Expect that the weather-related pull-ahead we saw in January and February went into the deep-freeze in March. Overall, retail sales are expected to have increased just three-tenths of a percent, or six-tenths of a percent excluding auto sales.
Housing and business inventory numbers come at 10 o’clock, but in the meantime we should get off to a flattish to slightly positive start for stocks absent a big surprise at 8:30.
At this point, adjusted for fair value, the S&P futures are now up a half point, the Dow futures are up 25, and the NASDAQ futures are about 3 points above fair value.
Welcome to Friday the 13th, but don’t be scared. Even though the Chinese GDP report disappointed overnight, this morning’s earnings news has been pretty good thus far.
Over in China, first quarter Gross Domestic Product cooled to 8.1%. That, of course, is more than triple our GDP. However, traders are debating the odds of a hard landing versus the soft landing Chinese authorities have been trying to engineer. While the 8.1 is a little lower than expected, overseas markets haven’t panicked, although Europe is lower.
On the earnings front Google reported $10.08 per share of earnings last night. That beat estimates by 44 cents. Google will also split their stock 2 for 1.
This morning, Wells Fargo and JP Morgan Chase both check in with better than expected results. Revenue was up 24% at Chase, which was 10% more than expected.
At 8:30, we’ll get the Consumer Inflation numbers for March. Yesterday, the Producer Price number came in surprisingly unchanged, although the core rate was three-tenths higher. Expect the CPI to be up three-tenths. Then, just before 10 o’clock, the University of Michigan’s first estimate for April Consumer Sentiment is expected to read 76.2, unchanged from the March level.
Asia was mainly higher overnight. Europe is lower. Our futures to quite a dip during the past half hour. At this point, adjusted for fair value, the S&P futures are down almost 5 points, the Dow futures are down 38, and the NASDAQ futures are about 9 points below fair value.
It looks like yesterday’s rally will have some legs when we open at 9:30, although we have a couple of reports on the way in about 10 minutes that could trip us up.
The weekly Jobless Claims number will get a bit more than the usual amount of attention after last week’s stinko announcement about the monthly number from March. Expect 359,000 new unemployment claims, which would be just a sliver more than last week. Inflation in Producer Prices is also expected to be on the rise. But the expected three tenths of percent increase on overall price increases in March would be a tenth of a percent below the February rate.
Royal Dutch shares are slipping this morning on reports of a ten-mile-square oil slick in the Gulf of Mexico. RiteAid and Fastenal both reported higher than expected sales for the quarter gone by, but earnings appear to have missed the mark by a slight bit.
Earnings from JB Hunt and Google come later today. AT&T and Canadian Pacific Railway get upgrades this morning, while Sony will restructure about 10,000 employees out of their current employment, as they’re finding the big screen TV market not quite as profitable nowadays.
Asia was firmly higher, Europe is mixed to a little high. Our futures are still positive as we head toward the 8:30 economic reports. Adjusted for fair value, the S&P futures are higher by about 5½, the Dow futures are up 48, and the NASDAQ futures are 13 points above fair value.
We might have seen the climactic end to the long-awaited correction yesterday. Of course, maybe not. However, by some technical measures, the five-day pounding that stock prices have suffered has retraced exactly as much as many technical analysts had expected.
So, what’s to reverse this mini-trend? Some good earnings reports could help. And, right on cue, Alcoa kicked off the second quarter earnings season last night with a bang-up report. Operating earnings were 4 cents per share. That was 14 cents better than the expected loss of a dime. Alcoa shares are indicated about 6 percent higher pre-market. Supervalu also beat estimates in their report last night. Supervalu also raised their full-year guidance to $1.35 per share from the expected $1.19. The long parade of heavyweight reports starts tomorrow.
The auction of Italian one-year debt went off this morning at a 2.84% interest rate. That’s almost double the rate since the last auction, but still well below the crisis-time rate of 6 percent.
Asian markets were mixed overnight, but Europe is mostly higher. We’ll get a nice snap-back at the open as well, although our futures have cooled off a bit. At this point, adjusted for fair value, the S&P futures are higher by almost 12, the Dow futures are up 98, and the NASDAQ futures are 22 points above fair value.
Ben Bernanke stuck to the script last night and the script had nothing to do with future monetary policy. Instead he spoke about changes needed in the banking system, but he’ll be back on the podium on Friday’s session of the Atlanta Fed conference, so we’ll see if he gets a little more informative at that point.
Left to reflect on Friday’s payroll number, stock prices also stuck to the script and fell about one percent yesterday. This morning’s release of the National Federation of Independent Business survey isn’t engendering a lot of optimism. The NFIB survey of small business optimism had risen six months in a row until this morning’s release of the March numbers. The reading of 92½ fell more than 2 points short of the consensus estimate.
Second quarter earnings start to roll after the close of trading today with the announcement from Alcoa. Expect an operating loss of 5 cents per share. Earnings guidance was raised this morning for Sherwin-Williams and Magicjack.
Asian markets were mixed overnight, buy Europe is mostly lower. Our futures have been hovering around the flat-line most of the morning. At this point, adjusted for fair value, the S&P futures are down a point, the Dow futures are down 7, but the NASDAQ futures are a fraction of a point above fair value.
Stock traders had a three-day weekend to stew over last Friday’s lousy Jobs Report, and this morning, the price action is pretty predictable. The U.S. market should open about one percent lower. Keep in mind that since the market bottomed just over three years ago, the monthly Jobs number has checked in with a this magnitude of a major miss nine times. Stock prices declined the next trading day by an average of nearly one percent. But, on average, recovered half of that loss over the next week and prices were actually almost one percent HIGHER on average, two weeks later.
Those recoveries, however, were rooted in the hope of looser monetary policy, and based on the Fed’s minutes from last week, it’s not altogether clear that Uncle Ben and the bunch will come riding to the rescue of this shaky recovery once again. Mr. Bernanke is speaking at an Atlanta Fed conference later today, and given that he’s not speaking in Washington, perhaps someone will ask an insightful question.
Alcoa will kick off the second quarter earnings season tomorrow. As for today, the U.K. market is closed for Easter Monday. Also, markets are closed in Australia, Hong Kong and Germany.
But our trading starts at 9:30, so buckle up – here we go. Adjusted for fair value, the S&P futures are down almost 19 points, the Dow futures are lower by 142, and the NASDAQ futures are now almost 34 points below fair value.
The big economic report of the week comes tomorrow, with the March Jobs Report. You’d think that they could release it today, when the stock market is open. Unfortunately, the people currently occupying the Labor Department apparently don’t recognize Good Friday as a holiday. So any reaction to tomorrow’s number will have to fester over the long weekend.
Meanwhile, we do have the monthly Job Cut Report from the Challenger employment firm, and it is encouraging news with less than 38,000 layoff announcements last month. That’s a 37% drop from February and a 9% decline year-over-year.
It will be “goodbye” to Ruby Tuesday at least 25 locations. 2012 earnings will only be 45 cents, versus the expected 60 cents at Ruby Tuesday and 25 to 27 locations will close.
March Retail Sales numbers will be coming from the big chains all morning. So far Limited, TJX and Target all reported higher same store sales than expected. Credit Suisse had nice things to say this morning about Bed, Bath and Beyond, Monsanto, Direct TV and Panera Bread.
The next Greece, namely Spain, saw bond yield rise uncomfortably high this morning. Pencil Spanish banks in on your “worry-list” for next month.
Adjusted for fair value, the S&P futures are down 7 points, the Dow futures are lower by 56, and the NASDAQ futures are now almost 11 points below fair value.
An already weakened stock market took a turn for the worse with the release of the Federal Reserve Open Market Committee meeting minutes yesterday afternoon. With no hint of a follow-up stimulus program to “Operation Twist,” traders suspect that the free ride the Fed has provided interest rates for the past several years may be coming to an end.
Worries about Chinese growth coming to an end (or at least slowing down) has markets lower across the globe this morning. Last night, Australia announced a surprising half-billion dollar trade deficit. A billion dollar surplus was expected and the blame goes mainly to lower coal exports to China, which traders took as a possible canary in the coal mine.
Add to that the final March European PMI number this morning, which at 49.1 was a little improved, but still indicative of European economic contraction. The European Central Bank held interest rate unchanged this morning.
Dominion Resources is out with one of the very few “earnings warnings” we’ve seen lately. And Moody’s this morning downgraded the debt of General Electric.
In case you’ve noted a lack of good news this morning, it only means that you’ve been paying attention. Trust that traders ARE paying attention and will send stock prices lower at 9:30. Adjusted for fair value, the S&P futures are down 10 points, the Dow futures are lower by 96, and the NASDAQ futures are now just about 17 points below fair value.
We’ll be hearing from the automakers all day long with their March Sales Reports. Put ‘em all together, and the consensus estimate is an annualized rate of 14.7 million vehicle sales, as March looks to have been a pretty good month, especially for fuel-efficient vehicles. So far, Ford reported a 5% sales increase, just beating the 4.8% estimate. Chrysler was up 34.2%, just shy of the 34.9% estimate.
The European slowdown has hit Dow Chemical. Dow will be closing some facilities and will send about 900 employees off in search of “other opportunities.”
At 10 o’clock the February Factory Orders are expected to have risen 1½ percent. Factory Orders have been increasing at a pretty steady annualized 10 percent rate for the past two years.
The potential market mover of the day will be the 2 o’clock release of the minutes of the latest Federal Reserve Open Market Committee meeting. Any hints of a Fed encore to Operation Twist, which expires this coming summer, could reverse the early weakness we’re likely to see in stock prices.
Hong Kong was the overnight star, rising 1.3 percent. Mainland China also higher, Japan lower. European stocks have led our futures a little lower as well.
At this point, adjusted for fair value, the S&P futures are down nearly 4½ points, the Dow futures are down 34, and the NASDAQ futures are now just about 4 points below fair value.
April 2, 2012
Shockingly (not really) a lot of money was wasted on lottery tickets last Friday, but if you were smart enough to buy shares of Avon Products instead of that 173 million to one shot, you hit your own little jackpot this morning. Avon shares are higher by more than 27 percent on a $23.25 cash buyout offer from Coty. Avon may not go without a fight, and the stock is already being bid higher than $23.25 on the hope that a higher bid may be likely.
At 10 o’clock this morning, the March ISM report on the health of the Manufacturing sector is expected to improve to 53 from 52.4. This index, by the way, bottomed in December of 2008 and has been either improving, or above the break-even level of 50 ever since.
The February Construction spending also comes at 10 o’clock. This index bottomed in October 2009 and turn positive in late 2011. Expect a positive 0.7%.
It will be a short week of stock trading, with the markets closed for Good Friday. Strangely, the economic report with the most market-moving-potential won’t be released UNTIL Friday. That, of course, is the March Unemployment Report from the Labor Department.
Our futures took a turn to the dark side about a half hour ago and are pointing toward a lower open for stock prices at 9:30. At this point, adjusted for fair value, the S&P futures are down nearly 2 points, the Dow futures are down 27, and the NASDAQ futures are now just about 5 points below fair value.
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