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
August 31, 2005
Stock index futures were pointing toward a lower open an hour and a half ago. Then word came that the government would tap the Strategic Petroleum Reserve to alleviate oil supply problems in the wake of Hurricane Katrina. The futures turned on a dime. That’s the way it’s been of late and likely will be for the foreseeable future as stock prices and oil prices continue their little tango.
The worsening news out of New Orleans is giving rise to speculation about a possible hurricane-induced recession nationwide. Although hurricanes usually lead to a long-term increase in economic activity due to rebuilding, this one is causing enough disruption to oil and other material supplies that the short term impact is becoming particularly worrisome.
The preliminary 2nd quarter GDP number is due in ten minutes, and at 10 o’clock, the NAPM – Chicago Index is expected in at a reading of 61, versus 63 ½ last month. That’s a survey of business activity, but the only survey that’s likely to mean anything today is the survey of damage to the oil facilities and port on the Gulf of Mexico.
August 30, 2005
Damage reports in the wake of Hurricane Katrina will dominate trading today. Oil prices are up a buck this morning, and natural gas prices continue at record levels. Those natural gas prices may be a big problem during the next six months, especially for those of us who are thinking of heating our homes this winter. Natural gas prices are almost double the year-ago levels.
At 10 o’clock, the Conference Board will release the results of their August survey of Consumer Confidence. Expect a reading of 100 versus last month’s reading of 103.2, as consumers are catching on to the connection between these high energy prices and the lack of any spending cash left in their wallets.
At 2 o’clock, the minutes from the latest Federal Reserve Open Market Committee meeting will be released. We’ll be checking for any hint that the Fed might be getting ready to apply the brakes to the interest rate train. But, don’t hold your breath.
August 29, 2005
There aren’t any economic reports on the docket for today, and it’s just as well. There’s only one real story today, and it promises to push stocks around like so many grains of sand on an Alabama beach.
Hurricane Katrina has shut down over 40 percent of domestic oil production and 20 percent of natural gas production. Of course, the Port of New Orleans, which is a major U.S. port, is shut down. How quickly things can get up and running again is problematical in a city which may well be significantly underwater for a while.
Insurance stocks, gambling stocks, travel-and–vacation oriented stocks and of course, the oil stocks will all get whipped around today. Estimates of insured damages are running as high as 30 billion dollars this morning. Which, of course is pure speculation at this point – but no matter the final number – it’ll be a big number.
Natural gas futures were more than 20 percent higher earlier, at an all time high this morning. Light sweet crude broke the 70 dollar level earlier, although we’re down to $69.25 at this point.
August 19, 2005
Raise that tray table and fasten your seat belts. The intrigue is building around Northwest Airlines this morning. Word is that if Northwest doesn’t reach a contract agreement with its mechanics by midnight, a bankruptcy filing is right around the corner.
We’ll start the last day of a pretty lousy week to the upside this morning. However, today is the poster child for quiet trading days. There are no economic reports scheduled, there are no major earnings announcements coming, there are only five significant companies holding conference calls today and there’s a hot August afternoon on the way. Trading could get pretty light. Keep an eye on oil. Light sweet crude is up a buck after the declines of the last couple of sessions.
A lot of trendy retailers have given us very un-trendy sales reports this week. The Gap beat earnings estimates but warned that their jeans are not selling well. They lowered forecasts for the rest of the year. Sharper Image also with a disappointing report last night.
August 18, 2005
The major earnings reports are in the book for the second quarter, and while it was a good quarter for profits, it’s a mixed bag as far as business outlook for the current quarter. In the meantime, all we’re left to stew about is the outlook for oil prices and inflation. None of that data is particularly good.
Year-over-year inflation is running at 4.6%, that’s the highest in over ten years. Even the core rate of 2.8% is starting to pick up speed, as higher energy prices and lower productivity levels filter through. Although oil prices are down about 4 bucks since last week, stock markets are not convinced that the worst is over.
Several economic numbers roll today including the weekly jobless claims at 8:30 and the Leading Economic Indicators at 10 o’clock. Perhaps the most interesting will be the Philadelphia Fed Survey at noon. That’s a survey of manufacturing activity. Expect a reading of 12, up from 9.6 last month.
If you’re looking to own a piece of Google, there’s more supply on the way. Google’s IPO was a year ago. To celebrate, it’s issuing up to 14 million shares of Class A common stock. At yesterday’s price, that would raise about $4 billion dollars, and Google says it may consider some acquisitions. To give you some perspective of that 4 billion dollar number, the entire market cap of General Motors is 19 billion dollars.
August 17, 2005
A big surprise, and a good one from Hewlett-Packard last night. In spite of price pressures in the computer business, HP reported a 20% increase in storage and server sales and an 8.5% rise in PC sales. Operating profits beat estimates by 5 cents per share. Hewlett also repatriated over 14 billion dollars of overseas profit at a very low tax rate thanks to last year’s “American Jobs Creation Act of 2004.” Of course, HP is in the midst of cutting payrolls by almost 15,000 jobs. Those guys in Washington really know how to create jobs.
Abercrombie & Fitch shares will get smacked around a bit today. Earnings for last quarter missed estimates by about 6 cents per share, and they lowered their outlook for the year.
At 8:30 this morning, we’ll find out how much the big spike in energy prices has boosted Producer Prices. And a little later this morning, the weekly report on energy inventories is expected to show that oil and distillate stocks have risen by about 1.2 million barrels each, while gasoline stocks may have fallen by about that much.
August 16, 2005
It’s “big retailer” day on Wall Street, and the reports so far are pretty good for the quarter gone by. Forecasts for next quarter are a mixed bag. The biggest of the big, Walmart beat a 65 cents per share estimate, reporting 67 cents of profit. Sales were a little light and the third quarter forecast isn’t quite up to analyst estimates. Walmart’s revenue was up almost 11% from last year, but the stock will trade lower this morning.
JC Penney likewise beat profit estimates on worse than expected revenue. Home Depot beat estimates by 3 cents and raised their guidance. American Eagle Outfitters also beat estimates.
Most bulls are interested in most cows. But the bulls are running scared from the Gateway cow this morning after a disappointing report last night. The discounting that hurt Dell’s profits is really pressuring Gateway, and it will be a big surprise if Hewlett-Packard, which reports later today, has particularly good news on PC profits.
August 15, 2005
There’s a fair bit of economic and inflation news coming later in the week, but for today, there’s only one economic number that most people are thinking about – that’s the price of their next fill-up. The Lundberg survey says that the average price of a gallon of unleaded regular nationwide was $2.50 was week. Quite frankly, if you’re running low and you can FIND gas for $2.50 a gallon today you’re doing well.
Gateway and Agilent report earnings today. Agilent is reportedly ready to sell their chip division to a couple of private equity firms for over 2 billion dollars.
There is a report out this morning that Lear Corporation may be looking into acquiring the bankrupt Collins & Aikman.
August 12, 2005
If you consider yourself a reasonably intelligent, reasonably rational human being, and have trouble understanding the stock market, here’s an example of why you feel that way:
Dell Computer makes almost 1 out of every 5 PCs sold on the planet. Their profit for the quarter was up 28% and matched analyst expectations. Their revenues were up 15 percent at 13.43 billion for the quarter. So, what’s not to like? Dell stock was down about 8 percent in the evening session last night. They forecast only 14.1 to 14.5 billion of sales for next quarter, versus the expected 14.6. They say profits will be 39 to 41 cents versus the projected 41. This, folks, is not horrible news. However, Dell stock will be under pressure early on today.
Better results from Nvidia last night; 41 cents of profit versus 34 cents.
In an hour and a half, the preliminary number on August Consumer Sentiment comes from the University of Michigan and is expected in at 96.5, matching the July number.
Asian stocks were flat overnight, but Europe is down on some weak GDP numbers, especially in France where their GDP for the quarter was up a staggering 0.1%. Oh, they’re working hard over there.
August 11, 2005
We had a nice start for stocks yesterday just about totally washed out by spiking oil prices. Light sweet crude hit a record of 65.30 per barrel intraday. It’s pulled back a little bit this morning at 65.21. So, we’ll try another rally in stocks at the open and see how long it lasts.
Earnings season winds down today with reports from Dell Computer, Nvidia and a handful of retailers. For the quarter, it looks like earnings increased by an average of about 11 percent. Analysts had been expecting about 7, and explains why the market has held up as well as it has against the surge in resource prices.
July Retail sales are expected to have shot up about 2.4% overall, and 8 tenths of one percent if you strip out car sales. We’ll find out about that and the weekly jobless claims in ten minutes.
August 10, 2005
Things are cooking overseas this morning, and it looks like that will carry over to domestic stocks when trading starts today. The Hang Seng Index in Hong Kong was up about 2 percent overnight, the Nikkei in Japan was higher by more than a percent and a half and European markets are up across the board this morning.
The caboose of the train of big earnings reports is now arriving at the station. Last night, there was good news from Disney, which beat estimates by 3 cents and AIG, which beat estimates by six cents per share. Counter-balancing those, Cisco Systems met estimates, but their revenue guidance for next quarter was a little light. Cisco shares could suffer a bit this morning, although management did put to bed the recurring rumor about the possible acquisition of Nokia.
Oil prices are perking up again this morning after sliding yesterday. Look for more movement at 10:30 when the weekly inventory report is released by the Energy Information Agency.
August 9, 2005
Get ready for another step higher in short term interest rates. At 2:15 this afternoon, for the tenth time in a row, the Federal Reserve Open Market Committee will hike rates by a quarter of a percent, and will most likely give us no indication that they are in any mood to stop there.
The Wall Street Journal is reporting today that as many as 1 in every 4 members of the sales and marketing team at Ford Motor may be busy marketing their own services to prospective employers soon, as the automotive cost cutting continues.
Light sweet crude at one point this morning was over 64 dollars per barrel. It's pulled back to 63.66 at this point. Such a deal.
Disney and Cisco Systems report earnings after the close of trading today.
The Nikkei Index in Japan was up over a hundred points overnight. European markets are up just a little bit.
We should get off to a good start this morning. Of course, we did that yesterday to no avail. At this point, adjusted for fair value, the S&P futures are up about 4 points, the Dow futures are up 28 and the Nasdaq futures are about 5 1/2 points above fair value.
August 4, 2005
The Bank of England issued their first interest rate cut in quite a while this morning. Short term rates will drop in the U.K. from 4 ¾ to 4 ½ percent. The British economy has been pretty sluggish and consumer spending there has been dropping, so this rate cut was widely expected.
A lot of retailers report sales and earnings numbers this morning. Costco same-store sales were a little better than expected. Walmart sales were up 4.4 percent in July and they are projecting a 3 to 5 percent increase in August, as well. The perennial basket case of the retailers, every pun intended, Pier One, fell well short of expectations yet again. They moved a lot of inventory, but evidently did so at fire-sale prices.
Sara Lee beat earnings estimates by a nickel but warned that 2006 will not be a pretty sight due to rising costs. A good report, though, from EDS. They made 9 cents per share last quarter. EDS was expected to lose 3 cents.
About 60 percent of the companies reporting earnings this quarter have beaten estimates, and that’s a reason stocks have done well over the past few weeks. However, this morning’s futures are about as ugly as we’ve seen them for quite a little while.
August 3, 2005
Oil is jumping again this morning. We’re at $62.30 per barrel for light sweet crude. That’s in front of the weekly inventory data that will be announced at 10:30 this morning. It’s expected that oil inventories have been drawn down by about 1 ½ million barrels, although distillate inventories are expected to have risen.
If you play soccer, you know the name Adidas. Adidas has Reebok shareholders jumping for joy this morning. Adidas will buy Reebok at a 30% premium to last night’s closing price. Stocks of both companies are indicated higher this morning.
On the earnings front, Time Warner missed by a penny but finally settled a shareholder lawsuit over their disastrous acquisition of AOL. The big miss of the morning comes from Duke Power. They made 30 cents per share versus an expected 38. However, it may be timing. Duke is sticking to their earnings guidance for the entire year.
Mortgage activity slowed last week, after interest rates took their biggest jump since March. CIBC, the Canadian Imperial Bank of Commerce, is the latest to settle in the Enron case. They’ll pony up 2.4 billion bucks.
August 2, 2005
July sales numbers are due out of the Big Three today. It’s expected that those “everybody gets the employee price” sent sales volume up between 17 and 19 percent. Profits may be another matter, but we won’t worry about that right now.
Profits ARE the topic at a bunch of companies this morning. TRW beat estimates on earnings and revenues. Comcast made 19 cents per share versus an expected 15. Coach beat estimates by a penny and raised guidance for the year. Masco and Tyco each beat estimates by a penny, but both companies warned that the rest of the year won’t be as good as expected. Tyco shares are down 10% in the pre-market.
One big energy deal in the works this morning, as U.S. based Kinder Morgan is buying the big Canadian oil company Terasen. That’s a 5.6 billion dollar deal. It looks like the Chinese owned oil company CNOOC may withdraw from the bidding for Unocal, bowing to the bluster of the U.S. Congress. You know, many times, for every action there is a reaction. Let’s hope that the Chinese don’t respond with corresponding protectionist measures.
August 1, 2005
It was hot. It was humid. But July was a wonderful month if you were invested in stocks. The S&P 500 and the Dow Jones Industrials were up over 3 percent and the Nasdaq was up more than 6 percent. So, while we’re roughly even on the year to date, July healed a lot of old wounds.
One more big week of earnings news is on tap. So far, so good this morning. Humana matched estimates and raised their guidance. Procter & Gamble beat estimates by a penny and Walmart reported July same store sales up about 4.4 percent.
At 11 o’clock today, General Motors is expected to roll out the details of their 2006 model year pricing. Expect some permanent price cuts to take the place of the merry-go-round of incentives we’ve seen over the past few years.
Oil is up above 61 bucks this morning, on news of a refinery fire, an oil rig fire and the death of King Fahd in Saudi Arabia, but stock markets are shrugging off the rise.
Australian stocks were off a bit overnight, but all other major overseas markets are positive. We should start the month heading up as well. Adjusted for fair value, S&P futures are up 3 points, the Dow futures are up 29, and the NASDAQ futures are about 4 points above fair value.
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