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Daily Reports @ WJR

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WJR August 2006 Reports

August 25, 2006
 
We’ve had a week full of rumors about Ford Motor.  Fittingly, we’ll end the week with another rumor that should move Ford shares higher at 9:30.  Rumor has it that the Luxury Brand division of Ford – Jaguar, Volvo, etc. – is drawing the interest of an investor group headed by none other than Jacques Nasser.  On the news, Ford is looking to open up a dime or so from yesterday’s close.
 
How’s this for the shoe on the other foot?  The Nikkei in Japan closed lower overnight because of product quality problems at Sony and Toyota.  Apple Computer announced the recall of 1.8 million Sony lithium-ion batteries.  That follows the recall of 4 million of the same batteries in Dell laptops.  Toyota is reportedly delaying some new product launches by up to six moths after a rash of recalls in Japan and the U.S.
 
At 10 o’clock this morning, Ben Bernanke will be speaking in Wyoming and the traders that are not on vacation will be hanging on every word regarding inflation versus recession threats.
 
Oil is up a buck per barrel on renewed hurricane worries.  Natural gas is up almost 6 percent.
 
 It’s one of those funny mornings when the futures are positive, but are nevertheless indicating a lower open for stocks. That’s because after you adjust for fair value, the S&P futures are down about 2 points, Dow futures are down 21, and NASDAQ are about 2 points below fair value.
 
August 23, 2006
 
The market could turn on one data point at 10 o’clock this morning.  The July data on existing home sales is expected to decline to an annualized rate of 6.55 million versus 6.62 million in June.  It’s no secret, especially if you’re trying to sell your home, that rising inventories of unsold homes are depressing prices.  The big worry is that those declining prices will put an end to American’s favorite pastime of using their home equity as a giant piggy bank.  As that game ends, consumer spending, which is two-thirds of the domestic economy, will be in for some downsizing.
 
One encouraging note this morning:  The average rate on 30 year fixed rate mortgages is down to 6.38 percent.  That’s down from 6.54 percent a week ago.  Mortgage applications were up a touch last week as more homeowners are waking up, smelling the coffee, and getting out of the variable rate loans that are soon to reset to higher rates.
 
Medtronic is out with a better than expected earnings this morning.  On the downside, National Semiconductor cut their forecast last night.
 
Overseas, markets are generally a bit lower, and that’s the direction we’re likely headed at 9:30.  At this point, adjusted for fair value, the S&P futures are down a little more than a point, Dow futures are down 16, and NASDAQ are about 3 ½  points below fair value.
 
August 22, 2006
 
Ford Motor was, unfortunately, the stock of the day yesterday.  Ford shares fell almost 7 percent after a broker downgrade.  Of course, the 21% production cutback announcement was the catalyst.
 
The health of the housing market will be a big economic factor over the next year or two.  We’ll get the existing and new home sales data tomorrow and Thursday.  But in the meantime, Toll Brothers, a luxury homebuilder has issued their third quarter earnings report.  Earnings were $1.07 per share versus $1.27 last year, but against expectations of $1.04.  Toll lowered their 2006 earnings estimate to about $4.50 per share, down from about $4.85.  However, that’s not as bad as many analysts had expected.
 
There are a handful of broker upgrades this morning, which should help shares of Goodyear, Dollar General and XM Satellite.
 
However, rising oil prices caused by a little more Iranian saber rattling should keep stock prices under a little pressure early on.
 
At this point, adjusted for fair value, S&P futures are down about a point, Dow futures are now down 13, and the NASDAQ futures are about 3 points below fair value. 
 
August 21, 2006
 
I should be a relatively quiet week for investment data as summer vacations make their last stand, and quite frankly, after last weeks’ run-up in stock prices, which included a 5 percent rise in the NASDAQ, a break even week might be a good thing.
 
But here we go again – light sweet crude is inching higher.  We’re close to 72 bucks per barrel this morning, after hovering around the 70 dollar level late last week.
 
Lowe’s is the only big earnings report due out today.
 
The Hang Seng Index in Hong Kong was off almost 2 percent overnight.  Japanese stocks were lower by one nearly one percent. With the notable exception of Great Britain, European markets are mainly lower, but not by a lot.
 
It looks like the rising price of oil will have us giving back a little at the open as well. At this point, adjusted for fair value, S&P futures are down 2½ points, Dow futures are down 29 and the NASDAQ futures are about 9 points below fair value. 
 
August 18, 2006
 
It’s Friday.  It’s mid-August.  It’s going to be partly sunny and in the low 80’s  in New York.  This isn’t a weather forecast – it’s a trading activity forecast.  Trading volume is likely to experience some shrinkage after noon as traders jump into the pool a bit early.  In fact, the rally we’ve seen this entire week has been on fairly light volume.
 
Outside of a consumer sentiment reading out of the University of Michigan, it’s vacation time for economic reports and earnings reports as well.
 
After hours, a handful of stocks were under selling pressure after their earnings reports were released.  Gap and Nordstrom both took some hits.  Dell’s earnings and sales came in pretty much as expected, but the stock still sold off 7 percent after-hours, continuing a slide that cut the price almost in half over the past year.
 
China raised interest rates a little more than a quarter point overnight.  Asian markets were mixed, but European markets are up just a bit at this hour.  Our futures are pointing to a slightly lower open at 9:30.  Adjusted for fair value, the S&P futures are down about a point and a half, Dow futures are down 7, and NASDAQ are about 5 points below fair value.
 
August 17, 2006
 
Hewlett-Packard released earnings after the close of trading last night. They continue to exceed expectations and continue to gain ground on PC leader Dell.  Hewlett made 52 cents per share on an operating basis.  That beat expectations by a nickel per share on a more than 5 percent rise in revenue.  They also authorized a six billion dollar stock buyback. HP stock rose almost 8 percent in after-hours trading.  We’ll see if Dell can answer the bell a little later on today, when they release their quarterly report.
 
Sears Holdings, you may remember them as Sears plus Kmart, beat analysts’ earnings estimate of $1.67 by seven cents.  Sears is indicated up almost 2 percent in the pre-market.
 
Advanced Micro Devices is the beneficiary of a broker upgrade this morning.  Unfortunately, there’s a broker downgrade out there for General Motors.
 
The last big economic indicator of the week will come out at noon today with the release of the August Philadelphia Fed Survey.  That survey of economic activity is expected to come in at 8.3 versus last month’s 6.0.
 
European markets are almost completely uninteresting this morning.  Our futures are pointing toward a slightly lower open on Wall Street.  Adjusted for fair value, the S&P futures are down 2 ½ points, Dow futures are down 7 and NASDAQ are about 4 points below fair value.
 
August 16, 2006
 
Yesterday, a very-much-unexpected decline in the core Producer Price Index lit a fire under stock prices, as hope was rekindled the price inflation fears are way overblown.  However, the bottom line on inflation is not the Producer Price Index, it’s the Consumer Price Index that rules. 
 
The latest “ruling,” the July Consumer Price Index will be announced in about ten minutes and will set the direction of the market this morning.  Expect a headline number of 4 tenths of one percent, but a core number of 3 tenths of a percent.  Anything less than two-tenths of a percent would likely start another rally, but after yesterday’s results, anything at 3 tenths or above will be a bit of a drag on stocks.
 
Applied Materials came out with better than expected earnings and sales last night.  We’ll hear from Hewlett-Packard a little later today.
 
Asian stocks were up one percent or more after our rally yesterday, but Europe is mixed this morning in front of the inflation data that coming at 8:30.  Adjusted for fair value, the S&P futures are down 2 points, the Dow futures down 14, and the NASDAQ futures are about 1 ½ points below fair value. 
 
August 15, 2006
 
Renewed worries about inflation took most of the air out of a pretty decent rally yesterday.  At 8:30 this morning, we’ll find out if those worries will continue.  The Producer Price Index, which reflects the increase in prices paid by business, is expected to reflect an increase of four-tenths of one percent, which would be down from a full half-percent last month.  Anything lower than that four-tenths number would be welcomed.
 
Most retailers have fiscal years that end in January.  That means that we’re now in the middle of their 2nd quarter earnings reporting period.  Reporting in this morning are Walmart, Home Depot, Staples and BJ Wholesale.  The reports are all within a penny per share of expectations.  However, expectations for the rest of the year are mixed.  Walmart lowered expectations are bit, while Staples says that things for them are looking better.
 
Overseas markets are going a whole lot of nowhere in advance of the inflation data.  Our futures were pretty flat most of the morning, but kicked up a bit in the past half hour.  If the market were to open right now, the S&P would likely rise about 3 points, the Dow about 21, and the NASDAQ would rise about 4 ½ points. 
 
August 14, 2006
 
The investment firm Bear Stearns made a call on auto stocks this morning.  Their strategy on auto stocks is to play the restructuring stories.  This morning Bear Stearns downgraded General Motors to “underperform” on the view that the stock price now fully reflects GM’s turnaround plan.  The good news is that they upgraded Ford to “outperform,” theorizing that the restructuring taking place at Ford has not yet been appreciated by traders.
 
Coming up later this week, specifically tomorrow and Wednesday, will be July inflation data. Traders will be looking for confirmation that inflation is not a problem that the Federal Reserve needs to worry a great deal about.
 
But as far as this morning is concerned, it’s all about the Middle East truce.  The tenuous truce in Lebanon and some good news from BP about the Prudhoe Bay oil pipeline has the price of oil down about 73 bucks per barrel, and has the stock futures pointing to sharply higher prices at 9:30.
 
Japan was up 1 ½ percent overnight.  Other markets are uniformly positive at this hour, but generally around 1 percent or less.  At this point, adjusted for fair value, the S&P futures are up 7 ½ points, the Dow futures are up 61, and the NASDAQ futures are about 11 points above fair value. 
 
August 11, 2006
 
Two data points will attract attention this morning.  At 8:30, the report on July Retail Sales is expected to show an eight-tenths of one percent increase.  That would reverse a one-tenth of a percent decline from last month. 
 
Then at 9:45, the preliminary reading of August Consumer Sentiment from the University of Michigan is expected to decline ever-so-slightly to a reading of 84 from July’s 84.7.
 
There may be a bigger worm in the Apple than we thought.  About a half hour ago, Apple, which will not file their quarterly report on time, now says that they will be making a “significant” restatement of their financial statements that will reportedly increase expenses and revenues.  Pre-market traders are making a statement of their own, with Apple down about a half-dollar per share.
 
Asian markets were narrowly mixed overnight.  European markets are generally higher, but not by a lot.  Unless we get a big surprise out of the retail sales report, we should start off just slightly lower this morning.
 
At this point, adjusted for fair value, the S&P futures are down about a point, the Dow futures are down 4, and the NASDAQ futures are about 5 points below fair value. 
 
August 10 2006
 
It may not exactly be “code red” for stocks this morning, but markets around the world are in the red at this hour in response to the disrupted airline terror plot in England. European stocks are down between 1 and 2 percent.  Hong Kong was off about three quarters of a percent overnight.   Obviously, airline stocks will bear the brunt of the selling pressure.
 
If  there is a silver lining in all this, although likely a short-lived one, the price of oil is down 75 cents per barrel on the terror threat as the market considers the possibility of a slowdown in jet fuel demand if potential airline passengers decide to change their travel plans.
 
On the earnings front, JC Penney reported 76 cents per share in profit, which is 3 cents higher than expected.  Big insurer AIG reported a 29% drop in quarterly profit from a year ago.  But that still beat estimates of a $1.39 by a nickel or so.
 
There’s nothing big on the economic agenda today, so the airline safety issue will hold traders attention.  At this point, adjusted for fair value, the S&P futures are down about 5 points, the Dow futures are down 28, and the NASDAQ futures are 6 points below fair value. 
 
August 9, 2006
 
To stock investors, one of the most frustrating habits of stock traders is their tendency to “buy the rumor, and sell the news.”  That’s exactly what we saw yesterday at 2:15.  The Fed announced their well-telegraphed decision to NOT raise interest rates.  Stock prices, which were up only slightly at the time, surged, then almost immediately fell into negative territory for most of the rest of the day.
 
However, today is the proverbial “another day,” and we’ll be heading higher at 9:30 on the strength of some positive news from Cisco Systems.  Cisco’s profit was flat in the quarter gone by, but they are predicting 15 to 20 percent revenue growth for 2007 which is an upside surprise. Disney also out with a good report just 20 minutes ago, earning 53 cents per share versus the expected 44 on slightly higher than expected revenue.
 
Word is not so encouraging out of Toll Brothers.  The home builder’s revenue dipped in the third quarter and they lowered their delivery forecast for the current quarter.  Interestingly, Toll said that the weakness in housing was not coming from an economic slowdown, but from weakness in consumer confidence.  Or maybe it’s just consumers’ confidence that if they don’t need a house right now, lower prices may be available in the future.
 
Hong Kong and Japan were both up over 1 percent overnight, Europe is fairly flat.  Adjusted for fair value, the S&P futures are up 7 ½ points, the Dow futures are up 58, and the NASDAQ futures, on the strength on that Cisco earnings report, are more than 12 points above fair value. 
 
August 8, 2006
 
Stock prices are likely to drift higher in the early going today.  However, if we follow the pattern of recent Federal Reserve decision days, we’ll drift back toward even by 2:15 this afternoon.  That’s when the Open Market Committee announces its decision on short term interest rates.
 
This is the first Fed meeting in a long, long time that features a little uncertainty.  The bond futures and most observers are predicting that the streak of 17 straight interest rate increases ends here.  The argument is that Mr. Bernanke and Company can no longer risk turning a declining real estate market into a collapsing real estate market.
 
On the famous other hand, the Fed is seldom done until it’s overdone.  Hiking rates one more time and declaring the campaign over would send a couple of clear signals.  Firstly, we’re tough on inflation, and secondly, we’re done until next year so go about your business. We’ll find out at 2:15.
 
The loser of the morning will be Bausch and Lomb.  Traders don’t like what they can’t see and they won’t be seeing the Bausch & Lomb 10-Q for a while as the company assesses the full impact of the MoistureLoc recall.  The stock is down over 10% in the pre-market.
 
The futures are just about the mirror image of 24 hours ago as we’re almost exactly as much up as we were down yesterday.  Adjusted for fair value, the S&P futures are up almost 5 points, the Dow futures are up 33, and the NASDAQ futures are 3½ points above fair value. 
 
August 7, 2006
 
We’ve become accustomed to watching Iran, Nigeria, Iraq and the occasional hurricane as possible causes of oil supply disruption.  This morning, the price of oil has bubbled over 76 dollars per barrel on a disruption from a new source – the United States.
 
British Petroleum is shutting down a major pipeline in Alaska due to corrosion leaks.  That will shut off 8% of domestic production and will also send stocks sharply lower at 9:30.
 
El Paso beat estimates by a penny per share this morning, but outside of that, the earnings season is just about wrapped up and there is very little on the economic agenda today.  So, we can spend the rest of the day speculating on what the Fed will do with interest rates tomorrow.  Currently, the bond futures are putting the odds of another short term interest rate increase at only about 21 percent.
 
Japan was down over 2 percent overnight.  European stocks are off around 1 to 1 ½ percent at this hour.  We’ll start lower as well, but not terribly so.  At this point, adjusted for fair value, the S&P futures are down a little less than 3 points, the Dow futures are down 39, and the NASDAQ futures are 4 ½ points below fair value. 
 
August 4, 2006
 
Here’s a little math quiz:  According to Reuters, take the combined market value of General Motors, Ford and DaimlerChrysler.  Multiply by 3.  What do you get? You get the market value of Toyota. 
 
Toyota reported great earnings for the quarter, as it surpassed Ford in U.S. sales volume.  Revenue grew over 13 percent.  Net profit rose by almost 40 percent.  Toyota also affirmed their guidance for the remainder of the year.
 
Apple has reported some delicious earnings during the past few years.  Unfortunately, a worm has emerged.  As a result of an internal investigation, Apple may have to restate earnings all the way back to 2002, due to what’s being called “stock option irregularities.”  Apple will also delay its current 10-Q filing.  Traders will not delay punishing the shares.  Apple was trading about 7% lower in Europe earlier this morning, but is now looking to open only about 3 to 4 percent lower.
 
At 8:30, the July Unemployment data is expected to show 150,000 new jobs and an average hourly wage increase of 3 tenths of one percent.  They lower that each of those numbers are, the less likely the Fed is to raise short term interest rates next Tuesday.
 
The market’s direction at the open will be determined by the jobs number.  However, at this point, even though the futures are negative, they are indicating higher stock prices. That’s because, after you adjusted for fair value, the S&P futures are up about 1 ½ poinys, the Dow futures are up about 11, and the NASDAQ futures are a little more than a point above fair value. 
 
August 3, 2006
 
Just a couple weeks ago, Ford Motor told us that their second quarter loss would be 7 cents per share.  Last night, that loss magically doubled to 14 cents per share do to an “unforeseen rise in pension costs” and other evidently unforeseen stuff.  In order to foresee what should be done with its unprofitable Premier Auto Group, and perhaps with the rest of its operations, Ford has now brought in a mergers and acquisitions expert from Goldman Sachs.
 
The retailers are taking center stage today, as they report same store sales for July.  The big miss will likely be Starbucks.  Same store sales rose a disappointing 4 percent in July and while that doesn’t sound too bad, Starbucks stock is priced for much higher growth.  Starbucks is looking to open about 9 percent lower this morning.
 
CVS, the drug store, reported quarterly earnings that beat estimates by 3 cents per share.  CBS, the broadcaster, missed their number by 3 cents per share.
 
The Bank of England and the European Central Bank both raised interest rates a quarter point this morning, sending European stocks lower by one to 1 ½ percent. 
 
Word that Tropical Storm Chris is weakening has the price of natural gas down about 4 ½ percent this morning after a big run-up earlier in the week.
 
Asian markets were flat overnight, but we will follow Europe lower at 9:30.  Right now, adjusted for fair value, the S&P futures are down 5 points, the Dow futures are down about 29, and the NASDAQ futures are now about 8 points below fair value. 
 
August 2, 2006
 
There are no big economic reports due today as we get ready for Friday’s Unemployment data, so traders’ focus will turn to earnings and so far, the reporting companies are in pretty good shape.
 
Devon Energy, Procter & Gamble, Dean Foods, Alcan and Time Warner all reported better than expected earnings for the quarter gone by, although Procter did lower their guidance for next quarter ever so slightly.
 
The big heat wave is sending natural gas prices soaring again this morning.  Keep an eye on the natural gas stocks, some of which saw 8 to 10 percent gains just yesterday.  And while we’re on a related subject, light sweet crude oil is back above 75 dollars per barrel this morning.
 
According to the Mortgage Bankers Association, interest rates on home mortgages came down last week.  But in spite of that, the number of mortgage applications fell to a four year low as the housing market continues to chill.
 
Australian stocks dipped overnight as their central bank raised interest rates, but most every other market overseas is in the green by one percent or less.
 
We should follow that lead at 9:30.  Adjusted for fair value, the S&P futures are up 3 points, the Dow futures are up about 33, and the NASDAQ futures are now almost 4 points above fair value. 
 
August 1, 2006
 
One of the many downsides of offering big discounts on your product in year 1, is that sooner or later, there’s a year 2.  Well it’s the downside we’ll be seeing when automakers report their July sales today.  After last year’s incentive-induced annualized sales of over 17 million, expect this July’s number to come in at an annualized rate of just 13 million.  That’s a level consistent with three or four years ago, but depending on the company, may be 15 to 30 percent below last year’s pace.
 
In just about ten minutes, the July personal income and consumption numbers are due.  Income is expected to rise 6 tenths of a percent, with consumption holding steady at a 4 tenths of a percent increase. 
 
Coach beat estimates and increased their guidance this morning.  The biggest miss of the morning appears to be Vonage, reporting a much bigger loss than expected.
 
The July ISM Index at 10 o’clock, the new Treasury Secretary Paulson’s first post-confirmation speech at 11:30 could also be market movers.  However, in front of all that, we should have a fairly calm, albeit very slightly lower open for stocks.
 
Adjusted for fair value, the S&P futures are down about a point, the Dow futures are down about 4, and the NASDAQ futures are now almost 6 points below fair value. 
        
WJR September 2006 Reports
WJR July 2006 Reports

Daily Reports @ WJR

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