August 31, 2007
Some days are more interesting than others, and this day will be one of them. At 10 o’clock this morning, Federal Reserve Chairman Ben Bernanke will speak at the annual Fed retreat in Jackson Hole Wyoming. Traders will be on pins and needles listening for any hints that short term interest rates will be cut at the Fed’s September 18th meeting or earlier.
While that’s a lot of pressure on Bernanke, President Bush is reportedly providing some cover for the Fed. The Administration will be detailing a plan later today to provide help to homeowners with adjustable rate loans who fall behind in their payments.
And as if there wasn’t already enough going on, at 8:30 we’ll get the July personal income and consumption data, and at 10 o’clock, the August reports for Chicago PMI, the July factory Orders, and the University of Michigan Consumer Sentiment Index. So much for late August Friday’s being lazy days in the market.
Dell beat estimates with their earnings report last night. That helps, but we’re going sharply higher at the open based on reaction to the mortgage reform news.
Europe is up about one percent, Hong Kong was up 2 percent and Japan was up 2½ percent overnight.
At this point, adjusted for fair value, S&P futures are up about 15 points, the Dow futures are up 110, and the NASDAQ futures are about 21 points above fair value.
August 30, 2007
As weak as Wednesday’s stock prices were, they bounced right back yesterday, with the Dow up about 250 points and the NASDAQ finishing higher than it’s Tuesday close. Unfortunately, if yesterday was up – you know where we’re headed this morning. But we’ll get to that in a minute.
On the earnings front, Freddie Mac reported income 45% lower than a year ago. Sears Holding beat their lowered estimate of $1.13 by 4 cents, and H&R Block lost slightly less money in the quarter gone by than expected. However, Block is renegotiating the terms of the sale of its Option One Mortgage unit to Cerberus Capital, and that does not mean that the price is going up.
Standard and Poor’s says that second half profits of the big investment banks could be lower by about 70 percent if the current credit crunch proves as severe as the last.
Today’s only big economic number will be the first revision to the second quarter Gross Domestic Product number. The Street expects a revision to 4.1% from the advance number of 3.4. But this is one number where bad news might be good news for stock prices. A lower GDP number will increase the odds that interest rates will start coming down September 18th. That number rolls out at 8:30.
The futures are in better shape than a half-hour ago, but not by much. Right now, adjusted for fair value, the S&P futures are down 9 ½ points, the Dow futures are down 67 and the NASDAQ futures are about 4 points below fair value.
August 29, 2007
Yesterday was a day we could have done without, as the Dow lost over 280 points and the NASDAQ fared even worse, losing 2.3% of its value.
We’ll get a little bounce back at the open today as the bargain hunters appear to be on the prowl.
Eleven hundred title-company employees will soon be looking for another gig as LandAmerica announced their layoffs this morning. Confirming the further slowdown in housing, the Mortgage Bankers Association reported that mortgage applications slumped another 4 percent last week.
The biggest remaining economic events on the agenda come tomorrow and Friday, with Friday’s event being a speech by Ben Barnanke.
Later today, Altria’s board will meet and may announce a spinoff of Philip Morris International, or perhaps a share buyback.
Major Asian markets slumped between one and two percent overnight. But Europe is much more of a mixed picture at this hour and we will bounce back a bit at the open. At this point, adjusted for fair value, S&P futures are up 7 points, the Dow futures are up 57 and the NASDAQ futures are about 8 points above fair value.
August 27, 2007
In the fine tradition of Merger Monday, there are a couple of buyouts to talk about. U.S. Steel is buying Canadian firm Stelco at a 43% premium to Friday’s close – that’s just a tad over a billion U.S. dollars. And former computer high-flyer Gateway, which once upon a time traded just shy of 80 dollars per share, is being bought for 700 million dollars by Taiwanese computer maker Acer. That computes to a smooth dollar and ninety cents per share.
And speaking of discounts, the sale of Home Depot’s wholesale supply unit is going to get rung-up. However, it will be marked down at the register. The new sale price 8½ billion, which is 18% lower than the price tag posted a couple of months ago, due to the current state of the commercial credit market.
Last Friday, a better than expected number on the rather unreliable New Home Sales Report gave stocks a boost. At 10 o’clock this morning, we’ll find out how many used homes sold during the month of July. Expect an annualized rate of 5.7 million units.
Overseas, markets are higher. In Hong Kong, the Hang Seng was up almost 3 percent overnight, to another new record. We should start the week with slightly lower prices. At this point, adjusted for fair value, S&P futures are down a little more than 3 points, the Dow futures are down 20 and the NASDAQ futures are about 4½ points below fair value.
August 24, 2007
It’s been a relatively quiet week for stock prices. And quiet is just what the doctor ordered. Of course just about anything could be considered quiet when compared to last week. But it’s also been a pretty quiet week for economic data.
However, a couple of interesting readings will be disclosed within the next couple of hours. At 8:30, the July Durable Goods Report is expected to reflect a one percent increase, and at 10 o’clock, we’ll see just how badly New Home Sales did in July. Expect a reading of 820,000 units.
Retailer Ann Taylor had higher sales, but made less money last quarter than the comparable quarter a year ago. However, the 50 cent profit beat estimates by 2 cents per share and affirmed guidance for the rest of the year.
Not much going on overseas. The international markets are mixed, without a lot of movement in any direction. Our futures are pointing toward a slightly lower open, but the Durable Goods number at 8:30 could bump the numbers around a bit. At this point, adjusted for fair value, S&P futures are down 1 ½ , the Dow futures are down 23 and the NASDAQ futures are about 5½ points below fair value.
August 23, 2007
The very beleaguered mortgage broker stocks got a giant shot in the arm yesterday. And, for providing the shot, Bank of America may, if things work out, earn a nice return. Yesterday Bank of America provided 2 billion dollars to the financially strapped Countrywide Financial. Countrywide will pay 7¼ percent interest, and the debt is convertible to Countrywide stock at 16 bucks per share. Considering the Countrywide is looking to open around 24 or 25 or so this morning, Bank of America looks, at least in the short run, to have made a pretty good deal.
The Bank of Japan ended a two day meeting overnight by holding interest rates steady.
At 4:30 this afternoon, the Federal Reserve will report on lending activity at its discount window through last night. This is a report that has never received any attention until now. However, tonight’s report will give us some idea as to whether last week’s rate cut is stirring any activity.
Stock prices were up across the globe overnight. Big Asian markets were up 2 ½ to 3 percent. Our futures have given back a lot of ground over the past couple of hours, but we’re still looking to open higher at 9:30. Adjusted for fair value, S&P futures are up 8 points, the Dow futures are up 41 and the NASDAQ futures are about 5 points above fair value.
August 22, 2007
We haven’t heard much about mergers and acquisitions since all of this sub-prime slime hit the front page. But this morning, shares of E-Trade rose about 5 percent in Europe on word that E-Trade is in merger talks with TDAmeritrade. Ameritrade has been a rumored merger candidate for some time, but this is the first time we’re hearing that there’s some fire to accompany the smoke.
Homebuilder Toll Brothers reported that profit slumped 85% from the comparable quarter a year ago. However, they beat the three cent estimate. More telling, though, is that they were not willing to give guidance for the rest of the year.
The Chinese Shanghai index stocks rose again, even in the >
Our stock index futures are weaker than they were a couple of hours ago, but at this point, they’re still pointing toward higher stock prices at the open. Adjusted for fair value, S&P futures are up about 8 ½ points, the Dow futures are up 49 points and the NASDAQ futures are over 8 points above fair value.
August 21, 2007
With all the rain yesterday it was a great day for ducks, and not to be outdone, the financial markets behaved like a proverbial duck. Things looked relatively calm on the sur>
The yield on the 3 month Treasury Bill, which has hovered in the 4½ to 5 percent range for quite some time, was pushed down to 2½ percent at one point yesterday. What does that mean? That means there was a massive demand for short term government debt as the big money decided that the risk of longer term debt, and especially corporate longer term debt, wasn’t worth the wait. Treasury bill yields are up to the mid threes this morning, but there’s no doubt that the volatility we’ve seen in the financial markets lately is not going to leave us anytime soon.
Capital One is the latest in line to get out of the wholesale mortgage business, which will put 1,900 people out of work.
Overseas markets are generally higher, with Chinese stocks at another all time record. We’re looking to open a little higher at this point as the futures have improved just in the past half hour. S&P futures are up almost 6, Dow futures are up about 29, and the NASDAQ futures are about 6 points above fair value.
August 20, 2007
Overseas markets are in big-time rally mode after our Fed-induced rally on Friday. The big question, of course, is “what happens next?”
Well, the next thing that happens will happen at 10 o’clock this morning, when we’ll get the reading on July’s Leading Indicators. Expect an uptick, believe it or not, of 4 tenths of a percent, versus a 3 tenths of a percent decline in June.
We’ve all had banana splits, but tonight we’ll get a Blackberry split. After the close of trading tonight, Research in Motion, the Blackberry people will split their shares 3 for 1, so if you’re a RIMM shareholder, don’t panic tomorrow morning when the price drops by two-thirds.
Here’s some good news -- Oil is trading about 50 cents lower, as it looks like Hurricane Dean will miss most of the oil infrastructure in the Gulf.
It looks like we’re headed for a mixed market at 9:30. At this point, adjusted for fair value, S&P futures are up 3 points, Dow futures are now up 12, but the NASDAQ futures are about 3 points below fair value.
August 10, 2007
If you like roller coasters, you could have saved a trip to Sandusky this week and just strapped in to your easy chair with a bag of Doritos and your favorite beverage to watch the stock market. Volatility is at a four year high, and while most investors have no problem with UPWARD volatility, this is a whole different thing.
There’s no official Federal Reserve Open Market Committee meeting today. But don’t think that they won’t be talking – or acting. Yesterday, the European Central Bank pumped a lot of money into the banking system to calm the financial waters. Traders will be watching the Fed for signals about the amount of credit available and the target interest rate.
In the meantime, more financial institutions are signing the blues. Last night Countrywide Financial blamed what they called “unprecedented” poor conditions in the credit markets for trouble ahead. Countrywide is holding far more mortgage paper than they’d like, for lack of any buyers at reasonable prices. Wells Fargo also warned about future earnings this morning.
There’s nothing fancy on the economic calendar today, but it doesn’t matter. It’s going to be a wild day as we wait on the Fed’s action, words, and willingly of traders to be long going into the weekend will take center stage.
Overseas markets are lower by 2 to 4 percent, and we’ll see more selling at 9:30. At this point, adjusted for fair value, S&P futures are down almost 24 points, the Dow futures are down 184 points and the NASDAQ futures are about 28 points below fair value.
August 9, 2007
Have you seen this movie lately? Big rally yesterday, big drop this morning. Well, here we go again.
Sub-prime slime gets the blame again, as French bank BNP Paribas has frozen investments in three of its hedge funds that invested in those lovely little ticking time bombs. Liquidity, they say, has totally dried up in sectors of the U.S. credit market. So, if you’re one of the high-rollers in one of those Paribas hedge funds, get used to it. Your money, or what’s left of it, will be unavailable for at least another month. In response, the European Central Bank has released a statement this morning, assuring the markets that they are paying attention, and will act if necessary.
Back to business fundamentals for a minute. The big retailers are announcing July same store sales today, and so far, it’s a mixed bag. The specialty names, which have done so well over the past few years, appear to be hitting a dry patch.
American Eagle Outfitters said July same store sales were down 6 percent. They were expected to be up 4 percent. Limited also missed estimates, with sales down 3 percent. Gap was down 7 percent. On the flip side, Best Buy reaffirmed their full year projections and Costco says that July sales rose 7 percent, which was a percent and a half higher than expected.
We’ll have another volatile day on our hands and at the open, it will be downward volatility. At this point, adjusted for fair value, S&P futures are down 13 points, the Dow futures are down 109 points and the NASDAQ futures are just about 11 points below fair value.
August 8, 2007
The Federal Reserve Open Market Committee winked at the subprime and general credit market mess, but they didn’t blink in their ongoing inflation watch. Stock traders took a while to come to grips with themselves, but finally voiced their approval with a rally into the close yesterday and more rising prices on tap this morning.
Helping the bulls get back on their hoofs this morning is Cisco Systems. Cisco beat estimates by a penny per share and lifted their quarterly guidance. Cisco shares rallied about 5% in Germany this morning.
Sprint Nextel beat estimates by 3 cents this morning and Celgene was upgraded by a major broker.
Homebuilder Toll Brothers reported better 3rd quarter revenue than expected, but that doesn’t mean that it was good. Revenue was down 21% year-to-year as the housing market continues to suffer.
General Motors will hold their annual auto analyst conference today.
Overseas stocks are higher across the board, with Hong Kong up almost 3percent overnight, and we should head higher at 9:30 as well.
Adjusted for fair value, S&P futures are up almost 7 points, the Dow futures are up 62 points and the NASDAQ futures are just about 14½ points above fair value.
August 7, 2007
It’s Open Market Committee meeting day for the Fed and by now, you know the drill. At 2:15 this afternoon, the Fed will announce no change in the target short term interest rate. They do so in a carefully worded statement. Instantly, millions of traders, many of whom could not diagram a sentence if their life depended on it will then examine every word of that statement for clues about future Fed policy.
If stock prices behave consistently with Fed meeting days of the recent past, prices will gyrate around quite a bit for most of the day, but will hang pretty much around the unchanged level at 2:15.
Tyco beat estimates handily this morning, Marsh & McLennan missed by a penny, and we’ll get earnings from Cisco Systems after the market closes this afternoon.
Stocks in Hong Kong were basically unchanged overnight, but most other markets overseas are higher.
The Dow gained almost 300 points yesterday, and in this one-step-forward-one-step-back market of ours, it should be a one-step back open for stock prices, although the futures improved quite a bit a half hour ago. Although they look positive on the sur>
August 6, 2007
Volatility will again be the order of the day for stock prices. But, after a big downdraft last Friday, we’re looking at a stronger start in the offing. Of course, there’s still an hour or so to go before the market opens, and the way sentiment has gyrated lately, there’s no such thing as a sure bet.
By the way, the S&P 500 is about 7 ½ percent lower than the recent record high.
There’s not a lot on the docket today. No economic reports and not a lot of earnings reports. So, traders will likely speculate on what the Fed will be up to tomorrow. The Open Market Committee will hold a one-day meeting and is widely expected to hold interest rates steady. However, the jury is out on whether the Fed statement will acknowledge the recent problems in the credit markets, which might signal an interest rate cut in the months to come.
A handful of foreign markets are closed today. Canadian markets are closed and it’s Picnic Day in Australia. Most Asian markets that did trade were lower, although China was up again. European markets are mixed.
Our futures have quite slipped a bit over the past hour, but we’re still looking for rising prices at 9:30. At this point, adjusted for fair value, S&P futures are up about 7 points, the Dow futures are up 43 points and the NASDAQ futures are about 14½ points above fair value.
August 1, 2007
Midday yesterday, you might have thought that the latest stock market correction was over. We were up about 140 points after a 90 point gain Monday. All of a sudden, the Dow gave up about 300 points and the futures this morning are pointing a good bit lower as well.
The problem is of course, that nobody knows the degree to which the sub-prime mortgage mess is not confined just to sub-prime loans, but will reach all the way up the credit ladder. Yesterday, word that American Home Mortgage may have to liquidate (for some reason) took a lot of people by surprise, especially people who owned the stock a couple days ago at 10 bucks a share. It closed the day at $1.04.
This morning brings word from Bear Stearns of another failed hedge fund. This one is mortgage related as well, but was reportedly invested in higher quality, non-sub-prime mortgages.
We’ll get more earnings reports today from the likes of Disney, Time Warner and Kraft – but nobody cares. In the long run, the fundamentals like earnings are critically important, but in the short run, fear and rumor are in control.
Asian markets were a mess overnight, off 2 to 4 percent. Europe is also about 2 percent lower. Our futures are in better shape than they were in an hour or two ago, but that doesn’t mean they’re good. At this point, adjusted for fair value, S&P futures are down 11 points, the Dow futures are down 74 points and the NASDAQ futures are almost 14 points below fair value.
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