August 31, 2010
It looks like August will go down in the books as another down month for our stock markets. Make that three of the last four as traders continue to worry about what Friday’s Unemployment Report will bring.
As for today, there will be a few reports that could change our downward trajectory. Just 15 minutes after trading starts in New York, the August Chicago Purchasing Managers Index is expected to slow of a reading of 57 from July’s 62.3.
Then, fifteen minutes later, the Conference Board’s report on August Consumer Confidence is actually expected to improve to 50.9 from 50.4. If improving consumer confidence in this economic environment sound a bit far-fetched, remember that the consumer confidence numbers are much more buoyed by a drop in gasoline prices than you might think. Light sweet crude, by the way, is trading below 74 bucks per barrel this morning, after topping 80 bucks not long ago.
Later today, the minutes from the Fed’s rather contentious August 10thmeeting.
Dollar General is out with better than expected earnings.
Overseas, we’re looking at a sea of red numbers this morning and we’ll be heading lower at 9:30 as well. Our futures have been sliding all morning. At this point, adjusted for fair value, the S&P 500 futures are down almost 7 points, the Dow futures are down 64, and the NASDAQ futures are almost 10 points below fair value.
We’re not seeing any indication of a big follow-through to Friday’s rally in the stock futures – but at this point we’re not seeing any big pullback either.
One stock that will pop a bit this morning is Genzyme. Over the weekend, Sanofi put a 69 dollar cash offer on the table. The Genzyme Board is likely to hold out for a better offer from someone, although it’s not clear that there’s another “someone” out there. Nevertheless, Genzyme stock is indicated over 70 bucks (that’s a move of about 3½ percent) pre-market.
Meanwhile Hewlett-Packard has held serve in the battle for 3Par, offering 30 bucks per share for shares that traded at 9 bucks just a few weeks ago.
3M is buying Cogent for just under a billion dollars, and Intel is bolstering its Smartphone chip business, paying 1.4 billion dollars for the wireless assets of German company Infineon. That’s the second recent big purchase for Intel, after picking up McAfee a couple of weeks ago. Traditional computer chip sales are slowing, and Intel is evidently convinced that broadening its product line is a good move.
At 8:30, the report on July Consumer Income and Spending is expected to reflect a three-tenths of a percent increase in each.
Asian stocks rose overnight, but Europe is more of a mixed picture. The U.K. market is closed today for a holiday. At this point, adjusted for fair value, the S&P 500 futures are down a half-point, the Dow futures are down 16, and the NASDAQ futures are about a point below fair value.
We’ll get two data points and a speech this morning and all have the potential to whip stock prices around quite a bit. Leading the way at 8:30 will be the “preliminary” estimate of Gross Domestic Product for the second quarter of 2010. The Government takes three bites at this apple. This is estimate number two, and it’s expected that this estimate will be dramatically lower than the “advance” estimate of 2.4%. The consensus estimate is an increase of 1.4% in GDP. Not a double-dip recession, which would be two negative quarters in a row. However, the slide backward is what is causing the market indigestion.
At 9:55, the University of Michigan’s final read on August Consumer Confidence is expected to be unchanged from the original estimate of 69.6.
Then, at 10 o’clock, the main feature will be Ben Bernanke’s speech from the big economic conference in Jackson Hole, Wyoming. A little more clarity about the Fed’s plans in dealing with our still-overleveraged economy will give traders their direction for the day.
Dell and HP continue to bid up the price for little 3Par. Dell held serve this morning, matching HP’s offer of 27 bucks per share. 3Par was trading for about 9 bucks just a month ago.
Stocks overseas are in wait-and-see mode in front of our GDP Report this morning. Our futures are positive right now, but of course that could all change at 8:30.
At this point, adjusted for fair value, the S&P 500 futures are up about 2½ points, the Dow futures are up 18, and the NASDAQ futures are about 9 points above fair value.
If you recall, the acceleration of the recent slump in stock prices came last Thursday on word that weekly jobless claims surged to the 500,000 level. Well, it’s Thursday again. At 8:30 this morning, the Labor Department is expected to announce 495,000 new claims and should we go higher than a half-million, look for stock prices to take it on the chin.
Continuing claims have continued to fall, which would be good news if it were the result of more jobs. However, it is likely the result of claimants simply running out of regular benefits.
Hewlett-Packard is evidently comfortable in leading the current wave of merger and acquisition activity. Even while embroiled in a battle with Dell in trying to acquire 3Par, HP has announced the purchase of Denver-based Stratavia, a privately held computer technology firm.
Overseas markets are generally up just a touch. Our futures were higher earlier this morning, but then went on a steady march back to just about unchanged, which is where they’re likely to be until just before the Unemployment Report is released at 8:30. At this point, adjusted for fair value, the S&P 500 futures are up about a half-point, the Dow futures are down 4, and the NASDAQ futures are about 1½ points above fair value.
It’s been over 11 years now since the Dow Jones Industrial Average first crossed the 10,000 mark. Since then, we’ve crossed it dozens of times, including a couple of times yesterday. At this point the futures are pointing to an open down below the 10,000 level for the Dow again as pessimism about the economy, the jobs market and the general direction of the country continue to hold sway.
In case you were wondering why Irish stocks were off 4 percent at this time yesterday and finished the day down 6 percent – the answer came last night when Standard & Poors downgraded Irish debt with a negative outlook. Perhaps word was out to some a little early on that one.
American consumers appear to be changing their debt habits rather dramatically. Not only has the savings rate gone from negative to a positive 6 percent, but credit card debt over the past 3 months is down 13 percent. Where’s is all going? Lower mortgage rates had mortgage refi applications up almost 6 percent last week as those who can refinance are doing it, and those who can’t refi may be paying down credit cards as their first priority, even if it means going late on that monthly mortgage.
At 8:30 we’ll get the July Durable Goods Report, which is expected to be up 3 percent. At 10 o’clock the July New Home Sales report is expected to be unchanged from last month’s 330,000 level. But in light of the ugly existing home sales report yesterday, that may be wishful thinking.
Overseas markets followed us lower overnight. Our futures started to slip about an hour ago. At this point, adjusted for fair value, the S&P 500 futures are down 3½ points, the Dow futures are down 28, and the NASDAQ futures are about 7 points below fair value.
More suggestions that a double-dip recession may be in the offing have stock prices on the run overseas, and we’ll get off to a rather ugly start as well. A member of England’s Monetary Policy Committee chatted up the possibility of a double dip this morning, and European stock prices took it on the chin. Stocks in the UK are off one percent, and the Irish stock index is lower by more then 4 percent.
On this side of the pond, the Chicago Fed President was scheduled to begin a speech in Indianapolis at 8 o’clock this morning. Traders will be on the loose-lips lookout for any further double-dip warnings.
At 8:30 this morning, we’ll get the June Existing Home Sales Report, and it’s expected to reflect an annualized rate of 4.65 million units. That would be way off the 5.37 million rate last month. Expiration of the Government’s new buyer bailout program will get the blame.
Earnings reports from advertising firm WPP and discount retailers Big Lots were better than expected this morning, but traders appear to be looking past that news to focus on the prospect of the dreaded double-dip.
Chinese stocks rose a bit overnight, but other major markets are lower.
At this point, adjusted for fair value, the S&P 500 futures are down about 11 points, the Dow futures are down 94, and the NASDAQ futures are almost 17 points below fair value.
There’s an interesting article in Barron’s this weekend regarding the upcoming IPO of General Motors. Barron’s speculates that GM could carry a total value of over 60 billion dollars.
The big earnings reports are pretty much behind us. There are only four significant economic reports due this entire week. And, the trading volume we will see will be done by the unfortunate few in New York who have not headed to the shore for the rest of the month.
Anyway, filling the void this morning is corporate merger news. Potash’s Board of Directors has formally rejected BHP Billiton’s bear-hug and has put itself up for bid. Potash stock it bid in the low 150’s this morning, up about 40 points in the last week.
Hewlett-Packard announced an offer to buy data-storage provider 3Par this morning. The HP offer of 24 bucks per share in cash easily beats Dell’s offer of 18 dollars. It’s potentially a 1.6 billion dollar deal, but 3Par stock is actually bid at about $24.80 this morning, as traders are anticipating an even higher offer. Before all this started a couple of weeks ago, 3Par was trading under 10 dollars per share.
Asian markets were mixed overnight, but Europe is a bit higher and our futures have been picking up steam on the corporate merger news.
At this point, adjusted for fair value, the S&P 500 futures are higher by almost 6½ points, the Dow futures are up 47, and the NASDAQ futures are almost 13 points above fair value.
Happy Friday the 13th. Somehow, a very fitting end to a somewhat scary week. If you’re not scared yet, there’s plenty of economic data on the way today. Most of that data is expected to show improvement from last month. So perhaps there’s fuel for optimism, but plenty of room for disappointment, as well.
At 8:30, The July Retail Sales report is expected to reflect a one-half of one percent increase, after a half-percent decrease in June. Also at 8:30, July Consumer Prices are expected to have risen two-tenths of a percent, after a tenth of a percent decline in June.
Then, just before 10, the University of Michigan’s first estimate of August Consumer Sentiment is expected to have risen to 69.4 from 67.8. Hopefully they only surveyed happy households this month.
There’s interesting news out of Germany this morning. German second quarter GDP was up 2.2 percent. That’s the fastest growth they’ve seen since the East and the West came together 20 years ago.
JC Penney earned six cents per share versus the expected nickel, but guidance for the remainder of the year appears guarded.
Asian markets had a pretty good day. Chinese stocks rose about a percent and a half. Europe’s not so good. Our futures are in just about the same shape as they were 24 hours ago, and that’s not so good. At this point, adjusted for fair value, the S&P 500 futures are down 6 points, the Dow futures are down 46, and the NASDAQ futures are almost 12 points below fair value.
It’s become a Thursday morning ritual for stock traders – awaiting the weekly Jobless Claims Report. While it’s true that the number really hasn’t gotten any worse during the past nine months or so – it hasn’t gotten any better either. Until the jobs market improves, there’s not a lot of hope for housing and in turn, consumer spending, and in turn business growth, and in turn – well, you get the idea.
Anyway, the weekly claims are expected to come in a bit improved from last week’s 479,000. Expect a total of 460,000 new claims filed.
Last night, after the market closed, Cisco Systems reported a quarterly profit that beat estimates by a penny per share. Unfortunately, revenue was lighter than expected, and CEO John Chambers’ comments about the rest of the year were uncharacteristically cautious. That has Cisco shares off about 6 percent or so pre-market.
Other earnings news this morning is not so great, either. Kohl’s beat earnings estimates by two cents per share, but guided lower for the rest of the year and Estee Lauder earned a penny per share less than expected.
General Motors did post a 1.3 billion dollar profit last quarter and generated almost 3 billion of free cash flow, so it looks like the IPO of new GM shares that a lot of people are awaiting will happen before year’s end.
Stocks in the U.K. are a touch higher, but most other markets overseas that were open overnight are lower.
Our futures have been on a steady slide lower during the past hour. Right now, adjusted for fair value, the S&P 500 futures are down almost 8 points, the Dow futures are down 55, and the NASDAQ futures are 12 points below fair value.
Let’s start with the good news of the morning and that would once again come from corporate earnings reports. Last night, Disney reported quarterly operating earnings of 67 cents versus the expected 58 cents on the strength of Toy Story 3, among other things. This morning, retail giant Macy’s raised their earnings guidance for the year after earning 35 cents during the quarter gone by. That was 6 cents better than expected.
Later today we’ll hear from Cisco Systems. Expect earnings of 42 cents versus 31 cents from the comparable quarter last year.
Now to the less-than-good news, especially if you’re long the stock market. Yesterday’s statement from the Fed said that the “pace of economic recovery is likely to be more modest in the near term than expected.” While a little more modesty in prime-time TV might be a good thing, modesty in the economic recovery did not play well is Asia overnight.
Japanese stocks were lower by 2.7%. Major European markets are off between one and two percent. And it looks like we’ll continue that loop at 9:30, as our futures have been steady at pretty ugly levels all morning.
Right now, adjusted for fair value, the S&P 500 futures are down about 15 points, the Dow futures are down 116, and the NASDAQ futures are more than 28 points below fair value.
Yesterday’s light-volume rally in stock prices is a distant memory at this point, as we will likely give back yesterday’s gains and a bit more right at the get-go today. The trouble started in China, where stocks lost almost 3 percent overnight.
Chinese exports rose 38% in July from a year ago, but imports rose “only” about 23%. That, believe it or not, represents a big slowdown in imports, exacerbates China’s trade surplus, and is indicative of a consumer slowdown in China, presumably resulting from their government’s attempts to cool down an overheating economy. We should have such problems.
The problems we do have will be the topic of conversation at the Federal Reserve Open Market Committee today. Their report is due at 2:15 this afternoon, and a look at the Fed futures tells us that the market puts the odds of a rate hike at zero today. In fact, the odds of any rate hike by March of next year is only at 14 percent.
MBIA stock is up about 7 percent pre-market after a good earnings report last night. Intercontinental Hotels is off about 7% on a disappointing outlook.
Overseas markets are lower, although China is by far the worst-off of the bunch. We will start lower as we await the Fed report at 2:15. Right now, adjusted for fair value, the S&P 500 futures are down more than 9 points, the Dow futures are down 75, and the NASDAQ futures are more than 14 points below fair value.
Chrysler reported an improvement in market share and operating income for last quarter, although still losing money overall. Revenue was up 8 percent and operating income was $183 million.
Shares of Hewlett-Packard fell more than 10 percent late Friday, on the resignation of CEO Mark Hurd. However, the bargain hunters appear to be moving in this morning, as HP shares are looking to open about a dollar to two higher.
Speaking of executives named Mark who will have a little more time to work on their golf game this fall, Mark Papermaster, the man in charge of the design of the iphone 4 has left Apple after “antennagate.” Papermaster had just been recruited from IBM a couple of years ago, but apparently there was a drop off in reception.
McDonalds reported July same store sales this morning and they are stunningly good. Same store sales in the U.S. were up 5.7 percent versus the expected 4.5 percent. Sales in Europe and Asia were also far better than expected. Must be those new frappes.
Japan was a bit lower overnight, but major European markets are one to two percent higher, and we should get off to a good start as well.
Adjusted for fair value, the S&P 500 futures are up 5½ points, the Dow futures are up 39, and the NASDAQ futures are about 8 points above fair value.
Stock prices have been stuck pretty much in neutral for the last few days, arguably in anticipation of what happens in about 8 minutes. That, of course is the Labor Department’ July Unemployment Report. We know that a lot of temporary census jobs came to an end in July, and those losses are expected to more than offset the any jobs that may have been added in the private sector. Expect an overall loss of about 50,000 jobs.
Of course, before the economy can really rebound, housing has to come back. Until, the country can start creating some jobs for all the twenty-somethings coming out of college every year, new household generation will continue to falter. Expect any surprise to have a pretty dramatic consequence for stock prices today.
AIG and Progress Energy out with better than expected earnings reports this morning.AIG did particularly well, earning $1.14 on an operating basis, 15 cents better than expected.
Once again, Asian markets are mixed, but major European markets are a little higher.
At this point, the futures appear to be holding out hope for a decent Jobs Report, but they’re certainly not convinced. Adjusted for fair value, the S&P 500 futures are up about 3 points, the Dow futures are up 14, and the NASDAQ futures are about a point above fair value.
As the market gears up for tomorrow’s July Unemployment numbers, we have a little job data on which to nibble this morning. The Monster Job Report released this morning reflected a 21 percent increase from a year ago. Granted, it’s not back up to pre-recession levels, but it does seem to be moving in the right direction. At 8:30 this morning, we’ll find out how many former workers were moving in the direction of the Unemployment Line last week. The consensus estimate there is 455,000.
The Limited, Target and Costco all posted better than expected same store July sales this morning. Comps at Big Lots and BJ’s Wholesale, Target and Macy’s were a little lower than expected. We’ll be hearing from the other big chains as the day unfolds.
Barclays Bank, Cardinal Health, Orbitz and Cigna all reported better earnings than the consensus estimates this morning. Cigna just crushed the estimate, earning $1.38, which was a 37 cent beat. They also raised full year guidance.
Asian markets were mixed overnight, but European markets are mostly higher at this hour. Our futures haven’t moved much all morning long and are telling us that stock prices won’t be moving much this morning either. Of course, a big surprise in the weekly Unemployment Claims Report could change that, but at this point, adjusted for fair value, the S&P 500 futures are up about a half-point, the Dow futures are up 4, and the NASDAQ futures are about 2 points above fair value.
The economic “main course” of the week will be Friday’s monthly Unemployment Report from the Labor Department. However, we have a couple of “appetizers” this morning. The Challenger Layoff Report is out this morning reporting only 41,000 announced layoffs in July. While that’s up 6% from the June number, it’s 57 percent lower from July 2009 as employers seem to have done just about all the job cutting they’re about to do to match current business conditions.
At 10 o’clock, the ISM reading on the services sector is expected to show a slower rate of growth than in June. Expect a reading there of 53.
On the earnings front, Toyota’s operating profits accelerated to 211 billion yen (that’s about 2½ billion dollars) for the fiscal first quarter. Compare than with a loss of 195 billion yen from a year ago.
Time Warner appears to be the star of the morning, earning 50 cents versus the 45 cent estimate. Time Warner also raised estimates for the full year.
Treasury Secretary will speak about tax and fiscal policy at 4 this afternoon.
Chinese stocks rose overnight, but most other markets overseas are lower. Japanese stocks lost about 2 percent overnight.
At this point, adjusted for fair value, the S&P 500 futures, the Dow futures, and the NASDAQ futures are all within a few points of fair value.
This is the last week of the quarter in which earnings reports come in bunches, and we have another big bunch of big companies reporting this morning. Reporting better than expected results were BMW, Molson-Coors, Pfizer, Archer Daniels Midland, Entergy, Duke Energy and Marsh & McLennan, although Marsh was a little light on revenue
Just missing expected earnings were Procter & Gamble and Kellogg.
That’s eight out of ten of the big boys beating estimates this morning, and that pretty much mirrors the ratio we’ve seen over the past three weeks. So while hands are being wrung about the prospect of a double-dip recession, companies continue to churn out pretty impressive income for their shareholders.
At 8:30 this morning, we’ll get the June Reports on Personal Income and Personal Consumption. Both are expected to be down from the May numbers, to tow-tenths of percent and one-tenth of a percent, respectively. At 10 o’clock the June Factory Orders report is expected to indicate only a three-tenths of one percent decline.
Overseas markets are mixed, even after our big rally yesterday. Our futures are just a touch lower at we head toward 9:30. At this point, adjusted for fair value, the S&P 500 futures are down about 2½ points, the Dow futures are down 28, and the NASDAQ futures are about 3 points below fair value.
It looks like we’ll get the month of August off to a strong start, based on news of economic contraction. And you wonder why people who speculate in stocks get it wrong so often.
Overnight, the HSBC Chinese Purchasing Managers Index reported that manufacturing in China contracted in July. Now it wasn’t much of a contraction – a reading of 49.4 versus the break-even level of 50. But it was a point lower than the June number and is raising hope that the Chinese Government will not take further measures to cool down the rampaging Chinese economy.
For its own part, HSBC also reported its own earnings this morning and they were better than expected. Operating earnings for the first sox months of the year were $9.6 billion versus the expected 9.3 billion. The net profit was only 6.76 billion, but that was almost double the year-ago number.
On this side of the world, our ISM index for July will be announced at 10 o’clock, and is expected to show a slower rate of growth, dipping to 54 from last month’s 57.
Humana’s operating earnings were $2.11. That easily beat the $1.67 estimate. Shares of Coca-Cola should be interesting to watch today after a very favorable piece in Barron’s over the weekend and a broker upgrade this morning.
Overseas markets are generally higher on the order of 1 to 2 percent. At this point, adjusted for fair value, the S&P 500 futures are higher by almost 13 points, the Dow futures are up 105, and the NASDAQ futures are about 19 points above fair value.
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