August 31, 2011
We thought that yesterday’s Consumer Confidence number would be bad, but it appears that consumers are paying more attention than we expected. The Conference Board’s reading of 44½ was a full 8 points lower than expected and sent stock prices down about one percent. Then, mid-afternoon, the Fed minutes inferred that some additional quantitative easing might be on the way and stock prices clawed their way back to a little better than break-even.
You’d expect that today’s rock-bottom interest rates would have everybody refinancing their mortgages. Well, it’s not happening – thank you Fannie Mae and Freddie Mac. Although new purchase mortgage applications rose almost one percent last week, refi’s were down over 12 percent as closing costs rose, and those oh-so-accurate bank appraisals continue to keep people locked at their older, higher rates.
At quarter to ten, the Chicago Purchasing Managers Index is expected to sink to 54 from nearly 59 last month. That would still be above the no-growth level of 50, but not by much.
Overseas markets are higher. Europe is up about 1½ percent. Just 3 minutes ago, ADP reported their estimate that 91,000 new private sector jobs were created in August. That gave our futures a little boost, although they’re not nearly as good as they appear on their >
There’s nothing much on the economic calendar between now and the open of trading. About a half hour ago, the ICSC-Goldman Retail Sales Report told us that retail sales rose a tenth of a percent last week, maintaining the year-over-year rise of 3 percent.
At 10 o’clock, we’ll get the Conference Board’s reading of Consumer Confidence. It’s a survey of 3,000 households, and is expected to take quite a dip from the July number of 59½. Expect that the recent stock market dip and Washington leadership void to take the August number all the way down to 52.5, as worries continue about the direction of the economy and the country.
Perhaps even more interesting will be the 2 o’clock release of the minutes from the latest Federal Reserve Open Market Committee meeting. We’ll find out just how much dissent is building to the Fed’s apparent zero-interest–rate-forever policy.
Overseas markets are a mixed picture, but the winners are outweighing the losers in the wake of yesterday’s big rally here. Russia and England are the standouts, higher by about 5 percent and 2 percent, respectively. Our futures are indicating a pullback from yesterday’s big rally. They’ve recovered a little during the past ten minutes, but they still have a ways to go. Right now, adjusted for fair value, the S&P futures are lower by 7½ points, the Dow futures are down about 64, and the NASDAQ futures, are just about 12½ points below fair value.
The speech of the week comes less than two hours from now from the annual Fed summit at Jackson Hole, Wyoming. It was a year ago that Ben Bernanke laid out the Fed’s plan for quantitative easing. While QE2’s impact on the economy is debatable, the announcement triggered a massive stock market rally. While most doubt that QE3 is on the way, we’ll find out more at 10 o’clock this morning.
In the meantime, the Government’s second guess at 2ndquarter Gross Domestic Product comes out at 8:30. Expect that the advance number of 1.3 percent might wind up closer to 1 percent.
Then, just before 10, the University of Michigan releases its final Consumer Sentiment reading for August. The preliminary estimate of 54.9 was even worse than the reading at the depth of the 2008 financial meltdown, so it’s not like people aren’t paying attention. Expect the final number to moderate slightly to a reading of 56.
Tiffany reported 86 cents of earnings for last quarter, easily beating the 77 cent estimate.
Asian markets were fairly flat overnight, but Europe is lower again. The DAX index in Germany is down 2½ percent, and is down almost 25% this month alone. Our futures have been drifting a bit lower as well.
Right now, adjusted for fair value, the S&P futures are lower by 4 points, the Dow futures are down about 27, and the NASDAQ futures, are just about 1½ points below fair value.
The big story of the morning is of course the resignation of Steve Jobs as CEO of Apple. Apple stock lost about 5 percent of its value after-hours yesterday after the resignation was announced. But this morning, the stock has recovered more than half of that loss. No one knows just how much Apple will miss Jobs’ vision long-term. No matter, he’s given us all a lesson in the value of being able to “think different.”
A surprisingly strong Durable Goods number got stock traders to “think different” yesterday as stocks rallied once again. This morning, we’ll have to focus on the weekly jobless claims, which have been stuck more or less in the 400,000 neighborhood for most of the year. Expect a reading of 405,000 for last week.
Shares of Applied Materials and Guess could be under some pressure this morning. Last night, both companies fessed up that earnings for the rest of the year won’t measure up to expectations. Gold is down another one percent after yesterday’s stunning $100 per ounce loss.
Stock indexes in Mainland China rose about 3 percent overnight. The rest of Asia was mixed, but European markets are a little higher, for the most part. Our futures have been up and down and all around. Right now, adjusted for fair value, the S&P and the Dow futures are virtually flat, but the NASDAQ futures, with Apple at the core, are now about 9 points below fair value.
Yesterday’s rally was certainly a big breath of fresh air for a lot of portfolios. However, we’re still holding our collective breath in anticipation of Ben Bernanke’s speech from Wyoming two days from now.
Today’s only economic news of note will be the announcement of the July Durable Goods Report. Tat 8:30 it’s expected that we’ll hear that production of big ticket items rose 2 percent in July, recovering the revised 1.9 percent decrease in June.
By the way, in case you’re looking for a big interest rate from your investments, you might note that the two year Greek bonds are going off at an annual interest rate of almost 44 percent this morning. Of course, if you interested in a return OF your money, rather than just a return ON your money, you might want to look elsewhere.
Asian markets were generally lower overnight, but major European markets are higher. Our stock futures are off their lows of the morning, but we’re still looking to give back a chunk of yesterday’s gains at the open. Adjusted for fair value, the S&P futures are down 12 points, the Dow futures are down 110, but the NASDAQ futures are now about 20½ points below fair value.
August 19, 2011
Adding to the pile of woe this morning, Bank of America will cut 3,500 jobs this quarter and is reportedly looking to cut 10,000 jobs overall. Bank of America stock was back under 7 bucks yesterday.
There are no economic or significant earnings reports on the docket. Accordingly, we’ll be dancing with the rumor mill as our partner for the rest of the day. It will be interesting to see how many dancers remain on the floor by 4 o’clock.
Mainland China down only one percent overnight, but most other markets overseas are down somewhere between 1 and 3 percent. Gold is up another 2 percent.
Our futures were really in the pits earlier this morning, with the Dow futures down close to 200. However, we’ve seen a pretty good rally over the past hour. At this point, we’re looking at a lower open, but not by that much. Adjusted for fair value, the S&P futures are down 7 points, the Dow futures are down 63, but the NASDAQ futures are now about 4 points below fair value.
August 18, 2011
It looks like we’re having another run-for-cover morning as Europe is once again coming a bit unglued. European bank stocks are again under significant pressure, so we’ll have to hope that a rather full menu of domestic economic reports helps us out as the morning unfolds.
Weekly Jobless Claims at 8:30 are again expected to hover around the 400,000 level after last week’s 395,000. Simultaneously, we’ll get the July Consumer Price Index, which is expected to rise two-tenths of a percent on the headline and the core rate. Yesterday, of course, we saw a rather uncomfortable rise in the core Producer Price Index. We’ll see if there is follow-through to the CPI. Then at 10 o’clock, we’ll get the Existing Home Sales, the Philly Fed Survey and the Leading Economic Indicators. Watch that LEI number, which is expected to ease to a positive two-tenths of a percent versus last month’s three-tenths
Hewlett-Packard reports after the close today, but so far this morning, Sears reported a loss of $1.13 per share. That was almost 50 cents lower than expected. Dollar Tree beat their estimate for the past quarter, but guided lower than analysts are currently expecting.
Asian markets were lower on the order of 1 to 2 percent. European markets are lower on the order of 2 to 4 percent. Hold on to your hats – here we go again. Right now, adjusted for fair value, the S&P futures are down 25 points, the Dow futures are down 191, and the NASDAQ futures are 49 points below fair value.
Yesterday’s announcement from the leaders of Germany and France proved that Europe has politicians too, just like we do. They recognized a problem, they talked about the problem and they shared a vision of what they’d like to have happen. Then, they announced nothing that would solve the problem, but they did propose that a new tax be imposed. I think we’ve seen this movie.
Anyway, stock prices slumped yesterday on that news, but it looks like we’ll get back on the one-day-down-next-day-up track this morning. Our futures have been improving on the back of some pretty good earnings news.
Target beat the 97 cent estimate by 6 cents per share and raised full year guidance. Staples earned 22 cents. That was three cents better than expected. Deere, Abercrombie & Fitch and Dell also beat their respective bogeys. However, Dell was a little light on sales and the stock was pushed about 6 percent lower after hours.
At 8:30 the overall Producer Price Index is expected to have been absolutely flat last month, and up two-tenths of a percent if you exclude those unnecessary items like food and energy.
Overseas stocks are mixed. Our futures had been pushing higher most of the morning, although they hit a little bump about 5 minutes ago. However, they’re still pointing north. Right now, adjusted for fair value, the S&P futures are up 5 points, the Dow futures are up 38, and the NASDAQ futures are 3½ points above fair value.
In case you thought that three days of rising stock prices meant that the coast was clear – well, think again, my friend. Much of yesterday’s two percent gain could evaporate in the early going today as the focus turns again to European growth – or lack thereof.
Second quarter Eurozone Growth checked in at a measly two-tenths of a percent, with only one-tenth growth in Germany. France’s economy had been previously announced as being absolutely flat in the second quarter. Of course, today is the day Sarkozy and Merkel are meeting to hopefully hammer out agreement on a plan to deal with the Eurozone’s problems. Hopefully we’ll hear something significant before the day’s over.
Home Depot and WalMart both checked in with better than expected earnings this morning and both raised their guidance for the year, although not by a lot.
At 8:30 we’ll get the July Housing starts figure which really hasn’t much moved off of the annualized rate of 600,000 units since November of 2008.
Gold is bouncing about 25 bucks an ounce higher this morning.
Asian stock markets were mixed, but Europe has turned decidedly lower and our stock futures could use a lot of help as well.
Right now, adjusted for fair value, the S&P futures are lower by almost 22 points, the Dow futures are down 163, and the NASDAQ futures are now about 34 points below fair value.
August 15, 2011
After this year’s earthquake and tsunami, Japan’s economy is in a recession. That’s no surprise. However, overnight the announcement that the decline in Japan’s second quarter GDP was only three-tenths of one percent – well, THAT was a rather pleasant surprise. The decline was expected to be more than twice as severe, and is a marked improvement from the first quarter.
Another economic measure that’s been pretty ugly during the past couple of months is the Empire Manufacturing Index. That’s a survey of manufacturing activity out East. It was a negative 7.79 in June, a negative 3.76 in July. At 8:30 this morning, expect a POSITIVE 1.0
If you own shares of Motorola Mobility, you’re waking to good news this morning. Mobility shares closed well under 25 bucks on Friday. This morning, Google is offering to buy all of those shares for 40 dollars per share in cash.
Lowe’s reported earnings that beat the 66 cent estimate by two cents. However, Lowe’s guided lower, no pun intended and the stock is indicated off about 5 percent. Earnings are on the way from Urban Outfitters and food supplier Sysco.
Stocks did not trade South Korea and Austria today. Venezuela will also be closed today, but most of the markets that are trading overseas are trading higher.
At this point, adjusted for fair value, the S&P futures are higher by about 8 points, the Dow futures are up 78 and the NASDAQ futures are about 6 points above fair value.
It’s like we’ve all entered an investment amusement park and have to decide whether we prefer the roller coaster or the merry-go-round. The roller coaster that the stock market has been over the past two weeks can make you frightened, excited, sick and yet thrilled all within a short period of time. Meanwhile, over there is the merry-go-round of cash and bonds goes around and around and around. The big question, of course, which ride is likely to let you off above ground, rather than under water. You buys your ticket and takes your chances.
Anyway, today’s roller coaster is likely to start on the upswing, pending some upcoming economic data. At 8:30, the July Retail Sales Report is expected to show a six-tenths of a percent increase in Retail Sales, with three-tenths of that coming without auto sales. Then, at 9:45 the University of Michigan’s first look at August Consumer Confidence is expected to decline only slightly to a reading of 63 from last month’s 63.7.
Nvidia could be the hot stock of the morning, after beating estimates and raising guidance last night. Kohl’s also raised guidance, while Sara Lee and Briggs and Stratton both lowered their outlooks.
European stocks are solidly higher at this hour. Our stock futures were higher early this morning, turned lower and, just within the past half hour, have turned again to suggest a moderately higher open for stock prices. Right now, adjusted for fair value, the S&P futures are higher by 2½ points, the Dow futures are up 13, although the NASDAQ futures are now just about 3 points below fair value.
The hedgies and high frequency traders, reacting to a lot of things, including RUMORS, continue to play ping pong with your retirement plan this morning as European markets and our futures have been all over the place.
If corporate earnings were all that we had to consider this morning, things would look pretty good. Much of that good came last night from one of this year’s underperformers, Cisco Systems. The giant network equipment maker Cisco Systems beat the 38 cent profit estimate by 2 cents per share. Cisco’s guidance bracketed the average analyst estimate. However, a pretty confident conference call from Cisco’s CEO had the stock up by 15% or so after market yesterday. It’s backed off a little since then, but should still open higher.
At 8:30 we’ll get the weekly Jobless Claims Report. Expect 405,000 new claims, and hope for far fewer, so that maybe we can get a little economic hope to offset the rumors and emotions.
Last night, the adjusted Dow futures were higher by over 160 points and in fact the futures were positive until the past hour or so. Since then, things have gotten a bit ugly. A Reuters report or a RUMOR that an Asian bank is cutting its credit line to a French bank then threw European markets and out futures for a loop. Just over the past hour, the Dow futures significantly higher, and then down almost 100 points. Right now, adjusted for fair value, the S&P futures are lower by 8 points, the Dow futures are down 70, and the NASDAQ futures, helped out by the Cisco results are just about even with fair value.
Yesterday, it took traders an hour or so to figure out that they liked the latest Federal Reserve Policy Statement, but when they did, they bid up the Dow Jones Industrials about 630 points from their lows of the day. Even though the Fed’s interest rate policy supposedly controls only short term rates, yesterday the Fed promised that your money market fund will be earning pretty much nothing for the next two years.
That “two year” promise also effectively cratered yields on the 2 year and the 10 year Treasury, to the point that the dividend yield on the S&P 500 is roughly equivalent to your interest yield in the 10 year Treasury. Simply put, there’s a new Bernanke “put” that reflated stock prices yesterday. Today, however, is another day.
The Mortgage bankers Association reported a huge 30 percent increase in mortgage refinancings last week as the average interest rate on the 30 year mortgage fell to 4.37 percent. Oil is up 3 bucks to about 82 dollars per barrel. Gold is up another 25 dollars nearing $1,770 an ounce.
Asian markets rose 1 to about 3 percent overnight. Europe is generally higher with the exception of Italy, Russia and Spain.
Expect another bumpy ride today as the hedgies and high frequency traders play ping pong with your retirement plan. The futures have been steadily sinking for the past couple of hours. Right now, adjusted for fair value, the S&P futures are lower by 9½ points, the Dow futures are down 112, and the NASDAQ futures are about 31 points below fair value.
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