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December 30, 2005
It looks like Santa Claus had a vacation planned, because he took off right after his day job was done last weekend. We started out the week with visions of Dow 11,000. If this morning’s futures are any indication, it looks like 2005 may go in the books as a DOWN year for the Dow Jones Industrials. The Dow closed last night up only 1 point for the year, and we’ll almost certainly open well below that this morning.
A lot of overseas markets are closed already. The UK and Germany closed early, and all major foreign markets are down at this hour. France is down over one percent.
One data point is on the way. At 10 o’clock the November Chicago Purchasing Manager’s Index is expected to slip a little to a level of 60.
Lock in those capital losses today, if you need them. Remember the bond market closes early. They’ll be done at 2 o’clock. But the best thing to do for your financial health may be to use the weekend to review where your investments stand. Make sure that your investments are diversified, make sure that you are spending within your means, and make sure that you a saving enough for your future goals.
December 29, 2005
It should be a quiet day of trading as we wind down toward the end of the year. Just remember, it’s today and tomorrow if you need to realize some tax losses before the end of the year.
The weekly jobless claims number should, once again, be roundly ignored at 8:30. The big number of the day will be the report of just how many used homes were sold nationwide in November. We’re expecting a slowdown of only 4 percent, which would still mean home sales are at a very high level. That seems realistic. Unless, of course you’re trying to sell your house around here nowadays.
Oil prices are backing off a bit this morning after a big run-up yesterday on fears that OPEC will start cutting production next year. Light sweet crude is going for $59.64 per barrel.
December 28, 2005
Japan is all done for the year. Tomorrow and Friday are year end holidays, so the Nikkei Index closed out the year overnight at 16,194. For the year 2005, the Nikkei rose more than 31 percent. That’s a five-year high.
There are a lot of well respected warning signs on Wall Street. One of them is called “the inverted yield curve.” The “yield curve” is simply a line graph that depicts the current interest rate you receive by investing in Treasury bonds of different durations. Normally, you’d expect that the longer-term the bond you buy, the higher the interest rate you receive. So the line graph normally slopes up from bottom left to top right. An INVERTED yield curve slopes the other way, meaning that short term yields are higher than long-term. Just about all recessions are preceded by inverted curves. However, not all inverted curves precede a recession. No matter – yesterday the yield curve inverted ever so slightly several times through the trading day and it threw the market for a low-volume loop. A lot of market watchers think an inverted curve is no big deal this time around, because of the generally low level of interest rates. However, the three four most dangerous words in investing are “It’s different this time.”
Nothing remarkable in the overseas markets outside of the big rise in Japan. We’ll get off the December Consumer Confidence number at 10 o’clock, but in front of that, we should get off on the right foot.
December 27, 2005
The week between Christmas and New Year’s Day is usually an interesting one. Trading volumes are light, and a little good news can go a long way. We’ll see if the Dow takes a run at the 11,000 mark by the end of the week.
Bristol-Myers Squibb got a little something in their stocking on Friday. The Food and Drug Administration has approved Orencia, which is an intravenous drug for the treatment of rheumatoid arthritis. Orencia has been effective for patients who haven’t responded to conventional treatments. Bristol-Myers stock is responding very well so far, up almost 5% in the pre-market.
Depending on what survey you believe, it looks like Holiday season sales were up somewhere between 7 and 9 percent, although some retailers definitely took the lion’s share of the gains.
December 23, 2005
The bond market closes at 2 o’clock this afternoon. Japanese stocks did not trade at all overnight, and if there wasn’t a rule against keeping our financial markets closed for four days in a row, our stock market might just as well take the day off today as well.
If anything raises eyebrows today it may be the report on November New Home sales. It’s expected to drop to an annualized rate of 1.31 million units. That would be down from a rate of 1.42 million last month and set the tongue to wagging again about just how soft housing might get in 2006.
We’ll also get the December Durable Goods number in about 15 minutes and the University of Michigan’s final reading on Consumer Sentiment at 9:45.
Ford shares were 4 cents higher in the after-hours yesterday on word that the UAW rank and file did approve those health care concessions, albeit by a 51 to 49 majority.
December 22, 2005
It’s a good day to finish up your Holiday shopping, or in my case, start it. Not only that, it’s still a long walk to work if you work at the New York Stock Exchange. Add it all up, and we’re probably in for a light day of stock trading today.
There’s somefinancial data coming out this morning, as well as the weekly oil, gasoline and distillate inventory numbers, but outside of that there’s just not a lot shaking.
“Four-tenths” appears to be the number of the day. At 8:30, we should hear that personal income rose about 4 tenths of a percent in November, personal spending should rise 4 tenths of a percent. At 10 o’clock the Conference Board is expected to tell us that the Leading Economic Indicators are up – you guessed it – about 4 tenths of a percent.
December 21, 2005
Oh Boy. Now even Kirk Kirkorian is selling shares of General Motors. Mr. Kirkorian, who not long ago, raised his stake to General Motors to 9.9%, mostly at a price of 31 bucks per share, has reportedly sold shares, which are now below 20 dollars to bring his stake to under 8 percent. Not exactly one of those deft investment moves on which Mr. K built his reputation.
A bunch of deals this morning. IBM is buying MicroMuse. It’s a cash deal at a 38 percent premium. How about a 60% premium? Shareholders of Maxtor will be getting that in a buyout by Seagate Technology. Allergan is also paying 3 billion to acquire Inamed.
Federal Express delivered its quarterly report about a half hour ago, and the quarter was a good one. Earnings of $1.53 per share beat the dollar-forty estimate handily. FedEx also reaffirmed guidance for their third quarter.
The final reading on 3rd quarter GDP is expected to come in unrevised at 4.3 percent. We’ll find out at 8:30.
December 20, 2005
New York is an exciting place to be this time of year. Wouldn’t you be excited if you had to walk to work this morning? It will be interesting to see how smoothly the trading goes in light of the big transit strike in the City. However, sales at New York City coffee shops will no doubt be up this morning.
Also going up is the price of shares of Morgan Stanley after a good earnings report this morning. What may not be going up is the Producer Price Index. We’ll find out just how prices are doing at the wholesale level in about 10 minutes. Due to a big drop in energy prices, it’s expected that the overall rate dropped about a half percent in November.
There’s word of a pending real estate purchase in central Tokyo. AIG is said to be negotiating to buy a little spot for about 3.5 billion dollars. That news set off a little real estate rally in Japan that took the Nikkei index up over a percent and a half overnight.
December 19, 2005
The deal between FPL and Constellation Energy that we talked about last week is done. It will be an 11 billion dollar merger with energy assets in about half of the states in the country.
If there are shareholders, outside of the auto industry shareholders, could use some good news, it’s the owners of big pharmaceutical companies. And just in time for Christmas, a U.S. judge has issued a ruling that will protect Pfizer’s patent on Lipitor until 2011. Pfizer shares, which were at $20.60 just over a week ago, should open north of 25 bucks per share this morning. In fact, all the big pharmaceutical stocks should rally this morning.
Circuit City beat estimates of 4 cents by making 6 cents in the quarter gone by. Circuit City shares are looking to open up a buck or two as well.
Pepsi Bottling reaffirmed their guidance this morning.
December 16, 2005
It seems odd this week to not have a big merger to talk about. However, one is getting close. Albertson’s is reportedly close to unloading its drug stores to CVS and selling off everything else to a consortium of buyers that includes Supervalu stores. It will be close to a 10 billion dollar deal.
Rick Waggoner with some optimistic words about GM’s 2006 prospects last night at a holiday party. Waggoner says that the rollout of a new line of big SUVs will help revenue early in the year. Let’s hope he’s right, and wasn’t just spending a little too much time next to the egg nog.
It’s a quadruple witching Friday as options, futures and options on futures will expire. That used to mean be volatility in prices, although things have quieted down a lot in recent months. Things might even be quieter in New York as traders use a pending transit strike as a good excuse to get in a little Holiday shopping this afternoon.
The only economic report of the day will be the Current Account Deficit figure, and if you can get excited about that one, you really need a little vacation.
December 15, 2005
Another day, another big merger this morning, and whether you own the acquirer or the acquiree, your stock price is on the rise. Biotech companies Amgen and Abgenics are getting together. Abgenics stock was up 55% in the after hours on news of the deal, and Amgen, after a one percent sell-off late in the regular session, came rallying back more than 3 percent last night.
Everybody knows that the air is leaking out of the housing bubble, but it’s not yet obvious to home builder Lennar. They reported $3.54 in earnings this morning versus an estimated $3.34 and the reiterated their 2006 guidance.
The big number of the day and the week will come in about 10 minutes with the release of the November Consumer Price Index. Due to a big drop in gas prices, it’s expected that the headline number fell 4 tenths of a percent, which would be the biggest drop in almost 20 years. The core rate is expected to rise 2 tenths of a percent.
December 14, 2005
In you know anyone who does due diligence work for a mergers and acquisitions practice, don’t expect them spend a lot of time shopping for your Holiday gift. Word is that there are a lot of deals in the hopper as companies try to figure out what to do with all the cash that’s been piling up on their balance sheets.
Two new deals are in the spotlight this morning. General Dynamics is buying Anteon for $55.50 per share in cash, which is a 36 percent premium to yesterday’s closing price. Also FPL, the old Florida Power and Light is thinking of linking up with Constellation Energy, which is the old Baltimore power company. That would be an 11 billion dollar deal.
Short term rates moved up again yesterday, but the market loved the Federal Reserve’s statement yesterday. Of course, truth be told, nobody really knows what it meant. For the first time in memory, the Committee did not describe its monetary policy as “accommodative.” Unfortunately, they didn’t promise that their policy wouldn’t get “un-accommodative.” Nevertheless, Wall Street loves an excuse to rally and that’s what we got.
Tokyo was hit with a 2 percent decline on a disappointing Tankan survey of business conditions. European markets are off a quarter-percent or so at this hour. We should see a little profit taking at 9:30 as well.
December 13, 2005
At 2:15 this afternoon, the Fed will announce yet another hike in short term interest rates. Odds are it will be another quarter point, and odds are that the Fed’s statement will be changed very little, if at all from last month. However, any hint in that statement that the Fed is near the end of the road for rate hikes would likely give stock prices a big boost. This is the second-to-last meeting for Chairman Greenspan. He may not want to wait for his finale to shift gears in that statement.
The potential ConocoPhillips acquisition of Burlington Resources is potential no more. The 36 billion dollar deal is done and will create another mega-company in oil and natural gas.
Lehman Brothers announced earnings that beat estimates by 12 cents per share this morning. Best Buy with a miss and a warning this morning.
S&P doing General Motors no favors yesterday as they dropped GM’s credit rating 2 notches and said that a GM bankruptcy isn’t farfetched.
December 12, 2005
If you spend a lot of time on the road working for a big company, today’s announcement from Hewlett-Packard could mean that you’ll soon get to see what your spouse and your kids look like again. Hewlett has partnered up with a Hollywood animation company, most probably Dreamworks, a soon-to-be division of Paramount Pictures, and will unveil a new high-end video conferencing system that is reportedly unlike anything else. It will be somewhat short of “Beam-Me-Up, Scottie,” but is said to be so good, that the high-end corporate customer may be able to vaporize its corporate travel budget.
The two big economic events this week will be tomorrow’s meeting of the Federal Reserve Open Market Committee and Thursday’s release of the Consumer Price Index for November. Although the CPI probably fell last month due to declining oil prices, short-term interest rates will no doubt be rising by another quarter percent tomorrow. We’ll all be watching for any hint of a change in the wording of their Statement at 2:15 tomorrow.
There’s a potential 30 billion dollar deal cooking in the oil and natural gas sector. ConocoPhillips is reportedly looking to buy Burlington Resources.
December 9, 2005
The University of Michigan goes center stage at 9:45 with their preliminary reading on December Consumer Sentiment. As the impact of the hurricanes fades, it’s expected that that reading will come in around 85, which would be a nice jump from last month’s 81.6.
Intel’s mid-quarter update wasn’t exactly the shot in the arm we were hoping for. Intel narrowed its sales forecast with the midpoint falling a tad lower than analysts had hoped. Gross margins are still in good shape at 63% and year-over year earnings growth is over 9%. But, Intel shares are lower in Europe by 2 percent or so.
IBM was hit with a broker downgrade this morning, based on valuation. And Merck will also be under pressure this morning after an article in the New England Journal of Medicine accused Merck scientists of playing fast and loose with the facts regarding Vioxx. Not exactly great PR when you have 700 lawsuits pending against you.
December 8, 2005
11,000 should be just another number on the Dow Jones Industrial Average. Nothing special -- no big deal. But every time prices threaten that 11,000 level, the bears seem to take over and push the Dow down into that 10,200 to 10,800 trading range that it seems we’ve been in for about a million years now.
Expect the day to start with another step backward on the heels of some pretty ugly results overseas. The red-hot Japanese market, for instance, took a cold shower to the tune of about 2 percent overnight.
Yes, last quarter was great, but luxury home builder Toll Brothers is now uncertain about fiscal 2007 profits and admits that the real estate market is softening. They beat last quarter’s estimates handily, but said that for 2007 they might “beat or miss” estimates. How’s that for uncertainty?
Texas Instruments and Xilinx with great mid-quarter guidance last night in computer chip-land. Intel will release its mid-quarter report card later today.
December 7, 2005
There’ll be a new resident at the Renaissance Center next month, or should I say a return resident, as Fritz Henderson will assume the CFO and Vice-Charman positions at General Motors. Henderson has been the head of just about every other big GM unit worldwide over the years, most recently GM-Europe. It’s a return to the Ren Cen because Fritz worked there years ago when he was with Price Waterhouse. Actually he and I worked there together and I can tell you, he’s one sharp individual.
Texas Instruments stock is up almost 65% since January, and after the market closes today they’ll give us a mid-quarter update. We’ll also get the weekly oil inventory numbers at 10:30 this morning. But in the meantime, oil is again floating above 60 bucks per barrel. Light sweet crude has been over 60 bucks every day this week, but hasn’t closed above 60. Should it clear 60, we may see a little more bad news in short order.
December 6, 2005
For stock traders, it’s all about oil prices and interest rates. Oil prices are down a little this morning, on the news that the East Coast escaped a big winter storm, and a hint as to future interest rates is on the way at 8:30.
Presumably, the Fed will stop raising interest rates when they perceive no threat of inflation. The biggest component of inflation pressure is rising wages. The most beneficial way to avoid inflation yet provide good wages is to increase productivity. The Government’s final reading on third quarter productivity is expected to be revised upward to 4.6 percent. Unit labor costs are expected to have fallen by almost one percent. Anything higher on productivity or lower on unit costs will be good news.
Apple Computer gets a broker upgrade this morning and is likely to open higher.
December 5, 2005
We’ll see if this is the week that the Dow Jones Industrial Average revisits the 11,000 level. It teased us back in March before falling back. The Dow starts this morning at 10,877.
Just when Johnson & Johnson thought that it had successfully renegotiated the price of Guidant, Boston Scientific is saying, “not so fast.” Boston Scientific is offering 72 bucks in cash and stock for Guidant this morning. That is 14% more than the J&J offer and 16 % higher than Guidant’s Friday close.
The ISM non-manufacturing index is the only scheduled data point of the morning. It’s expected that the services industry expanded at a slower rate in November, but this time of year, that index is pretty volatile and hard to take too seriously. The number that the market will be watching is the final revision to the 3rd quarter productivity numbers. That report comes out tomorrow.
Wal-Mart continues to rack up some serious Holiday sales. They reaffirmed their estimate of this morning for 2 to 4 percent same store sales growth in December.
December 2, 2005
Like those five dollar coffees? Starbucks’ November same store sales were up another 7 percent, as we just can’t seem to get caffeinated enough.
It’s all about the jobs report this morning. At 8:30 we’ll get the report, and the expectation is that the U.S. economy added 223,000 new non-farm jobs. It’s expected that the unemployment rate held steady at 5 percent. Perhaps more eagerly watched will be the average hourly wage. Last month it spiked up by a half percent. Analysts expect an increase of a far more moderate 2 tenths of a percent in November.
You may not be able to afford a meal at Morton’s, but you will soon be able to buy a share or two of their stock and chew on that. Morton’s, which has 69 restaurants nationwide, announced this morning that they will soon have an IPO on the menu.
December 1, 2005
Retailers and the car companies are reporting November sales today and there’s another wave of economic data coming as well, we could get some twists and turns as the day unfolds. But at least the open should be a turn to the positive after the big blue chips took a tumble yesterday.
The early retail numbers are a mixed bag. Costco reported a 6 percent increase in same store sales. That’s great. Unfortunately, analysts were expecting more like 7.2 percent. American Eagle Outfitters also missed their same store sales target by a bunch. That’s the bad news. The worse news is that there is widespread suspicion that the retailers that hit their sales targets did so by slashing prices. So sales may be great, but profits may be hard to come by.
Speaking of which, car sales in November, spurred by incentives that supposedly weren’t needed anymore, are expected to have gone back up to an annualized rate of 15.7 million units from October’s 14.7.
Personal income and spending data at 8:30 and the November ISM index at 10 may influence the market a bit more than all that. The ISM is expected to decline to a reading of 58.
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