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WJR December 2006 Reports

 
 
December 29, 2006
 
Shares of Apple Computer have been pressured lately.  Everyone knew that Apple, like a number of other companies, had improperly dated some employee stock options in the past.  It turns out that between October of 1996 and the beginning of 2003, almost 20% of granted options were improperly dated.  In connection with that, Apple is restating earnings and taking an 84 million dollar charge.  However, Apple shares are up 4 percent in the pre-market on news that while CEO Steve Jobs was aware of the backdating, he did not benefit from it.
 
Interestingly, the chairman of Apple’s audit and finance committee is Jerome York.  Maybe he was spending a little too much time focusing on other stuff, like taking over General Motors.
 
Yesterday was the second lightest volume day of the year at the New York Exchange, and today probably will probably be lighter still.
 
A three day weekend approaches, four days on the Nasdaq, and possibly the New York Exchange, although it is extremely rare to have the U.S. financial markets closed four days in a row.
 
The futures have rallied back to even over the past half hour.  Right now, adjusted for fair value, the S&P futures are down a half- point, the Dow futures are up 2 ½ but the Nasdaq futures are about a half-point below fair value.
 
December 28, 2006
 
Surprisingly strong November New Home Sales yesterday popped stock prices, as the Dow closed above 12,500 for the first time.  We’ll get a second bite of the pie at 10 o’clock this morning.  November Existing Home Sales are expected to be down a bit to a level of 6.19 million units.  An upside surprise in that number would buttress the argument that the nationwide housing market may be bottoming out, and will not be as big a drag on the economy that some fear.
 
Shares of Apple will be under some pressure today, as the Financial Times reported that Steve Jobs allegedly received about 7 ½ million unauthorized stock options a couple of years ago, and that Board of Directors documents were fudged to cover up.  The company isn’t commenting, but the market may comment on what they think of the prospects, no matter how remote, for Apple stock without Mr. Jobs.
 
Also at 10 o’clock, the Conference Board is expected to announce that Consumer Confidence in November dipped slightly to a reading of 102.
 
Adjusted for fair value, the S&P futures are down less than a half point, the Dow futures are down less than a point and the Nasdaq futures are about 3 points below fair value.
 
December 27, 2006
 
One of the big clouds hanging over the 2007 domestic economy is the health of the housing market.  Yes, the local housing market will be very weak.  We know that.  However, a significant national slump in housing could push the economy toward recession.  The November New Home Sales report at 10 o’clock is expected to show a slight increase from last November, to a level of 1.02 million units.
 
If the level of new mortgages in December is any indication, there could be rough waters ahead.  Earlier this morning, the mortgage bankers association reported that mortgage applications were down 14.2 percent for the week ended December 22nd, as long term rates rose slightly.
 
IBM was upgraded to a buy from a sell this morning, but it came from a firm that has maintained its sell rating all the way from 70 to 95, so take the upgrade for what it may be worth.
 
The futures have weakened over the past couple of hours, but we’re still looking for a pretty nice rally at 9:30.  Adjusted for fair value, the S&P futures are up about 5 points, the Dow futures are up 44 and the Nasdaq futures are about 8 points above fair value.
 
December 26, 2006
 
Just how well retailers did over the past month depends on whose estimate you believe.  The real story won’t be told until all those gift cards are redeemed, because retailers can’t book that revenue before then.  But even estimates on how much was spent on gift cards vary widely.  Estimates range from 25 billion to 85 billion dollars. It’s also estimated that 67 percent of all shoppers bought at least one.
 
However, according to the National Retail Federation, the sales increase for November and December 2006 was about 5 percent, versus 2005’s 6.1 percent.
 
Two reports that seldom draw much interest will be more closely watched today.  The Richmond and Dallas Feds will announced their November manufacturing indexes.  After recent weaker than expected readings from the Philadelphia and Chicago manufacturing reports, today’s readings could confirm that troubles in manufacturing are not just a mid-western problem.
 
Japanese stocks rose about a half percent overnight.  Outside of Asia, most markets are closed today.  Our futures are giving us a bit of a mixed picture at this point. Adjusted for fair value, the S&P futures are up about a point, and the Nasdaq futures are just a third of a point below fair value.
 
December 22, 2006
 
One more inflation indicator will be dropped into Santa’s bag today.  The personal consumption price index is expected to rise two tenths of a percent,  We’ll also get the November Durable Goods number at 8:30, which is expected to rise about one percent.  But absent any big surprises, odds are good that we’ll see higher prices for stocks on very light volume as we head into the Holiday weekend.
 
Red Hat, Research in Motion and Micron Technologies are all out with better than expected earnings this morning.  The disappointment du jour will be Qualcomm, as they lower their 4th quarter forecast, and suffer a broker downgrade.
 
Asian stocks were higher overnight, but European markets are mixed.  As I mentioned, we’re looking to open higher, but not by much. Adjusted for fair value, the S&P futures are up a point and a half, but Dow futures are up 10, and the Nasdaq futures are a touch more than a point above fair value. Merry Christmas everyone!
 
December 21, 2006
 
A couple of trading days are left before a long Holiday weekend.  It couple very well be that traders will be more focused on finding a Playstation 3 or a Nintendo Wii than finding a bargain stock.
 
Boston Scientific got a little Christmas present this morning.  Boston received an exclusive contract to provide the heart stents to the prestigious Cleveland Clinic.  It’s a two year deal worth 18 million.
 
In ten minutes, we’ll get the second estimate of 3rd quarter Gross Domestic Product.  Expect confirmation that the original estimate of 2.2% was right on the money. The November Leading Indicators will be announced at 10 o’clock, which could move the markets.
 
Overseas markets are mixed, and actually very close to unchanged.  We should start higher, but very close to unchanged as well.  Right now, adjusted for fair value, the S&P futures are up a little less than 2 points, but Dow futures are up a 10, and the Nasdaq futures are nearly 3 points above fair value.
 
December 20, 2006
 
Yesterday’s big news was a nearly 15% drop in the Taiwanese stock market after their government imposed some investment restrictions.  Well, overnight the Thai government said “Aw, we were just kidding, guys.”  They reversed the new restrictions for stock investments and the Thai stock market rose about 11 percent.  Don’t you love it when governments get involved in commerce?
 
If you’re about to lose your job, and are thinking about a new line of work, consider applying to be the Chairman of Goldman Sachs.  It’s not a bad gig.  The salary is only $600,000, but the perks are pretty good.  CEO Lloyd Blankfein was awarded a 2006 bonus of about 54 million.
 
We’ll get the weekly oil and gas inventory reports later this morning.  There’s a fear that inventories dipped last week due to weather factors.  That has light sweet crude edging close to 64 dollars per barrel.
 
Asia recovered nicely overnight from the prior days’ Thai take-out. European markets are higher as well.  Our futures are just a shade higher at this point.  Adjusted for fair value, the S&P futures are flat, but Dow futures are up about 2, and the Nasdaq futures are about a point above fair value.
 
December 19, 2006
 
Morgan Stanley is the latest Wall Street firm that had a better-than-expected quarter.  They beat estimates and will be spinning off their Discover Card unit.
 
We could use a little more good inflation news at 8:30 this morning.  The November Producer Price Index is expected to have risen 7 tenths of a percent overall and three tenths of a percent for core producer prices.  Lower numbers than those would help to offset what is currently shaping up to be a pretty weak open. Tech stocks will be among the weakest after Oracle’s ho-hum report last night.
 
Asian market investors are fit to be tied this morning, as the stock market in Thailand came undone overnight, down almost 15 percent.  Thailand’s central bank imposed some pretty severe restrictions on foreign capital flows to stem the rise in value of its currency, which is up 17% against the dollar this year.  The drop in Thailand dragged other Asian markets overnight as well.
 
Absent a lot of good news at 8:30, we’ll be heading lower at the open.  At this point, adjusted for fair value, the S&P futures are down about 3, but Dow futures are down 30, and the Nasdaq futures are 13 points below fair value.
 
December 18, 2006
 
We used to say “sounds like a broken record.”  What would you say nowadays – “sounds like a shattered CD?”  Anyway, it’s another Monday, and there are a fresh batch a bunch of mergers and buyouts.
 
Realogy, the parent company of Century 21 and Coldwell Banker, may be going private.  The offer is 6.6 billion dollars, which translates to about an 18% premium to Realogy’s Friday price.  Harrah’s is reportedly close to being acquired and Caremark, which was set to be gobbled up by CVS, could be entertaining a cash and stock offer from the much-smaller ExpressScripts. 
 
There’s also a big energy deal, with Norway’s Statoil buying a unit of Norsk Hydro, which will make it the largest offshore operator in the world.
 
Citigroup was upgraded this morning by a major broker, and oil is down a bit.  Add it all up, and our stocks, like most stocks overseas, will move higher at 9:30
 
At this point, adjusted for fair value, the S&P futures are up 4, but Dow futures are up 38, and the Nasdaq futures, in front of Oracle’s earnings report which comes after 4 this afternoon, are 10 points above fair value.
 
December 15, 2006
 
Up another 100 points and another all-time record for the Dow Jones Industrials yesterday.  The S&P 500, a better guide for the overall market is up over 14 percent on the year.  It has surprised a lot of people, but in the end it all boils down, as it has always boiled down, to earnings and inflation.
 
The earnings continue to barrel along, and fresh batch will be available in three weeks or so.  News about inflation, however, rolls out in 12 minutes or so.  The November Consumer Price Index is expected to show a nice, tame, 2 tenths of a percent increase, both in the overall rate and the core rate, which excludes food and energy.  Anything higher will pull stocks down.  But anything lower will likely add fuel to the rally’s fire.
 
Industrial utilization numbers and the Empire State Manufacturing Index are also on the docket.
 
Asia and Europe followed us higher overnight and assuming inflation behaves at 8:30, we should move higher again at 9:30.  At this point, adjusted for fair value, the S&P futures are flat, but Dow futures are up 10 ½ , and the Nasdaq futures are about 5 points above fair value.
 
December 14, 2006
 
If you feel overworked and stressed out this time of year, don’t feel alone.  Apparently, even the oil barons of the world are a little stressed out as well.  At their meeting today, OPEC oil ministers decided that they need to take January off – they’ve cancelled their January meeting.  However, just to make sure that oil prices won’t fall, they voted to cut February production by a half-million barrels per day.  Of course, what OPEC says and what it does have only a coincidental correlation.  However, oil futures are on the rise this morning, and that is stifling any upward movement for the stock futures.
 
The big Wall Street firms continue to rake it in. You wonder whose lawn is being raked.  Anyway, Lehman Brothers beat earnings estimates by four cent per share for the quarter, and Bear Stearns showed a 4 dollar profit for the quarter.  The estimate was only $3.36.
 
Asian markets were up around one percent or more overnight.  European markets are generally higher.  Our stock future have fought back to even after getting hit by those rising oil prices earlier in the morning.  At this point, adjusted for fair value, the S&P futures are flat, but Dow futures are up about 5, and the Nasdaq futures are almost 3 points above fair value.
 
December 13, 2006
 
Yesterday, the Federal Reserve Open Market Committee continued to huff and puff about raising interest rates to fend off inflation.  But, it appears more and more that the Fed may be leaving rates right where they are for quite some time to come.  Stock traders love a playing field that doesn’t move, so take that as good news for your investments.
 
Retailers could use some good news after a 4 tenths of a percent drop in October sales.  The November number will be announced at 8:30, and is expected to reflect an increase of 2 tenths of a percent.  Retailers Best Buy and Circuit City were both downgraded by a major brokerage firm this morning.
 
The latest pair with an urge to merge in the airline business are United and Continental.  They’re reportedly talking about it, although Northwest could well scuttle any deal if they so decide.
 
Asian markets were relatively uninteresting overnight.  Major European stock markets are almost a half percent higher.  We should float higher as well, absent any big surprise in the retail sales report.  Adjusted for fair value, the S&P futures are now up 3 points, Dow futures are up 23, and the Nasdaq futures are almost 3 points above fair value.
 
December 11, 2006
 
Stocks should get off to a modestly higher start this morning, although it would be a bit unusual to see a big move in front of the Federal Reserve Open Market Committee meeting tomorrow afternoon.
 
Ford is reportedly getting a lot of potential buying interest for its Aston-Martin division, including a Syrian billionaire.  And speaking of companies up for sale, Sabre Holdings, the online travel reservation company (think Travelocity) may be selling out to a private equity group for 4 billion dollars or so.
 
A major broker raised their ratings on a variety of energy and energy services stocks this morning.  Texas Instruments will give analysts a mid-quarter update later today, and Emerson Electric shares will split 2 for 1 after the market close.
 
Chinese stocks had a rough overnight, but just about all other major overseas markets are higher at this hour and that’s our general direction as well, although the futures really haven’t moved to speak of for the past couple of hours.
 
Adjusted for fair value, the S&P futures are now up a little more than a point, Dow futures are up 8 ½, and the Nasdaq futures are almost a point above fair value.
 
December 8, 2006
 
Once every month, it’s all about the jobs, and today is that day for December.  At 8:30, the national unemployment rate is expected to tick up to 4 ½ percent from last month’s 4.4.
 
Traders will focus on three big numbers.  First off, it’s expected that about 105,000 new jobs were created in November.  Anything between 80,000 and 140,000 would not be too much of a surprise.  The average hourly earnings number is expected to be up three tenths of a percent.  Perhaps the most important number is the revision to last month’s jobs number.  Recently, prior month revisions have been much larger than normal.  Last month’s jobs number, for reference, was 92,000.
 
Congress is reportedly moving closer to reinstating deductions for teacher’s out-of-pocket classroom expenses and college tuition expenses for 2006, just in time for 2007.
 
The futures have been moving higher during the past half-hour, but are still pretty much unchanged in front of the jobs numbers at 8:30.  Adjusted for fair value, the S&P futures are now up almost a point, Dow futures are up 2 ½ , but the Nasdaq futures are about 3 points below fair value.
 
December 6, 2006
 
It should be a relatively quiet day for market-moving news.  There are no big economic numbers on the agenda and earnings reports are pretty much wrapped up.  We will get the domestic oil inventory reading this morning.  Light sweet crude is down about 34 cents, but is still above 62 dollars per barrel.
 
One report that is out comes from drug-maker Merck.  Earnings for 2006 will be pretty much in line with expectations.  However, after running up a dollar per share yesterday, the stock may >
 
Yahoo is shaking up the executive suite.  The CEO will stay for now, but the COO and a few other executives will be out the door.  CFO Susan Decker will take on more responsibility and appears to be Yahoo!’s leader of the future.
 
Asian markets were up overnight, but European markets are mixed. Adjusted for fair value, the S&P futures are down about a half-point, the Dow futures are down 2 points, but the Nasdaq futures are 2 points below fair value.
 
December 4, 2006
 
Ever see 25 billion dollars disappear?  Watch Pfizer stock at 9:30.  Last week, Pfizer told us that their new cholesterol drug was on track for FDA approval next year, Pfizer announced this morning that they are pulling that drug, torcetrapib from Phase 3 testing after discovering an undesirable side-effect, otherwise know as death.  Pfizer has 7.2 billion shares outstanding, and each one of those shares looks to open 3 ½ to 4 dollars lower this morning. Pfizer’s current cholesterol fighter, Lipitor, may lose patent protection as early as 2010.
 
It’s Monday, so as usual, there’s lots of merger news.  LSI Logic is buying Agere Systems at a 28% premium. Bank of New York is merging with Mellon Financial Services.  That will make the combined entity the world largest asset custodian and largest corporate trustee.  The new entity is expected to enhance customer service by cutting 4,000 jobs.
 
Overseas markets are mixed.  Oil prices are down a bit, after rising for six straight sessions.  Stock futures are not doing badly, considering the Pfizer news.  Adjusted for fair value, the S&P futures are down a half point, the Dow futures are flat, but the Nasdaq futures are just about 2 ½  points  above fair value.
 
December 1, 2006
 
Perhaps the most interesting stock to watch for the next couple of months will be General Motors.  Kirk Krikorian has reportedly cleaned out his minivan full of GM shares, selling the last 5% ownership stake to Bank of America at $29.95 apiece.  GM is going for about $29.23 this morning, but don’t worry about BOA. Mr. Krikorian is a big banking client, so I’m sure they’ll come out just fine in the long run.  Anyway, GM shares lost 16% of their value in November, after a terrific run earlier in the year.  We’ll see how it does on its own.
 
The weather is horrible in Chicago this morning, but yesterday a horrible reading out of the Chicago Purchasing Managers Index sent about 6 to 9 inches of snow into stock prices.  Prices recovered later in the day.  But at 10 o’clock this morning, we’ll see it that Midwestern manufacturing weakness has spread nationally with the November ISM Index.  The estimate earlier this week was 52 to 53.  However, in light of the PMI number, anything much above 50 might be a relief.
 
November vehicle sales will be announced later, but in front of that, we should have a little rally cooking.  Adjusted for fair value, the S&P futures are almost 2 points, the Dow futures are up 18, and the Nasdaq futures are just about a point above fair value.
            
WJR January 2007 Reports
WJR November 2006 Reports

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