December 30, 2009
As we look back at 2009, there are two financial stories that stand out in my mind. The first is something that we were consistently told would never happen, and the second that we were consistently told would happen. We can all learn from both stories.
The one that affected everyone in this listening area either directly or indirectly was the bankruptcy filing of General Motors, which shortly followed the filing by Chrysler and amounted to a near-death experience for the domestic auto industry. Even 19 billion dollars of Government aid wasn’t enough to save GM and it collapsed into the arms of the Government June 1st. You can point the finger of blame in a number of different directions. Some say it’s the financial system’s fault due to the collapse of financing. Some will blame a bloated management structure for not bringing desirable cars to market and many lay the blame on the high labor and benefit costs that ultimately made the companies uncompetitive. Perhaps it’s fair to answer “all of the above.” In any event, if you grew up around here, you either worked for GM or Chrysler or Ford or had a family member who did. That June 1stfiling was clearly the biggest financial story in these parts.
The second story, which will have a bigger impact on how we all handle our finances in the future, is the Great Recovery of the financial markets from the Great Repression of 2008 and 2009. As we stared into the abyss around March 9thof this year, with the S&P 500 hitting an intra-day low of 666, very few people would have predicted that stock prices would rally almost 70 percent to today’s level, which has been the biggest rally in about 70 years.
But here, in my opinion, is the big story, and the big lesson. For years, true financial planners have told people to spend less, save more, don’t borrow too much, maintain a balanced, diversified investment portfolio, keep a year or two of cash on hand and DON’T try to time the market. Well, how’d you do this year? Many of us spent what we made and more, ran up credit card balances, bought way too much house (with WAY too big a mortgage) and kept precious little cash on hand. When the crisis hit, many panicked, sold their stocks, hid in cash, have since loaded up in bonds and missed the entire rally in stocks. If there has ever been a year that provided a great financial education lesson, this is it. And if anyone does not now understand that their best path forward is to spend less, save more eliminate those credit card balances and maintain a balanced investment portfolio, they will have only themselves to blame in the future.
The December Chicago Purchasing Managers Index rolls at 9:45 and is expected to read 55.1, which would be down a point from last month.
Asian stocks were mixed overnight, but Europe is mainly lower.
Adjusted for fair value, the S&P 500 futures are down about 4½ points, the Dow futures are down 38, and the NASDAQ futures are almost 6 points below fair value. Happy New Year everyone! See you next year!
December 29, 2009
Major stock indexes continue to drift higher as we finish out a decade that, to be charitable, has been a washout for stock prices. The S&P 500 index opens trade today about 23% lower than it stood at the end of 1999. Granted, that doesn’t include dividends. But it pales in comparison to the decade of the nineties, when the S&P 500 index doubled twice over, rising from 353 to 1,469.
At 9 o’clock, the Case-Shiller home index is expected to reflect good news regarding home prices from this past October as the housing market continues to feed off the Government’s homebuyer’s credit. It will be interesting to see what happens when that credit ends in April – or maybe I should say IF it ends in April.
The Conference Board’s reading on December Consumer Confidence is expected to rise to a reading of 53, from last month’s 49.5. We’ll find out at 10 o’clock.
All major overseas markets that were open rose in price overnight.
Once again, the dollar index is lower this morning, and the stock futures are pointing higher. Adjusted for fair value, the S&P 500 futures are up almost 4 points, the Dow futures are up 31, and the NASDAQ futures are a little more than 2½ points above fair value.
We should have a pretty quiet day as we head into the last week of 2009. No major economic reports are on the docket. Perhaps the biggest thing to watch for is possible 4thquarter earnings warnings from companies that look to come up a bit short on the bottom line.
The top line was decent for retailers this Holiday Season, as Mastercard’s SpendingPulse unit reports that retail sales rose 3.6% over last year. Granted, last year was pretty much a disaster, but an increase is an increase and we’ll take it.
Airline stocks should >
Friendly words for Apple and H&R Block from a couple of investment firms may have those stocks moving higher in the early going today.
The Treasury will auction 2 year notes today, and with the long end of the yield curve moving higher, it will be interesting to see how much demand there will be at the short end.
Stock markets in Portugal and Hong Kong are slightly lower, but just about every other overseas market is higher this morning, and we’re heading in that direction as well. The dollar is slightly lower and, as you might expect, stock futures are slightly higher. Adjusted for fair value, the S&P 500 futures are up more than 2 points, the Dow futures are up 23, and the NASDAQ futures are almost 4 points above fair value.
It should be a relatively quiet day for the market, as we slide into the Christmas Holiday. Tomorrow will be a short day of trading and the market is closed on Friday. So trading volume, which has been on the light side all week is bound to get lighter as the day goes on.
Personal Income and Consumption number roll out at 8:30 and although consumption is expected to have held steady from the October number, personal income is expected to have risen a bit, at least for those who have jobs.
New Home Sales at 10 o’clock are expected to be just slightly better at an annualized rate of 438,000 units, and just before that, the final reading on December Consumer Sentiment from The University of Michigan is due in at a level of 73.7.
Ford Motor looks to have a deal to sell its Volvo unit, and don’t look now, but Ford shares are just a dime under the 10 dollar mark.
Cintas reported 39 cents of operating profit for the quarter, but that missed estimates by 4 cents and should have the stock under pressure this morning.
At 8:30 this morning we’ll get the final estimate of 3rdquarter Gross Domestic Product and it’s expected to confirm the preliminary estimate of an increase of 2.8 percent as the economy, statistically at least, continues to crawl out of the Great Repression.
At 10 o’clock, analysts are expecting that the November Existing Home Sales will reflect the third straight monthly increase, rising to an annualized rate of six and a quarter million units. The October figure was 6.1 million. If the expected six and a quarter million rate materializes, it would mark a 37% increase from a year ago. On the one hand, that would be the best year-over-year increase in 26 years. Other the famous other hand, you have to remember that a year ago, everyone thought that the world was coming to an end.
Greek debt was downgraded by another ratings agency this morning. But a major broker raised their price target for Ford Motor to 12 bucks per share this morning, and that has Ford shares higher again in the pre-market.
The Chinese market and the Russian market are lower, but most other markets overseas are higher at this hour. At this point, our futures have weakened a bit over the past hour, but are still pointing toward higher stock prices at 9:30, raising hopes that a “Santa Claus” rally may be in the offing. Adjusted for fair value, the S&P 500 futures are up almost 4 points, the Dow futures are up 34, and the NASDAQ futures are about 8 points above fair value.
It will be a 3½ day week for stock trading and it looks like it will get off to a positive start, especially with a little stocking stuffer for shareholders of Chattem.
You may have never heard of a company called Chattem. But if you’ve ever used products called Icy Hot, Gold Bond or Selsen Blue, you now know who makes them. Anyway, this morning Sanofi-Aventis has announced that they are buying Chattem in a deal valued at $93.55 per share. Chattem shares closed Friday at less than 70 bucks per share.
All may not be over for Saab, after all. This morning, Dutch car-maker Spyker has contacted General Motors with another bid to rescue Saab, which GM had announced it would be winding down. GM is evaluating the new offer.
The three-month LIBOR rate dipped below one quarter of one percent this morning.
Walgreens announced quarterly earnings of 49 cents, which was a penny better than expected on higher than expected revenue. ConAgra made 52 cent on the quarter, beating their bogey by a nickel per share.
Asian markets were mixed, but mostly a bit lower. Across the Atlantic, outside of Ireland, markets are a bit higher, and on a 29 basis point drop in the dollar index (that means almost one-third of one percent) our futures are indicating higher prices at 9:30.
At this point, adjusted for fair value, the S&P 500 futures are up almost 6 points, the Dow futures are up 47, and the NASDAQ futures are almost 11½ points above fair value.
It looks like we’ll get a good chunk of yesterday’s losses back at the open this morning, and for once, rising stock prices have nothing to do with a falling dollar, as the dollar index is pretty much unchanged.
Last night a handful of better than expected earnings reports got things started in the after hours. Research in Motion, the maker of Blackberry phones reported $1.10 per share of operating earnings versus the expected $1.04. Oracle, at 39 cents per share, beat estimates by 3 cents. Nike reported rising orders and a profit of 76 cents, with was a nickel ahead.
Not doing quite so well, Palm reported a narrower than expected loss. However, it looks as though sales of the Pre and Pixi smartphones have already started to decline. Smartphone competition heated up last quarter with the introduction of Motorola’s Android, and Palm looks to be the weakest link in the chain.
Ben Bernanke did get the conflicted approval of a Senate Committee yesterday for another term as Fed head. There were 7 ‘no’ votes, however, as Bernanke was criticized for not repairing every problem that, for the most part, been created by Congress.
Asia lower, Europe is perking up a bit, and we should start higher as well. At this point, adjusted for fair value, the S&P 500 futures are up more than 7 points, the Dow futures are up 58, and the NASDAQ futures are about 15 points above fair value.
Who says the Treasury Department doesn’t care about what they do with taxpayer money? Yesterday, Citigroup went to the market in order to raise enough money to pay back the TARP bail-out. The market offered only about $3.15 per share of Citi’s secondary offering, well below what was expected. In turn, the Treasury Department, which owns a big chuck of Citi stock, changed its mind about cashing out. They’ll hold on to the shares for at least a few months longer, hoping for a better price.
At 8:30 this morning, the weekly jobless claims number, always a bit squirrely at this time of year, will likely garner an undue amount of attention from traders. Later, at 10 o’clock, the November Leading Economic Indicators are expected to increase seven-tenths of a percent, a nice pick-up from October’s three-tenths of a percent. We’ll also get the Philly Fed survey at 10 o’clock,
FedEx confirmed their pre-announcement of $1.10 in second quarter earnings, but forecast third quarter earnings of only 60 cents, versus analyst estimates of 84 cents. Even so, FedEx says that they expect that full-year earnings will be better than expected.
The dollar index is higher by almost one full percent this morning. In light of that, it’s surprising that the futures aren’t in worse shape than they are.
Most overseas markets are lower. At this point, adjusted for fair value, the S&P 500 futures are down almost 7 points, the Dow futures are down 45, and the NASDAQ futures are about 13 points below fair value.
It’s a big day for economic news, starting in just under 10 minutes with the November consumer inflation number. Expect that overall prices inflated about 4 tenths of a percent in November, but only one-tenth of a percent if you exclude the volatile food and energy components.
We’ll also get the November Housing Starts data at 8:30, and that number is expected to be a lot better than last month, up to an annualized rate of 579,000 units from October’s rate of 529,000.
At 2:15 this afternoon, the Federal Reserve’s Open Market Committee will wrap up a two-day meeting with their latest non-move in interest rates. Traders will look for any comments regarding the Fed’s quantitative easing program and the possible timing of any moves that would start to drain liquidity from our over-watered economic system.
Paychex and Herman Miller will report earnings later on.
It was a mixed picture in Asia overnight, but European markets are trending higher. Although on Fed meeting days our markets have a tendency to flatten out just before the 2:15 announcement, our stock future have been positive all morning on a weaker dollar, although the dollar has rallied a bit over the past 15 minutes and the futures have slid back a little closer to fair value.
Nevertheless, at this point, adjusted for fair value, the S&P 500 futures are higher by about 3 points, the Dow futures are up 39, and the NASDAQ futures are more than 7 points higher.
And then there were none. Wells Fargo reached a deal to get out from under the TARP yesterday, just hours after Citigroup announced that it was returning its bail-out money. Usually when you get your bail money back, YOU have to stand trail. In this case, the trial will start for the big banks to prove that they’re strong enough to stand on their own and MAYBE get in to the business of lending again. Maybe yes, maybe no. But at least they can pay their executives uncapped bonuses again, and after all – what’s more important?
In about 12 minutes, we’ll pay attention to some important inflation data as the November Producer Price Index is expected to reflect an increase of eight-tenths of one percent. But absent food and energy, expect a rise of only two-tenths of a percent.
Adobe will report earnings later today, Best Buy just reported 53 cents per share in quarterly earnings, versus the expected 43 cents. They also boosted their full year guidance. However, Best Buy indicated that there may be some issues with fourth quarter profit margins, and it’s evidently that comment that has the stock under some pressure this morning in the pre-market.
Overseas markets are mixed, but generally a bit lower. The dollar index is higher by more than three-quarters of one percent and, as you would expect, that has the stock futures pointing lower. At this point, adjusted for fair value, the S&P 500 futures are down about 4 points, the Dow futures are down 25, and the NASDAQ futures are almost 5½ points below fair value.
As expected, but not assured, Abu Dhabi took the first step this morning to back-stop the Dubai debacle, agreeing to finance 10 billion of Dubai’s debt. That has given traders some confidence in risk assets and has the futures pointing north this morning.
Speaking of debacles, Citigroup has reached an agreement with the Government that will enable it to crawl out of 20 billion dollars of federal bail-out funds. The Government will sell its 34 percent stake in Citi in an orderly fashion, and will no longer be obligated to share in Citi’s losses. The shares that the Government holds, by the way, have risen about 20 percent to date. It’s amazing how effective to executive pay caps have been in getting the banks to hit the accelerator on paying the taxpayers’ money back. We’ll see if those paybacks are premature sometime during the next year or so.
There’s a broker upgrade for Exxon-Mobil this morning, and they are also buying XTO Energy in a stock deal. XTO shares are higher by also 20% in the pre-market.
Word from Europe is that Oracle’s purchase of Sun Microsystems will get the thumbs up.
Asians markets were mixed overnight, but Europe is higher on the Dubai bailout news.
At this point, adjusted for fair value, the S&P 500 futures are up almost 8 points, the Dow futures are up 58, and the NASDAQ futures are almost 10 points above fair value.
We’ll take the pulse of the consumer today if we can find it, with Christmas just two weeks away. In just about 10 minutes, the November Retail Sales Report, which includes Black Friday. Most expect an increase of just seven-tenths of a percent, after a 1.4 percent pickup in October.
Then, just before ten, the University of Michigan in expected to announce an increase in Consumer Confidence from 67.4 to 69. This is U of M’s first estimate of the December number. They’ve fine tune it before the end of the month.
United Technologies reaffirmed earnings guidance for this year and next and raised their revenue estimates.
From the world of amazing statistics, China reported that industrial production rose over 19 percent. Consumer prices have also begun to rise in China. It’s the first rise since January and was due mainly to higher food prices. Chinese stocks were little changed over night. India was slightly lower, but most other major markets overseas are higher at this hour.
The dollar is just slightly lower. Our futures are higher by just about as much as they were 24 hours ago. Adjusted for fair value, the S&P futures are up more than 6 points, the Dow futures are up 51 and the NASDAQ futures are almost 8 points above fair value.
Now that Bank of America has repaid 45 billion dollars of TARP money, other big banks appear to be falling all over themselves to get out from under the TARP as soon as they possibly can. Not that this has anything to do with caps on executive pay, mind you – it must just be the right thing to do. Citigroup, which if you’ll remember, is more than one-third owned by the taxpayers is reportedly in talks with the Treasury Department on how soon it can give its TARP money back. Other big banks are sure to follow soon.
Weekly Jobless claims numbers are due at 8:30 this morning and we’ll also get international trade balance numbers and the quarterly flow of funds report from the Fed. However, tomorrow’s retail sales and Consumer Confidence data will likely have a much bigger influence on how the rest of the year will go for the stock market.
The Bank of England stood pat this morning on interest rates and made no changes to its massive quantitative easing program. The Swiss central bank held rates steady, but eased up on its bond buying program.
Asian markets were a mixed picture overnight, but European markets are generally higher. The dollar index is pretty much unchanged at this hour, so the strength we’re seeing in our futures may be well-earned.
At this point, adjusted for fair value, the S&P futures are up more than 6 points, the Dow futures are up 45 and the NASDAQ futures are 11½ points above fair value.
It was nine years ago that media giant Time Warner bought internet juggernaut America Online amid much hoo-ha and celebration of a new era in media. Well, it’s a new era alright, but by the end of this day, a much smaller America Online will be off on its own once again. Time Warner shareholders will receive a share of AOL for every 11 shares of Time Warner that they held as of November 27th.
At 10 o’clock this morning, the October Report on wholesale inventories is expected to reflect a one-half of one percent decline.
According to reports this morning, the 700 billion dollar TARP program will live on until at least October. One-fifth of those funds that have not yet been spent will reportedly become available to Congress, which will presumably spend them on some sort of jobs program, just in time for the November Congressional election.
Stocks in Dubai took their third tumble in a row, falling over 6 percent as the Dubai World default issue remains unresolved.
Asian stocks were lower across the board overnight, with Chinese indexes losing about 2 percent, but Europe is much more of a mixed picture. With the dollar index down about one half of one percent, our futures are indicating a bit of a bounce-back from yesterday’s decline. Adjusted for fair value, the S&P futures are up 4 points, the Dow futures are up 35 and the NASDAQ futures are 5½ points above fair value.
There’s little doubt that most voters will be in a lot better mood come election time if they have jobs. With a congressional election less than 11 months away, President Obama will outline his ideas for stimulating job growth later today. We’ll see how much of the plan will be designed to help businesses, rather than the federal or state governments, do the hiring.
FedEx may need to do a little of hiring. Last night FedEx raised their earnings guidance for the 2ndquarter, raising their estimate to $1.10 from the prior guidance of 80 cents.
McDonald’s November same store sales report was a bit of a disappointment this morning. Domestic sales were off six-tenths of a percent, and global sales were up only seven-tenths of a percent. Both of those numbers are a little worse than expected.
The National Federation of Independent Businesses issued their small-business sentiment survey this morning and it wasn’t pretty, dropping eight-tenths of a percent to a level of 88.3. Perhaps small businesses would feel a bit better if someone would extend them a little credit.
Indian stocks were up almost 1½ percent overnight, but most of the rest of Asia and Europe are all trading lower. With the dollar index up, our futures are pointing in that direction as well. Adjusted for fair value, the S&P futures are down a bit more than 7 points, the Dow futures are down 61 and the NASDAQ futures are about 15 points below fair value.
Retailers will start to roll out their 3rdquarter earnings reports this week and we will get the first read on December Consumer Confidence on Friday. But relatively speaking, economic news will be on the sparse side of normal.
At 3 o’clock this afternoon, a report on the amount of Consumer Credit outstanding is expected to reflect a drop of over nine percent as consumers continue to pull in their horns in the shadow of double digit unemployment.
Ben Bernanke will speak to the Economic Club of D.C. today and New York Fed President Dudley will speak at Columbia University.
The big mover of the morning so far is the price of gold. After spiking up to more than $1,226 per ounce last week, gold lost 4 percent on Friday and is lower by almost another 2½ percent this morning. Yes, the dollar index is higher this morning, but only by about 17 basis points, so the move in gold does seem to be a bit out of proportion.
Asian markets were mixed overnight. Europe is a bit lower.
There’s been very little movement in our stock futures this morning, as they are holding at levels that indicate a very slightly lower open at 9:30. At this point, adjusted for fair value, the S&P futures are down a fraction, the Dow futures are down 9 and the NASDAQ futures are about 5 points below fair value.
Yesterday’s stock prices were pretty much even-Steven for most of the day. However, the last couple of hours of trading were a steady walk down the stairs as worries about this morning’s unemployment report sent prices lower.
We’ll find out if those worries were justified in just over 15 minutes. November non-farm job losses are expected to have totaled 120,000. That would be another monthly improvement, as the October number was 190,000 and at 120,000, it would be the lowest number in almost 2 years. However, the unemployment rate is expected to hold steady at 10.2 percent. The average hourly wage is expected to have increased by two tenths of a percent.
A little later, at 10 o’clock the October Factory Orders Report is expected to show no change from the September level.
Today was to be the day that former Fed Chairman Paul Volcker’s committee WAS to report to President Obama regarding tax reform. Volcker is now the Chairman of the President’s Economic Recovery Advisory Board. But, we’ll have to wait a little longer for the new sausage recipe as Volker’s committee received so many ideas about our income tax system, they couldn’t get through them all. And that’s even AFTER they removed all the four letter words.
Asian markets were mixed overnight, but Europe is solidly lower at this hour. At this point, adjusted for fair value, the S&P futures are up a fraction of a point, the Dow futures are up 14, although the NASDAQ futures are about a point below fair value.
Say what you want about the government setting pay limits on the corporate executives of bailed-out companies, it sure seems to be a motivating factor in paying back the bail-out money. Bank of America, which seems to be having a great deal of difficulty finding anyone who wants to take their top job under the poison cloud of government-mandated pay restrictions, says that they will raise 19 billion dollars through a stock sale in order to repay 45 billion dollars to the Feds. Can’t wait to see who they find that wants to run General Motors. You know, Ben Bernanke might be available.
The Senate Banking Committee will be grilling Mr. Bernanke today as they take up the matter of his re-nomination to head the Federal Reserve. Expect a lot of bluster and maybe even a few pertinent questions as they go through that exercise.
At 8:30, the final reading on 3rdquarter productivity is expected to be trimmed to 8½ percent, down from 9½ percent, but still a very strong number as business continue to function, but with far fewer workers.
The European Central Bank held interest rates steady at one percent this morning, and they’ll be holding a news conference at 8:30.
Overseas markets are higher, with Japan rising almost 4 percent overnight. Hate to sound like a broken record, but here we go – the U.S. Dollar index is lower by about a third of a percent – so, stock oil and gold futures are all pointing higher.
At this point, adjusted for fair value, the S&P futures are higher by about 5 points, the Dow futures are up 39, and the NASDAQ futures are almost 5 points above fair value.
December got off to a strong start yesterday and it looks like we’ll hold those gains in the early going today.
This afternoon, the Fed will release their quarterly survey of regional economic conditions. It’s called the Beige Book and it should be an interesting read as we look for things to get better – or at least get worse at a slower rate.
Speaking of which, outplacement firm Challenger Gray and Christmas reported that domestic employers announced just over 50,000 new job cuts in November. Although more job cuts are not good news, it’s the lowest rate of new layoff announcements in two years. Just three minutes ago, the ADP employment report reported 169,000 jobs lost in November, which was a little worse than expected, but the eighth month in a row of fewer jobs being lost.
Maybe more people are buying suits for job interviews as Joseph A. Bank beat earnings estimate handily this morning. Profit was up 26 percent from a year ago, and at 63 cent per share, it beat estimates by 7 cents.
Mortgage applications rose about 2 percent last week as interest rates continue to drop.
The dollar index is pretty much unchanged at this hour, and, not surprisingly, so go the stock index futures. At this point, adjusted for fair value, the S&P and Dow futures are flat, although the NASDAQ futures are about 4½ points above fair value.
Welcome to December. By the way, since 1990, the month of December has produced the highest average return of any month, with the S&P 500 rising an average of almost 2 percent for the month. Of course, that means NOTHING with regard to December 2009, but people like to believe in stuff like that – so I thought I’d let you know.
Lots going on all over the world today. It started in Japan where the national Bank held an emergency meeting to announce more quantitative monetary easing, even though the short term interest rate has been at one-tenth of one percent for as long as I can remember.
On the famous other hand, the Reserve Bank of Australia raised interest rates a quarter point to 3.75 percent.
Comcast’s purchase of a controlling interest in NBC-Universal looks like a “go” this morning as General Electric now has a deal to buy Vivendi’s 20% stake.
Staples reported earnings that beat estimates by a penny per share on flat North American same store sales. Those sales were expected to be down about 3 percent. November car sales numbers will be coming out all through the day.
The dollar is up relative to the Japanese yen, but down again against the Euro and the Pound, and that has oil, gold and stock prices on the rise.
We have a case of “what you see is what you get” with the futures this morning, as there is almost no fair value adjustment. At this point, the S&P futures are up 8, the Dow futures are up 65, and the NASDAQ futures are about 13½ points above fair value.
Daily Reports @ WJR
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