December 31, 2010
We’re wrapping up the year today with a full day of trading for stocks, although the bond market closes at 2 o’clock. Many markets around the world are closed, including Germany, Brazil, South Korea and Japan.
Locally, Border’s stock will be under pressure this morning on word that they are delaying payments to vendors as the bookseller struggles to compete in the new e-reader world.
When you look back at the “big” economic story of the year, you look for something that “changes the ground rules.” If you live near the Gulf of Mexico, it might be the Deepwater Horizon explosion and oil spill. If you’re a technology consumer, the introduction of the Apple ipad certainly changed the ground rules. However, I choose two big “game changers” for the year, and they happened within a day of each other.
Number one nationally would be the Federal Reserve’s announcement November 3rdof its $600 billion “quantitative easing” (some would call it “quantitative guessing)” program. Basically, the Fed told us that the economy was SO weak that they we willing to follow the Japanese playbook, holding short term interest rates at zero and trying to force down long-term interest rates. That was basically the “go” signal for stock and commodities prices and a blow for savers in money markets and CD’s as well as a blow to the value of the dollar. That policy was compounded when the Bickersons in Congress extended just about all the “Bush era” tax cuts and added a new payroll tax cut without finding a way to pay for it.
Big story number two happened one day earlier when here in Michigan we elected a new governor, who promises to change the “ground rules” for how we do business in this state. Contrary to the partisan rancor of Washington, we appear to have someone here who is not bought and paid for either by big business or labor unions, is not a career politician and who is willing to “reach across the aisle” to actually find solutions to our problems. In short, it feels like we’ve started to put grown-ups in charge and it feels like it might be a game-changer for us. It’s an approach that might even catch on in Washington, although I doubt it.
The overseas markets that are open are generally a little lower. We should once again be off to a pretty sleepy start, as the S&P are down almost 3 points, the Dow futures are lower by 16 and NASDAQ futures are about 2 ½ points below fair value.
At 9:45 this morning, the Chicago Purchasing Managers Index is expected to read 61.0. That would mean expansion in business activity in the Midwest, but expansion at a slightly slower rate than in November. Overnight, the HSBC PMI Index in China showed exactly the same scenario, which is pretty good news. If business continues to grow at a not-overheated rate in China, their central bank may not have to slam on the interest rates and banking brakes. We’ll also get the weekly Jobless Claims at 8:30 and the November existing home sales report.
We’re wrapping up the year, with many markets around the world closed tomorrow, although stocks will trade in the U.S.
Our futures have been slowly grinding lower most of the morning. At this point, adjusted for fair value, the S&P futures are down a little more than a point, Dow futures are down 4 and the NASDAQ futures are about 3 points below fair value.
Stock prices continued to pile up December gains yesterday. The S&P 500, which is up almost 13 percent on the year has gained over half of the advance this month. The S&P 500 Index, by the way, is more than 23 percent higher than it was in early July.
Today should be a relatively quiet day in what has been a quiet week. Volumes are light and stock prices have continued the trend to start slowly and quietly rise late in the day.
Today’s most interesting economic report will be the report on crude oil inventories. It’s expected that we’ll see a big drawdown due to the lousy weather in many areas of the country during the past week.
Asian markets, on the whole, rose overnight. Europe is much more of a mixed picture at this hour. The dollar is just a few ticks lower this morning, and stock prices should once again start off very modestly higher.
At this point, adjusted for fair value, the S&P futures are higher by a point, the Dow futures are up 4 and the NASDAQ futures are about 3 points above fair value.
Things may start to get back to normal on Wall Street after the big snow-day yesterday.
This morning, no fewer that 5 big brokerage firms are out with new opinions on General Motors stock this morning, any the opinions are good. Four of the five place a “buy” rating on the stock. One rates GM a “hold.” It’s been about six weeks since GM’s IPO and the price still hasn’t risen to the level of the first public trade, which was around 35 bucks. But it hasn’t gone below the “friends and family” price of 33 dollars, either, and if those brokers are right, better things may be ahead.
At 10 o’clock, we’ll get the Conference Board’s reading on December Consumer Confidence. Like the University of Michigan’s December survey, we’re expecting consumers to be in a better mood. Expect a reading of 56.3 versus last month’s 54.1.
Hand in hand with that thought, Mastercard reports that Holiday Spending, that is, spending from November 5th through Christmas Eve was up 5 ½ percent from a year ago.
Markets are closed in Australia, Canada and the U.K. for Boxing Day today.
At this point, adjusted for fair value, the S&P futures are higher by not quite 2 points, Dow futures are up 19 and the NASDAQ futures are 3½ points above fair value.
December 27, 2010
There’s a lot of economic data on the calendar this week, but it will all be jammed into Tuesday, Wednesday and Thursday.
The last week of the trading year can be on the light side, due to Holiday vacations. Today should be REALLY light, given the foot and more of snow that dumped on New York City overnight. And although year-end trading often involves a “Santa-Claus rally,” the Chinese Central Bank tossed a lump of coal in the stocking overnight in the form of a surprise interest-rate hike.
The one year yuan lending rate is now set at 5.81 percent. The one year saving rate in China is now set at 2¾ percent. Remember when YOU could get 2¾ percent in your money market fund or one-year CD? The Chinese, of course are trying to rein-in a booming economy and accompanying inflation problem.
That interest rate increase has the dollar index lower. While a lower dollar has recently been a positive for our stock market, the prospect of a slowing Chinese economy will prove to be a drag in the early going.
A bunch of overseas markets are taking a holiday today. Japan was three-quarters of a percent higher overnight, but that’s about it for green numbers. Other major markets that are open are lower.
Our futures have been sliding lower pretty much throughout the morning, although they’re not all that bad. At this point, adjusted for fair value, the S&P futures are a little more than 5 points, Dow futures are down 35 and the NASDAQ futures are almost 6 points below fair value.
This is it for the trading week.
That means all the remaining economic reports get moved to this morning. So, in rapid succession, between 8:30 and 10 o’clock, we’ll hear about weekly Jobless Claims, the November Durable Goods Report, Personal Income and Consumption, U of M’s Consumer Sentiment Index and the November New Home Sales.
Perhaps the most interesting will be the first and the last of those reports. November Durable Goods are expected to have improved to a negative seven tenths of a percent from a revised negative 3.4 percent. The November New Home Sales are also expected to improve just a bit, to an annualized level of 300,000 units.
Yesterday’s earnings reports were better than expected for Bed Bath & Beyond, worse than expected for Micron, and right down the middle for ConAgra. This morning, word is that Jo-Ann stores will be acquired by a private equity firm for 61 bucks per share. That’s a pretty good premium to yesterday’s close of $45.63.
No major earnings announcements are due today. The bond market will close at 2 o’clock this afternoon, although stocks will trade until 4. Stocks did not trade in Japan overnight, in observance the Emperor’s birthday. Our markets will be closed tomorrow in observance of Ryan Seacrest’s birthday.
Just kidding. It’ll be Christmas Eve, you know.
China was down another one percent overnight, European markets are pretty much unchanged.
Once again this morning, our futures are pretty sleepy. S&P futures are down a point, Dow futures are down 6½ and the NASDAQ futures are about 5 points below fair value. Merry Christmas, everyone!
Oh-oh. Light sweet crude oil has again pushed its way past the 90 dollar per barrel mark this morning, which could make it tough to find any sub-three dollar gasoline ‘round these parts soon.
There are a couple of somewhat significant economic reports on the way this morning, in spite of this being a fairly data-starved week. In just about 15 minutes the final estimate of third quarter Gross Domestic Product is expected to be upgraded from a 2.5 percent increase to 2.8 percent. Then at 10 o’clock, expect the November Existing Home sales report to improve to an annualized level of 4.75 million units from October’s 4.43 million.
Walgreen’s, Hovnanian and Bed Bath & Beyond check in with earnings reports today. Last night, Nike reported 94 cents of second-quarter profit. That was up 22 percent from a year ago and it handily beat the 88 cent estimate. Problem is, Nike said that rising cotton and other input prices will hurt future margins. That is hitting the stock by about 5% in the pre-market.
Mainland China was the big mover in a mixed picture overseas overnight, down about one percent.
We may get some direction for stock prices out of the GDP revision at 8:30, but if the market were to open now, no one would notice. At this point, the S&P 500 futures are up a point, the Dow futures are up 2 points and the NASDAQ futures are just about even with fair value.
Last night, Abode Systems gave traders a pleasant surprise with the report of 56 cents in operating earnings. That beat estimates by 4 cents. The outlook was good, and the response was immediate as Adobe shares rose about 7 percent in the after-market trading.
This morning, CarMax beat earnings estimates by three cents. We’ll hear from Nike, Con-Agra and Red Hat a little later on today.
In a story with a little local ring to it is the announcement from the old Toronto-Dominion Bank. They’re now known as TD Bank and they’ll also be known as the owners of Chrysler Financial. TD will pay Cerberus 6.3 billion in cash. They expect a return of some 20 percent per year on the acquisition within the next 3 to 4 years.
It’s one of those relatively rare mornings when you can look across the globe and not find one single major market that’s in the red. That momentum and a slightly lower dollar should give us some green arrows at the open.
Our futures are just about as strong as they were 24 hours ago, and without any major economic reports due between now and then, it looks like the coast is clear for modestly higher prices at 9:30. Right now, adjusted for fair value, the S&P futures are higher by about 4 points, Dow futures are up 31, and NASDAQ futures are more than 6 points above fair value.
It’s the time of year when we expect to see Santa Claus in the mall and on Wall Street. It’s typically a good time to look for a rally, and any movement can be a bit exaggerated with some traders off on vacation. If nothing else, trading will have to squeeze into four days of trading as the markets will be closed on Friday for Christmas Eve.
We’ll get earnings reports from Darden Restaurants and Jabil circuit today. After the close of trading, Adobe Systems, whose stock has been bouncing around quite a bit this quarter, will report in. We’ll see if they can beat their lowered expectations.
Major economic reports for the week, to the extent that there are any, will come on Wednesday and Thursday.
Santa, in fact, may have arrived a little early as we’ve seen the Dow rise about 400 points over the past couple of weeks, and this morning should get off to a pretty good start.
Asian markets were a bit of a mess overnight, with Chinese stocks lower by almost a percent and a half. However, Europe has turned nicely higher. At this point, adjusted for fair value, the S&P futures are higher by a little more than 4½ points, Dow futures are up 33, and NASDAQ futures are just about 7 points above fair value.
Wow. We’re waking up to the news that ‘round midnight last night the House of Representatives huffed and puffed and passed a tax bill that finally lets us know tax rates will be for 2011 and 2012 and, finally, what the Alternative Minimum Tax rules are for 2010. It’s a good thing that tax planning is so simple, since the 53 percent of the population that still pays income tax will now have just nine working days to do a year’s worth of planning.
Anyway, if you were planning on good earnings news from Oracle, you got it in spades last night. Fifty one cents in operating profit beat estimates by a nickel. Revenue was up 47 percent. Operating margins were at 44 percent. Lots to like there, even a dividend of a nickel per share.
Not to be outdone, Research in Motion, the Blackberry maker, has been evidently been selling them by the bushel. They beat estimates by a dime per share on revenue that was up 40 percent.
At 10 o’clock this morning, the November Leading Economic Indicators are expected to have risen 1.1 percent. That would beat October’s one-half of one percent.
Overseas markets were a mixed picture overnight. But outside of India, which was up one percent and Italy, which is down one percent, there’s just not a whole lot of shakin’ going on.
It’s a triple witching Friday, so we could see some volatile prices later on, stock prices should get off to a snoozer of a start. At this point, adjusted for fair value, the S&P futures are flat, Dow futures are down 3 and NASDAQ futures are just about even with fair value.
Rite Aid reported this morning that same store sales fell a little bit more than expected, down 1.3% versus the expected decline of one percent.
FedEx shares could be under a little pressure early on. Wall Street was looking for $5.21 in earnings for the year and $1.31 for the second quarter. FedEx reported $1.16 for the quarter this morning. Although that appears a disappointment, FedEx pointed out that package shipments are higher than expected and that analysts may have just gotten the overhead number wrong. FedEx estimates $5 to $5.30 for the year, which brackets that $5.21 estimate.
General Mills earnings checked in at 76 cents. That’s a penny short. Oracle and Research in Motion report in after 4 o’clock.
We’re expecting improved housing starts of 550,000 at 8:30, as well as 420,000 new Claims for Unemployment Benefits. At 10 o’clock, the Philadelphia Fed Survey is forecast to slump to a reading of 14½ from the November level of 22½.
The FedEx report took the steam out of the futures, which had been rising most of the morning, but we’re still looking for higher stock prices at 9:30. At this point, adjusted for fair value, the S&P 500 futures are higher by about 3 points, the Dow futures are up 29, and the NASDAQ futures are 4 points above fair value.
The Federal Reserve Open Market Committee may as well have been sitting around playing Parcheesi yesterday – and maybe they were. But anyway, the short term target interest rate goes unchanged amount of quantitative easing – but don’t call it that – goes unchanged. Stock market? Pretty much unchanged, although we did notch the sixth straight positive session fro the S&P and we have the Dow this morning at the highest point we’ve seen in more than 2 years.
The Fed, of course, is trying to jump start the economy and engender a little inflation. In just ten minutes, we’ll get the November Report on how that’s going at the consumer level. Expect a two-tenths of a percent increase on the headline number, just like in October.
Honeywell, Dollar General and Danaher give mid-quarter updates a little later.
But in the meantime, a little bit of civil unrest in Europe, more possible downgrades of European sovereign debt – especially Spain’s, and probably just a little good old-fashioned profit-taking have the futures a bit under the weather.
The dollar index is higher by about an eight of a percent, and right on cue, if the market were to open right now, it would open just an itty-bit lower.
At this point, adjusted for fair value, the S&P 500 futures are down 2 points and the Dow futures are down 10, although the NASDAQ futures are now just about even with fair value.
A little later today the Senate will finally vote on tax rates for 2010 and the next two years, not that you’d want to wait till the last minute on something like that. Today’s vote is procedural. They’ll likely vote for real tomorrow. Then we’ll see how long the House delays before allowing us “little people” to do our year-end tax planning.
We have somewhat of a “merger Monday” today as General Electric is buying the U.K.’s Wellstream Holdings, PLC for 1.2 billion dollars, and Dell just announced an offer to buy Compellent Technologies for 960 million or $27.75 per share, which is a deal that’s been bouncing around for a while. Compellent shares have run up from a low of about 10 dollars per share in July.
Hormel Foods will split their shares 2 for 1 at the end of January.
Overseas markets are just about all in the green this morning. The highlight is an almost 3 percent rally in China. Although Chinese inflation was announced to have risen to 5.1 percent, the Chinese Central Bank did not raise interest rates over the weekend, relying instead on the reserve requirement tightening we talked about last Friday.
Stock prices may not be off and running at 9:30, but they should be jogging at a pretty good clip, even in this weather. At this point, adjusted for fair value, the S&P 500 futures are higher by 4½ points, the Dow futures are up 34, and the NASDAQ futures are almost 7 points above fair value.
We’ve had a week pretty much devoid of the normal slew of economic reports and today’s no exception – well – with one exception. Just before 10 o’clock we can all hold hands and sing a song as the University of Michigan will take their first guess at December Consumer Sentiment. Most expect that it will inch up to a reading of 72½ from the November final of 71.6.
The big deal of yesterday is getting pooh-poohed today. Community Health has offered 5 bucks in cash and a dollar in stock to buy rival Tenet Healthcare. That $6 per share, 7.3 billion dollar offer is a 40% premium. However, Tenet’s Board of Directors, at least at this point, is saying “thanks, but no thanks. But we’re listening if you have a better offer.”
The Chinese Central Bank raised the reserve rate for banks by ½ of one percent overnight. That’s the sixth time the Central Bank has tightened up on the banks this year, but mainland Chinese stocks shook off the news and rose over one percent. Japanese stocks were lower. Major European markets are edging a bit higher, although minor European markets are seeing some red.
Our futures have been slightly positive all morning, but not by a lot. At this point, adjusted for fair value, the S&P 500 futures are higher by 5 points, the Dow futures are up 25, and the NASDAQ futures are just about 7 points above fair value.
There’s not a lot on the docket today. Perhaps the weekly jobless claims will set the tone. Just about 5 minutes from now, it’s expected that the Labor Department will announce that 425,000 new claims for unemployment benefits were filed last week. That would be an improvement from last week’s 437,000, and keep in mind that we’ve spent just about the entire year listening to numbers that ranged between 450,000 and 500,000. So, 425 would be pretty good, relatively speaking, and would continue the pretty much uninterrupted series of lower claims numbers that we’ve gotten since April of 2009.
Principal Financial, United Technologies and Akamai Technologies hold analyst meetings today. Akamai has been the hot-shot of that group, with its stock up over 100% this year.
Overseas markets are once again mixed, mainland China took the worst hit, falling to a two-month low but South Korea rose by more than a percent and a half. We could have a pretty good morning on the way, in that the dollar index is higher, but so are the futures, which is a recent rarity.
At this point, adjusted for fair value, the S&P 500 futures are higher by nearly 5 points, the Dow futures are up 32, and the NASDAQ futures are just about 6 points above fair value.
What started as a pretty substantial rally yesterday ended with a whimper as stock prices sank mid-afternoon. Some have blamed President Obama’s press conference, which may be a bit of an overstatement. After European markets closed yesterday, the dollar index, which had been lower all morning, began to rise. Right on cue, oil, gold, silver, and stocks all hit the skids in response. Light sweet crude for instance, which was comfortably over 90 bucks for a good part of the day yesterday, starts today at around 88 dollars.
Mortgage applications continued to decline last week, according to the Mortgage Bankers Association. Although purchase applications were again a bit higher, refinance applications dropped by almost 1½ percent on rising interest rates.
We’re at the point in the quarter that companies who are expecting an earnings disappointment will start talking about it. Last night, Texas Instruments reaffirmed their earnings outlook for the quarter, narrowing their estimate around the midpoint of expectations. This morning Home Depot said that is expects to earn $1.97, which it about 2 cents higher than most expected.
McDonald’s November same store sales were up 4.8%, which was a little bit of a disappointment.
Overseas markets are again mixed. Our futures are showing a mixed picture as well.
At this point, adjusted for fair value, the S&P 500 futures are down a fraction, the Dow futures are down 11, although the NASDAQ futures are about 3½ points above fair value.
We have an agreement between the President and the Congressional Republicans regarding taxes for the next two years. That’s the good news. The bad news is that it hasn’t passed Congress yet and, even if it does, it will expire at the end of 2012, which makes it prime fodder for a Presidential campaign. Last night’s speech by President Obama certainly sounded a lot less like a conciliatory message than the first speech of his re-election campaign.
The tentative deal, among other things, freezes everybody’s tax rates for two years, gives employees a two percent break on their Social Security taxes in 2011, and caps estate taxes at 35% after a $5 million exclusion.
More than a half dozen major companies hold investor conferences today. Perhaps the most interesting will be the mid-quarter update from Texas Instruments.
The U.S. Treasury announced an IPO for its remaining 2.4 billion common shares of Citigroup. The taxpayer, according to the Department, will turn a tidy 12 billion dollar profit on the Citigroup bailout. The Government still holds warrants on Citigroup stock.
The dollar index is down about a third of a percent this morning, and that, of course, means stocks and commodities will head higher. Don’t look now, but light sweet crude is up over 90 bucks per barrel.
Japanese stocks fell about a quarter of one percent overnight, but other major overseas markets are higher, and we’re looking for another >
The futures are suggesting a little profit-taking after last week’s big rally as traders digest Chairman Bernanke’s comments on 60 minutes last night. In those comments, Bernanke suggested that the Fed is ready do less asset purchasing than they pledged, or more asset purchases than that, if needed. However, he is “100%” confident that the Fed’s financial engineering will work. Although the markets don’t have QUITE that degree of confidence, it’s hard to believe that Bernanke could have expressed any less confidence – even if he wanted to.
European finance ministers met in Brussels today and are floating the idea of floating a new European sovereign bond called an E-Bond, so that in case you don’t feel comfortable lending money to say, Portugal or Greece or Ireland or Spain directly…... Well, you get the idea, although I don’t think the Germans are wild about it.
In response, the euro is lower by another one percent. It is nice to have something that makes the dollar seem strong. The U.S. dollar was up over 5 percent in November. Unfortunately, a stronger dollar means weaker stock futures, although they are off their lowest levels of the morning.
Overseas markets are mixed. At this point, adjusted for fair value, the S&P 500 futures are lower by about 4 points, the Dow futures are down 28, and the NASDAQ futures are about almost 7 points below fair value.
Another sizable rise in stock prices yesterday gave us the best two-day rally since July. The S&P 500, not even counting dividends, is now nearly 10 percent higher on the year.
Of course, today is another day and our direction for the day may well be set in just about 8 minutes with the release of the Labor Department’s November Employment Report. The October number was a pleasant surprise, and the consensus estimate is that 150,000 or so new non-farm jobs were created in November. The higher that number of jobs, especially private sector jobs, the better for stock prices today. However, even at that level of job expansion, the Unemployment Rate is expected to hold at 9.6 percent, or perhaps even tick up to 9.7% due to growth in the overall working-age population.
One positive sign this morning is the Job Index from the National Federation of Independent Businesses. Although it is only up by one-tenth of one percent, it’s positive for the first time in 2½ years.
Walgreen’s says that same store sales in November rose 3.2 percent. Big Lots will report earnings a little later.
In front of the Jobs Report, the dollar has been weakening, and you know what that means – the stock futures are again on the rise, in fact they have been rising rather quickly over just that past five minutes. At this point, adjusted for fair value, the S&P 500 futures are higher by almost 6½ points, the Dow futures are up 42, and the NASDAQ futures are about 8½ points above fair value.
After a few days of drama and hand-wringing over European debt bailouts, we finally have markets looking at business conditions this morning. What those markets see is encouraging.
It started in China overnight as the Chinese Purchasing Managers Index rose for the 21ststraight month. Then Germany checked in with October Retail Sales up 2.3 percent and Great Britain’s manufacturing index came in at a 16 year high. Put all that together with yesterday’s better than expected Chicago PMI and Consumer Confidence numbers, and we have a bit of a rally brewing.
Still to come at 8:30 is the 3rdquarter labor productivity number. Expect productivity to have risen 2.3 percent, up from 1.9 percent last quarter. The November Purchasing Managers Index at 10 o’clock is expected to be down slightly, to a reading of 56.5.
The President’s Commission on Deficit Reduction will reveal their proposals today, although they still haven’t voted on whether they agree as a group on their findings. Of course everyone can agree that the deficit problem must be solved as long as no one’s taxes get raised and no one’s benefits get cut.
The ADP Employment report 5 minutes ago was better than expected.
There’s almost no adjustment needed between the futures and the cash market this morning, so what you see is what you get with the futures. At this point, the S&P 500 futures are higher by almost 15 points, the Dow futures are up 129, and the NASDAQ futures are about 26 points above fair value.
Daily Reports @ WJR
For an explanation of "fair value" please click here.