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WJR December 2013 Reports


December 31, 2013

It’s the last day of the year for trading in the U.S. Markets are closed in China, Germany and Brazil today and our bond market closes early.

Of the big financial stories of the year, the biggest story has to be the stock market itself. Many investors, with the crash of 2008 fresh in their minds, expected that the twin towers of intransigence and incompetence in Washington D.C. would crash the economy and crater stock prices again. While they nailed it on the incompetence scale, they didn’t foresee the cumulative impact that nearly 5 years of zero percent interest rates would have on financial asset prices. For as much as the economy has struggled to recover, the Federal Reserve’s constant monetary easing has turned the stock market into an easy money ride since early 2009, and especially this year, with gains of 25 to 30 percent. It’s been the best year for investors since the mid 1990’s and half of the stocks in the Dow Jones Industrials and S&P 500 are at all-time highs. Although the Fed has started to ease up on the gas pedal, it’s not likely that short term rates will move off of zero for the foreseeable future.

The second big story was Obamacare, which is also a game that’s only in the first or second inning. When you grab 20 percent of the economy and turn it inside out, there will likely be some bumps in the road. But the ramifications of not only the redistributionist financing of the plan and its incredibly botched rollout may well be a political game-changer in the years to come.

Thirdly, the Chapter 9 filing by the city of Detroit is far more than a local story.  It is certainly a lesson in reaping what you sow in terms of financial mis-management. But more than that, we have Judge Rhoades ruling that an accrued pension benefit is a contractual obligation, which is voidable under federal bankruptcy law. If that ruling is upheld, it’s likely to have ramifications well beyond Detroit. Four of the five largest municipal bankruptcies in this country have happened in just the past 26 months, and unfortunately, this may be another game that’s just in the early innings.

Our stock futures have been slowly rising most of the morning. Right now, adjusted for fair value, the S&P futures are higher by nearly 3 points, the Dow futures are up almost 27, and the NASDAQ futures are more than 6 points above fair value. Have a Happy and prosperous 2014!

December 24, 2013

It’s the morning before Christmas. But don’t worry, even if you don’t think there’s any way to complete your shopping on time, it’s always possible that the Administration will officially delay Christmas by a day or two.

Stocks will trade on the open market until 1 o’clock this afternoon, and it’s reasonable to expect that volume will be extremely light. The bond market closes at 2 and gold futures, which are still trading under 1,200 dollars per ounce close the book at 12:30.

Speaking of extremely light, according to research firm ShopperTrak, sales at the nation’s retailers fell 3.1 percent from the comparable week last year, and traffic was down more than 21 percent. As more and more people shop at their computers rather than the mall, retailers have to hope that post-Christmas gift card redemptions come to save the day.

The November Durable Goods Report is expected to recover to an increase of 1.7% at 8:30 and at 10, the November New Home Sales Reports is expected to creep higher to an annualized rate of 450,000. However, with mortgage rates on the rise, mortgage applications fell to their lowest level in 13 years last week, down 6.3 percent from the week before.

It’s early, but it looks like our market mini-melt-up will continue at 9:30. Right now, adjusted for fair value, the S&P futures are higher by a point and a half, the Dow futures are up 21, and the NASDAQ futures are about 3½ points above fair value.

December 23, 2013

This is the one week of the year that is earnings-report-free. No companies of significance will report this week. But, by the looks of the futures, stock prices will be on the rise this morning nonetheless.

One of the reasons for that is word that China Mobile, the world’s largest mobile phone carrier, will start selling Apple’s iphones. Thought is that there may be a couple of China Mobile’s 750 million customers who might be interested in owning an iphone. There’s no word on how much those companies will subsidize the list price of the iphone, if at all. That news has Apple shares trending about 3½ percent higher pre-market.

At 8:30, the November report on Personal Income and Consumption is expected to show each higher by one-half of one percent. Then, just before ten, we’ll get the University of Michigan’s final read on December Consumer Sentiment. Expect a small upward adjustment to 83.

A lot of traders will get their early week trades in today, given that tomorrow’s session will be a short one. But last Friday’s surprisingly good GDP Report continues to give stock prices a boost this morning.

Although there’s not a lot of movement either way overseas this morning, we should head higher at 9:30. Right now, adjusted for fair value, the S&P futures are higher by 12 points, the Dow futures are up 87, and the NASDAQ futures, boosted by the action in Apple shares, are about 35 points above fair value.
 
December 19, 2013

Ben Bernanke sang his swan song as the head of the Fed yesterday, and took a big load off of his successor in the process. The Fed will start to stop goosing the bond market come January. That DOESN’T mean they will raise interest rates. It DOES mean that they will start returning the long term interest rate decision over to market forces. Importantly, it’s JUST a start. The Fed will still buy Treasury and mortgage backed bonds at the rate of 75 billion dollars per month until further notice. The next scheduled announcement in that regard will come more than a month from now, on January 25th. In response, the 10 year Treasury rate DID rise, but it rose only moderately, this morning at just over 2.9 percent.

If you’ve always wanted to own a seafood restaurant, there may be a rather large one going up for sale. Darden Restaurants is reportedly looking to sell or spin of the Red Lobster chain. Darden shares are higher by about one percent pre-market on that news.

The loser of the morning may well be the price of gold. The Fed’s announcement yesterday has the price of gold falling like a yellow rock. Gold is down more than 30 bucks an ounce this morning, right around 1,204 dollars per ounce.

Chinese stocks fell another one percent overnight, but most other markets overseas followed us higher. So far this morning, our futures are pretty happy sitting  right about where they are. Adjusted for fair value, the S&P futures are down a point, the Dow futures are down only 3, and the NASDAQ futures are about 2½ points below fair value.

December 18, 2013

Will they? Or won’t they? This afternoon, the Federal Reserve Open Market Committee will tell Santa Claus just how many Treasury Bonds and mortgage-backed bonds they’ll shopping for during the next month and a half or so.

Indications of a possible pullback in their 85 billion dollar per month buying spree have led to declining stock prices during the past year. Maybe so this time, maybe not. Everybody knows that an improving economy is the trigger for an end to the program, which should be good for stocks. The near term danger is a rise in the 10 year Treasury Bond interest rate and related mortgage bonds. That could choke off the recovery in housing and would not be helpful to the stock market.

Not helpful to the price of FedEx shares is this morning’s earnings miss. $1.57 fell 7 cents short of estimates. General Mills missed the 88 cent estimate by a nickel. Home builder Lennar beat the 62 cent estimate by 11 cents.

The Nikkei Index in Japan rose more than 2 percent overnight. Other markets overseas are mixed, but generally positive.

On days of highly anticipated Federal Reserve policy announcements, it’s not unusual to see stocks trade close to even by mid-afternoon. If that’s to be the case today, we’ll have to lose some early gains to get there. At this point, adjusted for fair value, the S&P futures are higher by almost 2 points, the Dow futures are up 36, and the NASDAQ futures are about 2½ points above fair value.

December 17, 2013

Ben Bernanke and his pals will get the last bit of meaningful pre-meeting economic data at 8:30 this morning. The November Consumer Price Index is expected to have risen only one-tenth of one percent. The October reading was a negative one-tenth of a percent. Either way, according to the Government, inflation is still fast asleep. Until the Fed hears the alarm clock go off, it is more likely to maintain its current pump-priming policy.

The committee’s announcement comes tomorrow afternoon, and although it’s not the Fed’s >

Boeing shares may get a boost today on word that they’ll raise their dividend by 50 percent. Boeing has also authorized a 10 billion dollar buyback program.   So far, Boeing shares are about 2 percent higher. 

Jabil Circuit reports earnings after the market close today.

Chinese stocks fell overnight, but the rest of Asia followed our rally higher. Europe is modestly lower, but so far, our futures are pointing north. Adjusted for fair value, the S&P futures are higher by a point and a half, the Dow futures are up 24, and the NASDAQ futures are almost 4 points above fair value.

December 16, 2013

If traders are cowering in front of this week’s Fed meeting, it’s not reflected in our futures this morning, as it looks like stock prices will be on the rise early on.

The last meeting of the year for the Federal Reserve’s Open Market Committee stars tomorrow and concludes with a mid-afternoon statement of Wednesday. It’s also the last meeting with Ben Bernanke at the helm. Some of those who like to predict the unknowable are saying that there’s almost a 50/50 chance that the Fed will start pulling back on the 85 billion dollar a month stimulus program. Although the economy is showing signs only modest signs of improvement, we’ll see if Mr. Bernanke wants to start the great un-wind while he’s still in charge.

AIG, the big conglomerate that needed a Government bailout back in the day of the financial crisis, is selling off its last non-core asset. They’ll get almost 5½ billion dollars for International Lease Finance Corporation. It should be noted that AIG is again a formidable company and the Government did get paid back in full over a year ago.

The final reading on 3rdquarter productivity is expected to reflect an increase of 2.8 percent. That comes at 8:30 this morning. The Empire Manufacturing Index is also expected to rebound nicely at 8:30.

Asia lower, Europe higher. We’re on the move higher as well. Adjusted for fair value, the S&P futures are higher by about 11 points, the Dow futures are up 108, and the NASDAQ futures are 21 points above fair value.

December 13, 2013

You may recall that last week, stock prices took a ride on the down escalator most of the week, until a big rally on Friday pulled us back to the main floor. This week we’ve been riding that down escalator once again. Perhaps another good Friday can drag us out of the basement once again. Of course, it IS Friday the 13th, so trade in accordance with you own particular superstition.

The first black cat whose path we’ll have to cross is the November Producer Price Index. It’s been so long since we’ve seen the Government report significant inflation, we’ve almost forgotten it exists. Unless, of course, you pay attention to the price of things you actually buy. In any event, the official wholesale inflation number is expected to have crept up only one-tenth of percent in November.

We’re nearing the last two weeks of the quarter and the year and the number of companies guiding 2014 earnings estimates lower is growing. Yesterday, in addition to Lululemon, which we talked about yesterday, Danaher, SAIC and Adobe Systems all lower the target for future profits.

Chinese stocks were a little lower, but most other major markets that are trading are trading higher. 

Friday rally on the way? We shall see. At this point, adjusted for fair value, the S&P futures are higher by about 7 points, the Dow futures are up 49, and the NASDAQ futures are almost 17 points above fair value.

December 12, 2013

The most interesting pre-market data comes at 8:30, when we’ll find out about the level of retail sales in November. A late-in-the-month Thanksgiving probably didn’t help. But it’s expected that pretty solid automobile sales bought us an overall increase of six-tenths of a percent, which would be an increase from four tenths of a percent in October.

The level of Weekly Jobless Claims will also be announced in just over 15 minutes.

The good news/bad news story of the morning comes from Lululemon. Last quarter’s 45 cents per share of profit easily beat the 41 cent estimate on better than expected sales. But – and it’s a big but – (pun intended) Lululemon expects fourth quarter profit to sag to 79 cents per share, which would be 5 cents short of estimates. Lululemon shares are stretching almost 10 percent lower pre-market.

Hilton Worldwide is the hot IPO of the day. That stock will go out to the well-connected at 20 bucks per share, and Facebook will join the S&P 500 after the close of trading a week from tomorrow.

There will be no trading in Mexico today but so far, other markets overseas are following us lower after the Dow dropped over 120 points yesterday. Our futures are trying to dig out of an early hole, but they’ve slipped again over the past few minutes.  At this point, adjusted for fair value, the S&P futures are lower by almost 3 points, the Dow futures are down about 17 points, and the NASDAQ futures are about a point below fair value.

December 11, 2013

It’s a new day for General Motors, finally emerging from Government ownership and with Mary Barra as the new CEO. Congratulations to Mary and to the folks at GM. She will officially take over on January 15th. A lot of positive and exciting things happening at GM nowadays.

And we have potentially good news from Washington, seemingly for about the first time in a generation or so. For the first time in three years, we may actually have a budget deal. Although it does nothing to solve the country’s long term indebtedness, at least is appears that the January 15thGovernment shutdown threat may be over. We’ll see if the full Congress can swallow this tiny pill.

Good news also in the mortgage business. Last week, mortgage applications rose one percent in spite of a rise in rates. The average 30 year mortgage is now going out at 4.61%.

Mastercard will split its stock 10 for 1 and increase its dividend by a whopping 83 percent, from 60 cents to a pre-split payment of $1.10 per share. Mastercard shares are about 4 percent higher pre-market on that news.

Costco missed the $1.03 estimate by 7 cents last quarter, due mainly to a decline in gasoline prices. But don’t look now, the price of crude is just a buck and a half below the 100 dollar mark after threatening to break 90 just a few weeks ago.

Our futures were stuck in neutral most of the morning, but turned up within the past hour. Adjusted for fair value, the S&P futures are higher by more than 2 points, the Dow futures are up about 28 points, and the NASDAQ futures are about 3½ points above fair value.

December 10, 2013

You may recall the last time the Federal Reserve hinted that they might ease up on monetary stimulus. Mortgage rates ballooned and the stock market temporarily swooned. Well, they backed away from any action in the months since then and stocks rebounded.

However, reading between the lines in yesterday’s speeches, it appears that the now-famous “tapering” of bond buying may indeed start as early as next week, if not next month. Although some pundits claim that the market expects it, and it won’t result in a market disruption, seeing will be believing.

And believe it or not, General Motors shares are indicated at more than 41 dollars apiece pre-market. Yesterday, the U.S. Treasury sold off the last of its General Motors holdings, booking a 10 billion dollar loss for taxpayers in the process. However, traders appear to be happy to not have big brother as a shareholder any longer.

Home builder Toll Brothers shares are more than 4 percent higher after reporting a 54 cent per share profit. That was 11 cents better than expected.

There’s not any significant movement in major markets overseas this morning, and so it goes with our futures. Adjusted for fair value, the S&P futures are down less than a point, the Dow futures are down almost 17 points, although the NASDAQ futures are less than a point below fair value.

December 9, 2013

Friday’s rally on a pretty strong Employment Report bought stock prices back to about even for the week, and it looks like we may drift a bit higher in the early going today.

The cupboard is pretty bare as far as scheduled economic reports are concerned this week, with nothing on the agenda today.

However, four speeches from three different Federal Reserve regional Presidents will be closely monitored today. It’s still pretty much a coin flip as to whether the Federal Reserve will start to ease up on monetary stimulus at their meeting next week, and traders will be searching for clues.

McDonald’s November same store sales were up a half percent and that was two-tenths better than expected. However, then strength came from Europe. United States comps were lower by eight-tenths of a percent, and McDonald’s shares are about a half-percent lower pre-market.

Most markets are higher overseas, with Japan the star - rising over 2 percent. Our futures have been on a slow rise for the past couple of hours, although the McDonald news hasn’t helped a lot.  At this time, adjusted for fair value, the S&P futures are higher about 3 points, the Dow futures are up almost 7 points, and the NASDAQ futures are more than 10 points above fair value.

December 6, 2013

We’re suddenly working on a five day losing streak for stock prices, although the price action has felt more like a consolidation of gains than an overall swoon in value.

The pre-market focus today is on the Monthly Employment Report, which will come from the Labor Department in just about 12 minutes. On average, the expectation is that 180,000 new non-farm jobs were created in November, and that the hypothetical Unemployment Rate fell to 7.2 percent from 7.3 percent.

In corporate news, Sears Holdings, pending Board approval, will spin off its Land’s End business to shareholders.

November same store sales at Gap came in at a much-better-than-expected 2 percent increase as rising sales at Gap and Old Navy more than made up for a decline at Banana Republic.

The big retail disappointment of the morning may be Big Lots, which may be changing its name to “Big Loss.” They lost 17 cents per share last quarter, which was more than double the expected loss. Big Lots guided lower for the current quarter and the shares are lower by more than 10 percent pre-market.

Overseas markets are mixed, but pending an unpleasant surprise at 8:30, we’ll head higher ta 9:30. Right now, adjusted for fair value, the S&P futures are higher about 7½ points, the Dow futures are up 66, and the NASDAQ futures are more than 12 points above fair value.

December 3, 2013

Cyber Monday sales did not disappoint yesterday, up by some estimates over 20 percent year on year, reaching about 2 billion dollars. As the day rolls on, we’ll find out if November car sales lived up to expectations. Ford Motor Company sales are expected to have risen about 3 percent, General Motors expected to be up almost 8 percent and Chrysler about 10 percent. Overall, annualized light vehicle sales are expected to rise to about 15.4 million. That would put the yearly sales increase at about 4.7 percent.

Last night, Krispy Kreme beat earnings estimates by a penny per share. However, sales were light, and they lowered future profit guidance. Traders are punching a hole in the price of Krispy Kreme shares this morning by more than 13 percent.

And while we’re talking food, YUM brands shares are off about 1 percent pre-market on disappointing Chinese sales. About half of YUM profits come from Asia.

Australia’s Central Bank held interest rates steady overnight, and some encouraging words from the Bank of Japan sent Japanese stocks higher by more than one-half of one percent. European stocks are lower again this morning, this time by more than one percent.

Our late-day price drop should continue in the early going today. Right now, adjusted for fair value, the S&P futures are lower about 4½ points, the Dow futures are down 56, and the NASDAQ futures are almost 3 points below fair value.

December 2, 2013

Welcome to the last trading month of a year that has seen a pretty spectacular rise in stock prices. The S&P 500 rose almost 3 percent in November alone, not even counting dividend income. For the year to date, the S&P 500 is higher by almost 27 percent.  Of course, there are no guarantees, but since 1950, the S&P 500 has risen in December more than 3 years in every 4. In contrast, gold is down another one percent after losing another 6½ percent in November.

Over in Germany, shares of Thyssen Krupp are not on the rise. On word that they have found a buyer from their Alabama steel plant, Thyssen shares there are almost 10 percent lower. 

The November Purchasing Managers Index for the Eurozone rose to 51.6, which is mildly positive. Our ISM Manufacturing Index comes at 10 o’clock. Expect a slight decline to a reading of 55.

It’s Cyber Monday, with online sales expected to top 1½ billion dollars. Interestingly, Amazon.com is now testing a service that would deliver your purchases directly to your home by drone aircraft. No word, however, on whether the drone could then pick up your kids and get them to school, or perhaps get your dog to the vet.

Overseas markets are mixed. Right now, adjusted for fair value, the S&P futures are up a fraction of a point, the Dow futures are up 8, and the NASDAQ futures are almost 6 points above fair value.


WJR January 2014 Reports
WJR November 2013 Reports

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