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WJR February 2008 Reports

February 29, 2008
 
Today is the special day we only get to enjoy once every four years.  Kind of like a Presidential election without the annoying commercials.  Anyway, it may be a day that the stock market could do very well without.
 
The biggest domestic insurance company AIG got us off on the wrong foot this morning.  They announced a quarterly loss of 5 billion dollars, thanks to an 11 billion dollar charge-off of credit derivative investments.  AIG was almost 4 percent lower in European trade this morning.
 
Computer maker Dell is also indicated lower.  Dell increased revenue last quarter, but profit fell about 6 percent.  Corporate spending on computer hardware remains tepid.
 
A little later today, specifically at 9:45, we’ll get the final reading on February Consumer Sentiment from the University of Michigan.  We’ll also get speeches from some Fed governors.  But traders will most likely spend most of their time worrying about ongoing distress in the credit markets.
 
Japanese stock sank about 2 percent overnight.  Most other major markets a 1 to 2 percent lower.  Our futures have been unattractive all morning, but are now getting downright ugly.  At this point, adjusted for fair value, futures on the S&P 500 are down 16 points, the Dow futures are down 113, and the NASDAQ futures are more than 28 points below fair value.
 
February 28, 2008
 
The bulls are hoping against hope that this week’s rally holds.  But we’ll have to beat back a little profit-taking off the get-go this morning.
 
Ben Bernanke visits the Senate Banking Committee today to reprise his chat with the House Financial Services Committee from yesterday.  However, there is a fair amount of economic and earnings news on the way as well.
 
At 8:30, the preliminary read on 4th quarter Gross Domestic Product is expected to show an increase of seven-tenths of a percent.  Remember, a “recession” is popularly defined as two consecutive quarters of NEGATIVE GDP. While media chatter has many people believing that we’re already in a recession, you may want to consider the numbers facts as well as the opinions.
 
At 9:45 the February Chicago PMI is expected to dip under 50, from last month’s 51.5.  Any reading below 50 indicates contraction in the manufacturing sector.
 
Sprint and Fluor beat estimates this morning although Fluor’s guidance was a bit weaker. Sears Holdings missed estimates.  Earnings are on the way from Dell and insurer AIG as well.
 
Oil is just barely hanging on to the 100 dollar per barrel level.  Asian markets are mixed, Europe is about one percent lower.
 
At this point, futures on the S&P 500 are down almost 9 points, the Dow futures are down 63, and the NASDAQ futures are 6 points below fair value.
 
February 27, 2008
 
There are some earnings reports out and on the way, as well as some big economic reports.  However, center stage will again belong to Fed Chairman Ben Bernanke.  Bernanke will deliver this installment of his semi-annual testimony to the House Financial Services Committee.  They used to call this the Humphrey-Hawkins testimony, but call it what you will, currency markets are moving in anticipation.
 
The Euro broke through the dollar-fifty level overnight.  That’s a new record, as traders are expecting Mr. Bernanke to embrace additional interest rate cuts as a way to deal with the current credit crunch.
 
Sometimes getting expectations low enough is the best way to put lipstick on a pig.  That may be the case with home builder Toll Brothers this morning.  Toll Brothers’ revenue was off 28 percent, backlog is off 42% and they lost 35 cents per share on an operating basis.  But that was better than the 44 cent expected loss.  Homebuilders rallied yesterday on news that the average value of homes in the U.S. declined 9 percent last year.  Gosh, I remember hearing  that real estate never goes down in value.   Anyway, the hope is that prices are now getting low enough to attract buyers.
 
Japan was up 1 ½ percent overnight, Hong Kong up 3 percent, the Hang Seng in China up 4 ½ percent.  Europe, however, is lower and that’s where we’re likely to start. At this point, the S&P futures are down 7 points, the Dow futures are down 56, but the NASDAQ futures are 10 points below fair value.
 
February 26, 2008
 
Yesterday’s see-saw market saw a strong late day rally based on Standard & Poor’s reaffirmation of Triple-A ratings on the big bond insurers.  Not to be a wet blanket, here – but while no one wants to see that rating lowered, those ratings are not cast in stone.
 
Nevertheless, yesterday’s 1½% rally was a breath of fresh air.  Today’s big number to watch will roll out in about six minutes.  The January Producer Price Index is expected to have jumped four-tenths of one percent.  The core rate, which excludes food and energy, is expected to have risen two-tenths of a percent.  In this day of inflation sensitivity, he lower these numbers come in, the better.
  
Speaking of inflation control, Fed Vice Chairman Donald Kohn will give a speech at The University of North Carolina a little later.  Traders will be watching for hints about March’s anticipated interest rate cut.
 
Home Depot and El Paso both out with disappointing results this morning, Macy’s beat estimates, but once again nobody much cares about earnings in a market that’s on inflation and credit market watch.
 
European markets are once again generally more than one percent higher.   We’re waiting for the Producer Price number at 8:30 before we pick a firm direction.  At this point, the S&P futures are down a point, the Dow futures are down 13, but the NASDAQ futures are actually a point or so above fair value.
 
February 25, 2008
 
There’s a fair amount of economic news coming this week, and it’s not expected to be particularly good news.  Consider the categories: home sales, inflation, manufacturing and consumer sentiment readings.  All have been negative lately.  On the bright side, when everybody expects bad news, any good news in those areas or news about a bailout deal for the big bond insurers MBIA and AMBAC could give stocks a boost.
 
Earnings news has had little or no impact on the overall market lately as the credit crunch has played the role of the 800 pound gorilla.  But for what it’s worth, shares of home improvement company Lowe’s should head lower at the open.  Yes, they made 28 cents per share in the fourth quarter, which beat the 25 cent estimate.  However, their 2008 profit estimate of $1.54 per share is a full 30 cents lower than Wall Street expected.
 
Like it or not, Grand Theft Auto has been a very profitable video game franchise for Take-Two Interactive.  Electronic Arts has taken notice.  EA is offering to buy Take-Two Interactive for 26 dollars per share.  That’s about a dollar higher than their previous bid.
  
European markets are 1 to 2 percent higher.  Our futures were a lot higher a couple of hours ago but have been sliding ever since.  The S&P, Dow and NASDAQ futures are just about even with fair value.
 
February 14, 2008
 
The big event of the day will once again happen in the halls of Congress.  The general public was probably more interested in yesterday’s testimony about what players in Major League Baseball got stuck with what and by whom.  Today, Ben Bernanke and Treasury Secretary Henry Paulson will testify before the Senate Banking Committee on how the rest of us are getting stuck with a credit crisis that’s been caused by mortgage brokers and bankers who played the lending game on financial steroids.
 
Comcast stock may get a shot in the arm today.  They reported 20 cents per share of earnings versus the expected 17 cents.  That’s a 54 percent increase from last year’s comparable quarter.  Comcast will also start paying a 25 cent per share dividend.  The last time they did that was over 10 years ago.  They’ll also be buying back 7 billion worth of their own stock.
 
Overseas markets showing thumbs up this morning.  Two thumbs up in Asia, in fact, with the Japanese market up over 4 percent.
 
Stateside, it’s one of those funny mornings – like in funny unusual, not funny ha-ha – when the futures look a lot better on the sur>
 
February 13, 2008
 
A couple of big company earnings reports have the stock futures in a pretty good mood once again this morning.  Deere made 83 cents per share versus the expected 78 cents and Coca-Cola looks like it will open a dollar or so higher this morning.  Coke’s case volume was of 5% for the quarter and the made 58 cents per share, which was 3 cents better than expected.  Of that 5% rise in case volume, only 1% was in North America, as once again we see the strongest consumer growth coming from overseas.
 
At 8:30, the January Retail Sales report is expected to give us an increase of 4 tenths of a percent.  If you remove auto sales, a two-tenths of a percent increase is expected.
 
Oil is down a bit, but is still over 92 bucks per barrel.  Asian stocks traded mostly higher overnight, but Europe is mostly lower.
 
We should follow those earnings reports higher, absent some really bad news on retail sales.  At this point, adjusted for fair value, the S&P futures are up 4½  points, Dow futures are up 26 and the NASDAQ futures are now 14 points above fair value.
 
February 12, 2008
 
Lots of earnings news is rolling out this morning.  Some good, some bad, some ugly and one just a little confusing.
 
In that order, Schering-Plough beat estimates by three cents per share.  Qwest and Wyndham Hotels matched estimates.  Marsh McLennan made only 26 cents versus the expected 31.  Locally, Masco’s results – of course tied to the housing industry – were ugly.  Masco made 19 cents versus the expected 28 cents.  Masco now expects 85 cents to $1.15 of profit for the year.  The Street had expected $1.65.
 
The head fake of the morning goes to General Motors.  Wall Street expected a loss of 54 cents per share.  GM reported operating earnings of 8 cents per share.  Supposedly good news.  However, the results included a tax gain of 1.6 billion dollars.  Divide that by the outstanding shares, and the tax gain is almost 3 dollars per share. So evidently, it depends on how you look at it; either a beat of 62 cents or a miss of over 2 dollars per share.  The long and short of it is that traders are shorting.  GM stock is indicated about 2 ½ percent lower in the pre-market.
 
Our futures started the morning in the hole, then rallied strongly, slid back after the GM earnings announcement, but have rallied very strongly again since  8 o’clock.  At this point, adjusted for fair value, the S&P futures are up almost  8 points, Dow futures are up 55 and the NASDAQ futures are now 10 points above fair value.
 
February 11, 2008
 
The expected word from the Yahoo Board of Directors – “no” – came over the weekend, as Yahoo told Microsoft that their 31 dollar per share offer was not high enough.  Yahoo’s Board is reportedly looking for 40 dollars.  Expect some back and forth, but most expect that Microsoft will still prevail by sweetening the pot by a few dollars per share.  Remember, a share of Yahoo stock could be had for under 20 bucks just a couple of weeks ago.  Yahoo shareholders would really rather not go back there.
 
Earnings season has pretty much petered-out.  However, at 8:30 this morning we’ll get the report on January Retail Sales.  The consensus estimate is an increase of two-tenths of one percent, after a four-tenths of a percent decline in December.
 
Japanese stocks did not trade overnight, but a lot of Asian markets opened up again after last week’s New Year’s celebrations.  Unfortunately, it wasn’t much of a celebration, in Hong Kong for instance, the Hang Seng index closed almost 4 percent lower.  European markets are mixed, and as long as we don’t get any truly horrific news out of the Retail Sales report at 8:30, we’ll head higher at 9:30. 
 
Our futures have been climbing most of the morning. At this point, adjusted for fair value, the S&P futures are up 2 points, Dow futures are up 18, and the NASDAQ futures are now 8 points above fair value.
 
February 8, 2008
 
No disrespect to Cedar Point, but the BIG roller coaster ride continued on Wall Street yesterday.  A big opening decline was followed by a late day rally as stock prices bounced off what some call strong technical support levels.
 
The earnings train is nearing the end of the track.  There’s not much on the calendar for today.  The big news of the morning came from bond insurer MBIA.  IN an attempt to shore up its capital base, MBIA will bring to market over 82 million new shares of its own stock priced at $12.15 per share.  If it sells, that will raise a billion dollars, but it can’t make current shareholders terribly happy.  Those existing shares traded in the pre-market this morning over 11% lower.
 
In little more “Fed speak” this morning, San Francisco Fed head Janet Yellen said that she thought the U.S. would avoid outright recession, and she left the door open to additional short-term interest rate cuts.  That’s a good thing for a stock market that already has future cuts priced in.
 
MacDonald’s same store sales in the U.S. were up 1.9%, which is better than expected.  Worldwide they were up 5.7 percent.
 
European shares are fairly flat this morning. Our futures were positive earlier this morning, but have been on the slide ever since. At this point, adjusted for fair value, the S&P futures are down almost 5½ points, Dow futures are down 40 but the NASDAQ futures are actually 1½ points above fair value.
 
February 7, 2008
 
Yesterday we saw the morning futures looking positive on a reflex reaction to Tuesday’s loss.  However, this morning’s numbers are a mess – and, unfortunately, there’s reason for it.
 
Technology bellweather Cisco Systems reported a 7% profit increase last night, but warned that they expect sales growth this quarter will only be 10 percent versus the expected 15 percent.  Cisco stock is looking to open about 10% lower. In London, GlaxoSmithKline reported a 12% profit drop and warned that 2008 earnings would be lower.
 
Then this morning, WalMart announced that January same store sales rose only one-half of one percent.  Analysts expected a 2 percent increase. It’s becoming pretty clear that the U.S. consumer slowed down January. The next shoe may drop at 8:30 with the weekly Unemployment Claims number.  Nobody’s paid much attention to the weekly numbers in a while, but it may give us an indication of just how bad things are getting.
 
The Bank of England seems to be waking up.  They cut interest rates a quarter percent to 4 percent this morning.  Here is the U.S. we’re at 3 percent and headed lower.  In Europe, the EBC held rates steady this morning.  Obviously, Europe is immune to what’s going on.  Either that, or they haven’t gotten back from vacation.
 
Tokyo was up overnight.  Most Asian markets are closed for the Chinese New Year.  We may wish we were closed today.  At this point, adjusted for fair value, the S&P futures are up down 11 points, Dow futures are down 47 and the NASDAQ futures are 28 points above fair value.
 
February 6, 2008
 
We’ll get a little snap back from yesterday’s market drubbing, but it’s more reflex than the result of a lot of good news.  Earnings reports this morning are pretty much a mixed bag.
 
Yesterday, the ISM index that measures the health of the non-manufacturing sectors of the U.S. economy fell like it’s never fallen before.  41.9 versus the expected 53.  It’s the first reading that indicates contraction in the services industries since March, 2003.
 
In ten minutes we’ll get the reading on 4th quarter productivity, but earnings news will continue to roll in.  Last night Disney reported much better earnings than expected, making 63 cents per share versus the expected 52.  On the flip side, TimeWarner came up a penny light, Cigna missed by a nickel and home-builder Toll Brothers said there’s no end in sight for the housing downturn.  Their construction revenue was down 22 percent and the construction backlog was down 42 percent from a year ago.
 
Overseas, markets in China, South Korea and Vietnam were closed for the New Year’s Holiday and will be closed for the rest of the week.  Hong Kong, Singapore, Malaysia and Indonesia will be closed tomorrow and Friday, and prepared for it by taking a dive today.  Hong Kong was off over 5%.
 

We however, will recover a bit at 9:30. At this point, adjusted for fair value, the S&P futures are up 9 ½ points, Dow futures are up 98, and  the NASDAQ futures are 10 ½  points above fair value.

February 4, 2008

Good news this morning. Namely, the Super Bowl Indicator. Yes, it is meaningless.  But lots fun to talk about.  Tradition has it that when the NFC wins the big game, the stock market will have a good year.  At this point, the stock market is at least as much of an underdog as the Giants were, after starting the year with a 5% holding penalty.  But of course, we’re only in the first quarter.  Time to start blocking and tackling, and that means interest rates and earnings.
 
Archer Daniels Midland made only 73 cents per share last quarter, versus the expected 74 cents, but revenue was about 30% higher than expected on price increases.  That may bode well for future earnings.
 
Humana’s dollar-forty-three of earnings beat estimates handily.  They also raised estimates for the entire year.  Wendy’s is the bummer of the morning, making 21 cents.  That’s two cents shy.  Wendy’s stock should open lower.  Lots more earnings on the way later today.
 
Merrill Lynch sees something it doesn’t like in the banking sector.  They downgraded Wachovia and Wells Fargo this morning.
 
In front of all the earnings on the way, futures are now painting a slightly lower picture for the open.  At this point, adjusted for fair value, the S&P futures are down a little more than a point, the Dow futures are down 3, and the NASDAQ futures are just about even with fair value.
 
February 1, 2008
 
It’s the first Friday of the month.  That means that stock traders’ sole focus should be the monthly Unemployment Report that will be revealed at 8:30.  But – not so fast.  Earlier this morning, news broke that Microsoft is launching a hostile takeover bid for Yahoo!
 
Yahoo! shareholders would get their choice between Microsoft stock or cash, and the bid values Yahoo! stock at a 62 percent premium to last night’s closing price. Financing is not a problem, Microsoft has pleanty of stock and cash.  Two possible hang-ups here – Yahoo! might hold out for a slightly higher price and there’s always the possibility that regulators might not approve.  There’s no love lost between Microsoft and the European Commission.  But, for now, the offer has lit a fire under stock futures.
 
Oh yeah- the Unemployment Report.  Expect 65,000 new non-farm jobs created in January and a continued 5 percent unemployment rate.  Any number that shows a lot more jobs or a lower unemployment rate might be bad news for future interest rate cuts and stock prices.  But absent bad news there, we’re heading higher at 9:30.
 
Adjusted for fair value, the S&P futures are up 15½ points, the Dow futures are up 105 points, and the NASDAQ futures are about 21 points above fair value.
WJR March 2008 Reports
WJR January 2008 Reports

Daily Reports @ WJR

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