February 27, 2009
The good news for Citigroup this morning is that it will reportedly have tangible common equity of 81 billion dollars. The bad news is some big time dilution for common shareholders. Citi will exchange common stock for 27½ billion dollars of preferred stock at a price of $3.25 per share. The government will exchange its $25 billion of its preferred for common. It’s a pretty complicated deal with a lot of moving parts. The easy part of it is that up to 36 percent of Citi common stock will be owned by the Government, and that stock which won’t pay a dividend, and closed around 2½ bucks yesterday are bid at about a buck and a half per share this morning. The deal is sending shivers through many financial stocks this morning and will tip what was a pretty flat market into the red at 9:30.
The second estimate of 4th quarter GDP will be announced at 8:30 and it’s expected to reflect a decline of 4½ to 5½ percent versus the advance number of negative 3.8 percent.
Japanese industrial output dove a record 10 percent in January, and February is not expected to be a lot better.
In spite of that news, the Nikkei in Japan was a percent and a half higher overnight, while most overseas markets are lower. At this point, adjusted for fair value, S&P futures are down about 10 points, the Dow futures are down 85, and the NASDAQ futures are about 5 points below fair value.
February 26, 2009
General Motors stock gained over 12 percent yesterday. But pre-market indications suggest that half, or maybe all that gain could go “poof” at 9:30. Earlier this morning, GM announced a quarterly operating loss of $9.65 per share. That makes the 2008 annual loss $29 bucks a share, or almost 17 billion dollars.
The quarterly loss was about 30 percent worse than expected, and although GM may have “thrown the kitchen sink” in this quarter, the important number here is that the quarterly cash burn rate is 6.2 billion dollars and GM has only about 14 billion of cash on hand.
Sears Holdings is also out with their report this morning. On an operating basis, which means that you can ignore some inconvenient truths, Sears earned $2.94, which was much better than the estimated $2.59 cents. However, overall company profit was down 55% to $1.55 per share, driven down by a 12 percent revenue drop and another bunch of store closings.
Don’t look now, but oil is higher by another 80 cents this morning, to over $43 per barrel.
Asian markets were mixed overnight, but Europe is solidly higher. Our futures have been slipping during the past fifteen minutes, but are still pointing toward higher prices at the open. At this point, adjusted for fair value, S&P futures are up about 8½ points, the Dow futures are up 62, and the NASDAQ futures are almost 10 points above fair value.
February 25, 2009
The two big speeches came and went yesterday, and for the stock traders, Mr. Bernanke appears to have captured their attention a lot more than President Obama.
Yesterday’s testimony by Ben Bernanke was fairly unique for Congressional financial testimony. Some of the questions were actually pretty insightful and intelligent. Mr. Bernanke was equal to the task and the stock market enjoyed a much-needed bounce. Mr. Bernanke heads to the House of Representatives today. It’s likely the questions won’t be as good, but will likely be more entertaining.
A major broker downgraded Microsoft stock this morning, reflecting recent comments on the economy from Steve Ballmer. On the flip side, another broker granted an upgrade to AT&T.
Overseas markets are almost all higher overnight on the heels of our rally yesterday.
Our futures, which had dipped during the past couple of hours, appear to be on their way back toward the flat line as we head toward 9:30. On their >
February 24, 2009
A pretty full handful of companies reported earnings this morning, and guess what? They were all better than expected! Home Depot, although reporting a GAAP loss, reported operating earnings of 19 cents, which was 3 cents better than expected.
Heinz beat estimates by 8 cents per share, as did Marvel Entertainment. Foster Wheeler reported $1.03 in profit versus the expected 96 cents. Macy’s earned $1.06 versus the expected $1.03.
Another stock that is indicated higher this morning is JPMorgan Chase, after cutting their dividend from 38 cents to 5 cents. Normally a dividend cut is not greeted warmly by investors. But this cut is reportedly intended to preserve cash that can be used to pay back TARP money as soon as possible, and get the Government’s nose out from under JPMorgan’s tent.
Ben Bernanke speaks to the Senate Banking Committee this morning, and of course, President Obama speaks to the country tonight at 9 o’clock.
Ahead of all that, we should start off in the green. Right now, adjusted for fair value, S&P futures are up about 7½ points, the Dow futures are up 70, and the NASDAQ futures are about 10 points above fair value.
February 13, 2009
Happy Friday the 13th. Scared yet?
Yesterday’s horror story wound up with a happy ending after a furious late-day rally and it looks like we’ll get a little carry-over of the rally at the outset today.
The first estimate out of the University of Michigan regarding February Consumer Sentiment comes this morning just before 10 o’clock. Expect a slight decrease from last moth’s reading of 61.2.
On the earnings front, Pepsico matched the consensus operating income estimate or 88 cents per share. Pepsi expects mid to high single digit EPS growth this year, but also expect that currency translation will take most of the wind out of that sail. Wyndham Worldwide and Abercrombie and Fitch both beat estimates this morning.
The bond market closes at 2 o’clock today in anticipation of President’s Day. Evidently all those wild and wacky bond traders need the extra time off to plan their Presidents’ Day parties.
Overseas markets took a clue from our late rally yesterday and are higher be anywhere from 1 to 3 percent. Right now, adjusted for fair value, S&P futures are up about a point, the Dow futures are up 13, and the NASDAQ futures are about 3 points above fair value.
February 11, 2009
Treasury Secretary Geithner’s broad outline of the Administration’s bank rescue plan yesterday was a bit of a throwback to the old Seinfeld show. Some called it “a plan about nothing.” The stock market which, like the American public, was looking for some instant gratification sold off early and often. It looks like some stability has returned this morning in stock prices, as everyone hopes that Treasury can describe a plan, rather than give a speech, sooner than later.
General Electric announced a big deal with Saudi Arabia this morning. One and a half billion dollars is big – unless you’re talking about a government spending bill, of course. GE will provide 30 gas turbines in the deal.
This morning’s earnings disaster is Research in Motion. Doesn’t look like a bumper year for the Blackberry crop, as RIMM guided to the low end of estimates and the stock is looking to open down about 12 percent.
Marsh and McLennan and Ingersoll Rand both beat their earnings targets, but big steel maker Arcelor-Mittal lost money for the first time ever on big inventory write-downs caused by a “collapse” in demand.
Overseas markets are moderately lower although our futures are mixed. Right now, adjusted for fair value, S&P futures are up about 4 points, the Dow futures are up 29, but the NASDAQ futures are about 3 points below fair value.
February 10, 2009
This is one of those days we may look back upon as a pivot point in the economic story of the decade.
Details of the Treasury Department’s plan to get credit flowing again will be announced, and reportedly include a mechanism to entice the private sector to buy up “bad assets” from banks. A combination of cheap financing and limited downside exposure appear to be the core of the proposal. It is interesting, however, to see if the final decision of WHETHER to sell the bad assets, and WHETHER to get back in the lending business will still be left to the very financial institutions that caused the problem in the first place.
Unfortunately, a critical part of the solution, foreclosure mitigation, is being kicked down the road by at least another couple of weeks.
The funds will reportedly come from the TARP and an expansion of the Fed’s balance sheet, so that Congress won’t be asked to authorize a NEW source of funds.
On the earnings front, Qwest made 12 cents per share versus the expected dime, and Pepsi Bottling beat estimates by a nickel per share.
European markets are a bit lower as we await details on the Treasury plan. Our futures are telling almost exactly the same story as they did 24 hours ago. Right now, adjusted for fair value, S&P futures are down about 7 points, the Dow futures are down 51, and the NASDAQ futures are about 8 points below fair value.
February 9, 2009
The big Monday announcement we expected from the Treasury Department today has become the big Tuesday announcement we expect from Treasury tomorrow. Some details were leaked over the weekend, but we’ll give back some of Friday’s market gains at the open today.
It’s been quite the struggle as Delphi has tried to survive Chapter 11. This morning’s story is that General Motors is looking to re-acquire some or a lot of Delphi. GM’s offering price is reportedly, oh, around zero. Sounds like the classic example of a rock and a hard place.
Nissan now projects that it will lose nearly 3 billion dollars this fiscal year, and will layoff one out of every 12 workers worldwide.
Speaking of financial horror stories, the two big Swiss banks, UBS and Credit Suisse are reportedly set to announce a combined 25 billion in losses for the year.
Hasbro and Whirlpool both reported earnings this morning that fell a mile short of estimates. On the good news side, Pfizer and Wyeth were both upgrades to buy by a major broker. And McDonald’s reported global same-store-sales that were up over 7 percent from a year ago.
Asian markets were mixed, Europe is slightly lower. Right now, adjusted for fair value, S&P futures are down about 6½ points, the Dow futures are down 51, and the NASDAQ futures are about 8 points below fair value.
February 6, 2009
It’s once again the first Friday of the month, that means the Month Jobs report rolls out in about 13 minutes or so. About 525,000 non-farm jobs are expected to have disappeared last month, and the Unemployment Rate is expected to spike up to about 7½ percent.
It’s official at Toyota. Their fiscal year, which ends March 31st, will be the first losing year in almost 60 years. In December, Toyota predicted a loss for the year that’s only one-third as big as they are now predicting. The 3rd quarter loss was 1.8 billion dollars. They’re now predicting a full year loss of 3.8 billion.
There are about as many upgrades as downgrades out of the analyst community this morning, but one is of particular note; one major broker has downgraded Weight Watchers to “underweight.” I just love when that happens.
We’re expecting big announcements out of the White House about the “grand plan” next Monday and it will be interesting to see where the market wants to spend the weekend in front of that.
Foreign markets will spend the weekend higher. Chinese stocks rose almost 5 percent overnight. Our futures are slightly negative, but anything could happen after the Jobs Report at 8:30. Right now, adjusted for fair value, S&P futures are down about 3 points, the Dow futures are down 22, and the NASDAQ futures are about 5 points below fair value.
February 5, 2009
Just in case you’re interested, the list of Bernie Madoff’s clients (or possible clients) is out. It’s 163 pages long (single spaced.) Individuals, charities, foundations and big banks, Zsa Zsa Gabor, New York University, Senator Lautenberg as well all willing to fall for a too-good to-be-true story. By the way, Morningstar says that of 1684 hedge funds that have reported 20 consecutive quarters of results through the 3rd quarter of 2008, 34 never reported a “down” quarter and only 7 of those 34 had exposure to Madoff. There may be other bad stories out there.
Last night after the close, Cisco Systems beat earnings estimates for the quarter gone by, but also reported than January orders were 20 percent lower than a year ago. Cisco also warned that the current year will be extremely tough, as if you didn’t know that already.
Visa, Mastercard, Western Union and Moody’s both checked in with better than expected results this morning and Limited Brands reported that January same store sales were “only” down 9 percent versus the expected 16 percent. Walmart’s January sales were up more than 2 percent versus the expected 1 percent.
The bank of England cut interest rates another half percent this morning to one percent. The European Central Bank, as expected, held rates steady at 2 percent.
Overseas markets are lower and our futures have been on the slide all morning. Right now, adjusted for fair value, S&P futures are down 3 points, the Dow futures are down 34, and futures on the NASDAQ, on the Cisco warning last night, are about 18 points below fair value.
February 4, 2009
The big hub-bub of the day is the pending announcement from the White House regarding limits on executive compensation for companies that receive TARP funds. It’s a nice photo-op for the new President, and panders to the public outrage over the outrageous compensation practices at many big banks. Unfortunately, this type of tinkering has always backfired in the past and will further delay what the Government SHOULD be doing in getting the credit markets moving.
This morning, Time Warner reported earnings that missed the mark by 3 cents per share. Kraft missed by a penny and guided lower. Costco also guided lower as January same-store sales came in 2 percent lower. Costco stock is indicated almost 5% lower. Ryder beat estimates but guided much lower. Overall, 4th quarter earnings of the S&P 500 are coming in about 40% lower than a year ago.
The House Financial Services Committee will keep itself busy listening to testimony from the guy who spent the better part of a decade trying to convince regulators that Bernie Madoff was up to no good. Let’s hope the result is better regulation, rather than just more regulation.
Hong Kong, Japan, Europe – everybody’s higher overnight. We’ll likely get off to a more subdued start. Our futures have been improving, but they’re still under water at this point. Adjusted for fair value, S&P futures are up a fraction of a point, the Dow futures are down 29 points, but futures on the NASDAQ, which turned in a good day yesterday, are about 3 points below fair value.
February 3, 2009
There are a ton of earnings for traders to consider today, as the market for stocks bumps along, searching for a reliable bottom. Overall, the reports are a mixed bag.
UPS stock will head lower this morning. They made 83 cents versus the expected 85 cents. UPS gave a wide range of estimated future earnings. But that range ranges well below consensus estimates. Dow Chemical is the other big downer of the morning, losing 62 cents per share at the same time analysts were expecting a profit. Dow’s statement predicts low levels of demand for several more quarters and possibly beyond. Dow stock is down close to 10 bucks per share pre-market.
The good news of the morning comes from Archer Daniels Midland, making 91 cents versus the expected 68, and from the drug sector as Merck and Schering-Plough both beat estimates by a wide margin.
Asia was mixed, Europe is slightly higher. A good earnings story from Vodaphone helped there.
Our futures are throwing mixed signals, although they have been improving over the past hour. Adjusted for fair value, S&P futures are up a half-point, the Dow futures are up 5 points, but futures on the NASDAQ, which turned in a good day yesterday, are about 4½ points below fair value.
February 2, 2009
It’s Groundhog Day. Punxsutawney Phil climbed out of his hole and saw his shadow this morning. Wall Street has a much deeper hole from which to crawl, and I’m afraid we have a gloomy forecast for 9:30 this morning.
The market is anxious to hear about the Administration’s rumored “bad bank” plan. Instead, rumor is that “bad bank” has been sent to the corner and Washington will spend more time this week talking about limits on Wall Street’s compensation plans. Necessary or not, the last time Washington got involved in setting corporate compensation policy was in 1993 which led directly to the stock option scandals some years later.
At 8:30, December personal income and consumption indexes are expected to have fallen four-tenths and nine-tenths of a percent.
Rockwell Automation, Mattel and Humana all reported lower-than expected earnings. Rockwell and Mattel guided lower for the rest of the year and their stocks will hit this morning.
Overseas markets are lower on the order of 1 ½ to 3 percent. Adjusted for fair value, S&P futures are lower by about 11½ points, the Dow futures are down 98 points, and the NASDAQ futures are about 16 points below fair value.