February 29, 2016
What started as a horrible day for Chinese stocks moderated a bit by the close of trading there, and a post-market cut in the reserve requirement by China’s Central Bank may steady the ship tomorrow. But in the meantime, keep an eye once again on the price of oil. Our futures have improved a good bit from lower levels as West Texas Intermediate has recovered its earlier losses.
At 9:45 we’ll hear about the February Chicago Purchasing Managers Index. The January number surged very unexpectedly to a reading of 55.6. Most expect a much more subdued reading of 52.9 this time around. Anything above 50 indicates economic expansion, and the higher the number the better.
By 10:30, we’ll also get the Pending Home Sales Index and the Dallas Fed survey.
Chinese stocks finished 3 to5 percent lower, depending on which index you follow. Most European markets are lower, but better off than they were earlier, although Germany is still off by about one percent.
Adjusted for fair value, the S&P 500 futures are now lower by 5½ points, the Dow futures are down 46, and the NASDAQ futures are about 16 points below fair value.
Oil futures are down about a half-percent this morning, and although that is not helping the stock futures, it looks like stocks may open higher, due to some televised comments from St. Louis Federal Reserve Bank President Jim Bullard.
Bullard has been a fairly consistent proponent of tighter monetary policy. But in his comments this morning, he said that falling inflation expectations are reason enough to put the brakes on further rate increases for the time being.
Putting the brakes on expectations for a better 2016, Best Buy shares are looking about 3 percent lower. Best Buy earned $1.53 last quarter, which was 14 cents better than expected. However, same store sales were 1.8 percent lower and Best Buy lowered forward guidance from 39 cents to33 cents. They did hike their dividend by 22 percent.
Kohl’s raised their dividend by 11 percent after beating earnings expectations. They guided a little high on earnings and announced that they’ll be closing some underperforming stores and trying a smaller store format. Kohl’s shares are looking to open about 2 percent higher.
Our futures are higher, but have been slowly sinking back toward the flat line. Adjusted for fair value, the S&P 500 futures are now higher by less than 4 points, the Dow futures are up 21, and the NASDAQ futures are about 7 points above fair value.
I know it’s almost March, but it feels a little like Groundhog Day – the movie, that is. Once again today, what’s good for your pocketbook at the gas pump is bad news for your 401(k). West Texas Intermediate is more than three percent lower, below 31 bucks per barrel. Yesterday, a Saudi Arabian official confirmed that there will be no deal in the short term to restrict oil production and outside of China and New Zealand, equities around the world are again in the dumps.
Home improvement retailer Lowe’s is out with a solid, but not terrific report this morning, matching the earnings estimate on a 5.6 percent sales increase. Target just reported an earnings miss.
We’ll get speeches from three more Federal Reserve officials today, which lately have been doing more to confuse than clarify the future of Fed action.
Mortgage applications dipped last week on an 8 percent decline in refinancings. The average 30 year interest rate did rise a bit after a big decline in the prior week. At 10 o’clock, the January New Home Sales report is expected to reflect a decline to an annualized rate of 520,000. Perhaps more important for the stock market will be the 10:30 report from the Energy Information Administration on crude oil and gasoline inventory levels.
In front of all that, stock prices will head lower at 9:30. Adjusted for fair value, the S&P 500 futures are now lower by 16 points, the Dow futures are down 133, and the NASDAQ futures are a little more than 46 points below fair value.
We rolled to the April futures contract on West Texas Intermediate yesterday. That was part of the reason oil rose more than 6 percent and helped pull stocks prices along with.
Not needing any help to pull higher this morning are shares of Home Depot. $1.17 of quarterly profit was 7 cents better than expected on a 9 percent increase in sales. Home Depot is also hiking its dividend by 17 percent and the shares are up about 3 percent. Macy’s just reported beer than expected earnings. Macy’s shares looking about 7 percent higher pre-market.
Jogging downhill this morning are shares of Fitbit. Earnings of 35 cents per share sprinted ahead of the 25 cent estimate. Problem is that the outlook calls for higher production costs and increasing competition as everybody in the country can’t seem to function without knowing their current heart rate. Fitbit shares are looking to open about 15 percent lower.
At 10 o’clock, the Conference Board releases the results of their February survey on consumer confidence. It’s expected to slip a bit to a reading of 97.2 from January’s 98.1.
Markets overseas are generally lower, but generally on the order of one percent or less. Oil is lower by about one percent.
Friday’s late rally pulled stock prices pretty much back to even, and that momentum will continue in the early going today.
Over the weekend, the often influential Barron’s Magazine ran a cover story that acknowledged that although the markets have been volatile, we could very well see 3 percent growth in the domestic economy in 2016 and stock prices that could touch all-time highs by year’s end. The wild card in that scenario is the very real possibility that people will conclude that whoever is be elected President in November will be a disaster.
Speaking of disasters, shares of Lumber Liquidators are almost 17 percent lower pre-market. Those shares are falling through the floor, so to speak, on a Center for Disease Control reports that corrects an earlier CDC assessment of the cancer risk in Lumber Liquidators Chinese-made flooring. The CDC now says the cancer risk is more than 3 time higher than reported earlier.
Lots of economic data and Federal Reserve executive speeches are on the way this week, but today will be relatively quiet.
Oil futures are almost 4 percent higher this morning, which puts West Texas Intermediate at nearly 31 dollars per barrel. Still relatively cheap, but it’s almost 20 percent higher than a week or two ago.
European markets are generally one to two percent higher. Our futures are weaker than a couple of hours ago, but they’re still pretty strong. Adjusted for fair value, the S&P 500 futures are now higher by almost 22 points, the Dow futures are up 181, and the NASDAQ futures are a little more than 49 points above fair value.
Unless stock prices really fall out of bed today, we’re looking at the market’s first positive week this month, as the S&P 500 closed yesterday up almost 3 percent on the week.
Looking to open 2 to 3 percent lower this morning are shares of Deere & Company. Sales dropped 13 percent last quarter, which was 2 percent more than expected. The strong dollar is getting a lot of the blame. While earnings of 80 cents were 10 cents better than expected, Deere has lowered their full year outlook and shares are slumping on the news.
At 8:30 we’ll find out how much the Government says that our cost of living rose last month. If you forget about food and energy, expect a one-tenths of a percent increase. Factoring in food and energy, expect a tenth of a percent decrease.
Again this morning, the recent relationship between oil prices and stock prices continues. West Texas Intermediate futures are lower by a percent and a half this morning and stock futures have been modestly lower as well.
The Chinese Central Bank pumped another 1 ½ billion dollars into the banking system this morning, but Chinese stocks were little changed.
European markets are generally one to two percent lower. Right now, adjusted for fair value, the S&P 500 futures are now lower by 3 points, the Dow futures are down 34, and the NASDAQ futures are about 6 points below fair value.
Just about all news broke the right way for stock prices yesterday. Oil prices were higher, earnings reports generally beat estimates, the Fed minutes were benign and to top things off, we heard the St. Louis Federal Reserve President change his position, saying that now was NOT the time to raise interest rates.
That momentum continues this morning, to a somewhat lesser extent. A much lesser extent for Walmart shares. Walmart reported $1.49 per share of profit, which was 3 cents better than expected. Walmart raised their dividend to 2 bucks from $1.96. The problem is that sales fell short and same store sales were only six-tenths of a percent higher, and the shares of Walmart are indicated about 4 percent lower pre-market.
The famous other hand belongs to Nvidia. They beat estimates and guided higher for the full year. Ingram Micro shares are about 23 percent higher. That firm is being bought be a Chinese company.
Weekly Jobless Claims come at 8:30. Then we’ll get the Philly Fed Survey and the Leading Economic Indicators by 10 o’clock. The indicators are expected to again point about two points lower. Oil prices are more than 3 percent higher this morning.
Japan was up 2 percent, Europe is generally about one percent higher. Right now, adjusted for fair value, the S&P 500 futures are now higher by about 5½ points, the Dow futures are up 59, and the NASDAQ futures are nearly 20 points above fair value.
We’ve seen two “up” days in a row for stocks, which could stretch to three today as hopes rise that the early year selling may be over. Yesterday, stocks rose even though oil prices declined. From a historical perspective that makes sense, but it’s been a while since the relationship between oil and stocks has made sense.
We’re at the tail end of Fourth quarter earnings reports, and while almost 80 percent of companies have met or bettered estimates, those estimates set a pretty low bar to clear.
This morning, however, there is a string of better than expected reports. T-Mobile’s 34 cents more than doubled the estimate. Garmin’s 74 cents per share easily beat the 48 cent estimate. Priceline shares are looking about 13 percent higher this morning. $12.63 per share beat the estimate by 83 cents. Campbell Soup just raised their sales guidance and Campbell stock is edging higher.
Long-suffering shares of oil giant Kinder Morgan have gotten the attention of Warren Buffett. He has taken a 26 million share stake in the company and Kinder Morgan shares are about 9 percent higher pre-market.
At 2 o’clock we’ll get the latest Federal Reserve Open Market Committee meeting minutes.
European markets are about 2 percent higher at this hour and adjusted for fair value, the S&P 500 futures are now higher by about 10 points, the Dow futures are up 80, and the NASDAQ futures are 30 points above fair value.
There is an apparent agreement between Russia, Saudi Arabia, Qatar and Venezuela to freeze oil output at current levels. Not a cut in output, mind you – just a freeze. Moreover, it is reportedly dependent upon OTHER countries (like Iran) freezing their output. Iran, for one, says they’ll be happy to freeze, once they’ve increased their daily output a whole lot more.
So, is this really the bottom for oil prices? Well, you decide. But for this morning, West Texas Intermediate at $29.43 bucks is enough to light a little fire under stock prices, with the Dow futures now higher by about 160 points, although earlier they were higher by over 200.
Shares of ADT are on fire, but don’t be alarmed. Apollo Global will buy ADT for 42 dollars per share, unless ADT can come up with a better offer in the next three months. ADT shares are indicated more than 52 percent higher pre-market. Shares of Groupon are about 8 percent higher on word that Alibaba has taken a 5 percent interest in the company.
We’ll get the Housing Market Index and the Empire Manufacturing Survey results this morning. Three Fed Heads are running around giving speeches as well.
The Chinese market opened their New Year of trading and didn’t monkey around. Their currency strengthened and their stock market rose more than 3 percent. European markets are generally a little lower, but our stock futures have been strong all morning long. Adjusted for fair value, the S&P 500 futures are higher by about 17 points, the Dow futures are up 156, and the NASDAQ futures are 49 points above fair value.
For many years, oil was a great portfolio diversifier. When oil rose, the general stock market tended to decline and vice-versa. That was then and this is now, as oil prices and stock prices have recently been doing the Texas two-step without missing a beat. This morning, West Texas Intermediate crude is more than5 percent higher, and that has the stock futures pointing to at least a partial recovery from yesterday’s drubbing.
Yesterday afternoon’s comment by a United Arab Emirates official hinting that OPEC may soon restrict oil output turned a more than 400 point Dow loss into a mere 250 point loss, although as I said, we should get some of that back at the open today.
Groupon shares look to be the stars of the morning, indicated about 20 percent higher even though they lost money last quarter due to increased marketing expenses. Their 2016 guidance is fueling this morning’s gain. Of course, that gain comes after a 70 percent decline in Groupon shares over the past year.
AIG’s report wasn’t quite so good. $1.10 per share loss was wider than expected, but AIG raised its stock buyback program by 5 billion dollars.
At 8:30 we’ll find out about January Retail sales. Expect a two-tenths of a percent increase – three tenths if you ignore autos and gasoline,
In Japan the Nikkei index lost almost 5 percent overnight and has now declined 15 percent over the past year. Our futures are off earlier highs, but are still looking positive. Adjusted for fair value, the S&P 500 futures are higher by about 16 points, the Dow futures are up 99, and the NASDAQ futures are 32 points above fair value.
It used to be known as “The Bernanke Put.” It was the belief that if stocks started to sink, the Federal Reserve would ride to the rescue with monetary stimulus. Yesterday, Janet Yellen’s little chat with the House Financial Services Committee gave no such assurances and stock prices, which lost early gains into the close yesterday are set to take a pounding this morning and could open at 2 year lows.
If you’re looking for bright spots amid the carnage, TripAdvisor shares could open 6 percent higher on an earnings beat, Expedia is looking even better than that on upbeat guidance. Cisco Systems shares are looking 5percent higher on a good report , dividend hike and share buyback. Gold is quoted over $1,235 per ounce this morning and your bond prices are rising, as the yield on the 10 year Treasury Bond is all the way down to 1.59 percent.
Although Twitter posted better than expected earnings for last quarter, a slowdown in new users has the stock looking to open off about 7 percent.
Ms. Yellen climbs back up Capitol Hill again this morning. We’ll see if her tone changes at all in speaking with the Senate Banking Committee.
Hong Kong opened for trade after a few days off for the Chinese New Year and promptly gave up about 4 percent. Sweden resorted to negative interest rates this morning. European markets are down anywhere between 2 and 5 percent at this hour. Oil futures are nearly 4 percent lower, with a barrel of West Texas Intermediate going out at less than 27 dollars. Our stock futures are in better shape than a couple of hours ago, but that’s doesn’t mean they’re good. Adjusted for fair value, the S&P 500 futures are lower by 30 points, the Dow futures are down 251, and the NASDAQ futures are 58 points below fair value.
The price of oil is higher by about two percent this morning. European markets are higher by a little more than two percent this morning. Those two factors might be the reason that our stock futures are nicely higher as well.
However, whether stock prices continue to recover throughout the day will depend heavily on what transpires on Capitol Hill starting at 10 o’clock this morning. Actually, we’ll get a look at Janet Yellen’s planned testimony in about 15 minutes, but at 10 o’clock, we’ll hear her say it in front of the House Financial Services Committee. She will then have the opportunity to answer our representatives sometimes interesting and sometimes downright embarrassing questions.
No embarrassment at Time Warner this morning, although revenue fell short, earnings of $1.06 last quarter beat the average estimate by a nickel per share. Time Warner also raised its dividend and guided higher for the rest of the year. Shares of Panera Bread are more than 3 percent higher on a better-than-expected report.
The famous other hand belongs to Disney this morning, even though $1.63 in earnings beat the $1.45 estimate. Star Wars income was great, but on the dark side, worries about the future of ESPN revenue has Disney shares lower by a little more than 3 percent pre-market.
Japan was more than 2 percent lower overnight. Chinese markets are closed this week for the Chinese New Year. At this point, adjusted for fair value, the S&P 500 futures are higher by 21 points, the Dow futures are up 147, and the NASDAQ futures are 65 points above fair value.
There was some hope over the weekend that oil prices would stabilize with a meeting between Saudi Arabian and Venezuelan officials. However, word is that the meeting ended with no agreement to restrict production. That has the price of West Texas Intermediate down more than 4 percent this morning, below 30 dollars per barrel once again.
Two stocks in very different >
Hasbro’s sales and earnings were better than expected last quarter as Star Wars related sales helped out. $1.39 of profit beat the $1.30 estimate. Hasbro also raised their dividend by 11 percent.
Outside of the price of oil, the highlight this week will be Janet Yellen’s Congressional testimony on Wednesday and Thursday. Other than the JOLTS report from the Labor Department, which describes labor market conditions, there’s nothing much on the economic calendar today.
Japanese stocks gained a little more than one percent overnight, but Europe is decidedly lower, with most markets off 2 to 3 percent. Our futures are again following the falling price of oil.
At this point, adjusted for fair value, the S&P 500 futures are down 28 points, the Dow futures are down 239, and the NASDAQ futures are 91 points below with fair value.
Once again, it’s the first Friday of the month. That will give traders an excuse to fixate on something OTHER than oil prices this morning, which will be a welcome change of pace.
At 8:30 the Labor Department is expected to announce that 188,000 new non-farm jobs came to life in January and that the Unemployment Rate held steady at 5 percent. A number that’s a lot lower than that could spark recession fears, but too strong a number could strengthen the Federal Reserve’s resolve to raise interest rates.
Perhaps the best to hope for is a “Goldilocks” number that’s “just right.”Things were all right at LinkedIn last quarter, as results beat estimates. The problem is that 2016 guidance was sorely lacking enthusiasm, and LinkedIn shares are being linked down about 30 percent pre-market. At least five brokerage firms downgraded the stock this morning. LinkedIn now estimates $3.13 of 2016 profit. The average analyst estimate was $3.75.
Moody’s and CME group both beat estimates on better than expected revenue this morning. Symantec shares are about 9 percent higher on word of a new investment in the firm and a planned dividend.
European markets are mostly higher this morning. Our futures are stuck in neutral until the Jobs Report rolls at 8:30. At this point, adjusted for fair value, the S&P 500 futures are down a point, the Dow futures are up 3, and the NASDAQ futures are 4 points below fair value.
We’re heard the theories about “peak oil” and “peak auto sales.” We may be getting near to what might be called “peak employment.” This morning the Challenger Job Cut Report told us that January job cut announcements totaled over 75,000. That’s about 42 percent higher than a year ago. Almost 45,000 of those cuts came in energy and retail and were exacerbated by Walmart’s announced closing of 115 stores. However, it’s a number to keep an eye one.
Set your eyes lower if you’re watching the price of Credit Suisse stock. The big bank posted its first loss since 2008 and the stock of Credit Suisse is looking to open more than 11 percent lower.
On an 8 percent downslope this morning are shares of GoPro after announcing a surprise loss and weak guidance last night. ConocoPhilips shares are more than 5 percent lower after cutting its dividend from 74 cents to 25 cents and posting a 90 cent per share loss, which was 25 cents more than expected. Buffalo Wild Wings also disappointed this morning.
On the famous other hand, Viacom shares are 7 percent higher pre-market after announcing that Sumner Redstone is stepping aside as Executive Chairman. Delphi and L Brands are out with positive earnings surprises.
This morning, our stock futures have once again been following oil futures around like a puppy on a leash and that puppy is headed downstairs like there’s a steak dinner is waiting down there. Right now, adjusted for fair value, the S&P 500 futures are lower by about 11 points, the Dow futures are down 85, and the NASDAQ futures are now 21 points below fair value.
We’re past the midpoint of fourth quarter earnings reports now, but we’re still a long way from done. This morning, General Motors reported adjusted earnings of $1.39 per share, which was much better than the $1.21 estimate. The North American profit was a record on a profit margin of 10 percent and GM shares are about one percent higher pre-market after losing a percent and a half yesterday.
Companies reporting better than expected earnings but lower than expected sales include Eaton, Merck and Southern Company.
Comcast reported the flip side of that condition. Earnings of 81 cents missed by a penny, but Comcast shares are looking higher this morning as the increased their dividend by 10 cents and committed to buying back an additional 10 billion dollars of its own stock.
The ADP Employment report was released 2 minutes ago and it estimated that 205,000 new jobs came to like in January. That’s about 15,000 more new jobs than expected. The Labor Department will report their estimate on Friday.
Japanese stocks fell three percent overnight. European markets are lower by about one percent.
The stock index futures woke up this morning and again saw the shadow of lower oil prices. West Texas intermediate futures, which were around 35 dollars per barrel just a couple days ago, were nearing 30 bucks per barrel earlier this morning. That promises to send stock prices lower in the early going as well.
Leading the charge to the downside is oil giant BP. BP shares are indicated almost 9 percent higher pre-market after announcing job cuts and its worst loss in about 20 years. Pfizer shares are looking to open about 2 percent lower. Pfizer’s 53 cents of quarterly profit beat the 52 cent estimate, but forward earnings guidance was weaker than analysts expected.
Reporting better than expected earnings for the quarter gone by were Dow Chemical, Baxter, Michael Kors and United Parcel. United Parcel also raised guidance. Google shares are more than 5 percent higher premarket after last night’s big earnings beat.
January Automobile sales numbers will roll throughout the day, and are expected to be a little softer than last January, due in large part to last week’s big snowstorm on the East Coast. However, Chrysler just announced a 6.9 percent sales increase, which was much better than the expectation of 3.8 percent.