February 28, 2017
The spotlight hasn’t moved very far from the White House during the past 5 weeks, and tonight it will follow President Trump up to Capitol Hill for a little chat with a joint session of Congress. Military spending, infrastructure spending, healthcare reform, tax reform – it may be a good day for an afternoon nap just to make sure we’re aware enough to listen in starting at 9 o’clock tonight.
Target shareholders are ready to go back to bed right now and pretend that last quarter’s earnings report was just a bad dream. Sales were light, earnings of $1.45 were 6 cents short and 2017 earnings guidance went from the Street estimate of $5.34 all the way down to 4 bucks. Target share are looking to open about 11 percent lower this morning.
The December Case-Shiller Home Price Index comes this morning and is expected to show a seven-tenths of a percent increase and a year-over-year rise of 5.4 percent. We’ll also get the Government’s second guess at fourth quarter GDP. Expect a 2.1 percent increase.
Overseas markets are mixed. The Dow starts the day on a 12-day winning streak. That’s the longest since 1987. Let’s hope this year doesn’t end the same way.
Our futures have been a little lower all morning long. Adjusted for fair value, S&P futures are down about 3 points, Dow futures are down 19, and the NASDAQ futures are just about 2 points below fair value.February 27, 2017
One of the questions I often hear is “with stock market is at a record high – doesn’t it HAVE to go down?” Well, sure, stocks will not go higher forever. However, as trade opens today, the Dow Jones Industrial Average has now closed at an all-time high 11 times in a row. Perhaps the better question is “with the stock market is at a record high – isn’t it likely to go higher today?”
With earnings season pretty much in the rear-view mirror, traders will be looking for more economic details this week, especially any news about the structure of the tax cut proposals that will soon be batted around in Congress.
In less than 20 minutes, we’ll hear about the January Durable Goods Order, which are expected to bounce back from a negative December print. Expect a 1.8 percent increase, due principally from stronger auto sales. Ex-auto, the increase should match the December increase of one-half of one percent.
Then at 10 o’clock, January Pending Home Sales are expected to have risen by just over 1 percent.
Asian markets were in the red overnight. There are a couple of green arrows in Europe at this hour, but in general, stocks are trading a bit lower over there as well.
On Friday, a day-long slump in prices reversed itself quicker than an Oscar announcement, but we’ll start in the red this morning. Adjusted for fair value, S&P futures are down less than 2½ points, but Dow futures are down almost 27, and the NASDAQ futures are just about 11 points below fair value.
There’s a big merger deal cooking this morning. Word is that Kraft Heinz has made an offer to acquire consumer-goods maker Unilever. That offer, the amount of which has not been made public, has been rejected, but Kraft Heinz is not backing off. They say that they are looking forward to “working with” the reluctant target. Kraft shares are almost 5 percent higher pre-market, with Unilever shares up about 10 percent in European trade. Mondelez, which had been a rumored food-company acquisition target, is 5 percent lower pre-market.
Sticking with the food companies for a minute, Campbell Soup shares are off about one and a half percent. Adjusted earnings last quarter totaled 91 cents per share. That was three cents hotter than expected, but sales were a little thin.
At 10 this morning, expect the January Leading Economic Indicators Index to have risen four-tenths of a percent. This is a purported indicator of business conditions six months in the future. That four-tenths would be a bit weaker than the surprisingly strong December number of one-half percent.
Most overseas markets are lower. Our futures are indicating that our stock prices may experience their first significant downdraft in quite some time. Adjusted for fair value, S&P futures are down about 6 points, but Dow futures are down 59, and the NASDAQ futures are just about 10 points below fair value.
The Philadelphia Fed Survey has been on a winning streak since the August Report, and in case you hadn’t noticed, the stock market has run up almost 8 percent since then. At 8:30 we’ll hear the latest Philly Fed, which is expected to mark the end of that winning streak, dropping from 23.6 to 19.3.
We’ll also get the Weekly Jobless Claims and the January Housing Starts at 8:30.
Valeant shares are about 2 ½ percent higher pre-market on word that the FDA has approved their psoriasis drug. Cisco Systems is about one and a half percent higher after reporting 57 cents pf adjusted earnings, which was a penny ahead of estimates. Alexion Pharmaceuticals shares are more than 4 percent higher, even after giving downbeat earnings guidance this morning.
Time Inc. shares are a little lower on disappointing earnings, and the loser of the morning may be Trip Advisor, which is looking to open about 6 percent lower on lower hotel revenue and higher marketing costs. Even before that drop, Trip Advisor shares were off more than 11 percent over the past year.
Markets overseas are mixed, but are generally a bit lower. Our futures are fairly flat at this hour. Adjusted for fair value, S&P futures are down less a point, but Dow futures are up 4, and the NASDAQ futures are just about 2½ points above fair value.
Traders waited and waited and waited yesterday to see if Janet Yellen’s Senate testimony would give them any reason to hit the ‘sell” button. But when all was said and said again, the message was consistent, the prospect of a March interest rate hike was back on the table, and the consensus was that the Fed will not fall behind the economic curve – at least any more than they may already be behind it.
SodaStream’s cup bubbleth over this morning. Quarterly profit of 57 cents per share were almost 60 percent higher than expectations and more than 4 times higher than profits of a year ago. SodaStream shares, which have been all over the place over the past couple of years, are more than 5½ percent higher pre-market.
Softbank is buying asset manager Fortress for 3.3 billion dollars. Fortress manages about 700 billion dollars in assets and their stock is more than 25% higher this morning.
It’s a busy day for economic reports. After the report on Consumer Inflation and January Retail Sales at 8:30 we’ll get no fewer than a half-dozen additional reports on the economy before the day’s out. Look for retail sales figure to rise only one-tenth of a percent, on a slowdown in auto sales. Ex-auto, sales are expected to have risen one half of one percent.
The majority of major overseas markets are higher. Our futures are a little higher once again this morning. Adjusted for fair value, the Dow futures are up 32, but the S&P and the NASDAQ futures are just about even with fair value.
It’s easy to fall in love on Valentine’s Day, and if you have to break off relationship, it’s best if the feeling is mutual. That appears to be the case this morning as Humana and Aetna have agreed to kiss their merger plans goodbye. The romance was nineteen months in the making, but fell apart on the courthouse steps. Humana gets to keep the engagement ring; they’ll get a one billion dollar break-up fee.
Up on the steps of Capitol Hill, Federal Reserve Chair Janet Yellen will be chatting it up with the Senate Banking Committee. This is the first leg of the semi-annual get-together that used to be known as the Humphrey-Hawkins testimony. Now it’s just a bunch of Yellin’.
Yesterday, Verizon reversed policy and started selling unlimited data plans in response to competition, and this morning we can see how well that competition is doing. T-Mobile US reported 45 cents per share of quarterly operating profit. That was 50 percent better than the 30 cent estimate. Sales were way ahead of expectations and T-Mobile added over 2 million subscribers during the fourth quarter.
At 8:30 we’ll get two separate report on Producer Price Inflation.
The Nikkei Index in Japan fell more than one percent overnight. Most other Asian markets were a bit lower. Europe is mixed, but really not much changed at this hour.
Our futures haven’t moved over the past couple of hours. Adjusted for fair value, the S&P futures are higher by less than a point, the Dow futures are up 13, and the NASDAQ futures are about a point above fair value.
Among the companies reporting today, Lear checked in with overall profit that was 10 percent lower than last year. However, adjusted earnings of $3.20 per share were ten percent better than expected. Lear, which has bought back more than a third of its own shares since 2011 will continue the buyback program and will raise its dividend by 60 percent to boot.
If you stop at Tim Horton’s for breakfast and Burger King for lunch, the shareholders of Restaurant Brands International thank you. That’s the company that owns both restaurant chains, and they reported 44 cents of operating profit, two cents better than expected. Restaurant Brands stock is more than 60 percent higher than a year ago.
Teva Pharmaceuticals stock is almost 6 percent higher after reporting profits that were 3 cents ahead of the consensus estimate.
Overseas markets are all in rally mode.
At this point, our futures look very similar to their levels of last Friday morning and last Thursday morning. That’s kind of unusual and also pretty bullish. After you adjust for fair value, the S&P futures are higher by about 5 points, the Dow futures are up 55, and the NASDAQ futures are about 10 points above fair value.
All it took was one little comment out of President Trump yesterday resuscitate the post-election rally. The President assured traders that he had not forgotten about tax reform and he’ll give us some details in a few weeks, no matter how many department stores may still be selling his daughter’s clothing line at that time.
That resuscitated rally looks to continue this morning, especially in shares of Activision/Blizzard. The video game maker reported better than expected earnings and a dividend hike. Activision/Blizzard shares are about 9 percent higher pre-market.
Not to be outdone, Sears Holdings shares are higher by 16 percent this morning, but not exactly because business is booming. Although the fourth quarter showed lowered losses, Sears is in the midst of restructuring operations, closing 150 stores, selling off its private brands, cut a billion dollars per year out of operating costs and pay down debt, although they announced an expanded credit facility at the same time.
The University of Michigan’s first look at Consumer Confidence comes at 10 o’clock this morning and is expected to match the January reading of 98.5.
Japanese stocks rose about 2 ½ percent overnight. European markets are mixed, but we should push further into record territory at 9:30.
Adjusted for fair value, the S&P futures, as they were at this point yesterday, are higher by 3 points, the Dow futures are up 43, and the NASDAQ futures are almost 7½ points above fair value.
Trading volume may be a little light in New York today as about a foot of snow is expected to fall today. In fact, the snow there is falling almost as fast as shares of Twitter this morning. Adjusted profits of 16 cents per share were better than the 12-cent estimate. However, if you’re one of those old fuddy-duddies who pays attention to Generally Accepted Accounting Principles, Twitter lost 23 cents per share as opposed to a 13-cent loss a year ago. More damaging, however was a 1stquarter forecast of about 85 million of adjusted profit, which is about half the amounts expected by analysts. Twitter shares are more than 10 percent lower pre-market.
Tesla shares are nearing an all-time high. They’re up 3 percent on word that pilot production of the Model 3 is about to start. That’s the Tesla that’s supposed to be the electric car designed for the hoi-poloi with a projected 35,000 price tag.
Coca Cola matched the 37-cent estimate, although GAAP earnings were 13 cents versus 28 cents a year ago. CVS Health, Dunkin Brands, Viacom and Yum brands all beat estimates this morning.
Our futures shot up from the flat line just before six o’clock this morning, and have held most of those gains ever since. At this point, adjusted for fair value, the S&P futures are higher by 3 points, the Dow futures are up 33, and the NASDAQ futures are about 3½ points above fair value.
If you’re hoping for the good old days of sub-$2.00 gasoline at the pump, the good old days may be on their way. The American Petroleum Institute’s weekly report on oil stockpiles was expected to report a 2½ million-barrel increase. But yesterday, the inventory build came in at 14.2 million barrels. That’s bad news of you own oil stocks (or if you’re OPEC) but a barrel of oil appears headed for a sub-50-dollar price point. This morning, we’re at $51.81, with the Energy Information Agency’s inventory report coming at 10:30.
On the corporate earnings front, most of the reports this morning are a little better than expected. Time Warner, $1.25 compares to the $1.19 estimate. Alaska Air’s $1.56 was a 16-cent beat. Allergan’s $3.90 was 14 cents better than expected. Last night, Disney’s profits beat, but revenue came in light, as ESPN continues to be a drag for Disney.
Twitter shares are about 3 percent higher on a broker upgrade. Gilead Sciences is off almost 7 percent on disappointing hepatitis drug sales and a lowered outlook.
Mortgage applications for both purchases and refis rose 2 percent last week.
Overseas markets are mixed and out futures have been treading water most of the morning, and right now they’re a little bit under that water. Adjusted for fair value, the S&P futures are down 2 points, the Dow futures are also down 2, and the NASDAQ futures are about 4 points below fair value.
More good news came from General Motors this morning. Earnings of $1.28 per share beat estimates by 11 cents on sales of almost 44 billion dollars, well ahead of the 41½ billion-dollar estimate. Don’t look now, but General Motors stock is about 30 percent higher than it was a year ago, including a one and a half percent rise this morning.
GAP shares are almost 3 percent higher pre-market on better than expected Holiday sales and raised guidance.
A trio of big companies reported earnings that were better than expected, but the closely watched sales figure disappointed. That includes Michael Kors, with shares off 7 percent, Cardinal Health with little change in share price and 21st Century Fox whose shares are about a half-percent lower. In the oil sector, BP earnings are at a 10-year low. BP shares are off about 3½ percent this morning.
The Labor Department’s latest Job Opportunities and Labor Turnover Survey results come our way at 10 this morning.
Asian markets were lower overnight, but European markets are mostly higher at this hour, as are our futures.
At this point, adjusted for fair value, the S&P futures are higher by almost 4 points, the Dow futures are up 51, and the NASDAQ futures are about 6 points above fair value.
If the Super Bowl indicator hold true, the first quarter stock market rally will be sacked for a loss by the end of the year. But, as we all know, but few people want to admit, “coincidence is not causality.” Over the past 50 Super Bowls, the old NFC teams have been pretty dominant over the old AFC teams. Pair that with a generally rising stock market, and it’s not surprising that NFC wins have coincided with gains. So, yesterday’s AFC win might coincide with a market fumble, but so far it looks like the indicator is facing second down and long.
Hasbro scored a touchdown with their results this morning. $1.64 in quarterly profit was 37 cents better than expected and Hasbro shares are about 6 percent higher. Tyson Foods reported $1.59 per share, which was 44 cents ahead. They raised full-year guidance and the shares are almost 4 percent higher pre-market.
Tiffany’s CEO is stepping down and Tiffany shares are stepping down about 6 percent on the news.
Asian markets were mostly higher overnight, but Europe can’t seem to make up its collective mind. As the number of fourth quarter earnings reports slows down a bit, this will also be a fairly quiet week for economic reports with nothing big on the calendar today. Our futures took a bit of a hit over the past 30 minutes. At this point, adjusted for fair value, the S&P futures are lower by about 5 points, the Dow futures are down 33, but the NASDAQ futures and 11 points below fair value.
The first Employment Report of the new Administration (at least as the reporting falls on the calendar) comes in less than 20 minutes. The consensus estimate is that 175,000 new non-farm jobs came into being in January. The Unemployment Rate is expected to hold at 4.7 percent, which sounds good until you consider that the December labor participation rate was only 62.7 percent. The average hourly wage is expected to cool by a tenth of a percent to three-tenths of a percent and the average workweek should inch a bit higher.
Profits at Hershey were higher last quarter, with $1.17 per share coming in 9 cents ahead. Clorox beat the estimate by 3 cents, but cut their forecast. Nevertheless, Clorox shares almost 2 percent higher pre-market.
The big earnings news from last night came from Amazon. Earnings were fine (up 55% from a year ago) but sales were light and Amazon shares are shedding about 4 percent pre-market.
And, there’s a lot of pressure on the discount brokerage stocks this morning, as Charles Schwab announced lowered fund expenses and a cut in its online trading commissions to $6.95, as brokerage commissions continue to march on the long road toward zero.
Asian markets were mixed overnight, but Europe is generally higher. At this point, adjusted for fair value, the S&P futures are higher by about 2 points, the Dow futures are up 45, but the NASDAQ futures, dragged lower by Amazon, are more than 11 points below fair value.
There’s lots of news on the way as the day unfolds, including the automakers’ January sales reports. Expect that overall sales declined a bit from the record pace of January 2016. General Motors is expected to report a slight monthly increase in sales, while Ford and Fiat Chrysler sales are expected to have slipped a bit.
Almost unnoticed, amid the rapid-fire headlines coming from Pennsylvania Avenue, the Federal Reserve Open Market Committee will render its latest decision on short term interest rates at 2 o’clock. Given that no one knows how much tax rates are coming down, and no one knows how much fewer regulations will spur economic growth, expect the Fed to sit quietly by before making another move.
Apple stock is on the move higher by more than 4 percent this morning. Another excellent earnings report last night told us about $3.36 per share of profit, which was 15 cents better than expected.
Altria and Johnson Controls both reported a penny ahead this morning, although Johnson Controls’ sales were a little light. Altria shares are about 4 percent lower pre-market while JCI is relatively unchanged. Pitney Bowes is almost 7 percent lower on a lousy report. Marathon and Anthem shares are both higher after reporting much better than expected results.
All major markets overseas are in the green, as are our futures. At this point, adjusted for fair value, the S&P futures are higher by about 5 points, the Dow futures are up 42 and the NASDAQ futures are 30 points above fair value.