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WJR February 2020 Reports

February 28, 2020

I wish that we had some good coronavirus news this morning, but fear of what we know and fear of what we don’t know will likely drive stock prices lower for the seventh day in a row.

Many analysts now expect that the Federal Reserve will cut interest rates as early as March, which has traditionally backstopped a slide in equity prices.  Although its not clear exactly how lower interest rates will stop a potential pandemic.  The silver lining, if you’re buying a home, is that the 10-year Treasury is now at 1.21 percent, which would be a factor in driving mortgage rates even lower than their current rock-bottom level.

Deutsche Bank slashed their price estimates by over 40 percent for a couple of cruise lines this morning.

A couple of disappointing earnings reports are driving shares of Wayfair and VMware lower.  Wayfair reported a much bigger loss than expected and shares are about 13 percent lower.  VMware reported $2.05 in profit last night, which was 12 cents worse than expected.  Lowered fiscal 2021 guidance is also helping to push share prices about 8 percent lower.

Overseas markets are again down generally between 2 and 4 percent.

At this point, our futures are off their lows of the morning, when the Dow futures were lower by about 650 points, but it looks like we’re in for another rough ride at 9:30. Adjusted for fair value, the S&P 500 futures are lower by 45 points. The Dow futures are down about 366 points, and the NASDAQ futures are about 138 points below fair value.

February 27, 2020

Here we go again.  Continuing apprehension about Covid-19 is driving stock markets around the world lower this morning.

A major broker is cutting their estimate for 2020 corporate earnings and says that if the virus becomes widespread, S&P full year earnings may show no growth at all compared with last year.

We should expect a wave of earnings warnings in the next month.  This morning, shares of beverage maker InBev are about 8½ percent lower after warning about lower profits, saying that the virus has already cost 170 million dollars in profit.

Booking.com expects a 3 to 7 percent decline in revenue this quarter. Microsoft and Marriott also guided lower due to Covid-19.

Among the few companies showing higher prices this week are companies working on treatments or a vaccine for the virus.  Also on the upside today are shares of Squarer and Box, on positive quarterly results.

Japan is closing its schools for the month of March to slow virus transmission. Most Asian markets were lower overnight, and European markets are lower on the order of two to three percent. If our markets open at prices inferred by the futures, we will be in very close correction mode, which is 10 percent lower than recent levels.

At this point, adjusted for fair value, the S&P 500 futures arelower by 48 points. The Dow futures are down about 409 points, and the NASDAQ futures areabout 171 points belowfair value.

February 26, 2020

It’s very easy to be comfortable with your investment strategy when just about everything is rising in value, like, for instance over the past 12 years or so.

In times of great uncertainly, like that brought upon us by the Covid-19 virus, a lot of people are a lot less comfortable.  Let’s face it – nobody knows with any degree of certainty the long-term impact of this virus.  That uncertainty has people waking up to losses in the stock market again yesterday and has some re-thinking the level of risk in their portfolio. Better late than never, I suppose, but something we should always be thinking about, not in terms of where you think the market is going, but in terms of your own age and future needs.

This morning the Center for Disease Control is warning that it’s just a matter of time before the virus spreads in the United States, potentially disrupting our daily routine. Still, the rate of new infections in China is slowing and no matter how widespread the virus, economically, it may impact the economy for only a quarter to a half of the year.

Speaking of last quarter, Lowe’s reported an income beat but disappointing guidance, and shares are a bit lower, as are shares of Wendy’s, also lower this morning on weakened guidance.

Overseas, most markets are lower once again.  Our futures have had a number of wild swings this morning, at points sharply higher and at times sharply lower.

Things are changing quickly, but last time looked, adjusted for fair value, the S&P 500 futures were higher by 10 points. The Dow futures are up 36, and the NASDAQ futures wereabout 37 points above fair value.

February 25, 2020

Stock prices took a three to four percent body blow yesterday.  The drop in the Dow Jones Industrial Average doesn’t even rank in the top 200 worst days on a percentage basis.  However, the more than 1,000-point drop counts as only the third time in history that the Dow has lost more than 1,000 points in a day.

The rate of newly reported Covid-19 infections has slowed.  However, the spread of infections in certain locations in Italy and South Korea is reinforcing concerns that the spread between towns and even countries is far from over.

There’s more trouble ahead for a couple of domestic companies this morning.  Shake Shack shares have risen more than 40 percent over the past year but are off about 14 percent this morning after reporting a 6-cent loss for the quarter gone by, which is 6 times worse than expected.

Tupperware shares are leaking badly this morning, down 18 percent on a profit warning and the news that an accounting probe is being undertaken.  That’s never good news.

On the brighter side, Home Depot reported a $2.28 quarterly profit, which was 18 cents better than expected.  Home Depot is also raising its dividend by 10 percent.

Japanese stocks were three percent lower overnight, after not trading on Monday for a holiday.  European markets are all lower, but our futures are showing a little bit of life, even though stock prices are likely to be volatile today.

At this point, adjusted for fair value, the S&P 500 futures are higher by more than 19 points. The Dow futures are up 154, and the NASDAQ futures are about 91 points above fair value.

February 24, 2020

The Covid-19 (which is the new code name for the most recent coronavirus) has spread to Italy, South Korea and Iran.  80,000 people have now been sickened and over 2,600 of them dead due to the highly communicable bug.  As a result, more activities, public gatherings and even towns are being shut down, more supply chains disrupted and traders are hitting the “Sell” button this morning.  World-wide contagion could bring global GDP to a near halt for a quarter or two.

If you’re a stock investor, now is the time you learn a lot about what they call “your risk tolerance.”  You also find out if you’re really an “investor” or a “trader.” There’s no doubt that besides the human toll, economic growth will take a hit for a quarter or two.  Especially hard hit are travel-related issues and this morning, stock of most of the major banks are off about 3 percent.

There are a couple corporate acquisitions to consider this morning.  Software maker Intuit is buying Credit Karma and Pepsico is picking up a Chinese company.

It’s a quiet day for economic data and earnings announcements, but we’re in for a ride on the down elevator in the early going.

Asian markets were lower overnight by as much as 2 percent.  Europe is lower by about 3 to 4½ percent.

At this point, adjustedfor fair value, the S&P 500 futures are lower by 79 points. The Dow futures are down 750, and the NASDAQ futures are about 247 points below fair value.

February 21, 2020

Not long ago, a headline about Chinese tariffs could send stock prices reeling. We’ve now moved from Chinese tariff trouble to Chinese virus transmission.  More concerning headlines about the coronavirus sickened stock prices mid-day yesterday and are infecting stock futures again this morning.

We should also expect companies to start revising profit estimates to reflect impact of the virus.  This morning, Coca-Cola lowered its first quarter profit estimate by one to two cents.

Faring worse than that this morning, shares of First Solar are off about 16 percent after last night’s announcement of a surprising fourth quarter loss.

On the plus side of the ledger this morning, shares of Dropbox are almost 14 percent higher on a three-cent earnings beat.  At over 21 bucks per share, Dropbox is now finally above its 2018 IPO price.

Earlier this morning, Deere reported a $1.63 profit, 38 cents better than expected and shares are indicated about 6½ percent higher.

Overseas markets are mixed, but mainly a little lower. Our futures cut earlier losses somewhat.  At this point, adjustedfor fair value, the S&P 500 futures are lower by about 14 points. The Dow futures are down 110, and the NASDAQ futures are about 38 points below fair value.

February 20, 2020

The NASDAQ and the S&P once again closed at record highs yesterday.

This morning, we’re getting flock of earnings reports and a big merger in the brokerage industry.  That merger has Morgan Stanley buying E-Trade in a 13-billion-dollar all-stock deal.  After the Schwab/Ameritrade deal, E-Trade was the biggest of the major discounters left standing, but would be far smaller than the Schwab/TD combination, assuming that THAT deal passes anti-trust review.  This morning’s deal further consolidates the industry and gives Morgan Stanley more   down-market exposure to the retail brokerage market. E-Trade shares are indicated about 24 percent higher pre-market.

There is rising dough at Domino’s Pizza this morning.  Shares are about 15 percent higher as $3.13 of adjusted profit came in 15 cents better than expected on a 3.4 increase in domestic same store sales.

For the downer of the morning, Six Flags is flying at half-staff, with shares lower by almost 2 percent after reporting an unexpected loss and cutting the dividend from 83 cents per share to 25 cents.

Asian markets were mixed, but Europe is lower.

Our futures have improved a bit, but are still pointing a bit lower.  At this point, adjustedfor fair value, the S&P 500 futures are lower by about 4½ points. The Dow futures are down 42, and the NASDAQ futures are about 11 points below fair value.

February 18, 2020

We ended last week with the S&P 500 higher by nearly 5 percent over just the first six weeks of 2020.  That, in spite of the emerging threat to growth caused by the spread if the coronavirus.  While traders are well aware of the threat, it’s been treated as a three-month problem from which there will be a rapid recovery.

Well, maybe yes, maybe no.

This morning, that emerging threat is translating to lower sales projections from tech giant Apple.  They warned yesterday that second quarter sales will suffer due to the travel restrictions and production slowdown in China, which is Apple’s third largest market and where most of Apple’s production is done.  So, the duration of the slowdown is still an open question, but traders are taking the threat a bit more seriously this morning.

Also feeding the bad news bears this morning is Walmart. $1.38 of adjusted profit was 6 cents shy of estimates on lower than expected comp sales.  Walmart did, however, raise its dividend by 2 percent and shares are only fractionally lower pre-market.

Overseas markets are mainly lower on the coronavirus worries, but our futures have stabilized after a bog overnight drop.

At this point, adjusted for fair value, the S&P 500 futures are lower by about 15 points. The Dow futures are down 145,with Apple responsible for more than 50 of those pointsand the NASDAQ futures are about 62 points below fair value.

February 14, 2020

Another jump in reported coronavirus infections in China is tempering enthusiasm for what otherwise would be pretty good earnings and economic news this morning.

You wouldn’t think that losing a billion dollars during a quarter (even if they’re Canadian dollars) would be good news.  However, if you’re cannabis company Canopy Growth, a billion Canadian dollar loss for the quarter was less than expected.  Canopy shares are bid more than 20 percent higher pre-market and the news has other cannabis stocks smoking as well.

Roku and Nvidia are both out with better than expected earnings and shares or 9 percent and 6 percent higher, respectively.  Newell Brands and Mattel shares are both higher on earnings news.

The University of Michigan’s first look at Consumer Sentiment comes this morning and is expected to decline a bit, perhaps in response to virus fears, to a reading of 99.2.  We’ll also get the January Retail Sales Data.  Expect a three-tenths of a percent rise.

Overseas markets are mixed, but Europe is generally a little bit higher, as are our futures.

At this point, adjusted for fair value, the S&P 500 futures are higher by about 10 points. The Dow futures are up 61, and the NASDAQ futures are about 39 points above fair value.

February 13, 2020

There has been many a year that folks have wondered whether we could believe the economic numbers announced by the Chinese Government.  This morning, there’s a troublesome amount of doubt as to whether we can believe the novel coronavirus statistics that the Chinese Government has been reporting.  Overnight, the announced total of infected folks in China jumped by 15,000 to over 60,000.  The big jump may be the result of how the Chinese are testing for the virus.  No matter. Markets hate uncertainty and traders are hoping that we can get numbers we can believe in sooner than later.

Another number that also draws a fair bit of skepticism is the Consumer Price Index.  At 8:30, we’ll get the official consumer inflation rate for January and is expected at two-tenths of a percent.

High-flying shares of Tesla are hitting a bit of a speed bump this morning after announcing a new 2-billion-dollar common stock offering.  Elon Musk will reportedly buy a 10-million-dollar chunk of that offering. Existing shares are bid lower by about 4½ percent.

Better than expected earnings announcements this morning came from Kraft-Heinz, Pepsico, Zoetis, Alibaba and Duke Energy.

Chinese markets led the rest of the world lower overnight after announcing the big jump in coronavirus infections.

Our futures are off earlier lows but are still pretty ugly if you’re long stocks. At this point, adjustedfor fair value, the S&P 500 futures are lower by about 19 points. The Dow futures are down 158, and the NASDAQ futures are about 74points below fair value.

February 12, 2020

In his testimony yesterday before the House Financial Services Committee, Fed head Jerome Powell threw some light shade on the prospect for additional interest rate cuts, although he didn’t rule them out if conditions change.

That took the steam out of an early rally, with stocks finishing the day only slightly higher.

Moving almost 3 percent higher this morning are shares of CVS Health.  The stock has been on a run higher over the past week or so, adjusted earnings of $1.73 came in a nickel per share better than expected.  Guidance for the full year is generally in line with what analysts had expected.

Doing even better pre-market are shares of Shopify, higher by almost 8 percent.  Shopify reported 43 cents, fully 19 cents better than expected. The famous other hand belongs to Bed Bath & Beyond, with share 25 percent lower this morning and falling same store comps.

According to the Mortgage Bankers Association, America continues to tap that ATM machine otherwise known as their home.  Falling interest rates boosted refinancing activity by 5 percent last week, and that’s an increase of over 200 percent from a year ago.   Careful, folks.  We’ve seen this movie before, and it didn’t win any Oscars last time.

Overseas markets are solidly higher. Our futures are off earlier highs but are still pointing toward new record levels. At this point, adjustedfor fair value, the S&P 500 futures are higher by about 14 points. The Dow futures are up 136, andthe NASDAQ futures are about 51 points above fair value.

February 11, 2020

It’s been a long road to a judge’s decision, but the rumor is that a federal judge is about to give the green light to the proposed merger of Sprint and T-Mobile.  That rumor has Sprint shares racing about 62 percent higher in pre-market trade, with T-Mobile higher by 9 percent or so.

Also on the rise this morning are shares of toy-maker Hasbro.  They’re about 7 percent higher, boosted by toy sales inspired by Disney’s Frozen 2 and Star Wars characters.

Getting undressed once again today are shares of Under Armour. An unexpected quarterly loss and downgraded guidance has the shares indicated about 13 percent lower as Under Armour warned that the coronavirus in China will infect 2020 results.

The Bureau of Labor Statistics will release their JOLTS report later this morning.  That’s the Job Openings and Labor Turnover Report.  Expect a report of nearly 6.8 million open jobs in the U.S.

Outside of Japan, overseas markets are solidly higher. Yesterday, the S&P 500 and the NASDAQ closed at all-time highs, and those highs should go even higher at 9:30 this morning.

At this point, adjusted for fair value, the S&P 500 futures are higher by about 12 points. The Dow futures are up 112 points, but the NASDAQ futures are about 43 points above fair value.

February 10, 2020

Just about an hour ago, we received word that Simon Properties will buy mall-owner Taubman Properties.  The purchase price is reportedly $52.50 per share, which would be more than 51 percent higher than Friday’s closing price.  Taubman shares, which were halted earlier in the pre-market pending that news, are now bid even higher, at $52.67.

Another company that may be close to getting new owners is Victoria’s Secret.  Current owner L Brands is reportedly in talks with private equity firm Sycamore.

With the bulk of big fourth quarter earnings reports now in the rear-view mirror, it looks like that expected collapse in profits once again did not happen, with about 70 percent of reporting companies beating expectations.

Two more companies with better than expected earnings reported this morning.  Drug maker Allergan shares are about one percent higher as $5.22 of adjusted warnings came in 65 cents better than expected.  Burger King and Popeye’s parent Restaurant Brands are up about 3 percent as those Popeye’s Chicken sandwiches get the credit for boosting earnings two cents above the 73-cent estimate.

As traders tread rather nervously around the latest coronavirus stories, stock futures shifted noticeably lower just about 10 minutes ago. Adjusted for fair value, the S&P 500 futures are lower by about 6 points. The Dow futures are down about 61 points, but the NASDAQ futures are about 14 points below fair value.

WJR March 2020 Reports
WJR January 2020 Reports

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