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January 31, 2005
Maybe we just need to hold more elections. The post-election rally in November and December of last year is but a fond memory after the beating stock prices have taken this month. But, just in the nick of time, with one day left in the trading month, the relatively smooth election in Iraq yesterday will send us higher, at least at the open.
By 10 this morning we’ll get readings on housing, manufacturing and your wallet today with the December New Home Sales report, the Chicago Purchasing Managers Index and December Personal Income and Spending data.
Until then the market will focus on the falling price of oil and the rising rate of corporate mergers. Light sweet crude is down more than a dollar and a half per barrel. The Merger Monday bandwagon features a mother and child reunion, as SBC buys AT&T. Lee Enterprises is buying Pulitzer and word is that MetLife is about to buy Citigroup’s Travelers insurance and annuity business.Overseas markets are up across the board. We will be off and running at 9:30. Let’s see if the early rally can survive the entire day. At this point, adjusted for fair value, the S&P futures are up 7 ½ points, Dow futures are up 65, and the NASDAQ futures are about 14 points above fair value.
January 28, 2005
There aren’t a lot of stocks that trade under a single letter ticker symbol. For instance, Ford Motor trades under “F.” Well “F” will be losing its neighbor “G” pretty soon. In a 57 billion dollar stock swap, Procter & Gamble is buying Gillette. It’s a big premium to Gillette’s closing price of yesterday, but pre-market traders seem to like both sides of the deal. Gillette should be bid up anywhere from 5 to 15%, and even Procter & Gamble looks to open a little higher when the market opens.
Microsoft came out with a terrific earnings report last night, as well as some enhanced forecasts. The miss of the morning is Maytag. They reported 8 cents per share versus and expected 17 cents. It’s possible that the Maytag repair guy who never seems to have enough work better start worrying about his job.
January 27, 2005
After a little flurry of M&A activity late last year, a lot of people expected that 2005 would see a lot of companies buying or merging with others. Well, there hasn’t been much activity so far. But, the Wall Street Journal is reporting this morning that the talks between SBC and AT&T, which collapsed in November, may be back on. That should help AT&T shares this morning.
Microsoft’s earnings will be announced later today. The star of the morning is Nokia. The cell phone maker, that sells over a third of all cell phones, beat their earnings number, beat the revenue estimate and raised their guidance. That little triple play should ring up some gains for Nokia today.
The weekly jobless claims are expected to rise by 16,000 at 8:30. Watch the price of oil today and tomorrow. With an OPEC meeting and the Iraqi election on Sunday, oil could breach the 50 dollar level once again by the weekend, which of course, is not going to help stock prices a lot.
January 26, 2005
The earnings reports are coming fast and furious this morning, and the vast majority of them are better than expected. So it looks like we’ll start the day building on yesterday’s rally.
Among those reporting in this morning, Kelly Services beat estimates by a penny per share as did SBC. General Dynamics beat by 3 cents, as did Texas Instruments. Oracle reaffirmed their forecast for 2005 and raised guidance for 2006. Vodaphone is up about a percent and a half in London after reiterating their 2005 guidance.
The serious miss of the morning appears to be Sirius Satellite Radio, which lost 21 cents versus an expected 16 cents. Of course, a lot of people have been trading Sirius for a while now without much regard to mundane things like profits, now or in the future.
January 24, 2005
First a little clarification: I said Friday that the stock market hasn’t been down three weeks in a row to start the year since 1977. Actually, we started the year with three down weeks in 1982. We haven’t started the year with four down weeks since 1977. So, now that that’s perfectly clear, welcome to week number four. Let’s see if we can avoid setting any more losing streak records in 2005.
It’s another big week for earnings reports. American Express checks in this afternoon. Expect 70 cents per share on the quarter. Eaton Corporation beat estimates by three cents, they’re raising their dividend and buying back stock.
But the big focus so far is again the price of oil. Light sweet crude is up around 49 bucks per barrel this morning, because of the Iraqi election and the frigid forecast for the northeastern United States.
January 21, 2005
Let’s do another flashback. What were doing 28 years ago? It was 1977. Jimmy Carter was busy introducing his brother Billy to the Washington social scene. It was the last time we started a year with three straight down weeks in the stock market. Until now. We’ll get a market rally to start the day, but it’s going to have to be a day long doozy to pull us to positive territory for the week.
General Electric has the good news of the morning. Earnings from GE beat estimates by a penny. Revenue also beat estimates and their outlook for 2005 is very positive on what they call an “excellent global economy.”
Last month, the University of Michigan Consumer Sentiment Index took an unexpected spike up to 97.1. At 9:45 this morning, we’ll find out the preliminary January number, which is expected to come in just about unchanged at a level of 97.
January 20, 2005
It was just a quarter ago that earnings announcements pummeled analyst expectations. So far this quarter, corporate profits are still going up, but the number of companies that are beating estimates is dwindling noticeably.
Last night, Ebay came within a whisker of the consensus revenue estimate, but fell a penny shy on earnings. Not only that, the guidance they gave for 2005 was lower than expected on both counts. Look for Ebay shares to trade 10 to 15 percent lower at the open this morning. We also got lowered guidance from Qualcomm last night.
Locally, Ford Motor beat the operating earnings estimate of 27 cents per share by a penny. Including special charges, earnings at Ford were only 6 cents per share. Meanwhile Delphi lost less money than expected. On an operating basis Delphi lost 9 cents per share. That’s better than the 15 cent estimated loss. But again, throwing in all the special charges, Delphi lost 18 cents per share.
On the bright side, Citigroup and United Health each beat their numbers by a penny per share.
At 10 o’clock, the December Index of Leading Economic Indicators is expected to rise just a tenth of one percent.
January 19, 2005
According to Mark Hulbert, who monitors investment newsletters, short-term trading newsletters were almost 60 percent exposed to stocks in late December. After the pullback in prices we’ve seen in the past two weeks, that exposure is down to under 39 percent. As everybody knows, but few people remember, when everybody is bullish, it’s time to sell. When everybody pulls back, it may signal a bottom in stock prices. So that little wave of fear may be a very good thing.
Due to the holiday-shortened week and the Inauguration tomorrow, today is jam packed with news. The December Consumer Price Index at 8:30 is expected to be unchanged. The weekly oil inventory report will be released at 5 o’clock tonight.
On the earnings front, IBM and Yahoo each beat estimates last night. General Motors announced a billion dollars in write-offs yesterday, but the stock, which slipped 1 percent yesterday, is bid higher in the pre-market after reporting earnings of $1.01 per share, which is a dime better than expected. There are an unusual number of earnings misses this morning. Pfizer missed estimates by a penny, as did Southwest Airlines. JP Morgan missed by 4 cents and Bank of New York and Ethan Allen each missed by 3 cents.
January 18, 2005
The fourth quarter earnings are starting to flow this morning, but the market’s focus at the opening bell will clearly be the born-again rise in oil prices. Don’t look now, but 50 dollar oil is right around the corner, as the winter deep freeze has settled in on the East Coast, where a lot of homes use oil heat. Oh, and then there’s that election thing in Iraq. At this point, light sweet crude futures are at 49.32. That’s up 94 cents per barrel, and it has European stock markets giving up yesterday’s gains.
The shortened trading week will pack a lot of earnings news into the next two days. So far this morning, Johnson Controls beat estimates, earning 87 cents per share versus an 81 cent target. National City Banks beat estimates by 7 cents per share, Ameritrade beat estimates and raised their 2005 guidance significantly.
The warning of the morning is from Georgia Pacific. They’ll miss their estimate because of asbestos-related costs. After the close of trading today, IBM and Yahoo report in. Expect a dollar seventy six from IBM and 11 cents per share from Yahoo.
January 17, 2005 - U.S. markets are closed.
January 14, 2005
Think back to five years ago. Does the number 11,722 ring a bell? Well when the closing bell rang on Wall Street five years ago today, the Dow Jones Industrials Industrial Average stood at its all-time high of 11,722. Unfortunately, you already know the rest of the story. We’ll start the day today about 10 percent lower than that. The NASDAQ, by the way, is about 60 percent lower than it was back then.
The buzz of the morning is about the General Motors earnings warning. GM says that profits for 2005 will be hurt buy a one billion dollar increase in health care costs as well as rising interest rates. They estimate that this year’s earnings will be between 4 and 5 dollars. A number of analysts are saying that even that may be wishful thinking.
We’ll get the December number on inflation in producer prices. Expect a slight decrease due to a decline in energy prices. Remember December, when energy prices were declining? Yes, those were the good old days. Oil is hovering around 48 bucks per barrel this morning.
January 13, 2005
The last half hour of trading was very kind to stock holders yesterday. This morning, we’ll need a strong retail sales report at 8:30 to get us off to a fruitful start.
Speaking of fruit - notice that artful segue – if Apple is your favorite fruit, that’s great. If Apple is your favorite stock – even better. Apple absolutely blew away earnings estimates last night, earning 70 cents per share versus an expected 49 cents. Look for Apple shares to trade 10 to 15 percent higher this morning.
The final word on Christmas Retail Sales comes from the government in about ten minutes. Expect a 1.2% increase overall, which was significantly boosted by a big surge of price cutting by the auto companies (otherwise known as increased incentives.) Take out the car sales, and the number is expected to be up 4 tenths of one percent.
The Bank of England and the European Central Bank both held interest rates steady this morning, as expected.
January 12, 2005
Stock prices took another drubbing yesterday after some bad news out of Advanced Micro had everybody wondering about chip stocks. Well wonder no more. The AMD problem appears to have been caused by some aggressive competition by an itty-bitty little company named Intel.
Intel posted 13% sales growth in their quarterly report last night. Their 33 cents of earnings beat estimates by 2 cents. However, within that number was a 2 cent investment gain – so call it a push. However, guidance for the year to come is positive for sales and gross margins. They are projected to rise to 58 percent.
The bad news of this morning comes from UPS. They are warning about last quarter’s results. But this one, too, looks to be company-specific rather than industry wide, as FedEx reaffirmed their targets.
January 11, 2005
Earnings season got off to a flying stop last night. Alcoa, the big aluminum company, missed their earnings number by 2 cents per share, despite the rapidly rising price of the stuff they sell. Who gets the blame? Alcoa says big cutbacks in orders by General Motors and Ford hurt their 4th quarter results.
If that wasn’t enough to swallow, Advanced Micro Devices put a quick end to a little rally in the semiconductor chip stocks last night, saying that their sales for the fourth quarter will be a little higher that the 3rd quarter, but way below expectations.
We’ll find out if those lower than expected sales are specific to AMD just after 4 o’clock this afternoon when industry leader Intel reports. But ahead of that, chip stocks will be under some significant pressure.
January 10, 2005
Earnings reports start to roll today as Alcoa reports in. So far, the ratio of negative pre-announcements to positive pre-announcements for the S&P 500 is about 1.9 to 1. That’s below the long term average of 2.0 and is a hopefully a good sign that companies will beat the expected average of 15% earnings growth for the quarter gone by.
Everyone is expecting a lot more merger activity in 2005, and if this morning is any indication, everybody is right. Alltel is buying Western Wireless for about 6 billion dollars. Movie Gallery is buying Hollywood Entertainment, after trumping Blockbuster’s bid. News Corp is buying the portion of Fox Entertainment that they don’t already own, and Britain’s Standard Charter is buying Korea’s First Bank in a 3.3 billion dollar deal.
January 7, 2005
It’s still pretty quiet on the earnings warning front. One is out this morning. Wellpoint, the big commercial health benefits provider, is going to miss their 95 cent to one dollar target. They now estimate 90 cents. But outside of that, nobody’s talking. Earnings stat to roll out early next week, so it could be that 4th quarter numbers are in pretty good shape.
We’ll see what kind of shape the job market’s in at 8:30 this morning. Last month’s job increase of 112,000 was a letdown. This time around, economists are looking for 175,000 new jobs and an unemployment rate holding steady at 5.4 percent.
Stocks in Hong Kong had another rough day. They’re down about one percent. But European markets are mainly positive at this hour.
January 6, 2005
Longing to feel younger? Imagine that it’s 14 years ago. It’s been 14 years since we started the year with three straight losing sessions, but here we are again. The wave of New Years profit-taking continued yesterday. The good news is that overseas markets have evidently had enough and are not following suit so far today.
It’s been hard to figure out just how good retailers did during the Holiday season gone by. The answer appears to be – it depends about which retailer you’re talking about. Costco December same store sales were up 9 percent. Joseph A. Bank up 16%. Chico’s up 18%. American Eagle Outfitters saw sale store sales rise almost 33 percent. On the other hand, Pier One was again down 8 percent and warned this morning about their 4th quarter earnings. The only thing that’s absolutely clear is that more and more people are avoiding the malls altogether and doing their shopping online.
At 8:30, the Weekly Jobless Claims are expected to have risen by about 8,000. However, jobless claims around the Holidays are always a little squirrelly, so don’t expect much market reaction.
January 5, 2005
No matter how much lipstick you apply, there is just no way to pretty up yesterday’s market. The Nasdaq had its worst day in 5 months. On the New York Exchange, down volume swamped up volume by a factor of 10 to 1. As is often the case, the Federal Reserve Open Market Committee was the root cause of the hysteria. The minutes from the Fed’s December meeting led many to believe that we may be in for more rapid interest rate increases in 2005. If you read the minutes, that interpretation seems a bit of a stretch. But, it was a good enough excuse for traders to book some of the gains made in the 4th quarter of last year and potentially not have to pay the tax until 2006.
It’s still pretty quiet on the earnings warning front, and that’s one good sign. In fact LSI, the big chipmaker, raised their outlook last night. December same store sales at Nordstrom were up 9 percent, but Circuit City sales slipped 6 percent.
It’s expected that crude oil inventories dipped last week, but distillate inventories (like heating oil) rose between 80 and 160 thousand barrels, due to the relatively warm weather on the east coast, where they use a lot of the stuff. That report, and the ISM Services Index come in the 10 o’clock hour this morning.
The futures were positive earlier, but have been slipping all morning. If the market opened at this point, it would be just about flat. Adjusted for fair value, the S&P futures are down just a tenth of a point, Dow futures are up 4, and the Nasdaq futures are dead even fair value.
January 4, 2005
Car sales on the agenda today. We’ll find out whether December’s flood of new incentives cleared the lots of the domestic car makers. It’s expected that while Asian car makers may have seen some gains, DaimlerChrysler sales are expected to be up 4 percent. GM and Ford are each expected to be down about 5 percent.
At 10 o’clock we’ll find out about November Factory Orders (it must take a long time to get information out of those factories). Expect an increase of 9 tenths of a percent. That would be up a touch from October.
Also, the Federal Reserve Open Market Committee is release the minutes of their December 14 meeting. This is the first time the minutes are being released that soon after a meeting. It used to take seven weeks to get these things out. They must have bought a new copy machine over there or something.
Rayovac is buying United Industries in a 1.2 billion dollar deal. So next summer when you buy your Cutter’s insect repellant, it might come with a new pack of batteries.
January 3, 2005
Happy New Year! It looks like stock traders, who basically took last week off, are returning in a good mood this morning.
The Japanese market was closed for a New Year’s Holiday as is the London exchange, but continental European markets are up about one percent.
The most-watched monthly reading on the health of domestic manufacturing is the ISM Index. At 10 o’clock this morning, the December ISM will be released and is expected to show a slight rise from 57.8 to 58.5. That’s not much. But then again, anything over 50 reflects an increase in manufacturing activity.
We have about a week and a half before fourth quarter earnings really start to roll out. In the meantime, watch out for earnings warnings. There have been relatively few so far this quarter. If it stays that way, we could be in for a lot of solid fourth quarter reports starting next week.
Walmart said this morning that December same store sales were up 3 percent. That’s one percent more than previous estimates. Look for Walmart shares to open nicely.
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