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WJR January 2009 Reports

WJR January 2009 Reports

 

January 30, 2009
 
The government takes three shots at estimating Gross Domestic Product each quarter.  Today comes the first shot at estimating fourth quarter GDP and it’s widely expected to be quite a stinker.  After a one-half-of-one-percent decline in the third quarter, the fourth quarter decline is expected to be around 5½ percent.  That number will be announced in just about ten minutes.  Before ten o’clock, we’ll also get the Chicago PMI and the University of Michigan’s final read on January Consumer Confidence.  Neither number is expected to be pretty.
 
Amazon amazed again with their earnings report last night.  Amazon made 52 cents per share, which is four cents better than they did a year ago and 12 cents better than analysts expected.  Speaking of 12, Amazon shares traded 12 percent higher after hours last night.
 
This morning Procter& Gamble and Honeywell both matched expectations with their earnings reports, although P&G warned about the rest of the year.  ExxonMobil reported $1.55 per share, which beat estimates by a dime.
 
Asia was mixed, Europe is lower, and absent a pleasant GDP surprise at 8:30, we’ll head lower at 9:30.  Adjusted for fair value, S&P futures are lower by about 6 points, the Dow futures are down 39 points, and the NASDAQ futures are about 7½ points below fair value. 
 
January 29, 2009
 
We should see a little pullback after our day-long rally yesterday.  Earnings reports continue to pour in.  Of most interest around here, Ford Motor reported an operating loss of $1.36, which was only 6 cents worse than expected.  However, the most important statistic out of the automakers nowadays is the cash burn rate.  Ford burned through 5½ billion dollars last quarter.  That’s about 2 billion better than the previous quarter, so that’s good.  Ford has about 23½ billion left in cash and credit lines.  At the current burn rate, that’s roughly one year’s worth of liquidity.  Ford says it has no plans to turn to the federal government for cash.
 
3M, Raytheon, Eli Lilly and Colgate-Palmolive beat estimates, Altria and International Paper matched, Royal Caribbean and Fortune Brands checked in lower than expected.
 
The House of Representative passed the first version of the latest stimulus package yesterday, although most of the buzz in the markets still involves the “bad bank” that the government may set up.  It’s not clear whether the “bad bank” will be allowed to own its own private jet.  Can’t wait to see how the CEOs office is decorated.
 
Anyway, Asia up, Europe down and our futures have been on the slide most of the morning.
 
Adjusted for fair value, S&P futures are lower by about 10½ points, the Dow futures are down 91 points, and the NASDAQ futures are about 13 points below fair value. 
 
January 28, 2009
 
No big economic reports on the docket today.  But it’s okay – there’ s enough going on already.  The Federal Reserve’s Open Market Committee will check in at 2:15 with their decision on monetary policy.  We used to say “their decision on short-term interest rates.”  But now that the short term target rate is effectively zero, we’ll see what the Fed has up its sleeve regarding longer term rate.  Perhaps buying long term Treasuries – we’ll see.
 
AT&T reported earnings that fell a penny short of estimates on lighter than expected revenue.  Boeing also disappointed by reporting a loss of 8 cents per share, including more than a dollar per share lost due to a machinist strike.
 
Santander, the big Spanish bank announced a 662 million dollar charge related to exposure to the Bernie Madoff fiasco.
 
But the big rumor of the morning is word that the Government may be close to implementing a good-bank-bad-bank program to soak up the junk loans on various bankers’ books.  You, know, kind of like what the TARP was supposed to do in the first place.  Stocks of major financial outfits like Citigroup, Wells Fargo, JP Morgan Chase and Bank of America are indicated anywhere between 9 and 20 percent higher in the pre-market.
 
Asian markets were mixed overnight, but Europe is solidly higher and we’re headed in that direction as well.  Adjusted for fair value, S&P futures are higher by about 19 points, the Dow futures are up 108 points, but the NASDAQ futures are almost 20 points above fair value. 
 
January 27, 2009
 
The Fed starts a two day meeting today.  They now have two day meetings four times a year versus the old days (like 2005) when they only had two two-day meetings per year.  Apparently, there’s a little more to talk about nowadays. 
 
Lots of earnings news this morning, and so far it’s kind of a mixed bag.
 
Checking in with worse than expected numbers were DuPont and Corning.  Verizon matched estimates.  Beating their bogey were EMC, Bristol-Myers and Hershey.
 
Just another warning this morning – be careful when someone promises you an interest rate or an earnings rate that sounds too good to be true.  Agape Investments wasn’t masquerading as a hedge fund.  They were supposedly arranging bridge financing for business deals.  Well, reportedly the real deal is that Agape, run by a guy who has previously served 21 months in prison for investment fraud, was a 350 million dollar Ponzi scheme.  Do your due diligence, people! There are snakes in the weeds.
 
The Nikkei Index in Japan rose almost 5 percent overnight, but Europe is slightly lower.  Our futures are pointing slightly higher. Adjusted for fair value, S&P futures are higher by about 4 points, the Dow futures are up 9 points, but the NASDAQ futures are about a half point below fair value. 
 
January 26, 2009
 
Friday morning we talked about the possibility of drug giants Pfizer and Wyeth getting together and this morning, it’s a done deal.  Pfizer will acquire Wyeth for $68 billion in cash and stock.  Pfizer will also cut its dividend in half.  However, the dividend was pushing 7½ percent before the cutback. Pfizer is also planning to reduce headcount by 10 percent.
 
Caterpillar had better than expected revenue in the 4th quarter, but that’s where the good news ends.  Cat made $1.08 per share versus the expected $1.29.  They guided much lower for 2009 and will let 20,000 workers go.
 
Kimberly Clark reported $1.01, which missed estimates by 2 cents. McDonald’s is the bright spot, reporting 87 cents in profit versus the expected 83 cents.
 
American Express and Amgen will also report today.  At 10 o’clock this morning, the December Existing Home Sales and the Leading Economic Indicators will be reported.
 
The futures look to be mixed, but if the market opened right now, stocks would trade lower. After you adjust for fair value, S&P futures are down 5 points, the Dow futures are down 84 and the NASDAQ futures are about 11 points below fair value. 
 
January 22, 2009
 
It’s been a while since we’ve been able to talk about a big merger.  That, of course, is because the credit markets froze up at the end of summer and the only firms that can pull off a big purchase now are companies that have a boatload of cash.  One of those select few companies is Pfizer.  Word is out that Pfizer has been in talks to acquire giant drug-marker Wyeth.  According to the Wall Street Journal, no deal is imminent, but if one does happen, it could be in the range of about 60 billion dollars.
 
General Electric reported earnings this morning that were 47 percent lower than last year, but matched estimates.  GE remains committed to its $1.24 dividend and that gave the futures a little boost.
 
Great Britain is now “officially” in recession, as GDP there has officially declined two quarters in a row.  And the former head of the New York Stock Exchange and later the head of Merrill Lynch is headed for the unemployment line.  John Thain has left his office, which he just recently spent a million dollars of Merrill Lynch money to redecorate.  Hard to imagine why people have lost confidence in the goings-on on Wall Street.
 
Our futures are in better shape than we saw before GE released its earnings report.  But that doesn’t mean that we’ll avoid some pain at 9:30.  At this point, adjusted for fair value, S&P futures are down 17 points, the Dow futures are down 129 and the NASDAQ futures are about 15 points below fair value. 
 
January 22, 2009
 
Yesterday proved to be a nice little bounce-back from the Inauguration Day dump in the stock market.  And, there’s a little bit of good news to go on this morning as well. 
 
Last night Apple announced earnings of $1.78. That beat estimates by about 40 cents.  Although Apple lowered its estimate for the current quarter (like they always seem to do) the stock is indicated about 8 percent higher in the pre-market. Also on the plus side this morning, Southwest Airlines made 8 cents versus the expected nickel on better-than-expected revenue.  Baxter and M&T Bank also did better than expected.
Likewise at Potash and Lockheed Martin, also both warned about the current quarter and Nokia came out with a disappointing report.
 
Weekly Jobless Claims will get some attention at 8:30.  We’ll also get data on building permits and domestic oil inventories.
 
Overseas markets are all a little positive this morning.  Our futures are looking mixed, at best. At this point, adjusted for fair value, S&P 500 futures are down about 4½, the Dow futures are down 44, but the NASDAQ futures, on the Apple news, are about 2 points above fair value. 
 
January 21, 2009
 
We have a new President, and maybe we can inaugurate a new market mood today.  There’s actually quite a smattering of good news to talk about. 
 
First off, Deutsche Bank upgraded their ratings on Ford Motor, Lear and American Axle this morning.  Granted, it’s only an upgrade from “sell” to “hold.”  But, we’ll take what we can get.
 
Earnings season is kicking into gear, and outside of the financials, there actually appear to be some earnings out there.  Last night, IBM beat estimates and raised their earnings guidance for 2009.  This morning, United Technologies posted slightly better earnings than expected.  Coach met estimates.  The disappointment again came from the financial sector, as Blockrock reported a 68 cent per share profit versus the expected 99 cents.
 
Abbott Labs, Apple, Ebay and US Bancorp are on the way later. 
 
Perhaps more importantly for the market mood will be the beginning of confirmation hearings for Treasury Secretary nominee Tim Geithner.  Geithner was a popular choice when nominated, and stock prices would likely suffer if the nomination goes down.  However, it’s somewhat problematic to place someone with a checkered tax history in charge of the IRS, especially at a time when it’s getting hard to know whom to trust.
 
Overseas markets are moderately lower after our bloodbath yesterday.  But we’re looking at an early bounce back this morning. At this point, adjusted for fair value, S&P futures are up almost 9 points, the Dow futures are up 80 and the NASDAQ futures are about 10 points above fair value. 
 
January 20, 2009
 
You have to go back a lot of Inauguration Days to find one where the stock market did well.  If, for no other reason than if you’re a company with a bad news story, you’re likely to spill the beans when everyone is looking the other way.  So, be on the lookout for some surprises.
 
In the “no surprise” category will be earnings reports from IBM, Parker-Hannifin and Forest Labs.  Earlier, TD Ameritrade met estimates on lighter than expected revenue. 
 
Johnson & Johnson made 94 cents last quarter versus the expected 92 cents, but once again, on lower-than-expected revenue.  J&J also estimates slightly lower 2009 results than the market expects.
 
State Street also beat their earnings number, but disclosed that they’re sitting on over 9 billion dollars in unrealized losses in its investment portfolio and conduits.  They slashed their future guidance and State Street stock is indicated about 30 percent lower in the pre-market.
 
Of course around here, the interesting story of the morning is Fiat taking a 35% stake in Chrysler, for an investment of zero dollars.  Fiat will reportedly contribute technology, distribution opportunities and management services.
 
Asian markets were lower overnight.  Europe is mixed, but we’ll start the day lower.  At this point, adjusted for fair value, S&P futures are down almost 9 points, the Dow futures are down 80 and the NASDAQ futures are about 11 points below fair value. 
 
January 16, 2009
 
It’s Charity Preview Night in Detroit.  But in Washington, it’s charity to Wall Street Day.  The government, without announcing any forced sale of corporate jets or ridiculing company executives for questionable management decisions told Bank of America today that it was willing to finance their purchase of Merrill Lynch with 20 billion dollars of preferred stock.  Not only that, the government will backstop 118 billion in questionable loan assets.  Not only THAT, the government will back up over 300 billion dollars of potential junk at Citigroup.
 
It sure helps to have friends in high places.  Now if only some small businesses around here could get these banks to give them a little line of credit at a reasonable rate so that they can stay alive.  But, that may be asking too much.
 
Last night Intel met estimates, Genentech made 95 cents versus the expected 97 cents.
 
At 8:30 we’ll get the December Consumer Price Index, although the only thing that seems to be inflating is the federal government’s balance sheet.  At 10 o’clock, the University of Michigan’s preliminary read on Consumer Confidence is expected to slip to 59, from last month’s 60.1.
 
Asian markets were generally higher after our late-day rally and Europe is significantly higher at this hour.  At this point, adjusted for fair value, S&P futures are up 10 points, the Dow futures are up 96 and the NASDAQ futures are about 8½ points above fair value. 
 
January 15, 2009
 
It’s been a week without sunshine, as far as business news is concerned.  One little ray of good news, if you want to call it that, came from JP Morgan this morning.  They issued a profit report for the fourth quarter that actually included – a profit.  They made 81 cents per share a year ago, but analysts expected a break even this time around.  JP Morgan actually reported a profit of 7 cents per share.  Even so, CEO Jamie Dimon says that economic conditions will get worse before they improve. 
 
The European Central Bank must think so too.  They cut short term interest rates from 2½ to 2 percent this morning.
 
Shares of Apple will be pressured this morning after last night’s announcement that Steve Jobs will take a medical leave for six months. Elsewhere in tech-land, Motorola will shed another 4,000 jobs in another expense reduction.
 
Bank of America, which was more than happy to bid for Countrywide Mortgage and Merrill Lynch is now reportedly looking for additional TARP money so that we can all help to finance their happiness.  BOA stock is bid about 6 percent lower than yesterday’s close.
 
We’ll get quarterly results from Intel later on today, but in the meantime, we’ll stare at a lot of red numbers once again.
 
At this point, adjusted for fair value, S&P futures are down 6½ points, the Dow futures are down 65 and the NASDAQ futures are about 14 points below fair value. 
 
January 14, 2009
 
We’ll get the December Retail Sales Report at 8:30 this morning.  The consensus estimate is a 1.2 percent.  The November decline was 1.8 percent.
 
It looks like the big financial “supermarket” called Citigroup will be pared into a vegetable stand, a dry goods counter and a butcher shop.  The Smith Barney brokerage will split off into a joint venture run by Morgan Stanley and other units will be sold off as Citi will go back to concentrating on being a bank.
 
Speaking of Morgan Stanley, an analyst there says that HSBC is undercapitalized and needs another 30 billion or so.  Deutsche Bank says that it lost 6.4 billion in the fourth quarter. That stock is 10 percent lower in Europe.  
 
The largest listed hedge fund in the world, the Man Group, which has some exposure to Madoff Securities, says its assets dropped by over 20 percent in the fourth quarter as markets declined and clients declined to keep paying handsome fees for not knowing where all their money is invested.
 
Asian stocks all rose overnight for the first time in six trading sessions. Europe, however, is solidly lower and our futures are rather as ugly as well.  At this point, adjusted for fair value, S&P futures are down almost 13 points, the Dow futures are down 105 and the NASDAQ futures are nearly 15 points below fair value. 
 
January 13, 2009
 
Alcoa got the fourth quarter earnings season off to a flying stop last night.  Perhaps even calling it “earnings” season is a stretch this time around.  Alcoa reported an overall loss of 1.2 billion dollars.  Aluminum prices are down 56 percent from just six months ago.  According to Alcoa, aluminum consumption dropped 3 percent last year and is likely to fall another 2 percent in 2009.  Alcoa stock, which dropped 7 percent yesterday, is indicated even lower this morning.
 
Lexmark and CSX both lowered earnings guidance this morning.  In fact, during the fourth quarter, S&P 500 companies lowering guidance outnumbered those raising guidance by a ratio of 4 to 1, which is not a good sign. Sony is looking at its first loss in 14 years.  They are now forecasting a loss of a billion dollars for the year ending March 31st.  As recently as October, they predicted a profit of over 2 billion dollars.
 
Looking for good news?  The three-month LIBOR rate dipped under 1.1 percent this morning as borrowing rates continue to drop.  The price of oil is down again, to less than 37 dollars per barrel.
 
Japanese stocks dropped nearly 5 percent on the Sony news.  Other markets overseas are significantly lower as well.  At this point, adjusted for fair value, S&P futures are down 7 points, the Dow futures are down 49 and the NASDAQ futures are nearly 7 points below fair value. 
 
January 12, 2009
 
It’s been a while since the beginning of earnings season caused this much trepidation.  Fourth quarter earnings season “officially” kicks off when Alcoa reports after the close of trading today, although we will get a dozen other companies reporting today, and the news over the next three or four weeks is not expected to be good.  Fewer companies are giving guidance about future earnings in this uncertain economy.  The ones that do are not likely to be very positive.
 
Citigroup may be in for a big write-up on their marked-down Smith Barney unit.  Word is that Morgan Stanley may pay 2.7 billion dollars for 51% of Smith Barney as the shakeout in the brokerage industry continues.
 
Speaking of which, UBS is more than 5% lower in Europe this morning on rumors of a possible 7 billion dollar 4th quarter loss.
 
Pfizer was upgraded to neutral over at Goldman Sachs.  Oil’s down over 2 dollars at 38.50 bucks for a barrel of light sweet crude.
 
Overseas markets are lower and that’s where we’re headed as well. At this point, adjusted for fair value, S&P futures are down about 5 points, the Dow futures are down 46 and the NASDAQ futures are nearly 3 points below fair value. 
 
January 8, 2009
 
We’ll be getting a lot of economic news today and tomorrow.  The best news may be that none of it is expected to be good news.  That leaves less room for unpleasant surprises.  One rather massive unpleasant surprise came from Walmart.  They blamed bad weather in part, but December same store sales were up only 1.7 percent.  They had expected an increase of 2.8 percent.  Walmart now estimates that fourth quarter earnings will be in the neighborhood of 92 cents versus the expected 99 cents.  Walmart stock is expected to open about 4 dollars per share lower.
 
Costco’s sales were off 4 percent, but were actually a couple of percent higher if you strip out gasoline sales.  Macy’s is reportedly getting set to close 11 stores nationwide.
 
Shares of ThinkPad maker Lenovo, the fourth-largest PC maker in the world, were off more than 25 percent in Asia overnight, after warning about a significant loss for the quarter and announcing an 11 percent reduction in staffing levels.
 
The Bank of England cut interest rates to their lowest level since 1690 – and you remember how bad things were back then.
 
A little good news – the average interest rat for a 30 year mortgage slid to 5.33 percent last week.  The average 15 year fixed went for 4.85 percent.
 
Overseas markets are 2 to 4 percent lower, and our futures headed south on the Walmart report.  At this point, adjusted for fair value, futures on the S&P 500 are down 9, the Dow futures are down 90, and the NASDAQ futures are just about 6 points below fair value.
 
January 7, 2009
 
In case you were feeling ashamed of the amount of mismanagement and fraud we’ve seen this decade in the American financial system in the wake of Bernie Madoff, Enron and the like – well – it’s not just us.  Stock of Satyam, the fourth largest software maker in India was off over 75 percent overnight as its founder and Chairman resigned, and admitted that cash on the balance sheet was overstated by a billion dollars or so.  Liabilities are also understated by a quarter billion or so. It’s just another good news story to instill confidence.  Fidelity Investments reportedly owns over 4 percent of Satyam.
 
Alcoa announced late yesterday a 13 percent reduction in its workforce.  That’s about 13,500 jobs going away worldwide.
 
The outplacement firm Challenger Gray & Christmas released their un-scientific monthly job cut survey this morning and reported the largest number of December job-cut announcements by big companies since the survey started in 1993. The 166,000 announced job cuts almost tripled the announced cuts of a year ago.
 
The Indian market was off almost 6 percent on the news from Satyam.  Japan rose 1¾ percent, but Europe is mostly lower. Our futures are the mirror image of 24 hours ago. At this point, adjusted for fair value, futures on the S&P 500 are down 9 points, the Dow futures are down 70, and the NASDAQ futures are just about 12 points below fair value.
 
January 6, 2009
 
Volume is coming back, and volatility continues to subside in the stock market.  Although the major averages lost some ground yesterday, it looks like a lot, if not all of that loss will be re-cooped at the open this morning.
 
The big economic reports of the week will come late on Friday.  Meanwhile, our number du jour will be the November Factory Orders Reports at 10 o’clock.  Expect a 2.3 percent decline, which would be good news only compared with the 5.1 percent decline in October.
 
If you’ve been getting used to those nice dollar-and-a-half prices for a gallon of gasoline - well, you’d better fill up.  Light sweet crude regained the 50 dollar mark this morning, after hanging in the mid-thirties last week.  Right now we’re at 49.94 per barrel
 
Logitech is indicated lower after missing their estimate and announcing a 15% reduction in white-collar staff. 
 
Dow Chemical is indicated about 3% higher after announcing that they will take legal action against Kuwait regarding their busted petrochemical deal.  Business may not get done, but at least the lawyers will have full employment.
 
Hong Kong was a bit lower, but most other markets overseas are higher. At this point, adjusted for fair value, futures on the S&P 500 are up about 11½ points, the Dow futures are up 81, and the NASDAQ futures are just about 12 points above fair value.

January 5, 2009

All hands are back on deck as traders are back, Congress is back, Steve Courtney is back and right out of the gate, we’re facing a bunch of bad news stories that will test last week’s rally.
 
December car sales reports will roll out all day.  They are expected to be off 40 percent from a year ago, and although December is expected to be 14 percent higher than November, that’s lower than the normal December uptick.
 
If that’s not bad news enough – did I mention that Congress was back in session?  The House Financial Services Committee will hold a hearing today to ask some polite questions about how Bernie Madoff allegedly made off with 50 billion dollars or so in a giant Ponzi scheme that the Securities and Exchange Commission somehow missed, in spite of multiple audits of Madoff’s operation.  No matter how those hearings go, they are not likely to inspire investor confidence in a system that depends on investor confidence.
 
Oil’s down 30 cents per barrel to just about 46 dollars per barrel after a big spike upward on Friday.
 
Hong Kong and Japan were up a lot over night, Europe is up a little.  But we’re looking to give back some of Friday’s gain at the open, as the futures just fell off quite a bit within the past few minutes.  At this point, adjusted for fair value, futures on the S&P 500 are down about 10 points, the Dow futures are down 89, and the NASDAQ futures are just about 18 points below fair value.

WJR February 2009 Reports
WJR December 2008 Reports

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