January 29, 2010
It’s the last trading day of what’s been a pretty punk month for stocks. We’re off about 3 percent on the month, but it looks like we’ll get a little bit back at the open today.
Once again this morning, the earnings news is pretty good. Microsoft has sold over 60 million copies of Windows 7 and earned 74 cents on an operating basis last quarter, which was 15 cents better than expected. Also beating their bogey were Honeywell, Fortune Brands, Mattel, Amazon, and Sandisk. Sandisk’s outlook wasn’t so hot, however, and the stock looks to trade lower today.
At 8:30, the preliminary estimate of 4thquarter Gross Domestic Product. It’s estimated to be somewhere in the 4½ to 5½ percent range. However, a big part of that is likely to be inventory adjustment, and not really indicative of a strong economic rebound.
U of M’s final January Consumer Sentiment number rolls at 9:55. Expect a reading of 73.
The Reserve Bank of India did a little monetary tightening overnight, following China’s lead of a couple weeks ago. That sent Asian markets lower. European markets, on the other hand, are mostly higher at this hour.
We should head a bit higher at 9:30 as well, barring an unpleasant surprise in the 8:30 GDP number. At this point, adjusted for fair value, the S&P 500 futures are up 3 points, and the Dow futures are up 39, and the NASDAQ futures are about 9 points above fair value.
The river of earnings reports is reaching flood stage this morning, and for the first time this week, there are a number of earnings misses. However, stock traders always focus on predicted rather than reported earnings, and there are a number of strong predictions today.
Let’s start off with Ford Motor. After getting a boost from the Toyota’s woes yesterday, Ford stock may pop up over 12 bucks again today. Adjusted earnings were a penny per share short of expectations. However, revenue of over 35 billion last quarter was almost 10 percent higher than expected, 4thquarter cash flow was over 3 billion dollars, and Ford says that it will be profitable, pre-tax in 2010. By the way, Toyota announced recall of another million vehicles this morning. That brings the recent recall total to almost 8 million units.
Procter & Gamble made $1.49 versus the expected $1.42. 3M checked at $1.30, which beat estimates by 9 cents. 3M also raised guidance. Checking in with slight misses were Motorola, Eli Lilly and Altria.
AT&T matched estimates but will likely benefit from its association (and the apparent lack of Verizon’s association) with the new Apple ipad.
There’s a cloture vote on tap in the Senate regarding Ben Bernanke’s confirmation today. If 60 Senators agree to stop the chatter, stocks should get a mid-day boost.
Overseas markets are higher. Our stock futures have been rising all morning long and at this point, we’re looking at a fairly strong open for stocks. At this point, adjusted for fair value, the S&P 500 futures are up more than 6 points, and the Dow futures are up 50, although the NASDAQ futures are just about a point below fair value.
Ford Motor Company stock should have a good morning, and it’s not because of anything Ford has done. This morning, Toyota is suspending sales of 8 models which comprise about 65% of their domestic sales. Toyota is trying to figure out what to do about an apparent problem with sticking accelerators and they are not giving an estimate of how long those 8 models, which include the Camry, will be on the shelf.
Stryker, United Technologies, Abbott Labs, Rockwell Automation, Boeing and Caterpillar all beat earnings estimates for the quarter gone by. Caterpillar and Boeing did lower guidance for futures earnings and Rockwell Automation was downgraded to a sell by a major broker.
The Federal Reserve’s Open Market Committee is meeting today and will issue their statement at 2:15 and nobody is expecting any surprises or any changes in short term rates.
More fireworks on Capitol Hill are on tap. The House Oversight and Government Reform Committee will have Henry Paulson and Treasury Secretary Geithner strapped into the hot seat for questions that will likely generate more heat than illumination.
The State of the Union address is tonight, Apple will unveil their new tablet device later today. There’s a lot going on.
Asia lower, Europe is mixed, the dollar index is flat. Our stock futures are indicating a quiet open for stocks. At this point, adjusted for fair value, the S&P 500 futures are flat, Dow futures are down 2, and the NASDAQ futures are now 5 points below fair value.
The stock story of this morning started overnight as Standard & Poor’s placed the AA sovereign debt of Japan on credit watch-negative. S&P warned that due to Japan’s aging demographic profile and overwhelming amount of government debt (are you listening, Washington?) S&P may give the ziggy to that double-A rating.
That warning sent the yen south, the dollar up, and, of course, stock futures down.
Since then, however, a stream of better-than-expected earnings have traders in a better mood. Here’s the run-down: Verizon matched earnings estimates of 54 cents per share. Travelers stock looks to open about 4 percent higher on $2.12 of earnings versus the expected $1.48. Dupont earned 44 cents. That was a 3 cent beat. Johnson & Johnson beat by a nickel. Last night, Texas Instruments reported 52 versus 49 cents and Apple reported $3.67 versus the expected $2.07.
The Conference Board will report on January Consumer Confidence at 10 o’clock. Expect a reading of 53.5.
No trading in Australia and India overnight. Most overseas markets are lower, but Europe is staging a mild rally. Germany just went positive.
Our futures have crawled almost all of the way out of a fairly significant hole that they were in a couple of hours ago. Right now, adjusted for fair value, the S&P 500 futures are lower by about 2½ points, Dow futures are down 10, and the NASDAQ futures just went positive a few minutes ago, now just about 2 points above fair value.
The Super Bowl is almost two weeks away, but the political football that is Ben Bernanke’s reappointment will continue to get kicked around this week. Late last week, a handful of Congressmen, looking for a villain, sought to place the blame for the Great Repression squarely on Fed Chairman Bernanke. Evidently, they’ve removed all the mirrors from Congressional restrooms. In any event, the Senate will vote on Bernanke’s reappointment sometime this week, and some re-emerging support for Bernanke on the Sunday morning talk shows has the futures pointing higher this morning.
Haliburton is the only major company reporting earnings this morning. They made 28 cents per share versus the expected 27 cents. After the market closes at 4 o’clock this afternoon, we’ll hear from Apple, Texas Instruments and Amgen.
At 10 o’clock, we’re expecting the report on December Existing Home Sales to reflect a big drop to an annualized level of 5.9 million units. Remember, that the Homebuyer tax credit was due to expire last November 30th, before it was extended and broadened. That expected expiration will get the blame for the big drop in December sales.
Asian markets were lower overnight, but Europe has turned just a little bit higher, and our futures have been solidly higher all morning long. Right now, adjusted for fair value, the S&P 500 futures are up more than 10 points, Dow futures are up 89, and the NASDAQ futures are almost 13 points above fair value.
After the United States Congress, under the influence of a ton of lobbyist influence, repealed the Glass-Steagall act in 1999, it took less than 10 years for the big banks to help nearly collapse the entire financial system. Yesterday, President Obama announced his intention to start reining in the risk profile of the biggest banks. Not exactly a return to the Glass-Steagall era, but a step in the right direction. Word of that step sent stock prices sharply lower and it looks like we’ll see more of the same this morning.
Earnings reports continue to roll in generally better than expected. This morning McDonald’s’ reported $1.03 of operating profit, which was a penny better than expected. Johnson Controls is out with a very strong report. JCI made 52 cents on the quarter, which was very nearly twice as much as expected. General Electric, Google, American Express also beat their profit targets.
The misses of the morning are Kimberly-Clark, whose $1.17 fell eight cents short, and Harley-Davidson, which lost 63 cents per share, which is about double the expected loss.
Stocks overseas are lower on the heels of yesterday’s sell-off in the U.S. And the selling button is still being pushed this morning, although the futures are in better shape than the were in a couple of hours ago.
Right now, adjusted for fair value, the S&P 500 futures are down 5 points, Dow futures are down almost 40, and the NASDAQ futures are almost 7 points below fair value.
January 21, 2010
The earnings are really starting to flow, and for the most part, this morning’s reports are pretty good. Or, at least, better than expected. Let’s get the money losers out of the way first.
KeyCorp’s loss of 30 cents per share was ten cents narrower than expected. Similarly, Fifth Third Bank reported an operating loss of 20 cents per share, which was 11 cents less of a loss than expected.
A surprise profit in the Airline sector, as Continental reported an operating profit of 3 cents, rather than the expected 7 cent loss. Southwest air made 10 cents per share, which beat the bogey by 3 cents.
Starbucks beat estimates by a nickel per share and saw same store sales rise for the first time in 2 years. Also beating estimates were PNC and Xerox.
Interestingly, 20 minutes ago Goldman Sachs reported $8.20 per share of earnings. That beat estimates by three full dollars, and will likely stoke a little more of the populist bluster about hitting the big banks with punitive taxes.
Overseas markets are generally higher, and our futures are, for the most part, fighting off the effect of a slightly higher dollar index. Right now, adjusted for fair value, the S&P 500 futures are flat, Dow futures are down 2, but the NASDAQ futures are about a half-point below fair value.
January 20, 2010
Health care stocks led the charge higher yesterday in anticipation of a Republican win in the Massachusetts Senate race. This morning, it’s another case of buy the rumor and sell the news and stock futures have moved on from the health care story to the China story.
That China story is another round of Chinese Government efforts to restrain its banks from speculative lending. Bank lending in China surged this month to the highest rate since last June and the Government would like to diffuse what it fears may be a big speculative bubble. On this side of the Pacific, we know all about speculative bubbles. Now if only we could get some of those banks to make loans over here.
Our big banks are busy with quarterly reports this morning. Bank of America lost 60 cents per share on an operating basis, which was 8 cents worse than expected. Wells Fargo actually turned in an 8 cent profit on better than expected revenue, versus and expected loss of a penny.
The December Producer Price Index at 8:30 is expected to be unchanged.
Chinese stocks were off over 3 percent overnight, most other markets are a bit lower, and the dollar index is almost one percent higher. Put it all together and we’ll likely start the day lower, although the futures have improved during the past fifteen minutes. Right now, adjusted for fair value, the S&P 500 futures are down about 4 points, Dow futures are down 29, and the NASDAQ futures are just about 9 points below fair value.
Seldom does one single Senate election have a potential impact on national political policy and possibly the stock market. However, today’s Senate election in Massachusetts is definitely one to watch. A Republican upset that breaks the filibuster-proof composition of the Senate could be a real game-changer.
The game has changed for several corporations this morning. Japan Airlines filed for the Japanese equivalent of Chapter 11 bankruptcy protection and the parent of Brink’s Security will be acquired by Tyco for 1.9 billion dollars. The end of the Kraft-Cadbury saga may be here as well, as the Cadbury Board agreed to a 19½ billion dollar offer from Kraft.
Credit Suisse with an interesting call this morning as they upgraded McDonald’s and downgraded Burger King. Don’t know - maybe it’s the fries.
Citigroup just reported a loss of 33 cents per share, which was right in line with expectations. Later today we’ll get earnings from IBM. But in the meantime, Asia was mixed, Europe is down about one percent and the dollar index is up about three-quarters of one percent and you know what that means – stock futures have been in the red all morning, although they’re pointing to just a slightly lower open.
Adjusted for fair value, the S&P 500 futures are down a little less than 4 points, Dow futures are down 28, and the NASDAQ futures are just a point and a half below fair value.
January 15, 2010
The earnings spigot has started to open, and this morning’s reports are good, but may not be good enough. Intel started us off last night with a better than expected earnings report and an upward revision of estimates. Perhaps most impressive, Intel’s Gross Profit Margin rose into the low 60’s – somewhere between 61 and 65 percent. That’s an important metric where you’re pumping out millions and millions of computer chips.
This morning JP Morgan Chase became the first of the big banks to report. Chase made 74 cents of operating profit, which was about 13 cents better than expected. Revenue was a little light, and that’s holding the stock back pre-market.
Lots of data rolls out today in front of the three-day stock and bond market weekend. At 8:30, the Consumer Price Index is expected to have risen two-tenths of one percent. December Industrial Production data comes at 9:15 and then just before 10 o’clock, we’ll get the University of Michigan’s first read on January Consumer Confidence.
Although the earnings reports have been good, our old buddy, the dollar is higher. The dollar index is up more than a half of a percent, and true to recent form, when the dollar rises, stock futures drift lower.
At this point, adjusted for fair value, the S&P 500 futures are down about 5 points, Dow futures are down 26, and the NASDAQ futures are 6 points below fair value.
Today, President Obama is expected to propose a 90 billion dollar tax on big financial institutions that received TARP funds. The 10-year plan would only apply to financial firms with more than 50 billion dollars in assets, and would not apply to certain firms in which the government owns a big chunk. General Motors, Chrysler, Fannie Mae and Freddie Mac are reportedly off the hook. An administration official terms the penalty tax as “the least that the big banks can do.” Of course, when it comes to lending, the big banks have been accused of “doing the least they can do” for the past year and a half. The administration folks are also quoted as saying that they don’t believe that the banks will pass the new tax along to their customers. Check back for more fantasies at a later date.
After the close of trading today, Intel will report their quarterly results. The technology sector was the best domestic stock-market sector in 2009. Granted, 2010 is less that two weeks old, but tech stocks have not exactly been a ball of fire. A good report from Intel might shore up the NASDAQ.
The European central Bank left interest rates unchanged this morning.
At 8:30, we will hear about weekly jobless claims, which are expected to have dropped to 430,000. December Retail sales are expected to have risen about a half of one percent.
Outside of Hong Kong, overseas markets are pretty much all higher. At this point, adjusted for fair value, the S&P 500 futures are up about a point, Dow futures are up 15, and the NASDAQ futures are just about even with fair value.
The head cheeses at Goldman Sachs, Bank of America, JP Morgan Chase and Morgan Stanley may enjoy the “Rick Wagoner” treatment on Capitol Hill today. A Congressional committee, called the “Financial Crisis Inquiry Commission” is charged with finding out how the financial system almost melted down. They will likely be asking some pointed questions of the big four. No guarantee here, but I’d imagine that the word “bonus” might also be included in the questioning.
Speaking of banks, mortgage applications rose 14 percent last week. Re-fi’s were actually up 21 percent. That on the heels of a report that over 13 percent of all U.S. mortgagees are either late on their payments or in some stage of foreclosure.
Chinese stocks hit the skids overnight, reflecting concern over the Chinese Government’s financial tightening moves we talked about yesterday. Not a major tightening, mind you. However, it could be a sign of things to come.
UPS and Merck shares should benefit from broker upgrades this morning.
Asian markets were mostly lower overnight, but outside of a slightly lower U.K. market, Europe is mostly higher. Our stock futures have been positive all morning relative to fair value, and have actually been picking up steam during the past hour. At this point, adjusted for fair value, the S&P 500 futures are up about 4 points, Dow futures are up 33, and the NASDAQ futures are about 9 points above fair value.
Rising stock prices are primarily the result of expectations - that is, expectations of low interest rates and increasing corporate earnings. In the second and third quarters of 2009, those corporate earnings started bouncing back from the Great Repression. The question now, of course, is whether or not they will continue to bounce back. Alcoa led off the 4thquarter earnings season on the wrong foot last night, announcing an unexpected loss of 277 million dollars. On an operating basis, they had a small profit, but it was still lower than expected. Alcoa stock traded about 6 percent lower in Europe this morning.
Overnight, China took further steps to tightened interest rate policy, raising their bank reserve requirements by ½ percent to 15%, and also raising the interest rates on the one year bill by 8 basis points.
Things are still going well with the hoi-polloi. Tiffany reported holiday sales up 17 percent, with same store sales up 8 percent. Tiffany raised their fiscal 2010 earnings estimate to $2.10 from $1.98 per share.
On the famous other hand, Chevron and Electronic Arts warned about future profits, with Chevron warning the profits will be “sharply” lower.
The Treasury will auction one-month, one year and 3 year obligations today. We’ll know about the rates on all of them by 1 o’clock.
Chinese stocks rose about a percent and a half, which is the third straight day of higher prices. Europe is solidly lower and we’ll be in a bit of a hole at 9:30 as well. At this point, adjusted for fair value, the S&P 500 futures are down about 8 points, Dow futures are down 72, and the NASDAQ futures are about 12 points below fair value.
Last Monday brought us a New Year for the stock market and today brings us a new “earnings season” as Alcoa kicks it off just after 4 o’clock this afternoon. If you think back a couple of years, it was fairly common to have a fairly sizable number of companies “warn” that they weren’t going to hit earnings targets in the three weeks prior to the start of the reporting season. Those “warnings” have been just about non-existent this quarter.
If your favorite adult beverage is the occasional Dos Equis, you’ll be buying your brew from Heineken pretty soon. Heineken has bellied up to the bar with 5½ billion dollars to buy Mexican beverage company Femsa.
For those who think the bad economic conditions automatically mean sinking stock prices – try to follow this. Friday’s lousy jobs report means the Fed might have to keep interest rates low. That’s bad for the dollar. This morning, the dollar index is down about 70 basis points. That has gold up 20 bucks, oil up a dollar and stock futures pointing higher. Got it? What’s good is bad. What’s bad is good. Make sense? And you wondered why the capital gain line on your tax return always shows a minus 3,000 bucks. Maybe you’re just thinking too much.
Japanese stocks did not trade overnight, but other than the New Zealand market, which was a little lower, we have green arrows pretty much across the board overseas. At this point, adjusted for fair value, the S&P 500 futures are higher by about 5½ points, Dow futures are up 44 points, are the NASDAQ futures are about 4 points above fair value.
It’s is once again the first Friday of the month and, has been the case for the past year or so, stock traders are stuck in neutral as they await the monthly Jobs Report from the Labor Department at 8:30. Most expect little change in the number of jobs, but an overall unemployment rate of 10.1 percent. If the actual jobs number happens to come in north of zero, it would be the first time the economy added jobs in about two years. Just about any kind of positive number should get us an uptick in the futures.
Spyker has reportedly put another offer on the table for the Saab unit of General Motors, and that may not be the only offer GMs Board will have to consider today, as they hold the wrecking ball over the Saab brand in a little sale-price brinksmanship.
By the way, annual car sales in China last year reportedly topped 13 million units. Compare that to the U.S. sales of 10 million, and you can bet that that gap will widen into the future.
No trading in India overnight. Great Britain is a bit lower, but just about all other overseas markets are a little bit higher.
There’s no discernable direction in the futures as we await the jobs report. At this point, adjusted for fair value, the S&P 500 futures are down a fraction, Dow futures are down 4 points, but the NASDAQ futures are actually about 4 points above fair value.
In what may be a little preview of tomorrow’s Labor Department Report on monthly joblessness, 8:30 will bring us the jobless claims number for the week ended January 2nd. Expect a total of about 450,000 new claims.
Good news continues to come from the discount retailers. This morning. Sears raised their 4thquarter earnings estimates to about $3.70 per share based predominantly on strength at Kmart. Analysts had been expecting only $2.65 from Sears. Costco reported same store sales were 9 percent higher in December, which is better than expected. The Limited’s same store sales were a bit disappointing, but they raised earnings guidance from 77 cents to 94 cents. Although they didn’t do the expected volume in December, they didn’t cut prices as much. Macy’s also raised guidance just a bit.
Bed Bath and Beyond received a broker upgrade this morning after a better than expected earnings report yesterday. Also getting upgrades were Bank of America and Humana. Alcoa, which was up 5 percent yesterday after an upgrade, suffered a downgrade from a different brokerage house this today. Reynolds America also downgraded this morning.
Asian markets lost ground overnight after an unexpected interest rate hike by the Chinese Central Bank. Europe is more of a mixed picture. The dollar index is higher by seven tenths of a percent, and, not surprisingly, our stock futures are pointing a bit lower. At this point, adjusted for fair value, the S&P 500 futures are down about 4 points, Dow futures are down almost 29, and the NASDAQ futures are about 2½ points below fair value.
The big economic number of the week will likely be Friday’s Employment Report from the labor Department, but this morning there are some other job-related surveys to consider. Outplacement firm Challenger, Gray and Christmas estimates that only 45,000 layoffs were announced in December. That’s about 73% lower than a year ago, and the pace of downsizing fell over 50% during the second half of 2009. A skeptic might say, well, that’s nice, but jobs are still being lost. True enough, but at least things are getting worse at a slower pace.
Just about two minutes ago, payroll firm ADP announced 84,000 jobs lost in December. That’s just slightly better than expected.
The ISM index of activity in the services sector and the Energy Information Agency’s Petroleum Status Report come in the 10 o’clock hour. Oil prices have been in the background for a while, but in case you haven’t noticed, we’re back to almost 82 per barrel oil once again.
Time Warner stock was downgraded by a major broker this morning. 3M and Dow Chemical received upgrades.
Overseas markets are a decidedly mixed picture. However, our most reliable market indicator of late is once again in place this morning, as the dollar index is up about twelve basis points, and accordingly, oil futures and stock futures are all pointing a bit lower.
At this point, adjusted for fair value, the S&P 500 futures are down about 3½ points, Dow futures are down 17, and the NASDAQ futures are about 5½ points below fair value.
If you’re long the stock market, there was a little more zip in your voice when you said “Happy New Year” to people yesterday. Stocks started the day with a strong advance and it really never gave much of anything back all day long, as the major indexes rose a percent and a half or more.
December car sales reports will be rolling out all day long today and the news is expected to be a bit better than we’ve grown accustomed to hearing. Then at 10 o’clock, we’ll get the November Factory Orders and Pending Home Sales Reports.
Kraft continues to wheel and deal. This morning, they announced the sale of their North American frozen food business to Nestle for 3.7 billion dollars. That will free up cash that Kraft will use to improve the terms of its offer to buy Cadbury. Cadbury’s Board, however, continues to publicly say “thanks, but no thanks.”
VISA was hit with a broker downgrade, and Google is expected to launch their own Android smartphone today which could be a game-changer in the industry, as it’s not expected to be tried to a particular mobile carrier.
Major overseas markets are on the main a bit higher. Our stock futures hovered right around fair value most of the morning. At this point, adjusted for fair value, the S&P 500 futures are up a fraction, Dow futures are up 3, and the NASDAQ futures are almost 2 points above fair value.
It looks like we’ll follow overseas markets into the green to start 2010 this morning.
It’s not unusual to see a push for higher stock prices in early January as new 401(k) money and January bonus money comes to market looking for a home. Of course, this year, with unemployment up and bonus payments under scrutiny, there may be a little less of that kind of cash floating around.
Overnight we heard better-than-expected manufacturing statistics out of China and the U.K. We’ll find out more about domestic manufacturing activity at 10 o’clock with the release of the December ISM index. Expect a light rise to a reading of 54. We’ll also get an update on domestic construction spending.
The Saab story may not yet be over. Spyker says that they will put a final offer on GM’s table before Thursday’s deadline.
Shares of Chesapeake Energy and Alcon look to open a bit higher. Chesapeake agreed to a big asset sale with Total and Novartis has offered to buyout minority shareholders of Alcon, and although that offer is at a discount to Friday’s close, thought it that a better offer may be in the offing.
Hong Kong and mainland China stocks markets were a bit lower overnight, but all other major overseas markets are higher.
The dollar index is down a little more than a third of a percent this morning, and here we go again – oil’s higher, gold’s higher and the stock futures are pointing higher as well.Adjusted for fair value, the S&P 500 futures are higher by about 6½ points, the Dow futures are up 53, and the NASDAQ futures are almost 17½ points above fair value.
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