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WJR July 2006 Reports

July 31, 2006
 
We sure could use another week just like the other week.  Stocks and bonds both went on a tear last week, and according to some technicians are now bumping up against some significant resistance.  Breaking through that resistance with another rally, on top of the 3 to 4 percent gains of last week would be very encouraging for investors.
 
Walmart says that July same-store-sales will come in about 2.4 percent higher than last year.  That’s at the high end of the 1 to 3 percent estimate.
 
At 10 o’clock this morning, a measure of the health of U.S. manufacturing will be release.  The July Chicago Purchasing Managers Index is expected to read 56.  That’s a slight decline from June, but still reflects expansion in domestic manufacturing.
 
There are a couple of Federal Reserve governors running loose, and they’ll be spouting off later today.  That could move the markets, which are now putting the odds of an interest rate increase next week at only about 28%.
 
Asia was up overnight.  European markets are very slightly lower, and we should start that way as well.  Adjusted for fair value, the S&P futures are down about 2 points, the Dow futures are down about 11, and the NASDAQ futures are now a point and a half below fair value. 
 
July 28, 2006
 
We’ll get a little respite from the torrent of earnings reports today.  The only big reports due come from oil concerns Chevron and Baker Hughes.
 
Traders will focus on the economy today.  At 8:30, the advance estimate of 2nd quarter Gross Domestic Product is expected to reflect 3 percent growth in the economy.  Too strong a number, say north of 3 ½ percent or so may put an interest rate scare into the market.  Sub-par growth would, or course, signal a slowdown in corporate profits ahead.  So we’re looking for Goldilocks.  Not too hot, not too cold, 3 to 3 ½ percent.  Another important number to watch is the PCE deflator, which is a measure of the increase in prices of personal consumption.  That’s expected in at 3.4 percent.
 
At 9:45, the University of Michigan’s final July Consumer Confidence Index is expected to hold steady at a reading of 83.
 
Japan and Hong Kong were higher overnight, but that’s about it – other markets overseas a slightly negative at this point.
 
Our futures are stronger than they appear at first blush.  After you consider fair value, if the market were to open right now the S&P would open 4 points higher, the Dow would rise about 36, and the NASDAQ would rise 4 points. 
 
July 27, 2006
 
Stocks recovered some modest losses yesterday to finish flat for the day, and you can point directly at the release of the Federal Reserve’s Beige Book.  The Fed survey highlighted indications of economic weakness in several regions of the country.  While economic weakness is not a great thing, if it keeps interest rates in check, stocks will perk up.  Fed futures had been indicating a better than 50/50 chance that the Fed will raise interest rates again in August, but after the Beige Book came out, that likelihood dropped into the low 40 percent range.
 
More good news for automotive profits this morning, as DaimlerChrysler reported that although revenue was flat, operating profit was up 11% from last year.  Daimler shares are up more than 3 percent in Europe.
 
ExxonMobil released their earnings about 20 minutes ago, so let the whining begin.  Exxon made $1.72 per share, which was 8 cents better than expected.  It’s a profit, over the past 3 months, of over 10 billion dollars. 
 
Raytheon, Fortune Brands and Comcast are all out with better than expected earnings reports.
 
Overseas stocks are up across the board.  Our futures aren’t quite as good as they look on their >
 
July 26, 2006
 
Maybe this General Motors-Nissan alliance isn’t such a bad idea after all.  From the looks of the quarterly earnings reports, Carlos Ghosn could use some pointers from Rick Waggoner and his crew.
 
On the heels of a pretty lousy quarterly report from Nissan yesterday, General Motor absolutely blew the doors off estimates this morning.  Earnings, not considering special charges, were $2.03 per shares versus and expected 51 cents.  Remember, GM lost 56 cents per share during the same quarter a year ago.  Perhaps the biggest surprise and the biggest positive out of this report, revenue was over 54 billion dollars.  The estimate was 42 ½ billion.  You can’t grow a business by cost reduction alone.  That big growth in sales is a giant piece of good news.  General Motors shares are up almost 5 percent in pre-market trade.
 
Boeing and GlaxoSmithKline also reported better than expected numbers this morning.  Glaxo also reported some positive news on a potential vaccine for the bird flu.
 
The disaster du jour will be Amazon.  Shares slid 12 after-hours yesterday after an earnings miss and a warning.
 
Traders will pay attention when he Fed releases their beige book later today, but we should start the day trading lower.  Right now, adjusted for fair value, the S&P futures are down 4½ , the Dow futures are down almost 19, and the NASDAQ futures are about 9 points below fair value. 
 
July 25, 2006
 
Iraqis fighting Iraqis.  Israelis fighting Hezbollah.  Bernanke fighting inflation.  As the fog of all this fighting lifts a bit, people are starting to figure out that while all that has been going on, corporate earnings are doing just fine, thank you.
 
Today may be the busiest corporate reporting day of the quarter, and there’s not enough time to cover them all.  But among the companies reporting this morning, AT&T beat estimates buy about 10%, as did Dupont.  Altria, the parent of Phillip Morris beat estimates by 4 cents per share and raised guidance for the entire year.  McDonald’s reported earnings in line with estimates.  In summary, so far this quarter, only about 13 percent of companies reported earnings that were less than expected.  That’s pretty darned good, and that’s why stock prices have started to bubble up again.
 
The Nikkei in Japan was higher by almost a percent and a half overnight, but most other foreign markets are up a half percent or less.  We should get off to a fairly flat start.  Adjusted for fair value, the S&P futures are down a fraction of a point, but the Dow futures are up 4, and the NASDAQ futures are almost 5 points above fair value. 
 
July 21, 2006
 
We might get a little more calm today after a pretty volatile week in the stock market.  But on a company-by-company basis, we’ll see some big winners and some big losers.
 
On the plus side, Caterpillar beat earnings estimates by 10 cents per share and raised their guidance for the rest of the year.
 
The big downer of the morning will be Dell.  Dell says that their second quarter earnings will only be about 2/3 of what the market expected.  They also said that they are making big investments in new product lines and customer service for 2007.  Yet, Dell significantly lowered their sale forecast for next year.  
 
Ironically, the main reason that the next PC replacement cycle has been delayed is Microsoft’s delay in rolling out the new Vista operating system, which will force most everyone to buy new computers.  Microsoft reported a big drop in profits last night, but they also announced a 40 billion dollar stock buyback.  Microsoft shares rose about 6 percent after-hours.
 
Most overseas markets are one-half to one percent lower this morning.  We should get off to a generally lower start.  Adjusted for fair value, the S&P futures are down a little more than a point, the Dow futures are up 4½, but that’s mainly Caterpillar and Microsoft.  The NASDAQ futures, because of the Dell news, are about 7 ½ points below fair value. 
 
July 19, 2006
 
For many of us, it is tough to keep a secret, no matter how many inquiring minds are trying to pry it out.  Imagine having to testify before Congress every couple of months, when you know that they know that you know a secret that you had better not tell them.  It’s kind of like the modern version of To Tell the Truth without Kitty Carlisle.
 
Anyway, Ben Bernanke will be in the hot seat at 10 o’clock this morning.  Not only that, nine minutes from now we’ll get the June Consumer Price Index, which may well be the determining data point for next month’s interest rate decision.  Thinking is, that a two-tenths of a percent increase in the overall and core CPI will lead the Fed to hold interest rates steady August 8th, but an increase of 3 tenths of percent or more will deliver another rate hike.
 
IBM beat estimates last night by a penny per share.  This morning, JP Morgan Chase, Bank of America and United Healthcare are all out with good reports.
 
The disaster du jour would be Yahoo!  Yahoo reported in-line earnings, but warned about the rest of the year and reported that an upgrade to their search technology will be delayed.  Yahoo shares were down 12% in Europe this morning.
 
Our markets’ fate is in the hands of the CPI report at 8:30.  However, in front of that, adjusted for fair value, the S&P futures are up about 5 ½  points, the Dow futures are up 21 but the NASDAQ futures, because of the Yahoo! news,  are about 1 ½  points below fair value. 
 
July 18, 2006
 
If you’re into acronyms, you might call this day just plain WEIRD.  As war, earnings, inflation and revised data will have markets on edge.
 
Four members of the Dow Jones Industrial Average report earnings today and we’ll get the June Producer Price Index in about ten minutes.  But clearly, the news out of Israel and Lebanon continues to depress stock prices around the world. 
 
At 8:30, look for the headline number on June Producer Prices to reflect an increase of 3 tenths of a percent, with the core rate rising 2 tenths.  Anything below those numbers would be a good thing for stocks.
 
Retailer Target revised its July sales outlook lower.  The former estimate of 4 to 6 percent is now lowered to 3 to 4 percent.
 
Earnings that are in so far are pretty good.  United Technologies beat estimates and raised guidance. Coca-Cola and Merrill Lynch also beat estimates.  The loser of the mornings will be electronics maker Sanmina.  They warned that earnings for the quarter will be about 25% lower than expected.  Sanmina traded about 12% lower in the after-hours yesterday.
 
Overnight, Japan lost about 2¾ percent, but most other foreign markets are down, as they were yesterday at this time, about a half percent or so.
At this point, our futures are pointing just slightly lower, but are a whole lot higher than they were a couple of hours ago.  Adjusted for fair value, the S&P futures are down about 1 ½ points, the Dow futures are down 7 ½ and the NASDAQ futures are just about a point and a half below fair value. 
 
July 17, 2006
 
This is one of the weeks that corporate earnings are supposed to take center stage, and there will be plenty of earnings news as the week wears on.  But so far this morning, the price of oil and the stock index futures have been whipping around not on earnings news, but on every news report out of the Israel and Lebanon.
 
On the corporate front, Citigroup reported results this morning that narrowly missed expectations both in revenue and earnings, but it was a razor-thin miss.  Citi’s profits of $1.05 per share last quarter missed estimates by only a penny. Some good news from McDonald’s -  their June same store sales were up 5.2%, versus a 3.5% estimate.
 
Japanese and South Korean stock markets were closed for a holiday overnight.  All other major overseas markets are lower, on the order of about a half of one percent.
 
The futures, which started the morning in a pretty fair->
 
July 14, 2006
 
Remember the good old days (a few weeks ago) when the market’s biggest worry was an unfriendly speech from a Federal Reserve banker?  Things have gotten a lot more serious during the past few days as terrorism, Middle East war and spiking oil prices have set the markets on their collective ear. Oil did spike north of 78 bucks this morning. It’s now back to about $77.50.
 
Meanwhile, earnings reports continue to roll in.  EMC met its lowered guidance.  General Electric also matched estimates for last quarter.  The big losers of the day may be the big homebuilder DR Horton, and the big bookseller, Borders.  Last night, DR Horton cut its full-year estimate by almost a third due to the deteriorating conditions in residential real estate.  Borders said lower-than-expected sales will cause it a bigger loss than expected in the second quarter.
 
The winner of the morning will be Petco.  Petco is being bought out by a private equity group at a 49 percent premium to last night’s closing price.
 
The futures look fairly neutral on their > 
 
July 13, 2006
 
Let’s start with the good news this morning.  That won’t take very long. 
 
Pepsi reported profit that beat estimates by three cents per share and Marriott’s revenue per room was up 10% from a year ago and profits were up 35% last quarter, beating estimates by 2 cents per share.  Okay, that’s it for the good news.
 
On the other side of the proverbial news fence, the expanding hostilities in Lebanon and Gaza have the Israeli stock market off almost 5 percent.  Compounding the problem, a reported explosion in a Nigerian pipeline has the price of oil up over 75 dollars per barrel.
 
Walmart was downgraded from “buy” to “neutral” at a major brokerage house this morning.  Walmart is off about 2 percent in pre-market trading.
 
And, just in case the geo-political situation stabilizes later in the today, the President of the Minneapolis Fed is giving a speech on prospects for the economy later today.
 
Adjusted for fair value, the S&P futures are down 5 points, the Dow futures are down 57 and the Nasdaq futures are 10 points below fair value. 
 
July 12, 2006
 
Here’s a good rule to remember: Question all “sure things.”
 
For instance, two out, nobody on, bottom of the ninth, up by a run, National League wins, right?  Uh-uh.
 
How about this one….India suffered a horrific terrorist bombing after their stock market closed yesterday.  So, Indian stocks would surely go down today, right?  The Sensex Index rose 3 percent this morning.
 
Or, how about Genentech? They reported last night that their quarterly profit soared 80%.  Where’s the stock headed?  Well, it traded sharply lower in the after hours on concern about future Avastin sales.  However, Genentech’s majority owner, Roche Holdings, traded higher in Europe earlier today.  Go figure.
 
The earnings spigot opens a little wider today as we’ll hear from Gannett, Wolverine Worldwide and a smattering of other companies.
 
Japanese stocks were off about a percent and a half overnight, but most of Europe is slightly higher, in spite of the expanding violence in Israel and Lebanon.  Our futures are not showing any real commitment at this hour.  Adjusted for fair value, the S&P futures are up almost a half point and the Dow futures are up about 6 points.  However, the Nasdaq futures are about 3 points below fair value. 
 
July 11, 2006
 
The 2nd quarter earnings season got off to a stumbling start last night.  Alcoa’s profits rose 62%, just as expected.  But revenue did not quite get up to the 8 billion dollar estimate.  Producing aluminum requires a lot of energy, and the persistently high cost of energy is causing concern about Alcoa’s future earnings growth.  That will push Alcoa shares lower this morning.
 
Lucent warned last night that weakness in the North America wireless equipment market will push future revenue and earnings well below forecasts.  Of course, if you’ve been holding Lucent shares for the past 6 years or so, disappointing projections can’t really be considered news.
 
And speaking of the same old song, Bill Gates says that there is still a 20% chance that the Microsoft’s new operating system Vista may not be ready for prime time in January.  Vista’s release is expected to set in motion the next big computer replacement cycle, and the longer the delay, the worse it is for an awful lot of personal computer hardware and software companies.
 
Pepsi Bottling and Talbots both raised guidance this morning.  That has helped to moderate the futures a bit.  At this point it looks like an extremely uninteresting open for stocks.  The S&P futures are down a fraction, the Dow futures are down about 7½, and Nasdaq futures are 6 points below fair value. 
 
July 10, 2006
 
Once again this quarter, we’ve made it through earnings-warning-season with very few companies singing the blues.  Yes, on Friday, 3M, KB Homes and Advanced Micro Devices did warn that earnings won’t be up to snuff.  However, the aluminum hits the road after the close of trading this afternoon when Alcoa, as usual, kicks off the 2nd quarter earnings reporting season.
 
Alcoa is expected to have earned 86 cents per share during the quarter gone by on 8 billion in revenue.  Overall, analysts are expecting corporate earnings to be up 12% over last year.  However, many expect a slowing economy and tougher comparisons to slow the earnings train later this year.  So, pay particular attention not to what happened last quarter, but what a company projects for the remainder of the year.
 
Shares of Disney may get a little boost this morning based on the weekend success of “Pirates of the Carribean.”
 
There was a lot of success in Asian markets overnight.  The Nikkei in Japan was up over 1 ½ percent.  Europe has just turned modestly higher, and it looks like we’ll head higher at 9:30.  At this point, the S&P futures are up almost 6 points, Dow futures are up 42, and Nasdaq futures are 7 points above fair value. 
 
July 7, 2006
 
The story of the stock market is pretty simple this morning.  It’s all about the jobs.  The official June Unemployment data, at least until it gets revised next month, is due out in 10 minutes, and the strength of the job market is this week’s key to where inflation may be headed.
 
The consensus estimate going into this week was for an increase in 160,000 new non-farm jobs and a steady unemployment rate of 4.6%.  But the on Wednesday, a relatively new job market barometer, the ADP Employment Index, inferred that job growth is a lot stronger than that.  Then, yesterday’s layoff data from outplacement firm Challenger, Gray and Christmas seemed to contradict that conclusion, as layoffs jumped in May.
 
So, as everybody tries to get their corporate name on a survey that may or may not be worth the paper upon which it’s printed, the markets will sit in idle as we await the government data at 8:30.  Too hot a number, and the market will slump, fearing more interest rate hikes.  Again the consensus estimate a week ago was 160,000 new jobs.  At this point, analysts are expecting a rise of about 200,000.
 
Overseas markets and our futures are in sleepy-bye mode in front of the report.  Right now. the S&P futures are up a point, Dow futures are up almost 4, but Nasdaq futures are almost 2 points below fair value. 
 
July 6, 2006
 
Retail sales reports are pouring in this morning, and it looks like those nearly 3 dollar gasoline prices are starting to bite some more than others.  Costco same store sales were up about 6 percent, versus and expected 7 percent.  The Limited checked in with a 3 percent rise versus and expected 5 percent.  And, not to be outdone as the leader in disappointing results, Pier One sales, which were expected to be down 13 percent – were down 18 percent.
 
Surprising to the upside was Joseph A Bank, with sales up 8 ½ percent, which was twice the expected increase. Also reporting better than expected numbers were Dress Barn, JC Penney, and American Eagle Outfitters.
 
Job cuts rose 25% in May, and that’s the first jump in six months, according to outplacement firm Challenger, Gray and Christmas.  That tends to contradict the ADP employment Report from yesterday.  Most of that increase, and most of the job cuts -- surprise, surprise – were in the automotive industry.
 
European stocks are gaining ground this morning, in spite of $75 dollar per barrel oil prices, and our futures are in pretty good shape as well.
 
Right now, adjusted for fair value, the S&P futures are up 2 points, the Dow futures are up 14, and the NASDAQ futures are now more than 3 points above fair value. 
 
July 5, 2006
 
Well, now here’s something new.  Worrying about interest rates was getting a bit old.  Worrying about corporate earnings?  That will start next week.  No, this morning it’s North Korea’s 4th of July fireworks that have markets around the world seeing red.
 
Japan, being closest to the problem, initially suffered the worst.  Although, the Nikkei recovered late in the day to close only ¾ of one percent lower.
 
AT&T stock is called higher this morning on a broker upgrade.  And in case you haven’t been watching, light sweet crude is just a hair under 74 dollars per barrel.
 
At 10 o’clock the May Factory Orders report is expected to be unchanged from April. But the only economic report that will make much of an impact this week is Friday’s Labor Department unemployment report. The ADP Employment report, released just a couple minutes ago, was much stronger than expected.
 
Overseas markets, as mentioned earlier, flamed out quicker than a North Korean missile overnight.  European markets are down about one percent or so. We should start the day in the rocket’s red glare as well.  Right now, adjusted for fair value, the S&P futures are down about 6 points, the Dow futures are down 47, and the NASDAQ futures are now almost 8 points below fair value. 
 
July 3, 2006
 
It’s the first trading day of the second half of the year and it will be a short one, even for the traders who do show up.  Stocks will trade until 1 o’clock, and bonds until 2pm.  In case you’re keeping score, the S&P 500 companies, not counting dividends, rose one and three-quarters percent over the past six months.
 
A little bit of disappointing news from Walmart this morning hasn’t had much impact on the futures.  Walmart’s same store sales for June came in at the low end of expectations; up only 1.2 percent.
 
While that news won’t help the Dow at 9:30, the news is being outweighed by strength in Citigroup and General Motors.  Citi is up after an article in Barron’s over the weekend, and just as they did on Friday, GM shares should open above 30 dollars per share as the Kerkorian squeeze play continues, and Bank of America upgrades their rating on the stock to “neutral.”
 
Speaking of GM, we’ll get the June car sales numbers from the major automakers today, and it’s not expected to be particularly pretty.
 
Overseas markets are generally higher at this hour.  We should start a little higher as well. Adjusted for fair value, the S&P futures are up 3 points, the Dow futures are up 40, but the NASDAQ futures are now more than 4 points above fair value. 
    
WJR August 2006 Reports
WJR June 2006 Reports

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