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WJR July 2007 Reports

July 31, 2007
 
It’s going to be a busy day for financial news and a fun morning if you ignored the fear of last week and held on to your stock holdings.
 
Leading the earnings parade, of course, is General Motors.  Wall Street estimates of GM’s operating profit last quarter, well, Wall Street estimates ranged all the way from 50 cents to a dollar sixty-four.  The average estimate was $1.13.  Well, so much for that.  GM made $2.48 cents per share and GM share are looking to open a dollar or two higher this morning.
 
The parade stretches a lot farther than that this morning.  Sun Microsystems, Masco and CBS are among the list of companies that beat expectations.
 
Coming in somewhat below expectations is the hedge fund run by investment firm Sowood.  Sowood sent a letter to their hedge fund investors this morning that you could sum up as saying, “Gosh, the hedge we had in place didn’t work, we lost 57% of your money, we’re closing the fund and sending you back the money of yours that we haven’t had a chance to lose yet.  Have a nice day”
 
At 8:30, we’ll get personal income and spending data and the PCE deflator.  If that PCE number comes in at less than 2 percent, we’ll get another boost, but we’re looking at a very strong open even without another boost.
 
At this point, adjusted for fair value, S&P futures are up almost 13 points, the Dow futures are up 101 points and the NASDAQ futures are 19 points above fair value.
 
July 30, 2007
 
Remember the good old days?  It used to be that we’d wake up Monday morning, and there would be a long list of corporate buyout deals to talk about.  Those good old days may have become a one-week old distant memory after the cheap money spigot plugged up late last week.  There’s only one tiny deal one the wire this morning – too tiny to even talk about.
 
Verizon announced earnings in line with estimates this morning.  Radio Shack beat estimates by two cents per share.  A few stocks were up graded this morning, including Nordstrom and Motorola.
 
However, American Home Mortgage will likely be the disaster du jour.  They will delay paying their dividend as they look for cash to prop up their portfolio of less than wonderfully performing mortgages.  American Home Mortgage stock is looking to open – oh – 20 to 25 percent lower this morning.
 
Asian stocks were generally higher overnight, but Europe is slightly lower.
 
Our stock futures have been all over the place this morning.  And although they look positive to the casual observer, don’t believe it.  After you adjust for fair value, they’re indicating a bit more selling when trading starts.  Adjusted for fair value, S&P futures are down 4½ points, the Dow futures are down 29 and the NASDAQ futures are about 1 ½ points below fair value.
 
July 27, 2007
 
For eight trading days, the Dow and the S&P 500 have been one session up, one session down.  Yesterday, of course, was a definite downer and we may have more on the way today.
 
Although it’s easy to get jittery after a 300 point dive in the Dow, and the worst three-day stretch we’ve seen in five years, keep a few things in mind.  Prices are just back to where they were four weeks ago.  The Dow is still up 1,000 points for the year.
 
It’s been no secret that there have been stupid things going on in the credit markets for a long time now.  Stupid mortgages to people who couldn’t afford them, stupid corporate buyout loans without adequate risk premiums – all that easy money had to come to an end – and it has.  But keep in mind that second quarter earnings have been running at about 8 percent, which is good.  We’re long overdue a meaningful “correction” in stock prices, which is healthy for the long term.  If you’re a trader, good luck out there.  But if you’re an investor, take your medicine and get some rest.  This too will pass.
 
In ten minutes, we’ll get the Advance reading on Gross Domestic Product.  Expect a healthy increase of 3.2 percent.
 
The futures were in pretty good shape until about an hour ago when they pretty much fell out of bed.  They’ve been gyrating quite a bit at lower levels since then.   At this point, adjusted for fair value, the S&P futures are down 13 points, the Dow futures are down 84 and the NASDAQ futures are about 11 ½ points below fair value.
 
July 26, 2007
 
There’s some good news from Ford Motor this morning.  Excluding the nasty little “special items” that tend to accumulate faster in turnaround situations, Ford made an operating profit of 13 cents in the quarter gone by.  Wall Street was expecting a 35 cent loss and Ford shares, which have been on a pretty dramatic downward slide over the past couple weeks may perk up about 20 cents at the open.
 
Apple’s 92 cents per share of profit beat estimates by a full 20 cents.  Sales were up 24%, as Mac sales hit 2 million units and iphones and ipods continues to fly off the shelves.  Apple shares are looking to open more than 10 percent higher this morning.
 
Dow, Aetna, AstraZeneca and 3M are all out with better-than-expected reports.
 
In about 10 minutes, we’ll get the reading on June Durable Goods Sales.  Expect a 1.9 percent increase versus last month’s decline of 2.8 percent.
 
But, it may take more than good durable goods news to get the market to straighten up and fly right this morning, as the futures are indicating trouble ahead.  The combination of rising oil prices, soaring mortgage delinquencies and a drying up of takeover money will send a chill through stock prices at 9:30.
 
At this point, adjusted for fair value, the S&P futures are down 13 points, the Dow futures are down 108 and the NASDAQ futures are about 11 points below fair value.
 
July 25, 2007
 
Stock prices have been doing the one-step-forward-one-step-back waltz for the past couple of weeks.  Yesterday, we got a giant step backward, as the Dow lost more than 225 points on worries about the housing market and some rather ugly comments by a major bond fund manager.  Well, true to recent form, we should get more than a third of that loss back right off the bat this morning.
 
Why the snapback?  Earnings reports from big companies continue to surprise to the upside.  Last night Amazon beat estimates by 3 cents on a 35% jump in revenue.  That should push Amazon shares up well over 20 percent this morning, as no less than 6 brokerage firms are upgrading the stock today.
 
Boeing beat their number by 19 cents per share and raised their guidance, General Dynamics beat by a dime and raised guidance.  Corning also beat estimates.
 
Asia and most of Europe drifted lower overnight. Stocks in the U.K. are higher and that’s where we’re headed as well.
 
At this point, adjusted for fair value, the S&P futures are up more than 9 points and the Dow futures are up 83. Yes, the NASDAQ dropped 50 yesterday, but the NASDAQ futures are currently about 17 ½  points above fair value.
 
July 24, 2007
 
We’re in the sweet spot of earnings season and for the most part, the reports this morning have been good.  Pepsico made 94 cents versus the expected 89 and raised their guidance for the year.   Eli Lilly beat by two cents are raised guidance.  Lockheed is also out with a good report this morning.
 
AT&T beat estimates by 3 cents per share.  DuPont missed estimates by less than 2 percent.  Both AT&T and DuPont are looking to open a little lower.  The miss of the morning is mortgage lender Countrywide. They made 69 cents versus the expected 95, lowered full year guidance substantially and Countrywide stock is likely too be off 10% at 9:30.
 
Former Fed Chairman Greenspan gives another speech today as does current Fed Governor Poole.
 
The only economic data point will be the Richmond Fed’s index of manufacturing activity, which is about as ho-hum as economic indicators tend to get.
 
Oil prices are down another buck today after a big drop yesterday.
The futures have taken a turn for the worse over the past five minutes, and we’re looking to give back a little ground at the open.
 
Right now, adjusted for fair value, the S&P futures are down about 6 points, the Dow futures are down 51, and the NASDAQ futures are about 9 points below fair value.
 
July 23, 2007
 
Economic data will be on the light side until later in the week, but that doesn’t mean that there’s no news to drive stock prices today.  And so far, that news is all pretty good.
 
Merck’s earnings beat estimates by a dime per share and they raised guidance for the year as a whole.  Schering-Plough, Halliburton and Taser also did better than expected last quarter.
 
Later today we’ll hear from American Express and Texas Instruments.
 
On the merger front, Cerberus capital is buying United Rentals in a 4 billion dollar deal.  But the big deal of the day will be the merger of two oil exploration companies.  Transocean and Globalsantafe are getting together to form a 50 billion dollar company.  Shareholders of both companies will receive a load of cash in the deal which will effectively recapitalize the combined company.
 
Japanese stocks traded about one percent lower overnight, but most of the rest of the overseas markets are showing green arrows at this hour.  We will likely start the day with some nice->Right now, adjusted for fair value, the S&P futures are up about 5 ½  points, the Dow futures are up 47, and the NASDAQ futures are about 3 points above fair value.
 
July 20, 2007
 
To paraphrase, it’s one small step for a company and a union, but could be a giant leap for an industry and for Michigan.  Chrysler and the UAW officially kick off the arguably most important round of contract negotiations ever for many of us.  We’ll see what happens.
 
In another much celebrated, but far less important event, the Dow Jones Industrial Average closed above 14,000 for the first time yesterday.  However, when trading starts at this morning, you can temporarily say goodbye to 14,000.  Last night, Google checked in with a rare disappointment as
far as earnings are concerned.  This morning, Caterpillar also disappointed on earnings, although revenue was higher than expected.  Put those two together, and we’ll head lower at 9:30.
 
On the plus side of the ledger, oil services giant Schlumberger and Citigroup came in with positive earnings reports. Oil is down a little, but is still close to 76 bucks per barrel.
 
Asians stocks rose overnight. Europe is narrowly mixed.  However, we will head lower at 9:30.
 
At this point, adjusted for fair value, the S&P futures are down about 6 points, the Dow futures are down 64, and the NASDAQ futures are about 11 points below fair value.
 
July 19, 2007
 
Stock prices took a pretty good beating during most of the trading day yesterday.  However, in the last half hour of trading, the Dow rallied very strongly, and that momentum will carry us higher in the early going today.  In fact, the futures are just as pretty as they were ugly 24 hours ago.
 
Once again, it’s a case of earnings and interest rates.  Ben Bernanke said all the right things during his Congressional testimony yesterday – inflation’s coming down, but that he’d vote to raise rates if it threatened to rise.  This morning, the earnings story is a good one as well.  Among the companies beating estimates are Harley Davidson, Bank of America, United Health, Continental Airlines, SAP and Motorola.  IBM< and Wyeth both beat estimates and raised guidance to the rest of the year.  IBM, in fact, had their best earnings quarter since 2002.
 
Oil is up another 64 cents or so to around $75.69 per barrel.  Looking for a reason?  How about this – Gross Domestic Product in China last quarter rose just short of 12 percent.  Compare that with about 3 percent in the U.S.
 
Chinese stocks were lower on interest rate worries after that report, but other markets overseas are higher and that’s where we’re headed as well.  At this point, adjusted for fair value, the S&P futures are up about 4 points, the Dow futures are up 53, and the NASDAQ futures are about 14 points above fair value.
 
July 18, 2007
 
It’s about as busy as can be for financial news today. 
 
Earnings reports are pouring in, and it’s not all happy news.  Drug giant Pfizer just can’t seem to get out of its own way.  Pfizer made 42 cents last quarter versus the expected 50 cents.  Sales of Lipitor were down 13 percent.  Last night Yahoo also disappointed, and while Intel earned 3 cents more than expected, gross margins were weaker than expected.
 
On the plus side of the ledger, Altria, JP Morgan, United Technologies, Southwest Airlines all beat estimates.  Johnson Controls confirmed their guidance of $6.25 to $6.30 for the year, which would be its 17th straight year of increased earnings.
 
In ten minutes we’ll get the June Consumer Price Index and at 10:00 o’clock Ben Bernanke will be speaking on Capitol Hill.
 
Bear Stearns disclosed last night that their two troubled hedge funds that had bet heavily on sub-prime mortgages are nearly worthless.  That news is sending some shivers through the markets this morning, and will likely send us lower in the early going.
 
At this point, adjusted for fair value, the S&P futures are down about 8 points, the Dow futures are down 51, and the NASDAQ futures are almost 12 points below fair value.
 
July 6, 2007
 
It’s the first Friday of the month, and like every first Friday, it’s all about the Jobs Report.  In just about ten minutes, the Labor Department is expected to announce another not-too-hot, not-too-cold addition of about 128,000 non-farm jobs during the month of June.  The unemployment rate is expected to hold steady at 4 ½ percent.
 
Last month’s report came in a little hot at 157,000 jobs, and that sent shivers though bond prices, which sure doesn’t help stock prices.  So something in the 105,000 to 140,000 range is what could make traders smile.
 
Microsoft will be taking a 1.15 billion dollar charge in order to extend the warranties on its Xbox 360 product.  Evidently, a recurring problem, affectionately known as the “red ring of death” is giving Xbox users fits.  Microsoft wants to lower user’s frustration levels before everybody discovers how much fun a Wii can be,
 
Oil is on the rise again, at $72.40 per barrel for light sweet crude. New violence in Nigeria is getting the blame.
 
But, stock prices at the open will take their direction from the Jobs Report at 8:30, because so far, the futures are showing no direction at all. Adjusted for fair value, the S&P futures are down a fraction, the Dow futures are up 9, but the NASDAQ futures are almost 3 points below fair value.
 
July 5, 2007
 
It’s no surprise to report that there were some Chinese fireworks last night, although we didn’t necessarily expect the Chinese stock market to blow up.  The Shanghai index dropped over 5 percent overnight on liquidity concerns, but other markets around the world are pretty much taking it in stride, having seen those pyrotechnics show before.
 
Private equity funds may have been working from their Holiday barbeques yesterday.  Blackstone announced that they’re buying the Hilton Hotels for 20 billion dollars plus debt.  That’s about a 26 percent premium to Tuesday’s close and should boost shares of other hotel stocks as well.  Apollo Management has bid 6 billion for chemical maker Huntsman, which is 8% higher that another private equity bid already on the table.
 
General Motors is being downgraded to “underperform” by a major brokerage firm this morning. 
 
A little over an hour ago the Bank of England, as expected, raised U.K. interest rates by a quarter point to 5¾ percent.
 
Light sweet crude is up another 50 cents per barrel and is close to 72 bucks per barrel.
 
European markets are fairly flat, but our futures have been ticking a little higher during the past half-hour.  At this point, adjusted for fair value, the S&P futures are up about 3 points, the Dow futures are up 18, and the NASDAQ futures are about 4½ points above fair value.
 
July 3, 2007
 
Yesterday, the ISM index indicated a better-than-expected expansion in manufacturing, and stock prices wasted no time in reacting as the third quarter got off to a booming start.
 
Today’s the day that automakers report their monthly sales data.  Expect about a 6 percent decline for both General Motors and Ford.  DaimlerChrysler is expected to show a slight sales increase.  The annualized sales rate overall may hit 16 ½ million units due to (what else) incentives like zero percent financing. Domestic-made vehicles are expected to make up about 12 ½ million of that total.
 
At 10 o’clock, the May Factory Orders report is expected to reflect a decline of about 1.2 percent.  A big decline in the durable goods component is the expected villain.
 
Markets will, of course be closed tomorrow for the 4th of July, and some will get an early start.  The bond market closes at 2 o’clock today.  The New York, American and Nasdaq exchanges will close at 2 o’clock.
 
Overseas markets are up across the board, and our futures are up by just about exactly as much as they were at this point yesterday. Adjusted for fair value, the S&P futures are up about 4 ½ points, the Dow futures are up 32, and the NASDAQ futures are about 4 points above fair value.
 
July 2, 2007
 
It’s a new week, a new month and a new quarter, and although the futures aren’t as robust as they were an hour or so ago, if trading were to start right now, stock prices would drift higher.
 
Second quarter earnings reports won’t start rolling out until next week, which leaves this week as the week to watch out for earnings warnings, which were noticeably absent last week.
 
It’s Monday, so there must be buyouts.  BCE, the big Canadian telephone company is going private, purchased by the Ontario Teacher’s Pension fund and a couple of U.S. based private equity funds.  Dobson Communications (you may recognize them as Cellular One) is being acquired by AT&T for about 2 ½ billion dollars.
 
At 8:30, we’ll find out how manufacturers did in June.  The June ISM index is expected to show modest expansion in manufacturing, at a level of 55, which would equal the May report.
 
Hong Kong’s market was closed overnight.  Japanese stocks closed little changed.  However, most European markets are down, but generally by less than a half percent.
 
Pending the ISM reading at 8:30, our futures are still holding up well. At this point, adjusted for fair value, the S&P futures are up about 5 points, the Dow futures are up 32, and the NASDAQ futures are about 6 points above fair value.
WJR August 2007 Reports
WJR June 2007 Reports

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