July 31, 2012
The Federal Reserve Open Market Committee starts a two-day meeting today, and while we await word on just how they intend to figuratively push on the string of interest rates this time around, we have a few earnings reports to consider.
Pfizer shares are looking to open more than 2 percent higher this morning after reporting 62 cents per share versus the expected 54 cents of operating profit. Tyco International is also out with better than expected numbers, earning $1.01, which was 8 cents better than expected.
One disappointment of the morning appears to be former-high-flyer Coach. While adjusted earnings were a penny better than expected, discounting drove sales and the outlook is driving shares of Coach about 13 percent lower pre-market.
Not to be out-done, UBS, the big Swiss financial conglomerate reported a 58 percent drop in profit from last year and 49 percent from the first quarter. UBS is blaming the Facebook IPO and announced that at least their lawyers will be making money on planned legal action against the Nasdaq exchange relating to that rather messy Facebook IPO.
By 10 this morning we’ll get June personal income and consumption numbers, as well as the July Chicago PMI and the Conference Board’s Consumer Confidence number. In the meantime, stock futures are only marginally higher.
Adjusted for fair value, S&P futures are higher by almost 2 points, the Dow futures are up 7, and the NASDAQ futures are about 8½ points above fair value.
Although we’ll get a lot of potentially market moving news later in the week, there’s no a lot going on so far, and today’s menu is pretty sparse concerning economic and/or earnings reports.
Greek politicians are meeting today to debate what budget cuts are the least unpalatable as they try to craft a fiscal 2013 budget that will sucker more money out of the rest of Europe while keeping the Greek populace from taking to the streets. You know, when you retire at 50, you’ve got a lot of time on your hands. By the way, yield on the Italian 10 year bond is back below 6 percent this morning, on the hope that the ECB will be back in the bailout business by the end of the week.
We will get monetary policy announcements from the ECB and the Federal Reserve later this week. And of course Friday will be the first Friday of the month, which means that the Labor Department will report on domestic employment.
In the construction industry, Shaw Group is being acquired by CB&I for 46 bucks per share. Most of that price is in cash, and it is a more than 70 percent premium to where Shaw Group shares closed on Friday.
Mainland China was lower overnight, but all other major markets overseas are in the green. We should start pretty close to the flat line at 9:30. Adjusted for fair value, S&P futures are down almost 2 points, the Dow futures are down 4, but the NASDAQ futures are about 3 points above fair value.
Welcome to the opening day of the Olympic Games. After the close of trading yesterday, Facebook tried to stick the landing in its first attempt off the high bar of issuing earnings reports. Unfortunately, the only thing that is stuck this morning is the common shareholder of Facebook shares. Although operating earnings met expectations, guidance was weak and Facebook shares are down more than a perfect 10 percent pre-market.
Amazon matched earnings expectations of a penny per share, but issued weak guidance, due to rising expenses they will incur to build out more infrastructure. However, traders seem to like the story, as the shares are being bid slightly higher. Drug-maker Merck reported $1.05 this morning, which was 4 cents better than expected.
They say you have to crawl before you can walk. Unfortunately, most forecasters now think that our economy has slowed to a crawl, after walking slower and slower in recent quarters. We’ll find out at 8:30 with the Government’s first estimate of second quarter Gross Domestic Product. Expect no more than a rate of 1½ percent.
Chinese stocks were fairly flat overnight, but other major markets overseas and our futures are higher. Adjusted for fair value, S&P futures are higher by about 5 points, the Dow futures are up 42, and the NASDAQ futures are about 6 points above fair value.
The big financial news of the morning came from Europe a couple of hours ago. And for a change, the news is boosting stock prices around the world. European Central Bank President Mario Draghi stated this morning that the ECB will “do whatever it takes” to hold the euro together. Please understand that that statement doesn’t solve anything. It’s just words. Moreover, more financial engineering from a central bank really do much either, other than either buying time for fundamental change or just delaying the inevitable. Nevertheless, stock traders love delaying the inevitable, as long as they can profit in the meantime. That has stock prices in Europe and our futures surging this morning.
On the earnings front, Starwood Hotels, ExxonMobil, Whole Foods and VISA are the stars of the morning. [[ subsequent correction: ExxonMobil's adjusted numbers were actually BELOW estimates, although revenue was higher ]] 3M beat earnings estimates, but revenue was light. Dow Chemical and Zynga are out with lower than expected profit and guidance. Zynga shares were hammered overnight and Facebook, that gets a big chuck of its revenue from Zynga, is indicated about 6 percent lower this morning.
At 8:30, June Durable Goods are expected to come in at a modest four tenths of a percent increase.
In front of that, we have a nice rally in the works. Adjusted for fair value, S&P futures are higher by about 17 points, the Dow futures are up 115, and the NASDAQ futures are about 33 points above fair value.
There are no major economic explosions in Europe this morning, so it looks like our market will be able to focus on the multiple corporate earnings reports that have been released. And, with one notable exception, those reports are pretty good this morning.
The big miss came last night. We have ipads and ipods and iphones. Yesterday after the close of trading we had an imissed, and it’s the first one Apple has manufactured in a long, long time. Apple reported $9.32 in earnings, which was more than a dollar short of expectations. Apple also lowered guidance to $7.65 versus the expected $10.27 for next quarter. Of course, they could be sandbagging and all those numbers could change with the release on a new version of the iphone or Apple TV.
This morning, Ford Motor reported 30 cents in operating earnings. That was 2 cents better than expected. Also beating their respective bogeys were Pepsico, Northrup Grumman, Eli Lilly, General Dynamics, Boeing and Caterpillar, with the last two of that group raising future guidance.
Asia was lower overnight, but Europe is higher and our futures took jump higher within the past hour. Adjusted for fair value, S&P futures are higher by nearly 2 points, the Dow futures are up 75, although the NASDAQ futures, where Apple is the 800 pound gorilla, are about 23 points below fair value.
When it comes to stock prices, the big source of pain falls plainly upon Spain. Spanish 5 year sovereign debt traded at a higher yield than the 10 year this morning, as investors demand higher rates on all maturities of Spanish Government debt. That, of course, just makes a bad fiscal situation worse as the rest of the world awaits the latest bailout of the Spanish ship, or at least some sort of umbrella from European fiscal authorities.
In the meantime, earnings continue to roll stateside as we await the quarterly report from Apple later today. So far, Under Armour, Lockheed Martin, AT&T, Dominos, Biogen Idec and Dupont all turned in better than expected earnings. The big misses of the morning come from Whirlpool and UPS. UPS also lowered their guidance.
Now that we’re knee-deep in the second quarter earnings season, it’s becoming apparent that a lot of companies, especially those with European exposure, are struggling to meet revenue expectations, even if they’re making the bottom line look good.
A better than expected PMI number out of China boosted prices in the Chinese market overnight, but most other overseas markets are lower, as are our futures. Adjusted for fair value, S&P futures are down about 5 points, the Dow futures are down 42 and the NASDAQ futures are about 7½ points below fair value.
There are some big mergers to talk about and some big earnings reports to talk about, but European angst will once again drive stock prices in the early going, and it will be driving them about one percent lower.
There is fresh concern about the need for a full-fledged Spanish bailout and Spanish government bonds are diving in price again, with the yield rocketing up to about 7 ½ percent.
If is that weren’t enough, the IMF is making noises about cutting Greece off from additional bailout funds, while for its part, the Greek government is promising to slash government overhead far more than has been demanded. Suffice it to say that this drama is only in its second act.
China’s CNOOC is buying Canada’s Nexen at a 61 percent premium. NRE Energy and GENon are merging in a 1.7 billion dollar deal.
Halliburton, Hasbro and Eaton are all out with better than expected earnings, although sales at Eaton and Hasbro came up a little short. McDonald’s missed its expected earnings number, largely due to strength in the U.S. dollar. The dollar is higher by almost a half percent today, and that’s rarely good news for our stock market.
Overseas markets are lower on the order of 1½ to 3 percent. Adjusted for fair value, S&P futures are down almost 16 points, the Dow futures are down 155 and the NASDAQ futures are about 36 points below fair value.
There’s not much in the way of economic data on the way today, but that’s alright. There’s plenty of corporate news to sift on a morning when most markets overseas will lead us to lower stock prices.
Leading the price dive this morning may well be one of the year’s high-flyers. Shares of Chipotle Mexican Grill are indicated around 17 percent lower this morning. Last night, Chipotle reported a $2.56 profit, which was 26 cents better than expected. Restaurant operating margins were up nicely as well. However, Chipotle noted a slowdown in second quarter customer traffic, and that is apparently all it will take to erase most of the year’s gain in the stock price.
Xerox is also looking lower, maybe by about 5 percent, on lowered guidance.
JP Morgan Chase initiated coverage on Ford Motor today, rating the stock an overweight with a 13 dollar price target.
General Electric, Google, Manpower, Baker Hughes, Schlumberger and Sandisk all beat earnings estimates. Sandisk indicated about 12 percent higher pre-market. However, the market overall will see red numbers at 9:30.
Adjusted for fair value, S&P futures are down almost 8½ points, the Dow futures are higher down 71 and the NASDAQ futures are about 6 points below fair value.
We have a little change of pace this morning, and that’s a good thing if you’re long stocks. Another weak Spanish bond auction has the yield on the Spanish 10 year bond up above the potentially scary 7 percent level. Yet, for a change, no one seems to care. Stocks worldwide are on the rise, as we will spend the morning sifting through a torrent of earnings and economic data.
In 16 minutes we’ll likely see the weekly jobless claims rise to 365,000 from last week’s surprisingly low 350,000. Then at 10, the June Existing Home Sales and Leading Economic Indicators will be released, as well as the July Philly Fed Survey. After yesterday’s strong Housing starts report, we may get more good news at 10.
In the meantime, better than expected results are out from United Health Care and IBM. Both beat estimates and raised guidance. EBay, Baxter, Sherwin Williams, Union Pacific, VF Corp and Southwest Airlines all beat estimates. Verizon matched the 64 cent target, while missing the expected earnings number were Johnson Controls, Morgan Stanley, Travelers and Qualcomm, although Qualcomm raised guidance for the rest of the year.
Walgreen and Express Scripts have reached a new pharmacy network agreement this morning. Both stocks are indicated sharply higher.
The futures are raising the odds we’ll see green arrows at 9:30. Adjusted for fair value, S&P futures are up more almost 5½ points, the Dow futures are higher by 66 and the NASDAQ futures are about 17 points above fair value.
Ben Bernanke will trudge up Capitol Hill once again this morning to clock his required time before the House Financial Services Committee, as they attempt to find out what else the Fed can do to help the economy, given that Congress can’t seem to do anything constructive in that regard.
In the meantime, earnings are starting to roll. Beating estimates this morning were Blackrock, Bank of America, St. Jude Medical and Honeywell. The big miss of the morning was from Stanley Black and Decker, earning $1.32 which was a 20 cent miss. They did, however, announce a share buyback and a 20% dividend increase.
Pharmaceutical maker Vivus will be the winner of the morning. Vivus shares are indicated more than 20 percent higher and approval of a new weight-loss drug.
Broker Jeffries upgrades Oshkosh this morning, while Wunderlich Securities downgraded Tesla Motors to a sell. Wunderlich lowered their target price from 49 to 28. Of course, the stock is already down to about 33 bucks per share.
Overseas markets are mixed, our futures are pointing modestly lower. Adjusted for fair value, S&P futures are down more almost 4 points, the Dow futures are down 38 and the NASDAQ futures are about 5 points below fair value.
Earnings season really starts to rev up this week. Citigroup got things going less than fifteen minutes ago, reporting operating earnings of a dollar per share, which beat the average estimate by 12 cents per share, although revenue was a little light. Last year, Citi reported second quarter earnings of $1.09.
Glaxo SmithKline has been after Human Genome for a while now, and it looks like today, there might be a deal. Four dollars per share is reportedly acceptable for Human Genome, which is a dollar per share more than the latest offer. It won’t do a lot for the stock, which closed Friday at $13.58, but remember that Human Genome was trading around 7 bucks when the initial offer arose about three months ago.
Just about 15 minutes from now, the June Retail Sales report is expected to tell us that sales rose two-tenths of a percent, or just one tenth of a percent exclusive of automobiles. Another number to watch is the 8:30 release of the Empire State manufacturing index, which is expected to tick higher to a July reading of 4.5. That would be higher than the rather ugly June number of 2.29, but well below April’s 17.09.
Overseas markets are mostly modestly lower, with the China Shanghai Index more than modestly lower, down by more than 2 percent overnight. We’re pointing only modestly lower at this hour. Adjusted for fair value, the S&P futures are down about 4points, the Dow futures are down 36, and the NASDAQ futures are about 8 points below fair value.
Happy Friday the 13th, everybody. The day started in the Far East, as days tend to do, and it started with some moderately reassuring news about the Chinese economy. It wasn’t too many years ago the Chinese were trying to cool down double digit annual growth in their economy. Well, mission accomplished. What worried traders was over-accomplishment.
Well, first quarter GDP in China rose an annualized 7.6 percent. The bad news is that’s the slowest in three years, but the good news is that it’s no worse than the consensus estimate and better than the infamous “whisper number.” That gave stock prices overseas and our futures a jolt to the upside.
Getting a jolt out the door at J.P. Morgan Chase is the “London Whale” and his gang of derivative traders in the U.K. JP Morgan reported quarterly earnings of $1.21, which was a lot better than the 70 cent estimate. However, they will have to re-state the prior quarter’s financials due to what can be charitably called “aggressive valuations” of the London Whale trading portfolio. Seems amazing what’s developed at the big banks since Congress repealed Glass-Steagall. But that’s a topic for another day.
Today, Italian stocks are a little lower after a downgrade by Moody’s, but most other European markets are higher. At this point, adjusted for fair value, the S&P futures are higher by about 2 ½ points, the Dow futures are up 25, and the NASDAQ futures are about 6 points above fair value.
It will be rough sledding at the open this morning. Traders are a bit down in the mouth after the release of the Federal Reserve Open Market committee minutes. Therein lied no hope of imminent stimulus, and irrespective of whether additional monetary easing might actually help the economy, stock prices continue to slip on the news.
At 8:30 this morning, the Weekly Jobless Claims Report is not expected to help. Last week’s report counted 374,000 new unemployment claims. The consensus estimate for today’s report is 375,000.
Smithfield Foods and Tyson took a broker downgrade this morning. In case you haven’t noticed, the price of corn has skyrocketed lately. Wheat and soybeans are no deal either as the nationwide heat wave is boosting input costs for a lot of food producers.
Fastenal beat estimates by a penny this morning. On the famous other hand, Supervalu withdrew previous guidance, suspended their dividend, and may well be looking for a buyer
Stocks in mainland China were higher overnight, but that’s about the only land of rising stock prices overseas.
At this point, adjusted for fair value, the S&P futures are down by about 10 points, the Dow futures are down 82, and the NASDAQ futures are about 19 points below fair value.
We may start the day with a little uptick, just like we did yesterday. Let’s hope this time we can keep prices above water as the day rolls on.
Once again today, encouraging words in Europe will get us started. Encouraging, anyway, if you don’t own preferred shares or subordinated debt in Spanish banks. Most of that type of investment is owned by Spanish citizens and that type of investment apparently stands to take most of the hit as Spanish Banks will pretty much come under pan-European control. That protects foreign investors from much of the fallout.
Spain detailed new austerity measures this morning designed to bring their debt to 3 percent of GDP by 2014. Included are reductions in government benefits and an increase in the value added tax. The Spanish 10 year bond yield has dropped below 7 percent to 6.77 percent this morning.
Our Federal Reserve will release the minutes of the latest Open Market committee meeting at 2 o’clock this afternoon which may hint at just how close we are to the good ship QE3.Asia lower, Europe is mixed. Our futures were nicely higher earlier, and while still positive, they’ve been losing ground over the past hour. At this point, adjusted for fair value, the S&P futures are higher by just over a point, the Dow futures are up 28, but the NASDAQ futures are just about even with fair value.
July 10, 2012
The second quarter earnings season Home Run Derby kicked off last night, and you might say that Alcoa hit a home run, but only because the fences had been moved in to just the other side of the pitcher’s mound.
Six cents per share of operating earnings beat the lowered estimate of a nickel. Of course, last year the second quarter profit at Alcoa was 32 cents per share.
The good news, of course, is that the only thing that seems to move markets nowadays is news from Europe and this morning, the news is good - at least if you’re a big fan of delaying the inevitable. After a meeting that stretched into the early morning hours, European finance ministers agreed to throw a life preserver to Spanish banks, loosen fiscal targets for Spain and agreed to give Spain until 2014 to get their fiscal act together.
Asia was mostly lower overnight, on weak Chinese import numbers. However, Europe has turned about one percent higher on the Spanish bailout and a good manufacturing number in England.
At this point, adjusted for fair value, the S&P futures are higher by 5 points, the Dow futures are up 56, and the NASDAQ futures are 10 points above fair value.
Another week, another meeting of European finance ministers concludes today, and another lower open for our stock prices. Coincidence? I think not.
Front and center, the yield on the 10 year Spanish Government bond s up over the theoretically unsustainable rate of 7 percent this morning. Italian yields are on the rise as well.
Perhaps we can distract ourselves with some good earnings reports, but don’t be surprised if estimates for the remainder of the year are trimmed.
Alcoa will start the earnings parade after the close of trading today, and they are only expected to report a nickel per share in earnings. That estimate is down by almost half on a glut of aluminum inventories. WD-40 is expected to report 61 cents in operating profit.
Shares of Amerigroup are bid about 40% higher pre-market. Amerigroup will be acquired by Wellpoint in a nearly 5 billion dollar deal.
Just about everybody overseas is lower this morning, and we’re drifting in that direction as well.
At this point, adjusted for fair value, the S&P futures are down about 3 points, the Dow futures are down 31, and the NASDAQ futures are just about 3 points below fair value.
It is once again the first Friday of the month. And, as usual for a first Friday, traders are pretty much sitting on their hands until 8:30, when the monthly payroll report is released.
New non-farm job creation has been on a downward slide for months now. However, the consensus has us changing direction with the June numbers. It’s expected that 90,000 new non-farm jobs were created in June. That would be an increase from 69,000 in May. The overall unemployment rate is expected to hold steady at 8.2 percent.
Any actual decline in new job growth will likely not be great news for stocks. Yesterday, the Bank of England bolstered their quantitative easing campaign, the People’s Bank of China dropper their one year savings rate a quarter percent and the lending rate by 31 basis points. The ECB also cut rates. So there is no argument here – economic weakness threatens both established and emerging economies around the world. This morning, Spain’s 10 bond yield rose VERY close to the psychologically scary rate of 7 percent
Seagate Technology warned about sales and profits for the remainder of the year.
That rate cut in China boosted their stock market nicely higher overnight, but most other overseas markets are lower.
Our futures will hang close to the flat line until we get the Jobs Report at 8:30. At this point, adjusted for fair value, the S&P futures are down about 3 points, the Dow futures are down about 8, and the NASDAQ futures are about 2 points below fair value.
Stock prices are usually helped on the first trading day of the month and the quarter, in part due to new money flows into retirement plans, and we saw a late day pop yesterday. Prices finished generally higher, offsetting the impact of a surprisingly awful reading from the Institute of Supply Management. The ISM survey suggested that the manufacturing sector actually contracted in June. That was the worst trend in three years and it’s getting harder and harder to figure out how this is George Bush’s fault. Unfortunately, there were no press conferences yesterday to explain.
In any event, the big dip caused by the ISM was fully recovered by day’s end although it looks like we’ll get off to a slightly lower open on this short day of trading.
Auto sales reports will be filtering in all day and when all is said and done, we’re looking for an annualized sales rate of just under 14 million units.
The only other data point on the board is the 10 o’clock May Factory Orders Report, which is expected to be up just a tenth of a percent.
Oil and gold are on the move higher this morning, and with the exception of Australia and Greece, most overseas markets are higher as well.
At this point, adjusted for fair value, the S&P futures are down a point and a half, the Dow futures are down 28, and the NASDAQ futures are just about a point below fair value.
Friday’s big rally over here carried on, to some extent, over there overnight. Most overseas markets tacked on some nice gains, with European markets faring the best – up close to one percent overall.
Back over here, it will be a short week of trading due to the mid-week Holiday. So far, it looks as if most of the fireworks will be outdoors and real, rather than indoors and financial.
Exploding higher this morning will be the price of Amylin Pharmaceutical shares. Amylin shares, which have been as low as about 8 bucks within the last year, will fetch 31 dollars per share from Bristol-Myers. Amylin shares are indicated about 9 percent higher pre-market.
One other merger this morning as Ingram Micro is buying BrightPoint for nine dollars per share in cash.
At 10 this morning, we’ll get the May Construction Spending and June ISM Manufacturing numbers. Both are expected to trend lower. The ISM is expected to dip to 52 from 53½.
Stock futures broke into positive territory about an hour and a half ago, but faded back toward the flat line over the past ten minutes.
At this point, adjusted for fair value, the S&P futures are higher by not quite 2 points, the Dow futures are up 3, and the NASDAQ futures are just about even with fair value.
Daily Reports @ WJR
For an explanation of "fair value" please click here.