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WJR July 2016 Reports



July 29, 2016

We know that the domestic economy grew at a paltry 1.1 percent in the first quarter of 2016. The Government’s first guess at the second quarter’s Gross Domestic Product comes at 8:30 this morning. Expect a bit of a pick-up to 2.6 percent.

We’ll also hear from the University of Michigan and their final reading on July Consumer Sentiment, which is expected to tick higher to a reading of 90.6 from 89.5.

The corporate earnings season is starting to thin out, but there are still a number of numbers to consider this morning. CBS and Newell Brands beat top and bottom line estimates. Drug-maker Merck’s 93 cents in profit was 2 cents ahead. Last night, Amazon and Alphabet trounced the estimated earnings numbers. Alphabet share are looking to open about 4 percent higher. The misses of the morning are insurer Cigna and oil company Exxon Mobil. Cigna checked in with $1.98 missing the $2.39 estimate by a mile. Exxon Mobil made 41 cents, a full 23 cents short.  Shares of both are looking to open about 2 percent lower

Japanese stocks rose overnight, but most of Asia is lower. European markets are modestly higher. Our stock futures are indicating another mixed open, with the technology-oriented NASDAQ faring the best on the Alphabet and Amazon results.

At this point, adjusted for fair value, the S&P 500 futures are lower by 2 points, the Dow futures are down 34, although the NASDAQ futures, and the Amazon and Alphabet earnings, are about 9 points above fair value.

July 28, 2016

Of the millions of people focused on the Federal Reserve’s interest rate decision yesterday, only one or two were expecting an increase in rates and those one or two people were once again disappointed. The Committee left open the possibility of a September hike, but with an election coming in November, we might not see a move in rates until December meeting at the earliest.

In the meantime, we’re starting to put the wraps on the busiest week of the quarter for corporate earnings news, and the miss of the morning is a local one. Ford Motor reported a 52 cent operating profit. That was 8 cents per share short of estimates. Rising levels of incentives are getting the blame, and when incentives start to rise, the trend is not easily reversed. Ford shares are about 7 percent lower pre-market.

Oil giant ConocoPhillips also disappointed, reporting of loss of 79 cents per share, which was 18 cents worse than expected.

The famous other hand is shared by a bunch of firms beating estimates, including Facebook, whose shares are about 5 percent higher pre-market. Apple, Raytheon, Marathon Petroleum, Hershey, Mastercard, Colgate-Palmolive and Dow Chemical also earned more than expected. After 4 o’clock tonight, we’ll hear from Amazon and Google.

European markets are a bit lower at this hour, and so are our stock futures. At this point, adjusted for fair value, the S&P 500 futures are lower by 2 points, the Dow futures are down 19, although the NASDAQ futures are about 7 points above fair value.

July 26, 2016

The Dow Jones Industrial Average took only its second loss in the past twelve trading sessions yesterday, but it looks like we’ll get off to a rather tepid start today as we look to a slew of corporate earnings reports as the start of another two-day Federal Reserve Open Market Committee meeting.

So far this morning, Caterpillar reported $1.09 in quarterly profit, which is 13 cents better than expected. However, CAT guided lower with respect to sales and earnings for the full year and the stock is off about a half percent.

Verizon, the new owner of the guts of Yahoo, beat the 92 cent estimate by 2 cents. 3M beat the $2.07 estimate by a penny per share and Eli Lilly matched expectations. McDonald’s $1.45 was 20 cents better than expected, but comparable store sales were weak and the shares are about 2 percent lower. DuPont and United Technologies both beat their earnings estimates.

Later this morning, we’ll get the June New Home Sales Report, the Case-Shiller Home Price Report, the PMI Services Flash Report as well as the Conference Board’s analysis of how confident we are as consumers.

Don’t look now, but light sweet crude futures are at just $42.66 per barrel this morning.

At this point, adjusted for fair value, the S&P 500 futures are lower by a point, the Dow futures are down 21, but the NASDAQ futures are about 2 points above fair value.

July 25, 2016

The Democratic Convention, a bunch of economic reports, earnings reports from about a third of the S&P 500 companies , and who knows what else – traders will have a lot to trade on this week, as we again start the week at record highs. Kimberly Clark just reported earnings of $1.56, which was 8 cents better than expected.

It’s one thing to make a popular product.   It’s another thing to make money after making that popular product. In Japanese trading overnight, shares of Nintendo dropped almost 18 percent after announcing that the incredibly popular Pokemon Go game will not have a material near-term impact on earnings.

If you were thinking about buying a big piece of Yahoo!, you can keep that extra 4.8 billion dollars in your pocket. Verizon will pick up Yahoo’s content to complement its delivery pipelines, although the 4.8 billion dollar price tag does not get them Yahoo’s stake in Alibaba.

At 10:30 the Dallas Fed will release their monthly look at regional economic activity. The majority of big economic reports are again crammed into the last half of the week.

Most overseas markets are higher, but we will likely get off to a rather muted start at 9:30. Our stock futures have lost their gains from earlier this morning, and at this point, adjusted for fair value, the S&P 500 futures are lower by a half point, the Dow futures are down 7, and the NASDAQ futures are about 2½ points below fair value.

July 22, 2016

We suffered a bit of rally-interruptus for the Dow Jones Industrial Average yesterday. However, on the back of another batch of pretty good earnings reports, stock futures are on the rise again this morning, although rather modestly so.

Beating earnings estimates this morning are General Electric and Whirlpool. GE reported 36 cents per share of profit, up from 17 cents in last year’s comparable quarter. Whirlpool reported $3.50 per share, beating the $3.39 estimate and raised their earnings forecast for the full year. American Airlines, VF Corp and Advanced Micro also are out with good reports. AMD shares are almost 10 percent higher pre-market.

On the not-so-hot list this morning are Chipotle and Starbucks after reporting lower earnings than expected. Apparently, no one likes to drink coffee when they’re upset with their Government. Starbucks blamed “political and social unrest in the United States and abroad” for the shortfall. That’s the third consecutive sales shortfall for Starbucks. Must be a whole lot of unrest going on.

The PMI Flash report on the American Manufacturing sector is due at 9:45 this morning. Expect a reading of 51.9, which would be a half-point better than last month.

There’s not much movement in either direction in overseas markets. At this point, adjusted for fair value, the S&P 500 futures are higher by 2 points, the Dow futures are up 16 points and the NASDAQ futures are almost 5 points above fair value.

July 21, 2016

Earnings, mergers, economic reports. There’s no shortage of any of those this morning, and some of it is very local. Front and center, General Motors absolutely blew away the $1.52 profit estimate by making $1.86 in the second quarter, as well as turning its first European profit in 5 years. Sales of 42 billion beat the estimate by 10 percent (which is a lot in the automotive business) and GM shares are more than 5 percent higher pre-market.

We also have a local merger in the news as The Bank of Birmingham/Bloomfield will be acquired by The Bank of Ann Arbor for $16.50 per share. That’s an 85 percent premium to Bank of Birmingham’s stock price on Tuesday.

Internationally, miner Joy Global is entertaining an offer from Japan’s Komatsu. That’s a more than 20 percent premium. The European Central Bank announced no change in interest rates.

Intel and American Express reported better profit than expected, although American Express missed on revenue.

Weekly Jobless Claims, Existing Home Sales, the Philly Fed Survey and the Leading Economic Indicators are on the way by 10 o’clock.

In the meantime, our stock futures bottoms in the 5 o’clock hour this morning and have been battling back ever since. At this point, adjusted for fair value, the S&P 500 futures are only down about a point, the Dow futures are down 14 points and the NASDAQ futures are about 4 points above fair value.

July 20, 2016

Yesterday’s second most raucous meeting did not feature any accusations of plagiarism. However, the shareholder’s confab for Texas-based Comerica Bank featured plenty of fireworks. Comerica will cut 9 percent of its workforce and close 40 branches to attempt to right the ship. The move to Dallas and increased exposure to oil-related loans apparently hasn’t worked out too well. The idea is to cut 230 million in expenses. Quarterly earnings of 58 cents per share is well down from the 73 cent profit in last year’s comparable quarter.

On the famous other hand, Morgan Stanley reported earnings of 75 cents per share, well ahead of the 59 cent estimate, although down from 85 cents a year ago. 

Better than expected results this morning also came from software firm SAP and robotic surgical machine maker Intuitive Surgical, whose shares are 4 percent higher pre-market, as are shares of Cintas. SAP shares, for their part, are indicated about 5 percent higher.

Not to be outdone, shares of Microsoft are almost 5 percent higher after last night’s earnings report. And Abbott Labs is about 3 percent higher on better than expected results.

Germany is leading Europe higher at this hour, and it looks like the Dow Jones Industrials might be on its way to an seventh consecutive record.

Adjusted for fair value, the S&P 500 futures are higher by almost 7 points, the Dow futures are up 58 points and the NASDAQ futures are about 24 points above fair value.

July 19, 2016

Even considering this super-low-interest environment, many regard stocks as pretty fully valued. We’ve seen seven positive days in a row now, and continued gains will likely be dependent on good earnings news, and so far this earnings season, so good.

Last night, IBM reported $2.95 per share in profit. That was six cents ahead of estimates. True, IBM’s sales have now declined for 17 consecutive quarters. However, gross margins have now increased for 11, as Big Blue transforms itself from a hardware company to a data and services company. IBM shares are higher by almost 2 percent pre-market.

Also out with good earnings news are Johnson and Johnson and Goldman Sachs. Yahoo is 1½ percent lower after missing by a penny per share. The miss of the morning (actually last night) is Netflix. Profit was better than expected last quarter, subscriber growth was WAY short. For a hyper-growth stock, that’s hyper-bad news. Netflix shares are about 13 percent lower this morning.

Stocks in Germany and France are about one percent lower. We’re looking a little lower in general, although the Dow Industrials are getting a boost from the IBM, Goldman Sachs and J&J numbers. Those three companies are among the eight most important stocks in the price-weighted index.  Adjusted for fair value, the S&P 500 futures are lower by 5 points, the Dow futures are higher by 5 points and the NASDAQ futures are about 15 points below fair value.

July 18, 2016

The second quarter corporate earnings reports start to roll out in volume this week. In general, it will be a matter of trying to beat lowered expectations. S&P 500 earnings are expected to dip almost 5 percent, which would make it the fourth consecutive quarterly decline.

Bank of America led us off this morning with a perfect example. Profit of 36 cents per share fell well short of 45 cents from a year ago. However, it did beat the 33 cent estimate and Bank of America shares are fractionally higher pre-market.

Toy maker Hasbro reported 41 cents, which was a 2 cent beat. However, trucker J.B. Hunt’s 92 cent profit missed the estimate by a nickel. After 4 o’clock today we’ll hear from IBM, Yahoo and Netflix.

The deal of the day features U.K. based ARM Holdings, which designs and licenses computer chips, being bought by Japan’s Softbank. It’s a 32 billion dollar deal and has ARM shares more than 40 percent higher this morning.

All the big economic reports of the week will be jammed into Thursday. The Japanese market was closed overnight. England is up about four-tenths of a percent, while mainland Europe is little changed.

Our futures perked up a bit over the past half hour. Adjusted for fair value, the S&P 500 futures are higher by 3½ points, the Dow futures are up 21 and the NASDAQ futures are about 7 points above fair value.

July 14, 2016

We’ll start the day with the Dow Industrials and the S&P 500 hitting all-time highs, and if the early action holds through the day, we’ll be able to say that tomorrow morning as well.

The Bank of England surprised this morning by holding short term interest rates steady. However, they did indicate that some easing may be on the way in August as the likely economic damage from the Brexit begins to rear its ugly head. This morning, Delta Airlines announced a capacity reduction in flights to and from Great Britain as they anticipate a slowdown in economic activity there.

By the way, Delta also announced quarterly earnings of $1.47 per share, which was a nickel better than expected.

JP Morgan Chase is also out with better than expected earnings news, reporting $1.55 per share, which is 12 cents better than the average estimate. That stock is about 2½ percent higher pre-market. Matching the $4.78 earnings estimate this morning was investment firm Blackrock.

Oil futures are bouncing almost 2 percent higher. Three Fed Heads speak today after we find out about weekly jobless claims and June Producer Prices. Expect a three-tenths of a percent increase there.

European markets are higher. Adjusted for fair value, the S&P 500 futures are higher by about 17½ points, the Dow futures are up 154 and the NASDAQ futures are about 34 points above fair value.

July 13, 2016

It’s hard to comprehend how cheap money has become around the world. Overnight, the yield on the Dutch Government Bond fell to a level not seen in about 500 years, which is before most of us were born.  

If you’re looking to take advantage of the low rates by refinancing a mortgage, you’re not alone.  According to the Mortgage Bankers Association, mortgage applications were up over 7 percent last week, driven completely by an 11 percent increase in people trying to re-finance. The average interest rate on a 30 year conventional mortgage is now down to 3.6 percent. 

Up 24 percent in the premarket are shares of Juno Therapeutics. Juno announced that they will resume clinical trials of a drug they hope will help battle leukemia. That test had been suspended after the death of a couple of patients.

A couple of Fed Heads will talk interest rates later today, and at 2 o’clock, the Fed’s most recent Beige Book survey of economic conditions will go public.

For those of you keeping score at home, the S&P 500 Index has risen 8 of the last 10 trading days and closed yesterday almost 8 percent higher than its close just 10 trading days ago. Our stock futures were suggesting a pullback overnight, but turned positive just before six o’clock this morning. Right now, they’re suggesting that stock prices will move a little higher at 9:30. 

Adjusted for fair value, the S&P 500 futures are higher by about 2 points, the Dow futures are up 11 and the NASDAQ futures are about 6½ points above fair value.

July 12, 2016

The second quarter earnings season is underway with Alcoa reporting in last night. Once again, it’s not necessarily how you’re doing, but how you’re doing compared to how you were expected to do. Alcoa’s quarterly profit dropped again, but the 15 cents per share of operating profit was a nickel ahead of expectations and Alcoa shares are more than 4 percent higher pre-market.

Seagate Technology shares are almost 14 percent higher pre-market, but last quarter’s earnings have nothing to do with it. Seagate announced that they’ll terminate one of every seven of their employees.

It’s almost six months until Christmas, and that’s a long time to wait for the American consumer to spend more than they should. So, if the next holiday is too far away, let’s manufacture a reason to run up the average person’s credit card balance.  That’s why today is Amazon Prime Day, and it’s expected to drive many more memberships and sales than last year’s event. So, ladies and gentlemen, start your computers.

No fewer than three Federal Reserve Presidents are speaking today. Expect them to huff and puff about a coming interest rate increase, although we may see that Christmas shopping season first.

Stocks rose another 2½ percent in Japan, and European markets are once again one to one and a half percent higher for the most part. We’re on the way to a new record high for the S&P 500 once again. At this point, adjusted for fair value, the S&P 500 futures are higher by 10 points, the Dow futures are up 87 and the NASDAQ futures are about 27 points above fair value.

July 11, 2016

We could well start the day higher than the all-time closing high for the S&P 500. Traders are viewing the Brexit in their rear view mirrors as they drive headlong into the second quarter corporate earnings reporting season. Alcoa unofficially kicks it off after the close of trading today. Expect 10 cents per share of operating profit.

Many expect that corporate earnings will perk up on the third and fourth quarter of the year to support the currently robust valuation of domestic stocks. Getting some solid second quarter numbers would certainly help inspire some confidence in the view. Nevertheless, the S&P 500 companies are expected to report the second quarter as the fifth consecutive quarter of declining earnings. 

No fewer than 14 Federal Reserve related speeches and events are on the way this week, as you have to wonder just who is running all the Regional Banks with their head honchos running around generating speaking fees.

Nintendo shares are more than 10 percent higher in the pre-market as the massive popularity of the new Pokemon Go game has young people wandering around aimlessly all over the country.

Japanese stocks are popular as well. They shot about 4 percent higher overnight. European markets are up one to two percent.

Our stock futures have been pointing higher all morning long. At this point, adjusted for fair value, the S&P 500 futures are higher by nearly 5 points, the Dow futures are up 48 and the NASDAQ futures are about 18 points above fair value.

July 7, 2016
 
A very dovish tone to the Federal Reserve Open Market Committee minutes helped turn a 120 point loss in the Dow Jones into an 80 point gain yesterday.

Yes, the European drama might throw some sand into the gears of international trade, but low interest rates may be with us for some time. Over a third of the world’s government bonds now trade at negative yields. While that never-never land may give us some long-term problems, in the shorter term, the wind is at the back of financial asset prices.

Earlier this morning, the Challenger Layoff Report surged to 38,000 from last month’s 30,000, with most of the layoff announcements coming from the energy and retail sectors. Still, 38,000 is one of the lowest totals over the past couple of years.

Pepsico issued quarterly results that beat estimates this morning and Samsung reported a strong quarter m thanks to strong sales of the Galaxy 7 phone.

Oil futures are higher by about one percent this morning, but so far, they’re not pulling the stock futures along with them.

Asian markets were mixed, but Europe is generally one percent higher. Our futures just took a little dip lower. At this point, adjusted for fair value, the S&P 500 futures are lower by almost 3 points, the Dow futures are off 19 and the NASDAQ futures are 4 points below fair value.

July 6, 2016

As stock traders try to figure out just how a Britain-free European Union will figure in to the worldwide economy and the future of interest rates, bond traders have clearly developed an opinion. In Japan, the 20 year Government Bond traded at negative yields for the first time EVER overnight. If you want to buy a 10 year U.S. Treasury Bond, you can expect no more than 1.38 percent in annual interest. But, if you’re felling badly about that, know that you can plan a cheaper vacation to the U.K. as the pound is worth only $1.28 as of this morning.

Shares of Walgreens/Boots Alliance which bucked the overall market and rose a half percent yesterday are giving up about half of that gain this morning, in spite of reporting $1.18 per share in profit, which was 4 cents better than expected. Sales fell short of forecasts, and even though Walgreens/Boots raised guidance, traders appear a little skeptical until the sales rebound.

At 10 this morning, the Ism services Index for June is expected to rise to a healthy level of 53.3. Later on, at 2 o’clock, we’ll get the minutes from the latest Federal Reserve Open Committee meeting, which may not be all that instructive, as that meeting occurred prior to the Brexit vote.

Other than China, overseas markets are a sea of red numbers this morning, with European stocks lower by about 2 percent.

At this point, adjusted for fair value, the S&P 500 futures are lower by 10 points, the Dow futures are off 82 and the NASDAQ futures are 28 points below fair value.

July 5, 2016

The post-Brexit rally may exit stage left today as traders get back to work and start to look forward to Friday’s Unemployment Report. Even so, after all the tumult of the past couple of weeks, the DOW and S&P Indexes rose about 3 percent in the first half of the year, not including dividends.

European stocks followed up yesterday’s losses with more of the same today, although the FTSE 100 in England has recovered after the Bank of England loosened monetary policy today. The Bank said that ensuring economic stability in the U.K. has “become more challenging” in anticipation of Brexit, so it loosened capital reserve requirements on British banks in hopes that they will keep making loans when times get tougher, which they will.

 
A report on Factory Orders is they only significant economic report due today.

Walgreens/Boots reports earnings tomorrow and Pepsico comes on Thursday, but second quarter reports won’t flow in volume until next week.

Overseas markets are lower. Oil futures are three percent lower. At this point, adjusted for fair value, the S&P 500 futures are lower by 13 points, the Dow futures are off 93 and the NASDAQ futures are 25 points below fair value.

July 1, 2016

Welcome to the second half of the year, and it will start with the S&P 500 only about a percent and a half from its all-time high. Interestingly, the first day of July has historically been of the best days of the year for rising stock prices. Moreover, during bull markets, Friday has shown to be the strongest day. If stocks are going to make a strong move on THIS Friday July 1st, they’ll likely do it on low volume as the afternoon will tempt some traders to stretch the long holiday weekend by a few hours.

June automobile sales reports will roll out as the day rolls on. Consulting firm AlixPartners just issued their automotive sales estimates for the next few years, and if they’re right, “peak auto” may be here. The estimated 2016 sales of 17.8 million units are projected to dip to 17.2 million next year, and not turn up again until 2019.

Everybody at streaming music service Tidal is apparently denying it, but Apple is reportedly in exploratory reports to acquire Tidal. Tidal is majority owned by wrapper Jay Z who may, if things develop, may be able to afford more letters in his name.

European markets are mostly higher once again, up on average about one-half of one percent. Our stock futures were in a significant hole until just before 6 this morning, but have been on the mend ever since. At this point, S&P, Dow and NASDAQ futures are all within point or so of fair value.

WJR August 2016 Reports
WJR June 2016 Reports

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