July 31, 2017
Tell me if you’ve heard this one before – The Dow Jones Industrials closed the last session at an all-time high, and it looks as if we’ll tack on more gains when the market opens at 9:30.
With earnings season about half over for the S&P 500 companies, 79 percent of those reporting have come in with better than expected profits which is much higher than average, and the average outperformance is more than 7 percent. That’s almost double the long-term average. Sales have exceeded expectations 73 percent of the time, which is the best quarter on that score in ten years.
The next potentially market moving report comes tomorrow from Apple.
It’s not much of a “merger Monday” but one deal has been announced. Discovery Communications is buying Scripps Networks for 90 bucks per share. That widely rumored deal is worth 14.6 billion dollars. And one deal apparently won’t happen as Charter Communications says that it has no interest in racing to buy Sprint. Charter shares are about 8 percent higher pre-market on that news.
Most markets overseas are a little higher.
At this point, adjusted for fair value, the S&P 500 futures are higher by 4½ points, the Dow futures are up 59, and the NASDAQ futures are almost 13 points above fair value.July 28, 2017
We’re wrapping up a big earnings week with another reporting flurry. Within the half hour we’ll hear from Chevron. ExxonMobil just reported 78 cents of profit, that was 6 cents short of the average estimate.
The elephant in the room this morning is Amaxon.com. Amazon reported just 40 cents per share of profit, versus the estimate of $1.42. Of course, Amazon has never been shy about spending now to gain share in the future, and that appears to be the case here as revenue was stronger than expected and full year guidance was raised. Nevertheless, Amazon shares are off about 3 percent in the pre-market.
Other companies with positive earnings news include Stryker, drug maker Merck, American Airlines, Intel and Abbvie. On the whole, Starbucks’ report disappointed a bit and shares are about 4 percent lower this morning.
Shares of Boston Beer are about 14 percent higher on good earnings. Goodyear shares are suffering a 10 percent blowout on a lowered outlook.
In the latest chapter of their customer account scandal, Wells Fargo may be sending $80 million back to some 575,000 (corrected) customers whose account were tapped for unneeded car insurance.
The Government’s first guess at second quarter Gross Domestic Product comes in 20 minutes. Expect 2.7 percent, which would almost double up the first quarter final reading of 1.4 percent.
At this point, adjusted for fair value, the S&P 500 futures are lower by almost 6½ points, the Dow futures are down 32, and the NASDAQ futures, after Amazon’s big earnings miss, are about 42 points below fair value.
Earnings news totally overshadowed the latest meeting of the Federal Reserve Open Market Committee yesterday, and for good reason. The Fed announced no change in short-term rates, but indicated that they might start shrinking their bond portfolio sooner than later. That, theoretically, means that long-term rates will soon be on the rise. Think about that if you’re considering borrowing or refinancing sometime soon.
Back to the present, we’ve seen only about 15 percent of the S&P 500 disappoint on profits. Revenue estimates have been exceeded by a majority of companies. However, on the whole, anyone hoping that a shortfall in profits would lead to a downfall in stock prices has been disappointed.
Since the market close yesterday, companies beating earnings estimates were Borg Warner, Comcast, Diageo, Gilead Sciences, Raytheon, PayPal and Procter & Gamble. Facebook reported $1.32, which was 19 cents better than expected on a 17% increase on active users. Shares are up 6 percent. This morning, Twitter reported good profits, but no user growth, and Twitter shares are lower by more than 9 percent.
Johnson Controls reported in line profit, but revenue missed. Verizon was in line on profits, with stronger sales.
Missing earnings targets were Altria, McKesson, Dr. Pepper Snapple, Whirlpool and Buffalo Wild Wings.
The June Durable Goods report at 8:30 is expected to improve to a 3½ percent increase on strength in aircraft orders.
Overseas markets followed us higher overnight, and it looks we’re ready to lead the parade higher again today. At this point, adjusted for fair value, the S&P 500 futures are 3 points higher, the Dow futures are up by 13, and the NASDAQ futures, spurred on by the Facebook and tech earnings reports, are about 37 points above fair value.
There are so many corporate earnings reports coming out this morning, there’s not nearly enough time to list them all. In fact, there’s a Federal Reserve meeting going on that been pretty much forgotten in the rush.
It’s hard to find any big disappointments in the reports. The big winners of the morning appear to be US Steel, up about 7 percent on an earnings beat, Advanced Micro Devices, up 10 percent after projecting revenue growth in the mid to higher teens, and Boeing, which is higher by more than 3 percent, after reporting adjusted earnings of $2.55, which was a 25 cents beat.
For Motor also reported this morning. 56 cents in profit was well ahead of the 43cent estimate. F-series vehicle sales were 7 percent higher. However, the outlook is not exciting traders, as the shares are about a half-percent percent lower pre-market, but that’s better than the two cencent selloff we saw earlier this morning.
Coca-Cola’s 59 cents beat the estimated number by 2 cents. DR Horton and Hilton Worldwide each reported a penny per share more in profit than expected.
The New Home Sales for June come at 10 o’clock. Expect little change from May.
In the meantime, we’re headed higher again. At this point, adjusted for fair value, the S&P 500 futures are 4 points higher, the Dow futures are up by 59, and the NASDAQ futures are 11 points above fair value.
About one out of every five of the S&P 500 companies reports earnings this week and today is about as busy as it gets.
Beating earnings estimates in a big way this morning is General Motors. $1.89 of operating earnings was a full 20 cents better than expected. Sales were a little on the light side, but is not that surprising given the company’s efforts to step back from operations that don’t make a profit. GM shares ae more than 2 percent higher pre-market.
Also reporting better than expected earnings that resulted from lower than expected sales are Eli Lilly, and 3M.
Caterpillar is the big story in the Dow 30 this morning. $1.49 in profit was 23 cents better than expected, and Caterpillar raised full year guidance. Shares are about 5 percent higher. Shares of Barnes & Noble are more than 17 percent higher, on word that an activist investor is urging the company to put itself up for sale.
Shopping for shoes to match that new purse may be getting a little easier as Michael Kors is buying Jimmy Choo.
This morning futures are demonstrating how misleading the major stock indexes can be. Futures on the capitalization-weighted S&P 500 are higher by a healthy seven points, as we have positive earnings reports from some large-cap companies, like General Motors and 3M, are higher by almost 8 points. Futures on the Dow 30, which only contains 30 companies and is price weighted, is higher by 153 points, largely because of the Caterpillar, which trades at over 113 dollars. The NASDAQ futures are lower by about 2 points, weighed down by Alphabet’s somewhat disappointing report last night.
Earnings reports continue to flow this morning, but perhaps the most noteworthy story of the past day is Mario Draghi’s press conference of yesterday. While most expected the leader of the European Central Bank to talk about a timetable for stopping the ECB’s bond buying program and even rolling back prior purchases, Draghi gave no indication that anything will change anytime soon.
That’s in contrast to most of the chatter out of our Central Bank, which has been prepping the market for a little money tightening. Like it or not, it’s doubtful that the Fed can ignore the ECB policy, which should weaken the euro versus the dollar. That makes it harder for U.S. exporters to make a buck, even if it is worth more on a relative basis. Bottom line is that everybody’s interest rates may stay lower for longer.
Certainly lower this morning is the price you’ll pay for a share of Ebay. A lowered outlook has Ebay on a more than 4 percent off sale this morning. General Electric is fractionally lower, even after beating estimates by 3 cents. Revenue there was off 12 percent. Microsoft is up about a half percent after cooling from the all-time high hit yesterday. Capital One’s second quarter profit was 10 percent higher than a year ago and the shares are almost 5 percent higher pre-market.
European stocks are lower this morning by anywhere between one half and about one percent, depending on the country.
Our futures are going nowhere slowly. At this point, adjusted for fair value, the S&P 500 and Dow futures are essentially flat, and the NASDAQ futures are now about 9 points below fair value.
The slow-motion market melt up of recent days looks to continue this morning.
Shares of Kinder Morgan may melt up a little faster than most. The oil sector hasn't been much of a money machine lately due to the collapsing price of oil. However, Kinder Morgan has announced that they will effectively hike their dividend by 60 percent in the next year, and by an additional 50 percent over the subsequent two years. That has yield-hungry investors hitting the "buy" button this morning and Kinder Morgan shares are up almost 4 percent.
Nike shares are looking to open about 2 percent higher on a broker upgrade. T-Mobile shares are rising 3 percent after reporting 67 cents of quarterly profit. That beat the 38 cent estimate handily as well as the 25 cent profit in the comparable quarter a year ago.
American Express shares are lower this morning. They beat the earnings estimate, but rising expenses get the blame. Philip Morris share almost 2 percent lower after cutting their full year outlook.
As expected, the European Central Bank held interest rates steady this morning. We'll be listening for comments about their bond-buying program in a bout a half hour from now. European stocks are about a half percent higher, as were our stocks yesterday.
At this point, adjusted for fair value, the S&P 50 futures are higher by 2 points, the Dow futures, which were higher earlier are up only 6 and the NASDAQ futures are about 13 points above fair value.
July 19, 2017
Twenty-one in a row. That’s how many consecutive quarters that IBM has now reported declining revenue. They keep talking about how the current investments in cloud computing will stop the tailspin, but nobody - not even Watson – seems to know when that will be. Yes, IBM reported a higher profit than expected, but the shares are almost 3 percent lower pre-market.
Also hitting rough air this morning are shares of United Continental. The airline offered up weak full-year guidance and the shares are descending by about 4 percent pre-market.
Better news comes from the financial sector as Morgan Stanley’s 87 cents pf profit was 11 cents better than expected, they are raising their dividend, and the shares are looking to down about 2 percent higher.
Two weeks ago, mortgage applications took a big dive, but it’s now apparent that a lot of people just took vacation during that 4thof July week. Last week, applications rose 6 percent, boosted by a 13 percent rise in refinancings, as the average interest rate for a 30-year conventional held steady at 4.22 percent.
Most major markets overseas are a little higher, and although the IBM report is depressing Dow futures, we’re still looking to open a little higher. At this point, adjusted for fair value, the S&P 500 futures are higher by almost 2 points, the Dow futures just turned positive, and are now up a single point, and the NASDAQ futures are now about 18 points above fair value.
We have a little flurry of earnings reports this morning, and so far, it’s mildly positive. Johnson & Johnson led the parade reporting $1.83 of adjusted profit. That was 3 cents better than expected. Better than that, J&J raised full year guidance to $7.17. Wall Street expected $7.10. Shares are a little more than one percent higher pre-market.
Bank of America’s 46 cents was also 3 cents better than expected. However, the stock looks to open a little lower. Likewise with Goldman Sachs. Shares are off about three-quarters of a percent even though $3.95 per share of profit was 56 cents better than expected. Traders appear concerned that the big investment banking deals that Goldman makes a living from may be fewer and farer between in the future.
Reporting better than expected results and raising guidance, Lockheed Martin shares are trading more than 2 percent higher so far this morning. The star of the morning remains Netflix, with shares more than 9 percent higher after reporting great subscriber growth last night.
We’ll see how home builders are feeling about business in July at 10 this morning with the release of the Housing Market Index.
Our futures are off their earlier highs. At this point, adjusted for fair value, the S&P 500 futures are higher by a about a point, the Dow futures are up 6, and the NASDAQ futures are now about 12 points above fair value.
As we open today with the Dow and S&P 500 sitting at record highs, the next big indicator for the direction of stock prices kicks off this week as second quarter earnings reports start to roll out in volume. Most of the big reports come later in the week. Tonight, after the close of normal trading, Netflix will report.
So far this morning, we learned of a rare misstep for asset manager Blackrock. $5.24 of adjusted earnings were better than last year’s $4.78. However, Blackrock was expected to earn $5.40 last quarter, and shares are indicated almost one percent lower pre-market.
A similar story in a very different industry came from trucker J. B. Hunt. Earnings of 88 cents fell 3 cents shy of estimates, and although revenue was higher year-over-year, sales fell short of the average analyst estimate. J. B. Hunt shares are down about 2 percent this morning.
The July report on the manufacturing sector in the New York region comes at 8:30, and is expected to have cooled a bit, perhaps dropping to a reading of 15 from June’s very hot reading of almost 20.
Chinese stocks lost ground overnight, but most other overseas markets are a little higher. Our futures are off their highs of the morning, but are still foretelling higher prices at 9:30. Right now, adjusted for fair value, the S&P 500 futures are higher by almost 2 points, the Dow futures are up 31, and the NASDAQ futures are now about 13 points above fair value.
Now that Ms. Yellen and friends are pretty much out of the way for a couple weeks, the focus will turn to corporate earnings, and we have four big banks checking in this morning.
Before we get to that, however, remember that Ms. Yellen told us once, twice, maybe fifty times during the past couple days that the Fed hopes interest rate hikes can help boost the inflation rate up to 2 percent. The June CPI will be announced at 8:30 this morning and is expected to have increased only one-tenth of a percent in June, after a one-tenth of a percent decline in May. I’ll do the math for you-that’s a long way from two percent.
The four banks I spoke of earlier are JPMorgan Chase, Citigroup, Wells Fargo and PNC. All four banks earned more than expected last quarter, with JPMorgan reporting $1.82 per share, 24 cents better than estimates. Citigroup made $1.28 versus $1.21, and PNC reported $2.10, which was 8 cents ahead. Well Fargo earned seven cents more than expected.
The big differences are that JP Morgan warned that its future net interest margin will be under pressure, and Well Fargo revenue fell short. That has JP Morgan shares lower by about one percent and Wells a bit more than that. Shares of Citi and PNC are pretty much unchanged in the pre-market.
Asia was mostly a little higher overnight, but Europe is mixed and very little changed.
At this point, adjusted for fair value, the S&P 500 futures are lower by about a half- point, the Dow futures are up 11, and the NASDAQ futures are now about 5 points above fair value.
Janet Yellen will have a little chat this morning with the Senate Banking Committee, and if our esteemed Senators were paying attention to yesterday’s testimony before the House Financial Services Committee, we should hear some follow-up questions.
Yesterday, Yellen’s comments sent bond yields lower and stock prices higher as she intimated that maybe – just maybe – the Fed may stop hiking short term rates well before they achieve their previously-stated long term goal of three percent. Granted, Yellen has ALWAYS said that Fed policy would be data-dependent, and that’s really what she reiterated yesterday. However, as long as interest rates rise slowly from these low levels and aren’t pushed up excessively, stock prices should benefit.
Shares of drug -maker Mallinckrodt are benefitting by almost 5 percent pre-market on the granting of orphan drug status for one of their concoctions. The famous other hand belongs to Delta Airlines. An April thunderstorm was too much of a headwind to overcome as quarterly operating earnings fell to $1.64 per share, three cents short of estimates. Delta shares are off by about 1 percent pre-market.
Japanese stocks were little changed overnight, but just about all other major foreign markets are higher after yesterday’s Yellen testimony.
Our futures have slipped a bit from earlier levels but have perked up a bit over the past 10 minutes or so. At this point, adjusted for fair value, the S&P 500 futures are higher by 3 points, the Dow futures are up 19, and the NASDAQ futures are now almost 18 points above fair value.
If you’re looking for a wild ride in the stock market, pick up a handful of small biotech stocks that are trying to discover new drugs for old diseases. This morning, a company called Cara Therapeutics is seeing it’s stock rise about 9 percent on positive EARLY stage results in testing a new drug to treat kidney disease.
If you’re NOT looking for a wild ride, start reading Federal Reserve Policy Statements and Reports. At 2 o’clock this afternoon we’ll get the Beige Book. That’s the Fed survey of regional economic conditions that they publish about two weeks before the Open Market Committee meets to determine the level of short-term interest rates.
Speaking of the Fed, it’s time for Janet Yellen’s semi-annual two-day visit to Capitol Hill. Her statement to the House Financial Services Committee will be released at 8:30, and her testimony begins at 10 o’clock.
Mortgage Applications took a rather unexpected dive last week, even AFTER you adjust for the Forth of July Holiday. Overall, apps were down 7.4 percent, which included a 13 percent fall-off in refinancings.
Asia was mixed overnight, but Europe is nicely higher, and it looks like we’ll get off to a good start. At this point, adjusted for fair value, the S&P 500 futures are higher by about 6 points, the Dow futures are up about 46, and the NASDAQ futures are now about 27 points above fair value.
It’s again the first Friday of the month, which will again bring us the Labor Department’s tally of last month’s job creation in the U.S. At 8:30 this morning, expect to hear about 175,000 new non-farm jobs and an unchanged Unemployment rate of 4.3 percent. A less-talked-about but perhaps more important statistic is the average hourly wage. Expect a monthly increase of three-tenths of a percent, which would give us a year-over-year hike of 2.6 percent. As the Fed tries to ignite a little inflation, a robustly rising hourly wage might be the first sign of success.
Campbell Soup is looking for some success in boosting revenue. They are buying Pacific Foods for 700 million dollars.
The price of oil, which had been on a tear for a week or so is backing off again this morning, down about 2 ½ percent at $44.32 per barrel.
And if you worry that indexed mutual funds might just be inflating stock prices a little too much, you may be on to something. The Vanguard S&P 500 fund now owns more than 5% of the shares of 491 of the S&P 500.
In front of the big Employment Report and anything interesting out of the G20 meeting in Germany, our futures are playing wait-and-see. Our futures have been a slightly positive all morning long. Adjusted for fair value, the S&P 500 futures are higher by about 3 points, the Dow futures are up 9 points, and the NASDAQ futures are now almost 5 points above fair value.
In front of tomorrow’s closely watched Employment Report from the Labor Department, we’ll get the ADP Employment Report at 8:15 this morning. It’s expected to tell us that 180,000 new jobs came into being in June. That being said, the last two monthly ADP reports proved to be wildly different than the official Government figures. However, for the first three months of the year, the ADP report was pretty spot-on.
The European Central Bank released the minutes of their latest meeting this morning. Like the Fed’s last meeting, there was disagreement among members with some calling for some economic tightening. In the final decision, the ECB kept their current stimulus in place, but it looks like the days of negative bond yield are thankfully numbered – and the number is getting smaller in a hurry.
It's no secret that Victoria’s Secret’s got out of the swimwear and apparel business recently. Consequently, shares of parent company L Brands are lower this morning after reporting a 6 percent sales drop year over year.
And don’t look now, but Tesla shares are off another 3½ percent pre-market after a more than 7 percent drop yesterday. Tesla’s first-half vehicle deliveries came in at the low end of what was promised. Nevertheless, Tesla stock is still about 50 percent higher this year.
Asian markets were mixed overnight, but European markets are generally about one percent lower. Our futures have been significantly lower all morning long. Adjusted for fair value, the S&P 500 futures are lower by about 10 points, the Dow futures are down 64, and the NASDAQ futures after gaining 41 points yesterday, are now 52 points below fair value.
The first half of 2017 is in the rear-view mirror, with the S&P 500 sitting on an 9.3 percent year-to-date gain including dividends. Let me do the simple arithmetic for you – that’s almost a 20 percent annualized gain for large-cap stock investments. That’s arithmetic and certainly not a prediction, but by any measure 2017 has been good to investors so far.
Granted, market leadership has changed in the past couple of weeks. Growth stocks, and technology stocks in particular have given investors about three times the return of more conservatively priced value stocks this year, with the NASDAQ 100 higher by over 14 percent. However, the big tech names have been on the skids lately and that relative weakness may continue this morning.
Continued strength will, as it usually does, depend on corporate earnings shooting higher and interest rates staying low or rising very slowly. Second quarter earnings reports kick off next week, but we’ll get some color on the future of interest rates at 2 o’clock this afternoon with the release of the minutes from the Federal Reserve Open Market Committee meeting from June 14th.
Overseas markets are mixed, with individual markets not moving much in any particular direction.
Adjusted for fair value, the S&P 500 futures are higher by almost 3 points, the Dow futures are up about 26, and the NASDAQ futures have risen from negative numbers and are now 9 points above fair value.