July 31, 2019
Okay, so there’s a lot of earnings news this morning, but we’ll get to that in a minute.
More importantly to most anyone’s investment portfolio is the direction of interest rates. If you look back to 1960, the Federal Reserve has cut interest rates, on average, more than 25 times per decade. This afternoon at 2 o’clock, the Federal Reserve is universally expected to cut short-term interest rates by a quarter of a percent. That will be the first interest rate cut in 11 years.
Of course, that lack of rate cuts can be explained by the near-zero rates adopted during the Great Recession of 2008 and 2009. However, it is remarkable that we haven’t had a rate cut this decade, while Central Banks across the globe have continued to cut rates, some even below zero.
Okay, back to earnings – Last night Apple reported very strong results in services, which is more than offsetting a drop in iphone sales. Apple shares are about 4 percent higher pre-market. Not to be outdone, General Electric reported 17 cents per share of profit this morning, a nickel better than expected. GE shares are almost 5 percent higher.
Electronic Arts shares are rallying more than 6 percent on a strong report, Molson Coors down more than 6 percent on a sales miss.
Asia was lower overnight, Europe is mixed.
Adjusted for fair value, the S&P 500 futures arehigher by 4 points, the Dow futures are up almost 70, and the NASDAQ futures are about 31 points abovefair value.
July 30, 2019
The busiest earnings week of the quarter rolls on this morning. Among the companies reporting better than expected earnings are Merck, Eli Lilly, Procter and Gamble. Eaton beat the profit estimate but missed on sales.
ConocoPhillips checked in with $1.01 per share of adjusted profit, two cents short of estimates. Last night, Beyond Meat announced a lower loss than expected, but also announced a new secondary offering of stock as they try to raise more cash to put on the broiler. A bunch of early shareholders are also ready to cash in. That has the Beyond Meat shares in the deep fryer this morning, down about 13 percent.
Under Armour shares are 12 percent lower on weak full year guidance and Capital One shares are off about 5 percent on word of a massive data breach.
The miss of the morning will likely be engineering and construction firm McDermott. A GAAP loss of 80 cents per share, and even an adjusted loss of seven cents came as a big surprise when analysts were expecting a profit. Full year guidance now predicts a loss and McDermott shares are on a one-third off sale this morning.
Consumer Confidence and Pending Home Sales numbers come later this morning.
In the meantime, we’ll see prices overall head lower, as a broker downgrade of Pfizer isn’t helping.
At this point, adjusted for fair value, the S&P 500 futures are down 13 points, the Dow futures are down 77, and the NASDAQ futures are about 55 points below fair value.
July 29, 2019
It will be a busy, busy week for market watchers, with a Federal Reserve Open Market Committee decision, the Monthly Employment Report on Friday, Chinese Trade Talks and the last huge surge of second quarter earnings reports for calendar year companies.
However, it just wouldn’t be a traditional Monday without some merger news. This morning, Pfizer reported 80 cents of quarterly profit, which was a nickel better than estimates. They also announced the merger of Upjohn, their off-patent drug business with Mylan. Pfizer shareholders will own 57 percent of the new company, which will be re-named something other than Mylan. Mylan shares are up more than 14 percent on the confirmation of that deal.
In a smaller deal, Exact Sciences is buying Genomic Health.
Perhaps the most interesting and mystifying company of this year will report earnings after 4 o’clock this afternoon. Shares of Beyond Meat are up about 840 percent since going public about 3 months ago. That part is mystifying. The interesting part is finding out just how much money the company lost last quarter.
Anadarko Petroleum, Simon Property, Sanofi and Illumina also report in today.
There’s not much going on with our stock futures. At this point, adjusted for fair value, the S&P 500 futures are down a point, the Dow futures higher by 3 points, and the NASDAQ futures are about 4 points below fair value.
July 19, 2019
Yesterday, comments by New York Federal Reserve President John Williams turned a pretty sluggish market positive. His comments re-kindled hopes of a possible half-point rate cut this month, although the Fed has since tamped down on that expectation.
What was expected of Microsoft was far exceeded last night. Earnings of $1.71 per share were a full half-dollar higher than expected as everything except the gaming business is going full speed ahead. Microsoft shares are looking about 3 percent higher this morning.
Not to be outdone, Sketchers shares are higher by about 13 percent as 49 cents of quarterly profit easily beat the 33-cent estimate on a nearly 5 percent increase in same store sales.
And newly public cybersecurity company Crowdstrike issued great full year guidance and shares are higher by nearly 20 percent.
American Express shares are down a fraction of a percent on earnings that were 3 cents ahead and sales that were roughly as expected.
Asian markets rose overnight. Europe is mixed, but our futures have been on the rise much of the morning. At this point, adjusted for fair value, the S&P 500 futures are higher by about 4 points, the Dow futures are up 70, and the NASDAQ futuresare about 27 points abovefair value.
July 18, 2019
Sometimes better than expected earnings or sales can drive a stock price higher, sometimes it’s enhanced projections of future earnings. With a company like Netflix, the pace of subscriber growth is the critical issue and the news there last night was not good. Subscriber growth came in about half of the expected number. In the U.S., the number of subscribers actually dropped, possibly due to price increases. That’s the first drop since 2011. Netflix shares are almost 11 percent lower this morning.
Dow component United Health checked in with $3.60 of profit, which was 15 cents better than expected. Shares are about one percent higher. Ebay shares are indicated about 5 percent higher on an earnings beat and improved guidance. Morgan Stanley’s income and revenue was lower than a year ago, but better than expected.
IBM had a pretty good report last night, although the shares are indicated a fraction of a percent lower pre-market.
Asian markets followed us lower overnight. Europe is more of a mixed picture.
Our futures have recovered a great deal from their very early morning lows, but are still pointing lower. Adjusted for fair value, the S&P 500 futures are lower by about 4 points, the Dow futures are down about 7 points, and the NASDAQ futures, reflecting the drop in Netflix shares,are about 32 points belowfair value.
July 17, 2019
A rather contentious Congressional hearing yesterday on Facebook’s proposed cryptocurrency Libra is not doing the price of other cryptocurrencies any favors. For those of you who love scary roller coasters without guardrails, a single bitcoin traded at $9,164 this morning, down by more than a third from its price just three weeks ago.
United Airlines, Bank of America and U.S. Bancorp all reported better results than expected. Last night’s report from Seattle Genetics has those shares about 9 percent higher. Abbott Laboratories also posted good results and raised full year earnings guidance.
Comerica shares are three percent lower pre-market after reporting earnings. Revenues were short of expectations and at least three major brokerage firms issued downgraded ratings on Comerica this morning.
The big loser of the morning may be multi-level marketing firm Nu-Skin. Shares are getting skinned by almost 20 percent this morning on worries about their Chinese business.
Overseas markets are mixed and whether higher or lower, they’re not higher or lower by much. And, for all the earnings news out this morning, there’s not a lot going on with our stock futures either. Adjusted for fair value, the S&P 500 futures are higher by a point or so, the Dow futures are up 15, and the NASDAQ futures are about 5 points above fair value.
July 16, 2019
The Dow, S&P and NASDAQ stock indexes all hit all-time highs yesterday as we start rolling into the second quarter earnings season and we could well have another day of record levels on tap.
Earlier this morning, Johnson & Johnson reported $2.58 cents in quarterly profit, 12 cents better than expected. Shares are less than one percent higher pre-market. Goldman Sachs beat the $4.89 estimate by 92 cents and JP Morgan Chase checked in with $2.82 cents per share. That was 32 cents better than expected, but it included a tax benefit of about 23 cents. Wells Fargo joined the parade, earning $1.30 per share, 15 cents better than expected. Wells and JP Morgan Chase shares are slightly lower pre-market.
The downer of the morning may be Domino’s Pizza. Earnings of $2.19 were better than expected, but sales fell short and same store sales were up by a lower than expected 3 percent. Domino’s shares are more than 5 percent lower this morning.
Retail Sales numbers come a little later, but in front of that we should head higher at the open, as our futures turned positive with the past hour or so.
Adjusted for fair value, the S&P 500 futures are higherby about 2 points, the Dow futures are up 28, andthe NASDAQ futures are about 6 pointsabove fair value.
July 15, 2019
What used to be known as the Humphrey-Hawkins testimony is now in the rear-view mirror and the next Federal Reserve meeting is up around the bend, but we won’t get there for another couple of weeks. Dead ahead are big company earnings reports, which start to roll in volume this week.
A few minutes ago, Citigroup reported $1.95 per share, which is 15 cents higher than the expected $1.80. There was a one-time gain in that number which may not have been considered in estimates. But even if you adjust for that gain, the EPS number is 2 cents better that expected. Citigroup shares are about 1½ percent higher pre-market.
China reported second quarter gross domestic product overnight that fell to a 27-year low. 6.2 percent come in below the first quarter’s 6.4 percent.
It’s Amazon Prime day, so expect your office productivity to drop by 10 to 50 percent, depending on the percentage of chronic shoppers you have on the payroll.
The Nikkei was unchanged as markets were closed in Japan today for a holiday other than Amazon Prime Day.
Chinese stocks, which were a little lower before their disappointing GDP report wound up the session higher, perhaps on hope of additional Chinese Government stimulus in view of the softening GDP. European markets have turned a little higher, and our futures have been a little high all morning long.
Adjusted for fair value, the S&P 500 futures are higher by about 4 points, the Dow futures are up 46, and the NASDAQ futures are about 12 points above fair value.
July 12, 2019
Stock indexes are looking to open at record highs once again this morning, as enthusiasm for the prospect of lower interest rates continues. Even yesterday’s rather hot June Consumer Price Index increase of three tenths of a percent failed to put much of a damper on the bull run.
At 8:30 this morning, the Producer Price Index could confirm that little uptick in prices. Expect an increase of only one-tenth of one percent for June. Excluding food and energy, most expect a two-tenths of a percent increase.
Shares of Milacron are surging by over 25 percent pre-market. Milacron will be acquired by Hillenbrand in a 2-billion-dollar deal.
President Trumps verbal disapproval of cryptocurrencies doesn’t seem to faze traders in that stuff as all cryptos are on the rise this morning.
Asian markets were mostly higher overnight. Germany is a bit lower after a Volkswagen profit warning, but the rest of Europe is higher.
Domestic second quarter earnings reports will start to roll out in volume next week, but the end of this week will start with rising stock prices.
Adjusted for fair value, the S&P 500 futures are higher by about 8 points, the Dow futures are up 86, and the NASDAQ futures are about 21 points above fair value.
July 11, 2019
Federal Reserve Chair Powell gave stock traders just about everything they wanted to hear yesterday. The domestic economy is fine, but things around the world are slowing, and there’s plenty of reason to believe that a cut in short term interest rates is right around the corner. Stock prices took off right after Powell’s prepared comments were released at 8:30 yesterday morning.
Later this morning, Powell reprises his performance before the Senate Banking Committee, but no big surprises are expected. Of course, big surprises are, by definition, never expected. So, it may pay to pay attention.
Delta Airlines was evidently paying attention to business last quarter. Earnings of $2.35 per share were 7 cents better than expected. Delta raised its full year guidance and raised its dividend by 15 percent. Delta shares look to leave the runway more than 2 percent higher at the open of trade.
At 8:30, the Bureau of Labor Statistics is expected to tell us that there was apparently no consumer price inflation in June, with the annual inflation rate holding at 2 percent or below.
Asian markets followed us higher overnight. Europe is mixed. Oil is higher again this morning after a big day yesterday. Drug makers and distributors are rising pre-market as the Trump Administration is reportedly withdrawing a proposed ban on pharmaceutical rebates.
Adjusted for fair value, the S&P 500 futures are higher by about 8 points, the Dow futures are up 112, and the NASDAQ futures are about 25 points abovefair value.
July 10, 2019
It’s generally accepted that financial asset prices are largely a function of earnings and interest rates. In the short run, it’s easy to see which one matters more. Consider that in 2018, corporate earnings were ripping higher, but interest rates were on the rise and the S&P 500 lost ground. This year, earnings are flat at best, and the S&P Index is higher by almost 20 percent, as it is generally perceived that interest rates will be headed lower.
That’s why Federal Reserve Chairman Powell’s appearance before the House Financial Services Committee will be must-see TV this morning. Any hint that rates will not be moving lower would be almost as much of a surprise as word that certain of our congressional representative wrote their own remarks. Powell’s prepared remarks will be released to the press at 8:30.
If that wasn’t enough monetary mush for you, the Fed’s most recent meeting minutes will be released at 2 o’clock.
Last night, Levi Strauss announced adjusted earnings for last quarter that were better than expected, but only after adjustment for the higher than expected cost of going public. Sales for the rest of the year aren’t expected to be so hot, and Strauss shares are looking to open about 7½ percent lower. Bed Bath & Beyond is set to report earnings later today.
Overseas markets are mixed ahead of the Powell testimony, but we’ll likely start the day a little lower. Adjusted for fair value, the S&P 500 futures are lower by about 8½ points, the Dow futures are down 64, and the NASDAQ futures are about 21 points below fair value.
July 9, 2019
Pepsico is one of the few companies to report earnings this week and they checked in with an adjusted quarterly profit of $1.54 per share, which was 4 cents better than expected. Sales were also better than expected and Pepsi shares are about one percent higher.
On the famous other hand, 3M shares are more than one percent lower pre-market on a broker downgrade.
There’s one potential deal in the financial services space this morning as Piper Jaffray is going to buy Sandler O’Neill. That’s a nearly half-billion-dollar deal and is expected to close in early 2020. And Cisco is buying Acacia Communications for 70 dollars per share. Acacia shares are almost 40 percent higher.
At 10 o’clock, the Bureau of Labor Statistics will report the May JOLTS report. That survey measures job opportunities and labor turnover. After last Friday’s surprisingly strong Employment Report, traders will be looking for a little bounce out of that JOLT.
Overseas markets are lower. Our futures are off their lows of the morning, but we’re still looking at red arrows as we head toward 9:30. Interestingly, at this point our futures are lower by almost exactly as much as they were 24 hours ago.
Adjusted for fair value, the S&P 500 futures are lower by almost 12 points, the Dow futures are down 106, and the NASDAQ futures are about 38 points below fair value.
July 8, 2019
As had been rumored, Deutsche Bank lowered the boom on its global equity business today. They announced that 18,000 or their 94,000 employees will be getting pink slips as they restructure around the new realities of the financial markets and get out of the equities business. Those job cuts started in Asia today. The Deutsche Bank ADR is indicated between two and three percent lower in the pre-market.
We’ll get a smattering of earnings reports later this week, but a full slate of reports comes next week. Most of the news this week will focus on interest and inflation rates. Last Friday’s very strong employment report sent a chill through stock prices as hopes of a 50-basis point interest rate cut pretty much disappeared.
Later this week, Fed Head Jerome Powell will spend a couple of mornings on Capitol Hill trying to make sense out of the inquisitors’ questions while not upsetting the market with his responses.
Consumer price and Producer price inflation numbers for June will come on Thursday and Friday, respectively.
Asian markets followed our Friday dip lower overnight and finished lower by 1 to 2½ percent. Europe is only modestly lower, on average less than a half of one percent.
Adjusted for fair value, the S&P 500 futures are lower by almost 11 points, the Dow futures are down 107, and the NASDAQ futures are about 43 points below fair value.
July 3, 2019
The ongoing drama of a company called Tesla took another plot twist yesterday. Tesla stock had been about 30 percent year to date after disappointing car deliveries in the first quarter. Yesterday, the company announced that over 95,000 Teslas were delivered in the second quarter, surpassing the 91,000 estimate. Some are suggesting that margins suffered as the company pushed to maximize deliveries. Nevertheless, the previously stated full-year delivery prediction seems out of reach and was not reiterated by the company. Tesla shares are looking to open about 7½ percent higher.
Mortgage rates held basically steady last week, according to the Mortgage Bankers Association. The 30-year conventional loan with 20 percent down averaged 4.07 percent. Applications were roughly in line with the prior week. However, overall applications are 31 percent higher than a year ago and the number of refis was nearly doubled from a year ago.
We’ll get the ISM reading on the health of the services sector of the economy this morning. Expect continued expansion with a June reading of 55.8, although that would be a touch lower than May’s 56.9.
It will be a short day for trading as the U.S. stock market will close at 1 o’clock to give traders enough time to apply their sunscreen before they head for the beach.
And we should start that short day of trade with higher prices once again. Adjusted for fair value, the S&P 500 futures are higher by about 9 points, the Dow futures are up 72, and the NASDAQ futures are 34 points abovefair value.
July 2, 2019
Now that the Chinese trade drama has been back-burnered, at least until the next Presidential tweet, we can get back to focusing on earnings and interest rates.
Second quarter earnings reports won’t roll in volume for another couple of weeks, but the next significant hint regarding the direction of interest rates comes on Friday with the June Employment Report. If new non-farm job creation comes in significantly under the 180,000 mark, odds of a July interest rate cut will improve.
Shares of CyberOptics are a few percent lower on downbeat guidance. They cited an industry-wide slump in semiconductor chip demand.
Another top executive at Tesla has left the building. We’ll be getting the highly anticipated delivery numbers from Tesla this week.
Brokerage firm Oppenheimer cut their price estimates on a number of financial firms this morning.
Asian markets are higher after the Australian Central Bank cut short term rates overnight as expected. The Hang Seng Index is more than one percent higher after being closed for a holiday yesterday. European markets are mostly a bit higher.
Adjusted for fair value, the S&P 500 futures are lower by about 2½ points, the Dow futures are down 35, and the NASDAQ futures are 14 points belowfair value.
July 1, 2019
The trade war isn’t nearly over, but a cease-fire is the next best thing as far as stock traders are concerned. The next round of threatened tariffs on Chinese goods will be put on hold and some restrictions on U.S. sales to Chinese telecommunications firm Huawei will be lifted. Negotiations will resume, as leaders of both counties may have good reason to come to a settlement.
A Chinese purchasing managers survey, released over the weekend, concluded that the Chinese manufacturing sector contracted in June, for the first time in four months. At 10 o’clock, the June ISM reading on the health of our manufacturing sector is expected to reflect slight expansion at a reading of 51.
Speaking of June, the Dow Jones Industrial Average enjoyed its best June performance in over 80 years, with the S&P 500 having its best June in 20 years.
The Board of Directors of Deutsche Bank will reportedly meet next weekend to decide just how many employees will get pink-slipped in the near future. As many as 20,000 workers could be getting a very extended summer vacation.
There’s no trading across the border today in observance of Canada Day.
In case you’re keeping score, the S&P 500 index rose over 17.3 percent in the first half of 2019, and that’s not including dividends paid by those companies.
Most overseas markets are higher. Our stock futures are off earlier levels, but we still should get a sizable pop at 9:30. Adjusted for fair value, the S&P 500 futures are higher by about 32 points, the Dow futures are up 259, and the NASDAQ futures are a rather massive135 points above fair value.