Please note that Ron Humenny and Starfire Investment Advisers, Inc. are not affiliated with, are not compensated by and do not endorse Flagstar Bank any of the sponsors of our daily WJR reports
June 28, 2005
How about that Bob Dylan? First a deal with Victoria’s Secret, and now an exclusive deal with Starbucks? Oh, the times they a change-ed. Starbucks will be the exclusive source of a new Bob Dylan CD for the next sixteen months. The price will be $13.95 for the CD, which I believe is still slightly higher than a cup of the house-brand coffee, although I’m not sure about that.
We’ll go into the trading day with the wind blowin’ at our back today. The price of oil has slipped below 60 dollars per barrel, currently $59.89, and that has markets overseas bubbling up.
On Friday of this week, we’ll get the University of Michigan’s Consumer Confidence Index. But at 10 o’clock this morning, it’ll be the June Consumer Confidence Index from the Conference Board. Expect a reading around 104. That would be up a couple points from the May number.
A little later today, Congress will consider the Central American Free Trade Agreement, which gives them a chance to do something that might actually HELP stock prices for a change, but don’t bet on it.
June 27, 2005
You can look at the monthly oil futures this morning, and month by month by month, as far as you can see, they all start with the number “6.” The August contract for light sweet crude hit 60 dollars and 64 cents per barrel overnight and that is not good news.
General Motors is reportedly restricting certain employee stock trading, now that their earnings guidance to the outside world is a lot less extensive. GM wants no trading in their stock by any GM employee who may know something that you don’t know. That idea, like gravity, is not only a good idea, it’s the law.
There’s nothing much cooking on the economic calendar today. Of course later this week we have some consumer confidence readings as well as a two-day meeting of the Alan Greenspan coffee klatch.
Nike beat estimates by 3 cents per share this morning. Walgreen also beat estimates.
Markets around the world are lower on the news of 60 dollar oil. Futures on our major stock indexes have improved during the past hour, but are still indicating lower prices at the market open. Adjusted for fair value, the S&P futures are down about 1 ½ points, the Dow futures are down 13, and the NASDAQ futures are about 2 points below fair value.
June 24, 2005
As they say, “Sticks and stones will break my bones, but Congressional hearings can cause incredible damage.” You can pin yesterday’s 166 point loss in the Dow squarely at the feet of the Senate Finance Committee. Yesterday, the Committee held a hearing, which included testimony from economic experts Alan Greenspan and John Snow about trade with China. While the testimony from those two suggested that Congress keep its hands off the China, there was a lot of very protectionist talk flowing from the mouths of the non-experts in the room. There’s nothing that spooks stock prices quite like fears of a good old-fashioned trade war.
The May Durable Goods report, due out in a few minutes, is expected to show an increase of 1.3 percent. There’s less than a week left in the second quarter, so keep an eye out as well for any earnings warnings that someone may try to leak out on a slow summer Friday afternoon.
June 23, 2005
Federal Express is out with their earnings report this morning. They missed Wall Street’s revenue and earnings estimates for the 4th quarter and issued guidance for the 1st quarter that’s not all that rosy. It’s a tough business when energy costs are up so much.
Speaking of energy, as expected, CNOOC is bidding 18 ½ billion dollars in cash to acquire Unocal. Chevron had bid about 17 billion for Unocal recently. Given that CNOOC is 70% owned by the Chinese Government, this offer may pour gasoline on some potentially fiery Congressional debate about trade sanctions against China.
Homebuilder D.R. Horton will be going into the S&P 500 Index, replacing Veritas Software, which is being acquired.
June 22, 2005
Bye-bye to salaried bonuses and bye-bye to 401(k) matching funds, and for some 1,750 Ford salaried employees, well, it’s just bye-bye altogether. Shortly after the market closed yesterday, Ford Motor lowered their earnings estimates once again, and announced a barrage of cost cutting which is not likely to help the purchasing power of a lot of local households. Profits for the year are now estimated to come in at a buck to a buck and a quarter per share. Ford stock traded down about 5% in the after hours last night. This morning, in Europe, there has been some recovery. However, look for Ford to open a 9:30 about 3 percent or so lower than yesterday’s close.
Coca-Cola and the European Economic Commission have settled a six-year-old dispute over trade practices. Coke won’t be subject to a big fine, but will have to change their sales practices. So, if you’re traveling to Europe, you may be able to enjoy a wider variety of “fizzy drinks” than before.
June 21, 2005
Obviously, with a billion or so people, China’s potential as a consumer nation is huge. But as a growing economic power, you can look for more Chinese investors assembling Chinese-owned companies to sell stuff to those consumers.
Two potential examples this morning; Maytag, which has been offered 14 dollars per share by Ripplewood Holdings, may be offered 16 bucks by an investment consortium that includes China’s Haier American Trading. There’s also speculation that China’s CNOOC may offer $71.50 per share in cash for the big oil firm Unocal, which would easily trump Chevron’s cash and stock offer.
Homebuilder Lennar reported terrific earnings this morning. They beat estimates by 29 cents per share and raising guidance for the year by almost 10 percent.
Overseas, most markets are up about a quarter percent at this hour. Our futures have been pointing toward a lower open all morning long, but at this point they’re not terribly bad.
Adjusted for fair value, the S&P futures are down about a point and a half, the Dow futures are down 17, and the NASDAQ futures are about 2 ½ points below fair value.
June 20, 2005
Throughout the first three months of this year, when the price of oil zigged, the stock market zagged. Hour after hour, it seemed to be an almost perfectly inverse correlation. So far this second quarter, stock prices have pretty much decoupled from that relationship. However, today’s oil prices may get the stock market’s attention again.
The August contract for light sweet crude breeched the 60 dollar level overnight, and although we’re back down to 59.66 right now, many overseas stock markets and our futures are seeing red.
If you own shares of Cablevision, you are about to be bought out. In a complex deal that involves spinning off some assets and spitting up 21 bucks per share in cash, the Dolan family is taking Cablevision private in what amounts to a 25 percent premium to the little people. Excuse me, I mean “other shareholders.”
June 16, 2005
If you’ve never heard of a company called Vicuron, you’re not alone. It’s a company that makes anti-infective and anti-fungal medical products. It’s a stock that you could have picked up for well under 9 dollars per share last summer. This morning, in a 2 billion dollar deal, drug giant Pfizer is buying all shares of Vicuron for more than 29 cash dough dollars per share. That’s a 74% premium from yesterday’s closing price.
There’s a story in the Wall Street Journal this morning that the Justice Department is weighing obstruction of justice charges against accounting firm KPMG. However, it may never come to that. You’ll remember that DOJ put Arthur Andersen out of business by indicting that firm on a charge that was later overturned. No matter how strong the case against KPMG, there are only four big accounting firms left. Potentially eliminating one of them, especially given the demand for their services created by Sarbanes-Oxley, may not be deemed to be in the public’s best interest.
May Housing start numbers are expected to be up slightly at 8:30. Stocks in Hong Kong were down overnight, but most other overseas markets are in the green. We’re looking for a light shade of green at 9:30. Adjusted for fair value, the S&P futures are up a less than a point, the Dow futures are up 10, and the NASDAQ futures are about 2 points above fair value.
June 15, 2005
We may have discovered a great new way to raise a lot of money. Today, JP Morgan announced that, without admitting that they did anything wrong in the Enron matter, they are forking over $2.2 billion dollars. Now that’s generosity. Just a couple of days ago, Citigroup paid 2 billion dollars in the same matter, again without admitting that they did anything wrong. You know, 2 billion here, 2 billion there…. this could totally replace bake sales as a way to raise some cash. By the way, for accused firms that don’t settle with the lead plaintiff, the University of California, the trial starts in October of 2006.
OPEC did the expected this morning. They announced an increase in the production quota by 500,000 barrels per day. It hasn’t helped much so far. Oil futures are up 51 cents at $55.51 per barrel.
At 8:30, look for the May Consumer Price Index to come in at a one-tenth of a percent increase. We’ll also get industrial production and capacity utilization numbers at 9:15.
June 14, 2005
A couple of big economic reports will be released in ten minutes or so. The May Producer Price Index is expected to have declined 2 tenths of one percent. BUT, if you exclude the food and energy components, it’s expected to show a 2 tenths of one percent INcrease.
Likewise, it’s expected that May Retail sales declined by 2 tenths of a percent, BUT if you exclude declining automobile sales, the core index is expected to be UP 2 tenths of a percent.
Of course, if all businesses could include all the revenue But exclude all the expenses they would always be wildly profitable. But, I digress…
The Manpower Job survey is out and for the sixth quarter in a row, it reports that more businesses are planning to add workers this year than the number that are planning to trim their workforce.
We have an earnings warning from Knight-Ridder and disappointing results (so what else is new) from Pier One this morning. Best Buy announced great quarterly results just a few minutes ago and they are raising their yearly guidance.
The futures are indicating slightly higher prices at this point. Adjusted for fair value, the S&P futures are up a point and a half, the Dow futures up 6, and the NASDAQ futures are 3 ½ points above fair value.
June 13, 2005
It seemed like a good idea at the time. Let’s merge a white shoe investment banking firm, Morgan Stanley, and a retail stock broker, Dean Witter. Never mind that apparent culture clash – they’ll work things out. Well after some very messy and very public disputes and after dozens of firings and defections, it appears that the turmoil surrounding the head honcho at Morgan Stanley is entering a final stage.
This morning Morgan Stanley announced that Phil Purcell, the embattled CEO will step down as soon as a replacement can be found, and you can bet that the headhunter has been given orders to make it snappy. Morgan Stanley stock is up 6% in pre-market bidding on that report.
News Corp will be buying back 3 billion dollars of company stock. Procter & Gamble is cutting their upfront television ad spending by 5% and their cable spending is going down faster than Mike Tyson on pay-per-view. They’re cutting cable by 25%.
June 10, 2005
Intel’s stock price has been running up of late, in anticipation that the quarter was going well. Well, Intel came through with that anticipated good news last night. Sales of computer chips for laptops will power Intel’s sales to the high end and beyond prior expectations. That news will be good news for stocks this morning. Except, of course, for Intel. It will be a case of buy on the rumor and sell on the news, as Intel is down about one percent on Europe this morning.
Yesterday Alan Greenspan played his favorite verbal game, called “Ring around the Congress,” no doubt leaving them more befuddled than before. The upshot, however, is that he gave no indication that the Fed is done (or close to being done) raising short-term interest rates. In reaction, interest rates on the 10 year Treasury Bond are backing up to 3.97 percent this morning. They had been below 3.90 earlier this week.
We’ll get some trade data at 8:30 and some Treasury Budget data at 2 o’clock, but all in all it should be a pretty quiet trading day. Adjusted for fair value, the S&P futures are up about a point, the Dow futures are up 16 but the NASDAQ futures, no doubt reflecting the pullback in Intel, are about 2 points below fair value.
June 9, 2005
There’s big doings on Capitol Hill today. Alan Greenspan will be there to play baseball with the Joint Economic Committee of Congress. Expect him to catch the usual flurry of wild curveballs, as investors strain to find out whether the interest rate tightening cycle is in the sixth inning, the seventh inning, or the ninth inning. Or maybe, like the National Champion Michigan softball team, he planning a 10th inning home run. In any event, the stock market will likely hang on his every word today.
The other major announcement of the day will come after the market closes when Intel issues their mid-quarter update. They are expected to reaffirm prior guidance, but if they surprise to the upside, like Texas Instruments did earlier this week, tech stocks should get off to a good start tomorrow.
Tokyo was off 1 percent overnight. Most European markets are marginally lower. The Bank of England held interest rates steady today.
Futures on our major stock indexes have rallied during the past hour and are pointing toward a flat open for stocks at this point. Adjusted for fair value, the S&P futures are up a point, the Dow futures are up 3 and the NASDAQ futures are 4 points above fair value.
June 8, 2005
Kirk Kikorian only got about 19 million of the 28 million shares of General Motors he was looking for yesterday in his tender offer. Don’t cry any tears for him. With GM trading below his offer price of 31 bucks, he can now just go out into the open market and pick up more shares on the cheap.
There’s nothing quite like good news from a technology company and lower oil prices to light a little fire under stock prices. So bring your marshmallows and get ready for a rally at 9:30.
Last night Texas Instruments raised their earnings and revenue guidance for the current quarter. They reported strong demand for calculators and cell phones. Apparently, a lot of people are trying to calculate how much home equity they can still borrow against, and then calling their mortgage broker before an opportunity to go further in debt slips away.
As I mentioned, oil prices are down this morning at $53.10. But at 10:30, we’ll get the weekly report on crude oil and distillate inventories. Expect a rise of about a million barrels in each.
Caterpillar landed a broker upgrade this morning and is looking to open higher as is Altria, on hopes for lower potential liability with respect to an on-going trial.
June 7, 2005
Some days, it’s just not much fun going in to work. Or at least, it’s not as much fun as it is on other days. I don’t know how much fun Rick Wagoner has had at work lately. But, I can’t imagine that he was terribly happy to hear the alarm go off this morning.
General Motors will be holding a shareholders’ meeting. Your run of the mill shareholders’ meeting will often have a sharp question or two directed at company management. This meeting may serve up a couple more than that.
For the general stock market, it’s another Alan Greenspan week. Yesterday, he spoke in China about the interest rate conundrum. On Thursday, he will testify before Congress about the economy. Yesterday his comments calmed a jittery market and we ended the day with a small gain.
European markets are mostly positive at this point. Our futures have been steady creeping higher all morning long. At this point, adjusted for fair value, the S&P futures are up almost 3 ½ , the Dow futures are up 29 and the NASDAQ futures are almost 5 points above fair value.
June 6, 2005
It’s Monday. There must be mergers to talk about. Washington Mutual is buying Providian Financial, which one of the biggest credit card companies out there. It’s about a 6 ½ billion dollar deal.
A couple of real estate companies are also getting together, as ProLogis is buying Catellus at about a 16 percent premium.
The music is playing a little faster in the three member waltz between E-Trade, Ameritrade and TD Waterhouse. E-Trade is raising their bid for Ameritrade, which is reportedly in late-stage talks to buy TD Waterhouse from Toronto Dominion.
Apple is reportedly switching suppliers for at least some of their chips it uses in its computers. Word is that Apple will start buying chips from Intel. Currently, IBM and Freescale Semicomductor are the providers.
Oil futures are up again, at $55.22 per barrel.
June 3, 2005
The monthly jobs report will be released in about 10 minutes. It should hold the key to how stocks trade at 9:30. The yield on long term bonds dropping like a stone recently. The ten year treasury yield this morning is at 3.89%. It could well be that the bond boys and girls are signaling an upcoming economic slowdown. A weak jobs report would add fuel to that fire. The consensus estimate is the addition of 185,000 new jobs last month. Any significant shortfall should add duel to that fire. The unemployment rate is expected to hold firm at 5.2 percent.
There’s a merger in the defense industry this morning, although this one has been widely anticipated. L-3 is buying Titan in a 2 billion dollar deal.
Intel stock has been on a little run lately and this morning two major brokerage firms have upgraded their rating on the stock.
Overseas markets are mostly positive, but only by a very tiny margin. Our futures are pointing slightly lower, but this morning everything depends on the jobs report at 9:30. At this point, adjusted for fair value, the S&P futures are down a point, the Dow futures are down 7 ½, and the NASDAQ futures are just about even with fair value.
June 2, 2005
At 10:30 this morning, we’ll get the weekly inventory data on gasoline and crude oil stocks in the U.S. Don’t look now, but light sweet crude prices are over 54 dollars a barrel again. They are down 25 cents this morning, but they’re still at $54.35.
On the flip side of the consumer pocketbook, long term interest rates plummeted again yesterday. The ten year Treasury that started the day around 4 percent ended the day at 3.9%. Either the bond market is predicting a really lousy economy in the future, or, a lot of hedge funds are busy covering short positions in the ten year bond and are driving that yield down. Either way, is you are about to lock in a mortgage or refinance, this is a very good thing. But, look out for the employment report tomorrow. A really strong number could give us a quick about->
Walmart same store sales were up 2 ½ % in May, Costco sales were up 3% domestically and 12% overseas. That works out to 5% overall.
There may never be a European Union, but there is a European Central Bank. They met this morning and decided to leave interest rates unchanged.
Stock futures haven’t moved much this morning and have been pointing toward a lower open for the market all morning long. At this point, adjusted for fair value, the S&P futures are down almost 2 points, the Dow futures are down 21, and the NASDAQ futures are up almost 4 points below fair value.
June 1, 2005
We’ll find out today just how bad the numbers are when the May car sales figures roll off the line. It’s expected that Ford sales slipped 4 percent. GM sales are expected to be off more than 5 percent.
At 10 o’clock the May ISM index, which is another gauge of manufacturing activity is expected to show very slight expansion at a level of 52.2. That’s down from 53.3 last month, but still above the “break even” number of 50.
In case you didn’t notice, yesterday the Supreme Court threw out the conviction of accounting firm Arthur Andersen in the Enron matter. This is roughly equivalent to changing the verdict after executing the defendant. So to the 30,000 people who lost their jobs – try not to be in the wrong place at the wrong time – next time.
Just in time for summer driving season, oil is pushing 52 and a half bucks per barrel this morning. On the good news side, the ten year Treasury Bond opens today at just a hair above a 4 percent yield, which of course is good news if you are looking to borrow long-term money. That assumes, of course that you are one of the remaining seven people left in this country who is not already hopelessly in debt.
Stock prices should be relatively flat at the open today. Adjusted for fair value, the S&P futures are up less than a point, the Dow futures are up 12 ½, and the NASDAQ futures are just a fraction above fair value.
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