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WJR June 2006 Reports

 
 
June 30, 2006
 
It’s the last day of a quarter that a lot of people would just as soon forget.  However, yesterday’s big rally did a lot of ease the pain.  The Dow jumped over 200 points and the downtrodden NASDAQ was up 3 percent on the day.
 
The reason for all the exuberance was, of course, the Federal Reserve Open Market Committee’s statement.  Yes, the end of interest rate hikes may be at or nearing an end.  However, as the statement inferred, it’s because the economy is slowing, the air is leaking from the housing bubble, and oil prices remain high.  So before we all get irrationally exuberant, keep in mind that these are not necessarily good things.
 
One of the Fed’s favorite inflation indicators will be released in about 10 minutes.  The May PCE deflator will be announced along with the May Personal income and expenditure stats.  Income is expected to be up 2 tenths of a percent.  Spending is expected to be double that.
 
U of M’s final Consumer Sentiment number comes at 9:45 and at 10 o’clock, the Chicago PMI is expected to drop to a level of 59.
 
The futures are clearly in wait-and-see mode in front of the PCE deflator.
At this point, adjusted for fair value, the S&P futures are down just a quarter point, the Dow futures are down 9, but the NASDAQ futures are now a little less than a point above fair value. 
 
June 27, 2006
 
There’s another merger to talk about this morning, and this time, it’s a couple of Michigan companies getting together.  Republic Bancorp will merge into Citizens Bancorp.  At $13.86 per Republic share, Citizens will pay about a 20% premium to last night’s close.  However, it’s mainly a stock deal, so that valuation may change by the end of the day.
 
We’ll get a couple of economic reports at 10 o’clock this morning.  The Conference Board’s June Consumer Confidence Index is expected to rise a bit to a reading of 103.8.  But perhaps a more interesting number will be the reading on May Sales of Existing Homes.  Yesterday’s unexpected uptick in the level of New Home Sales sparked a little stock market rally.  We’ll see today if the people who are buying all those new homes have been able to sell their old ones.
 
Overseas stock markets are pretty much unchanged, as the world waits on this Thursday’s interest rate announcement.  Uh-oh -- don’t look now, but light sweet crude is up another half dollar or so, at more than 72 dollars per barrel. 
 
General Motors shares should rise this morning based on the number of hourly workers that are going bye-bye, but overall stock prices may dip a bit at 9:30.  At this point, adjusted for fair value, the S&P futures are down a little less than  2 points, the Dow futures are down 26, and the NASDAQ futures are about 1 ½  points below fair value. 
 
June 26, 2006
 
As you head out to buy all your necessary remedies this morning – you know, your Listerine, your Rolaids, your Sudafed and your Rogaine – know that you may be buying them from Pfizer for the last time.  Johnson & Johnson will be buying Pfizer’s consumer products division for over 16 billion dollars. Pfizer has been shopping the unit since February, and was only expected to get about 14 billion.  Accordingly, shares of Pfizer are looking to open higher this morning.
 
But that deal is just one of many this morning, as the merger mania that started last Friday when Anadarko Petroleum snapped up two companies continues.
 
Phelps Dodge is pulling the same trick today, swallowing up fellow mining companies Inco and Falconbridge.  That’s a 40 billion dollar deal.
 
And Mittal Steel is, after five months of offers and counter-offers (and a 43 percent increase in the price tag) buying Arcelor Steel for over 33 billion.
 
Overseas markets are fairly flat as the world waits for Ben Bernanke and the bunch to shake things up on Thursday.  We should get a little pop at 9:30 on all the merger news.  At this point, adjusted for fair value, the S&P futures are up 2 points, the Dow futures are up 20, and the NASDAQ futures are about a point and a half above fair value. 
 
June 21, 2006
 
Ford Motor shares lost 5 percent of their value yesterday, on a report quoting those famous “unnamed company sources” that Ford’s goal of turnings a profit in North America by 2008 is now in doubt, due to declining SUV sales.
 
There’s nothing on the economic calendar for the day.  But, the weekly oil inventory data and a little rash of earnings reports could set the early tone of the market.
 
FedEx reported $1.82 in fiscal 4th quarter earnings versus an expected $1.77. That’s a profit increase of almost 25% from last year’s 4th quarter. They also boosted guidance for the current quarter.  FedEx is looking to open about 2 percent higher.
 
Morgan Stanley also beat estimates handily, making $1.85 versus an expected $1.45.  Bed Bath and Beyond reports later today.
 
Interest rate worries have European markets trading lower at this hour.  Asian markets finished the session mixed, but generally higher.
 
The futures are pretty much at a standstill as we head toward 9:30.  At this point, adjusted for fair value, the S&P futures are up a point, the Dow futures are down 3, but the NASDAQ futures are a little more than 2 points above fair value. 
 
June 19, 2006
 
At long last, we’re finally getting what everybody’s been hoping for.  Yes, the week ahead will feature NO speeches by Ben Bernanke or any of the voting governors at the Federal Reserve.  A couple of non-voting members will be floating around, but it looks like traders will have to find something else to obsess about this week.
 
Intel is picking up a little more love this morning, getting another broker upgrade, after picking up a couple last week.  Procter & Gamble also upgraded this morning on a valuation call.
 
Circuit City is a turnaround story continues.  They reported earnings of 3 cents per share versus last year’s 6 cent loss.  Analysts had expected only a penny.
 
Asia and Europe are off in different directions today.  Markets in Japan, Hong Kong were all off slightly overnight.  However, stocks in London are up almost 1 percent, France is up more than a percent and the DAX in Germany is up almost 2 percent.   We’re looking to float a little higher at 9:30 as well.  At this point, adjusted for fair value, the S&P futures are up about 3 points, the Dow futures are up 21, and the NASDAQ futures are 2 points above fair value. 
 
June 16, 2006
 
You could almost hear the collective sigh of relief from investors across the country yesterday, as the latest recovery from the latest correction completed day two in fine >
 
The good, the bad and the unchanged his morning would be represented by Oracle, KB Homes and Microsoft.  Oracle boosted earnings guidance last night and the stock saw a 4 percent pop in the after-hours.  KB Homes lowered their forecast, as orders for new homes slow and inventories build.  Microsoft’s big announcement last night came from Chairman Bill Gates who will be phasing out of day-to-day operations over the next two years to devote all his efforts to running his charitable foundation.  In after-hours trading, Microsoft was volatile, but ultimately unchanged.
 
The U of M Consumer Sentiment Index is expected to slide to 78.6 at 9:45 this morning.
 
Asian markets were up overnight, generally between 2 and 3 percent.  European markets are up about a half percent right now.  Our futures have weakened a bit over the past hour, but are only slightly negative as we head toward 9:30.  Adjusted for fair value, the S&P futures are down a bit more than a point, the Dow futures are down 16, and the NASDAQ futures are about 3 points below fair value. 
 
June 14, 2006
 
The second shoe of inflation data will drop at 8:30 this morning.  The May Consumer Price Index is expected to come in at an overall 4 tenths of a percent increase, and 2 tenths of a percent on the core rate, that is, excluding food and energy.  Lower numbers would be more than welcome.  Higher numbers, especially on the “core” number, could be “look out below” for stock prices.
 
A number of semi-conductor companies, including Intel, were upgraded this morning by Goldman Sachs. 
 
The country’s second largest ethanol producer will go public today.  VeraSun Energy shares will be offered at 23 dollars per share, and demand should be pretty firm.  The company had looked to price the shares at 18 to 20 dollars per share.  Ethanol stocks have been fairly strong of late, although the largest ethanol producer, Archer Daniels Midland, did drop over 5 percent yesterday.
 
It has been 22 years since the NASDAQ declined nine straight sessions.  Don’t look now, but yesterday was number eight.
 
Overseas markets are flat as they wait for our inflation data.  The futures at this point are to be taken with several grains of salt, in that everything could change at 8:30.  However, if the market opened right now, it would open higher.  Adjusted for fair value, the S&P futures are up 3 ½ points, the Dow futures are up 37, and the NASDAQ futures are about 5 points above fair value. 
 
June 13, 2006
 
Don’t blame Bernanke.  Ben Bernanke said absolutely nothing that could possibly be considered market moving yesterday, yet the global sell-off accelerated overnight.  The Japanese and Indian markets lost over 4 percent.  That the worst day for the Nikkei since September of 2001.  Europe is off about 2 ½ percent at this hour and our futures are pretty much a mess right now.
 
However, that could change in about 10 minutes.  It was an unwelcome spike in inflation data that started financial markets on a downward path a month ago.  At 8:30, the May Producer Price Index is expected to come in at a 4 tenths of one percent increase.  The core rate is expected to be 2 tenths of a percent.  Lower numbers than those may put the plug back in the drain, at least until Mr. Bernanke gives TODAY’s speech.
 
Best Buy reported earnings that easily beat expectations this morning, but quite frankly, nobody cares.
 
All hopes are on the 8:30 PPI report to make some magic.  In front of that, adjusted for fair value, the S&P futures are down 5 points, the Dow futures are down 49, and the NASDAQ futures are just about 4 points below fair value. 
 
June 12, 2006
 
Friday’s long-awaited debut of the Disney/Pixar movie “Cars” met with critical acclaim, as Mrs. Humenny and the kids gave it “six thumbs up.”  The box office totaled 63 million for the weekend.  While that’s good, it wasn’t quite up to some analyst expectations.  While it sounds like the films will have pretty strong legs, Disney suffered a broker downgrade this morning, based on valuation.
 
We’ll get some actual economic data to go along with economic speeches this week.  Most notably, the May Producer Price and Consumer Price Indexes will come out tomorrow and Wednesday, respectively. But in the meantime, the speeches continue.  Ben Bernanke speaks at Georgetown University today and again in Washington tomorrow.  We’ll also hear from a number of other Federal Reserve officials this week.
 
Lehman Brothers reported earnings this morning at dollar sixty-nine versus an expected dollar sixty.
 
Light sweet crude is up over 72 bucks again as Tropical Storm Alberto churns around in the Gulf of Mexico.
 
Stock futures had been in idle much of the morning, but kicked into first gear about an hour ago.  Right now, adjusted for fair value, the S&P futures are up more than 2 points, the Dow futures are up 16, and the NASDAQ futures are about 3 points above fair value. 
 
June 9, 2006
 
There’s has been a lot of speculation about the amount of foreign investment in U.S. stocks and bonds, and what would happen if a lot of that money moved out all at once.  We might have seen some of that yesterday.  The U.S. stock market was in a very deep hole, with the Dow seemingly headed for another 200 point loss.  Then, at the very time European markets closed, domestic stocks started a broad-based rally to close almost even on the day.
 
Later today, Ben Bernanke will be the commencement speaker at the Massachusetts Institute of Technology. Hopefully he gives a good speech, and hopefully he gives it in Cobol or Fortran or some other language that only the graduates, and not the financial journalists can understand.
 
Texas Instruments spoke clearly and confidently last night, as they raised guidance for the 2nd quarter during their mid-quarter update.  A broker upgrade is in for Coca-Cola.  Unfortunately a ratings downgrade is in for debt of Ford Motor.
 
Most overseas markets are up 1 percent or more.  Our futures look terrific on their >
 
June 8, 2006
 
A year or two ago, news of the death of a major terrorist leader like Al-Zarqawi would have triggered a spike upward in stock prices.  That was then and this is now.
 
It’s all about rising inflation and rising interest rates this week.  South Korea unexpectedly raised their short-term interest rates overnight, and on the heels of another Wall Street loss yesterday, Asian markets saw some big time red numbers.
 
Taiwan was off over 4 percent, South Korea 3 ½ percent, and Japanese stocks were off more than 3 percent.  That’s the worst day for the Nikkei in a year, pushing it down about 8 percent this week alone.
 
Not to be outdone, the European Central Bank also raised interest rates this morning, although the Bank of England, already at much higher rates than the ECB, held rates steady.
 
Novellus reported better than expected earnings and popped up in after-hours trade last night.  However, a brokerage downgrade of Intel and Advanced Micro should pressure those shares this morning.
 
If you are long the market, you’ll have to pin your hopes on a late-day turnaround, because we will start the day in a significant hole.  Right now, adjusted for fair value, the S&P futures are down almost 7, the Dow futures are down 53, and the NASDAQ futures are about 14½ points below fair value. 
 
June 7, 2006
 
It didn’t take long for continuing inflation worries to kill an early rally yesterday.  However, in the last half hour of trading, the Dow did rally to retake the 11,000 level.  We’ll take that as a positive this morning as we >
 
Alan Greenspan. Remember him? He’ll be chatting with the Senate Foreign Relations Committee today about the impact of dependence on foreign oil.  What do you think he’s going to say?  That it’s a GOOD thing?
 
Also out on the rubber chicken circuit will be Atlanta Fed President, who will hopefully say as little as possible about his outlook for the economy and interest rates.
 
Chemical company stocks will suffer from a brokerage downgrade today.
 
Asian was a mess overnight.  Japanese stocks sunk almost 2 percent.  The Chinese market, which has pretty much avoided damage in the recent correction took a 3 percent haircut overnight.
 
Europe, on the other hand, is showing some strength at this hour and our futures have rallied over the past few hours to recover from negative territory.  Right now, adjusted for fair value, the S&P futures are up almost 4, the Dow futures are up 20, and the NASDAQ futures are about 5 points above fair value. 
 
June 6, 2006
 
A lot of people complained that Alan Greenspan never spoke plainly.  Ben Bernanke’s ascension to the throne was welcomed as being as step toward clearer communication.  Careful what you ask for.
 
Mr. Bernanke pretty much slammed the door on the prospect of stable short term interest rates yesterday.  While acknowledging that the economy is slowing, Bernanke empha>
 
This morning, the Fed futures contract is now putting the odds of a June hike in interest rates at 82 percent.
 
A major broker downgraded the entire homebuilding sector to “hold” this morning, which may be a case of too little, too late.
 
Asian markets were down overnight.  European markets are down 1 to ½ percent at this point.  We may get a little bounce at 9:30, although the futures are weaker than they were a couple of hours ago.  Adjusted for fair value, the S&P futures are up 4, the Dow futures are up 34, and the NASDAQ futures are about 4 points above fair value. 
 
June 5, 2006
 
Earnings season is over for last quarter.  Earnings warning season for the current quarter is not yet here.  Add to that a week with very few economic reports, and we’ll likely have a stock market that will trade this week on fears and dreams more than on facts and analysis.
 
The prime fear of the morning is once again the price of oil.  Saber rattling from Iran over the weekend has the price of light sweet crude back up to about $73.50.
 
Possible dreams this morning may come from the big American Society of Clinical Oncologists conference in Atlanta as the big drug and biotech companies talk about their latest cancer treatments.
 
It took only two weeks for the lawyers to get on board, but there’s a class action lawsuit this morning regarding the IPO of Vonage.  Evidently retail investors who clamored to get a piece of the action are now claiming that they were duped by the company and/or the underwriters.  Vonage is currently about 30% lower than its public offering price.
 
The market as a whole should open lower as well.  Adjusted for fair value, the S&P futures are down 4 ½ , the Dow futures are down 33, and the NASDAQ futures are almost 6 ½ points below fair value. 
 
June 2, 2006
 
The stock market is watching the Fed, and the Fed has made it clear that they are watching the government-reported economic data closely.  At 8:30, what is arguably the third-most important economic report of the month will be released.  After the Consumer Price and Producer Price Indexes, the monthly Employment Report is a lynchpin of inflation expectations.
 
Expect that the economy added 170,000 new non-farm jobs in May.  For stock traders, this is one of those counter-intuitive numbers where the lower the number, the better.  The unemployment rate is expected to hold steady at 4.7 percent.
 
One stock that will not likely hold steady today is Pulte Homes.  Pulte has released guidance for the second quarter and it’s not good news.  Pulte estimates profits of 85 to 95 cents per share.  Analysts were expecting $1.09.  You should expect Pulte shares to trade lower at 9:30.
 
Overseas, stocks are solidly higher after our two day rally.  Our futures will not move much off dead-center until the Jobs report is released at 8:30. At this point, adjusted for fair value, the S&P futures are up a point, Dow futures are down 2, but the NASDAQ futures are about 6 points above fair value. 
 
June 1, 2006
 
This news may be a little hard to believe around these parts.  Job outplacement firm Challenger, Grey and Christmas reported this morning that nationwide, job cuts announced in May were down 35% from May of last year.  At 54,000, it’s the lowest number of layoffs in over 5 ½ years.  This news comes in front of the May Jobs report tomorrow.  If that number shows strong job growth, it could stoke inflation fears and push stocks lower.
 
But, before we get to tomorrow, we’ll be dealing with plenty of data today.
At 10 o’clock, the ISM manufacturing index is expected to be down slightly to 55.6 and April Construction Spending is expected to be flat.  But perhaps more importantly on the inflation watch, the final 1st Quarter Productivity report at 8:30 is expected to show a 3.9% increase in productivity.  The higher that number, the better for stocks.
 
AT&T received a broker upgrade this morning.
 
Walmart says that it is looking for a 1 to 3 percent increase in same store sales.  That’s lower than their previously issued outlook.
 
Asian markets were mixed overnight, but Europe is uniformly lower this morning.  We may give back some gains at the open, pending that productivity news at 8:30.  Adjusted for fair value, the S&P futures are down 2 points, Dow futures are down 17 and the Nasdaq futures are almost 4 points below fair value. 
    
WJR July 2006 Reports
WJR May 2006 Reports

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