June 28, 2007
Well, it’s finally iphone day. The new smartphone from Apple goes on sale at 6 o’clock. But as the lines lengthen at the Apple stores, there’s plenty of news out from iphone competitors.
Palm, maker of the Treo phones beat estimates for the quarter gone by. However, they warned about a possible loss for the current quarter and the stock will not do well early on today. On the flip side, Blackberry maker Research in Motion beat estimates, announced a 3 for 1 stock split and boosted guidance. RIMM stock looks to open about 22 percent higher this morning at around 200 dollars per share. Until that news came out, Bank of America had a 134 dollar price target on RIMM. This morning, BofA raised RIMM to a “buy.” Thank you for that prescient call.
At 8:30 we’ll get May income and consumption data. Later this morning, it’s the Chicago PMI and the University of Michigan’s final read on June Consumer Sentiment. Expect a reading of 84.
June 26, 2007
A pretty nice rally went up in sub-prime smoke yesterday, as continuing worries about the near-collapse of a couple of hedge funds at Bear Stearns and rebounding oil prices sent stock prices slightly lower on the day.
Nevertheless, we’ll try to rally again at 9:30, even though markets overseas, with the exception of China, are down slightly across the board.
Shares of homebuilder Lennar will take another hit this morning. Lennar wrote off about 4 percent of assets and, even excluding that writedown, reported a 22 cent per share loss. They were expected to turn a profit a nickel per share. Lennar, the nation’s biggest homebuilder, also warned that the losses aren’t over and there may actually be tougher times ahead.
Oracle and Nike also report earnings later today. But, perhaps more important to the market’s direction will be the release of the Conference Board’s report on June Consumer Confidence, expected to read 105 and the report on May New Home Sales, expected at a rate of 925,000 homes per year. Both of those reports are due at 10 o’clock.So far, so good, with the early market barometer. Right now, adjusted for fair value, the S&P futures are up about 5 points, the Dow futures are up 55 and the NASDAQ futures are about 9 points above fair value.
June 25, 2007
It’s the beginning of the end for the year’s second quarter. We’re looking forward to lots of economic data this week. It’s also prime time to hear from any companies that need to warn us that their quarterly earnings and sales are going to fall short of expectations.
Last month, a hot number on home sales spooked stock prices on fears of rising interest rates. At 8:30 we’ll get the lowdown on May Existing Home sales. The market is expecting a slight decrease, to an annualized rate of 5.97 million homes.
Broker upgrades will help the prices of Bristol-Myers, Chevron and General Motors this morning. Goldman Sachs, in fact, raised its target price on GM shares to 40 dollars per share.
Walgreen will give us the only major earnings report of the day. Expect 54 cents per share on an operating basis.
Overseas markets are lower across the board in reaction to our ugly results last Friday, but don’t despair. Oil is down over a dollar per barrel, and stock futures are pointing toward a stronger open in the U.S.At this point, adjusted for fair value, the S&P futures are up about 4 points, the Dow futures are up 39 and the NASDAQ futures are 6 points above fair value.
June 21, 2007
We get more sunlight today than any day of the year. But yesterday, we had a little more light shone on the sometimes mysterious hedge fund world. Nervousness in the bond market, caused in part by the meltdown of a Bear Stearns hedge fund sent shivers through the stock market.
The Bear Stearns problem is the collapse of a leveraged mortgage-related fund, and may be the first of a series when it comes to the fallout from the sub-prime mortgage mess.
At 10 o’clock this morning, the Conference Board’s May reading of Leading Economic Indicators is expected to rise three-tenths of a percent, and a little later today, the Philly Fed survey will give us a glimpse of the health of the Eastern part of the country’s manufacturing sector.
Light sweet crude is getting uncomfortably close to the 70 dollar level. It’s at 69.57 per barrel.
June 20, 2007
With less than two weeks to go in the 2nd quarter we’re into earnings warning season, although the least few traditional warning period have been very, very quiet.
There are a few big actual earnings reports left this month. There are big smiles at Morgan Stanley this morning. Morgan Stanley made $2.45 per share versus the expected $2.01. Home Depot is looking to open sharply higher as well. They’re selling their supplies business and they will buy back 22 ½ billion dollars worth of their own stock.
FedEx reported earnings that were roughly in line with estimates, but issued earnings guidance that is slightly lower than analysts expected. Circuit City was expected to lose a lot of money last quarter. In that way, they didn’t disappoint, losing 33 cents per share. That’s a chunk for a 16 dollar stock. Of course, by the time the market opens, it may not be a 16 dollar stock any more.
Private equity strikes again this morning as John Nuveen, the municipal bond firm is being offered 65 dollars per share. Yesterday’s closing price was 54 dollars and change.
The Shanghai Index in China took a 2 percent hit overnight. But most other Asian and all major European markets are higher, and that’s where we’re headed as well.
June 19, 2007
Outside of energy stocks, the market hasn’t paid a great deal of attention to oil prices during the past few months. However, we’ve got a pretty quiet news week on our hands, and traders have to worry about something. So as light sweet crude hangs stubbornly around 69 dollars per barrel, stock futures are a bit on the weak side this morning.
One of only two significant economic reports to come this week will roll in at 8:30. May housing starts are expected at an annualized rate of 1.47 million units. That would be down about 4 percent from last month. Traders are of course looking for a light at the end of the housing slump tunnel. But with another round of variable rate mortgage resets coming this summer, that tunnel may be a pretty long one.
Sit down on your easy chair and stare at the big screen TV today, as Earnings are on the way from Lazy Boy and Best Buy.
Overseas markets are pretty much a mixed bag, but pending a positive surprise in the housing data at 8:30, we’ll see lower prices at 9:30.
June 18, 2007
It’s okay to pursue the fish in front of you. But look out for the big fish behind you. Alcoa, which is trying to buy Canada’s Alcan, is the rumored target of massive mining company BHP Billiton. This is an old rumor that is being revived due to a pending change in command at Billiton. But rumor or reality, it should have the price of Alcoa on the rise this morning.
There’s a potential competitor for Rupert Murdoch in his bid to buy Dow Jones. The alliance will reportedly include General Electric, Pearson, which publishes the Financial Times and a minority stake for the current owners of the Journal. The bidding price is pretty high, but it may go higher as GE tries to keep Fox, and it’s soon to be launched business news cable outlet from controlling the Wall Street Journal.
Japanese stocks rose about one percent overnight. The Hong Kong markets was up over 2 ½ percent. And although it’s much more of a mixed picture in Europe, we should get off to a mildly higher start.
June 15, 2007
It looks as if Intel will open up about a dollar per share this morning. That’s about a 4 ½ percent gain on a broker upgrade.
But the big market mover of the morning will come in about 15 minutes. The May Consumer Price Index is expected to rise about a half of one percent. The core rate, which of course eliminates food and energy costs is expected to be up about 2 tenths of a percent. The Producer Price Index was higher than expected yesterday. But, the core rate was exactly as expected, which helped stock prices rally.
At 10 o’clock this morning, the University of Michigan’s preliminary reading on June Consumer Sentiment is expected to show a slight decrease to a level of 88 even.
Four times a year we get the simultaneous expiration of stock options, index options, options on futures and single stock futures, Today is that day this quarter. What’s it mean? Additional trading volume, and maybe – but not always – more volatility throughout the day.
If you invest in international stocks, you made money overnight. And, pending a tame inflation report at 8:30, we’ll head higher at 9:30.
June 13, 2007
Stock prices took a pounding yesterday as Treasury Bond yields continued to soar. The Dow has now lost over 100 points on three of the last five trading days.
Last Friday, we talked about 5.25% as a possible turning point for the 10 year bond. That is, a point where the surge stops and stocks recover. This morning, the 10 year broke through the 5 ¼ level, hitting 5.31. It has now backed off a bit and is sitting at 5.285 percent. As the rate started to back off, the stock futures surged, and it looks as if we’re looking for a higher start for stocks.
Tomorrow and Friday bring the May inflation reports and traders will be hanging on those numbers. Today’s news will include the May retail sales report at 8:30, but perhaps more importantly, at 2pm release of the Fed’s Beige Book, a survey of economic conditions on a region by region basis.
Major overseas markets are pretty much all lower, but by less than one percent. Oil prices are a bit lower, but are still hanging above 65 dollars per barrel.
June 12, 2007
We’ll get the May report on domestic consumer inflation on Friday. But today, there are a couple of other inflation measures of interest. Inflation in Great Britain rose 2 ½ percent in May. That’s a drop from 2.8% in April, but is still higher than the government target of 2 percent. So, higher interest rates there may be on the way.
Chinese inflation last month stood at 3.4 percent, which was slightly higher than expected and higher than the Chinese government’s target of 3 percent. So, Chinese interest rates may be going higher as well.
On Capitol Hill, a group of Senators will be spouting off today on their plans to help China adjust the value of their currency. Hopefully, something else will come up today to distract attention from that little exercise.
Texas Instruments lowered their forecast during their mid-quarter update last night. That will drive shares about 1 to 2 percent lower this morning. On the other hand, Wall Street continues to do well. Leman Brothers just reported $2.21 per share of profit for last quarter versus the expected $1.88.
Asian markets were generally higher overnight, but Europe is lower and we should head lower at the open as well. Adjusted for fair value, the S&P futures are down about 3 ½ points, the Dow futures are down 29, and the NASDAQ futures are about 6 points below fair value.
June 11, 2007
The usual Monday morning parade of buyout announcements is missing in action. Only one deal so far, and it’s a small one. IBM is buying Swedish software company Telelogic for about ¾ of a billion dollars.
Unlike last week, there’s a bunch of economic data on the way this week. The most important stuff – the inflation related data – will come Thursday and Friday.
A lot of investors are questioning whether the bull market will continue given last week’s weakness, and this is why that inflation data is important. The current leg of the bull run kicked off last summer when the interest rate on the 10-year Treasury peaked around 5.2% after running up from 4.4 percent seven months earlier. Today, the 10 year is a it over 5.1%, after running from 4.4% just seven months ago. Although history does not repeat year after year, suffice it to say that benign inflation data later this week could help push those interest rates down again, and sustain the rally in stock prices.
May retail sales are expected to have risen 6/10 of a percent. We’ll find out at 8:30. But unless we get some good news there, we should start a little lower at 9:30.
June 8, 2007
Stocks took a pounding for the third day running yesterday. Look no further than interest rates for the reason. Wednesday we talked about the ten year Treasury Bond breaking 5 percent. Yesterday it hit 5.1 percent. This morning we breached 5.2 percent, although we’re a little lower than that right now. Look for 5 ¼ percent as a crucial level. Some analysts are calling for a 5 ¼ percent top in rates to signal a bottom in stock prices.
Not much on the economic agenda today. We’ll get the Commerce Department’s report on international trade. However, that’s about it. It’s been a long week, the heat index will approach 100 degrees in New York City, and we may see trading slow down a bit this afternoon as some traders try to stretch their weekend on the shore.
Major Asian markets dropped about a percent and a half overnight. Europe is lower by about a half percent at this hour.
June 7, 2007
If you hold shares of Biomet and were excited about the proposed buyout of the company at 44 dollars per share, you can now upgrade your lunch plans. There’s a new deal from the same players that will pay shareholders 46 dollars per share as Biomet is the latest public company going private.
Procter & Gamble was downgraded by Lehman Brothers. At the same time Lehman upgraded General Dynamics. Chipotle Mexican Grill also suffered a broker downgrade this morning.
The big retailers are rolling out their May same store sales this morning. So far, so good. Walmart reported a 1.3 percent increase versus the expected 1.2 percent. Costco sales were up 7 percent versus the expected 5.6. Nordstrom and Limited also beat forecasts.
Stocks are once again looking to open lower on continuing interest rate jitters. The yield on the 10 year Treasury bond crossed the 5 percent line this morning. A 5 handle on the 10 year hasn’t been seen since last August. The 10 year bond now yields 5.03 percent.
June 6, 2007
You’ve heard it before and we’ll say it again; in the final analysis, stock prices are driven higher by higher earnings and lower interest rates. But this morning, interest rates in Europe are headed up. The European Central Bank, as expected, raised short term rates to 4 percent. That puts them a couple of years behind the U.S. rate policy, but probably within a half-percent or so of where they’ll stop.
Nevertheless, a major brokerage house is calling for a 14 percent correction in European stocks. Well, we’ll see. This morning, European markets are lower by anywhere between a half percent and one and a half percent.
Speaking of heading lower, Panera Bread reported same store sales up only 1.2 percent and lowered their profit estimate from about 50 cents per share to about 40 cents per share. Traders are lowering the price of Panera shares by about 7 percent pre-market.
In just seven minutes we’ll get the 1st quarter report on productivity, which of course is a big component of profitability. It’s expected that productivity slumped to 1 percent in the 1st quarter, versus 1.7 percent in the prior quarter.
June 5, 2007
Ben Bernanke is joining in an international monetary teleconference as we speak. If he speaks about future monetary policy, the futures could whip around on us before the open. But at this point, we’re headed for some selling at 9:30.
The Chinese have always been known as having some great ping-pong players. Now, if appears, they have a great ping-pong stock market. After Monday’s 8 percent loss, the Shanghai Index fell 7 percent overnight, before staging a 9 percent rally to finish 2percent higher. The rest of Asia was also higher. Europe, however, is a bit lower at this hour.
The ISM non-manufacturing index is expected later today, and is expected to be slightly lower at a reading of 55,
Telecommunications company Avaya is the latest public company to go private. They’re going out for 8.2 billion dollars.
And, of course, it’s the day General Motors shareholders get together to hear the latest and greatest in the turnaround plan. However, the proof at this point will be in the pudding. And the pudding involves increasing sales and successful negotiations with the UAW in September.
June 4, 2007
There was another big sell-off in China overnight, with the Shanghai market down about 8 percent. So far, the rest of the world is saying “so what?” Other Asian markets actually closed a little bit higher. Although most European markets are down, they’re not down by much.
Walmart, on the other hand, will head higher by about a dollar per share at the open. No fewer than four major brokerage houses upgraded the shares of Walmart this morning.
It will be a pretty quiet week for economic data. The only report on the schedule today is the 10 o’clock report on April Factory Orders. Yes, I said April, so this is fairly stale news. Anyway, expect an increase of only 7 tenths of a percent. The March increase was 3 ½ percent.
Citigroup raised their mid-2008 target for the Dow to 15,500. We’re currently under 13,700, so 15,500 would be a more than 13 percent increase.
Two M&A deals of note this morning. Solectron is being bought by Flextronics and Palm is selling a 25% stake to a private equity group.
June 1, 2007
It looks like June may start off looking a lot like May for stock prices. Last night, Dell blew away estimates, making 34 cents per share last quarter versus a 26 cent expectation. Dell did suffer a couple of broker downgrades this morning, which appear to be getting no respect at all, as the stock is looking to open about 7 to 8 percent higher.
At 10 o’clock, the University of Michigan will give it’s final assessment on May Consumer Sentiment. Expect a reading of 88.
But, the big economic number of the first Friday of every month is the Labor Department’s Jobs Report. Expect that business added 140,000 new non-farm jobs last month, with the unemployment rate holding at 4 ½ percent. Reading traders collective mind on the jobs number has been tricky lately. Suffice it to say that a stronger job number would be welcome news on a strengthening economy. However, any significant drop in the unemployment rate could spark inflation fears, which would not be the best of news.
Overseas markets are generally up a bit, and pending a decent Jobs Reports, we’ll be along for the ride. At this point, adjusted for fair value, the S&P futures are up 5 and change, the Dow futures are up 37, and the NASDAQ futures are more than 5 points above fair value.
Daily Reports @ WJR
For an explanation of "fair value" please click here.