June 30 - Ron's taking the week off! Have a Great 4th of July!
Yesterday was a not-so-pretty day near the end of a non-so-pretty month for stock prices. The first problem at hand is that it’s Friday. In the >
The second problem at hand is once again the price of oil. Light sweet crude finished up 5 dollars per barrel yesterday and this morning, it’s up another buck and a half at over 141 dollars.
Lehman Brothers is estimating that Merrill Lynch will have to write down another 5.4 billion of bad assets in the 2nd quarter. That’s about 3 billion more than prior estimates.
On the good news side? Well, how about this – There are only two business days left in the 2nd quarter, and we’ve heard earnings warnings out of less that 100 companies, which is roughly equivalent to the first quarter. So, either the Q2 earnings picture isn’t as bad as feared, or we’re in for a whole lot of bad news during the next four weeks.
The final figure on June Consumer Sentiment comes from U of M just before 10 this morning.
The figures on stock futures are on the slide, but not by a great deal. Adjusted for fair value, S&P 500 futures are down about 4½ points, the Dow futures are down 38, and the NASDAQ futures are about 8 points below fair value.
The Federal Reserve Open Market Committee did the expected yesterday, holding rates steady and jawboning about inflation as they try to buy more time before having to raise rates. After as initially positive response, stock prices slipped late in yesterday’s session and will continue that slide this morning.
Three companies were downgraded by Goldman Sachs this morning. Two are financials and one hits close to home. Merrill Lynch, Citigroup and General Motors were all downgraded on balance sheet concerns. GM shares are already under 13 bucks apiece and they will trade lower this morning. Other brokers are also piling on with downgrades in the financial sector this morning.
ConAgra reported better that expected earnings for last quarter, but warned about the current quarter this morning.
At 8:30 we’ll get the final reading on 1st Quarter Gross Domestic Product. Expect a 1 percent increase. Then at 10 o’clock, the May Existing Home Sales Report is expected to actually have risen a bit since April as the market looks for any signs of a bottom.
Oil’s up more than a buck and stock prices are, well – you know how that works. Adjusted for fair value, S&P 500 futures are down 14 points, the Dow futures are down 111, and the NASDAQ futures are about 34 points below fair value.
It’s June 25th – we’re half way to Christmas. At a quarter past two this afternoon, we’ll find out what kind of present we’ll get from Uncle Ben Bernanke. Don’t expect much of a gift, but make sure that you read the card that comes with it. There’s not much chance that the Fed will move the current rate higher or lower. However, the statement they will issue will be highly scrutinized for hints about how soon rates will rise in defense of the dollar.
The Fed, as we all know has cut short term rates over 3 percent during the past six months. Presumably they were trying to make credit more affordable. What they haven’t been able to do is make credit more available as troubled banks have tightened credit standards a lot. The Mortgage Bankers Association, in fact, says that the number of mortgage applications fell 9 percent last week from a year ago.
Mixed earnings news this morning. Darden Restaurants beat estimates by 3 cents, General Mills met estimates, but Rockwell Automation warned about the current quarter. Best Buy is raising their dividend ay 8 percent.
Oil inventory numbers will also be released this morning as the market expects another draw-down in crude oil supply.
Asian markets were mixed overnight, but Europe is higher and we should start a bit higher as well. Adjusted for fair value, S&P 500 futures are up 5 points, the Dow futures are up 43, and the NASDAQ futures are more than 8 points above fair value.
It’s the first day of a two-day grab-fest for the Federal Reserve Open Market Committee. They’re likely to spend most of their time filling the wastebasket with crumpled-up drafts of the Statement that will accompany their decision to not raise or lower rates tomorrow. The stock market has seemingly priced in a rate hike by September and some are hoping for an early rate hike to strengthen the dollar and kill the persistent rise in oil prices. We’ll find out tomorrow afternoon. By the way, oil’s up another dollar per barrel.
But we don’t have to wait for some bad news at UPS. They’ve cut their earnings forecast and traders are cutting the price of UPS stock this morning.
But don’t confuse UPS with UBS today. UBS stock should trade higher on a rumor that their beat-up balance sheet may be a takeover candidate.
If you can stand a little more bad news, Dow Chemical just announced a July price increase of up to 25% and a new fuel surcharge. That’s the second price hike out of Dow this year.
Add it all up, and we’re looking for a fairly rough open for stock prices. Adjusted for fair value, S&P 500 futures are down almost 9 points, the Dow futures are down 75, and the NASDAQ futures are more than 20 points below fair value.
Many times, a lousy Friday in the stock market is followed by a worse-than-lousy Monday. Add to that threat, the price of light sweet crude oil is up over 137 dollars per barrel. That’s a rise of almost 2 dollars. Stock futures were up nicely earlier this morning, but have lost a lot of gas (pun entirely intended) over the past hour.
Earlier this morning, Goldman Sachs reversed their recommendation of a month ago, and lowered their rating on the financial sector to “underweight” from “equal weight.” Geez, I wonder what they suddenly see? Perhaps it’ the torrent of pink slips over at Citigroup. Ten percent of the investment banking division at Citi will reportedly be getting a permanent vacation, many as early as today.
There are a couple of mergers this morning at opposite ends of the food chain. Agricultural companies Bunge and Corn Products will get together in a 4.4 billion dollar deal. In the waste management sector, Republic Services is buying Allied Waste for 6 billion of stock.
European markets are slightly higher and our futures, although off their best levels of the morning, are still pointing to a slightly higher open for stocks.
At this point, adjusted for fair value, S&P 500 futures are up 3 points, the Dow futures are up 25, and the NASDAQ futures are now 3 points above fair value.
A big drop in oil prices yesterday gave stocks prices a little bounce, but prices are bouncing the other way right now, and it looks like it will be a rough morning for the stock market.
It’s also “quadruple witching day,” as options, index options, futures and index futures contracts all expire at the very same time. That doesn’t always, but could very well add to the volatility of stock prices today.
Bond insurers Ambac and MBIA were both downgraded by Moody’s this morning. Ambac stock is at $1.74 per share, which is down from about 90 a year ago.
Piling on the bad news for financials, Washington Mutual will be cutting another 1,200 jobs, mainly in California and Florida. There’s also a rumor going around this morning that Merrill Lynch may be ready to issue a profit warning. A spokesperson for Merrill issued a “no comment” on Merrill’s performance. They did, however, have some less than kind words for the prospect for some domestic banks.
Chinese stocks rose overnight, but most all other markets overseas are lower.
At this point, adjusted for fair value, S&P 500 futures are down 11½ points, the Dow futures are down 91, and the NASDAQ futures are now almost 16 points below fair value.
A rebel attack on an offshore Nigerian oil rig 65 miles offshore has shut down the facility that puts 200,000 barrels of oil on the market everyday. Thankfully, in spite of that, light sweet crude is down almost a dollar per barrel this morning.
At 8:30 we’ll get the weekly jobless claims number and then at 10 o’clock, the May Leading market indicators are expected to be unchanged from the April numbers. We’ll also get the June Philly Fed survey, which is expected to indicate declining economic health in the Eastern region of the U.S., but a lower rate of decline than reported in May.
The earnings report, or should I say lack of earnings report comes from Circuit City today. Carnival will also check in.
One broker call of interest this morning in the financial sector at Citi group upgraded insurer AIG.
Japan and Hong Kong were each off about 2 percent. The Shanghai market was down 6 percent overnight. However, Europe is slightly higher at this point, but our futures are indicating a little bounce back from the last couple of days’ losses. At this point, adjusted for fair value, S&P 500 futures are up about 2 points, the Dow futures are up about 26, but the NASDAQ futures are now just about a half point above fair value.
It’s a relatively quiet week. Not a lot of economic data on tap – actually nothing on the agenda for today. And, there’s just a smattering of companies to report earnings. One company that had already warned that the quarter won’t be so hot is FedEx. FedEx just reported $1.45 of earnings, versus lowered expectations of $1.47. More importantly, they characterized the upcoming year as “very challenging.” They projected about 5 dollars per share for next year. Analysts were expecting almost 6 dollars. FedEx shares sold off by almost 5 dollars per share immediately after the report. Morgan Stanley also just reported a 95 cent profit versus the expected 92 cents.
If you were expecting your nice big 44 cent quarterly dividend on Fifth Third Bank stock, well, fuggettaboutit. Fifth Third will cut the quarterly payout from 44 cents to just 15 cents and set out to sell a billion dollars worth of preferred stock to shore up its balance sheet.
A little more than two hours from now we’ll get the domestic oil and gasoline inventory reports. Light sweet crude is up a half dollar in front of those reports, and that, along with the FedEx report, has the stock futures pointing lower.
As we speak, adjusted for fair value, S&P 500 futures are down 10 points, the Dow futures are down 78, and the NASDAQ futures are now just about 15 points below fair value.
Best Buy was expected to report a year-over-year decrease in earnings for their first quarter, but surprise, surprise – earnings of 43 cent per share were six cents ahead of estimates and 4 cents higher than last year’s first quarter.
Goldman Sachs, which for years has been an incredible Wall Street profit machine, is expected to announce $3.42 per share of earnings, down from almost 5 bucks per share in last year’s second quarter.
Inflation news is also on tap with the May Producer Price Index due out at 8:30. Expect a headline number of a 1 percent -- yes that’s a monthly number-- 1 percent increase due to rising energy prices. May Housing starts will also be announced at 8:30 and are expected to slip below an annualized rate of 1 million units.
Speaking of which, oil is down a buck and a quarter per barrel and that has European stocks trading nicely higher and our stock futures pointing cautiously higher in front of the PPI number.
At this point, adjusted for fair value, S&P 500 futures are up 6 points, the Dow futures are up 47, and the NASDAQ futures are now just about 3 points above fair value.
Last week’s market roller coaster climbed and fell based not only the price of oil, but also on speculation about the future of Lehman Brothers and other financial institutions.
Well, the price of oil is up about a half dollar this morning at around 135 dollars per barrel in spite of a pledge by the Saudis to pump more oil soon.. And we’ll get a little light shone on the condition of Lehman Brothers this morning. In fact, it’s being announced any minute now. Expect a write-off of about 2.8 billion dollars.
General Electric took a downgrade from JP Morgan this morning and should drop a little further at the open.
The head man at giant insurer AIG is rather unexpectedly out on the street this morning.
Ben Bernanke chats with the Senate Finance Committee a little later on.
Asian markets generally followed on to our Friday rally overnight, but European markets are slightly lower at this hour. Right now, adjusted for fair value, S&P 500 futures are down about 4 points, the Dow futures are down 25, and the NASDAQ futures are now just about 8½ points below fair value.
No way around it. The May Jobs Report will set the tone of early trading today. The market is expecting a loss of 60,000 non-farm jobs and a tick up in the Unemployment Rate to 5.1 percent. Any numbers that are significantly better than that could give us a follow on to yesterday’s rally, which was the best day stocks have had in a couple of months.
Speaking of big days, yesterday the price of oil went up more in dollars terms that in any day in history. Light sweet crude had come down about 10% from the record high of about $135 as the U.S. dollar had started to strengthen. That trend was interrupted yesterday when word came out of Europe that interest rates there might be raised later this year. Dollar down, oil up 5 bucks and it’s up another 2 dollars this morning to just shy of $130 per barrel.
Asian markets rose about 1 percent overnight. Europe is slightly higher, but is also waiting for our Employment Report at 8:30 this morning.
Our futures are also stuck in neutral for the next 10 minutes. Right now, adjusted for fair value, S&P 500 futures are up 2 points, the Dow futures are up 24, but the NASDAQ futures are now just about even with fair value.
As we await tomorrow’s May Employment Report, today’s economic focus will be the retailers May same-store sales reports. The news is good from the biggest of the big. Walmart’s May sales rose 3.9 percent on a same-store basis. Analysts expected only a 1.6 percent rise. Walmart estimates that exclusive of fuel sales, June’s number will again rise between 2 and 4 percent.
It sure looks like airlines are getting tired of flying into Chapter 11 and they’re prepared to do something about it. Yesterday, it was United Air. Today it’s Continental – but the trend is clear, and it’s not good if you’re a frequent flyer. Continental will retire 67 planes from the fleet, retire 3,000 people from the payroll and reduce capacity by 11 percent. Fares, folks, are goin’ up.
Verizon Wireless is reportedly in talks to acquire close-held Alltel. The offers price is expected to total 27 billion dollars, so it’s no small deal.
European markets are very modestly higher this morning and we’ll likely follow that path upward. Futures have been rising all morning and right now, adjusted for fair value, S&P 500 futures are almost 7 points higher, the Dow futures are up 59, and the NASDAQ futures are now about 6 points above fair value.
We’re in that quarterly quiet period now that the first quarter earnings reports are pretty much in the books, and it’s too early to get a read on the second quarter. And outside of the final reading on first quarter productivity, there’s really nothing significant on the economic agenda until Friday’s Job’s Report.
That productivity report is due in at 8:30 and is expected to show that first quarter productivity increased 2 ½ percent, revised up from the first estimate of 2.2 percent.
Ben Bernanke bucked up the dollar a bit yesterday and will be speaking today, comparing today’s economic challenges with those of 1975.
More bad news for travelers. United Airlines will reduce its fleet by 100 planes and lower capacity by 17% by 2009. Less capacity in the air can mean only one thing for the price of tickets, and it’s not good.
Japanese stocks rose 1½ percent overnight, but most other major foreign markets are lower. European markets, in fact, are about 2 percent lower. Our futures are looking weaker as well.
Right now, adjusted for fair value, S&P 500 futures are down 5 points, the Dow futures are down 56, and the NASDAQ futures are now about 8 points below fair value.
General Motors stock is again trending almost a half dollar higher this morning. Not only will we get the May Sales Reports from all the car companies, Rick Wagoner is currently speaking to shareholders and has just announced the closing of four truck plants as GM retools to produce more fuel-efficient cars. GM may sales, by the way, are guesstimated to be down as much as 19 percent.
Lehman Brothers, which, now that Bear Stearns is gone, is the financial industry’s current biggest worry, may have to raise another 4 billion dollars of fresh capital to shore up the balance sheet.
At 9 o’clock, a conference starts in Barcelona at which Ben Bernanke is a featured speaker. Traders will be listening attentively for any hint of future interest rate increases.
At 10 o’clock we’ll get the report on April Factory Orders. Oil is almost a dollar lower, and that has the futures perking up a bit.
Right now, adjusted for fair value, S&P 500 futures are up almost 3 points, the Dow futures are up 24, and the NASDAQ futures are now about 7 points above fair value.
For the past couple of weeks, stock prices have moved in almost perfect inverse-correlation to the price of oil. Unfortunately, this morning isn’t shaping up that way. Light sweet crude is more than a dollar per barrel lower, but the stock futures are under some moderate pressure.
An earnings warning from a big British lender and the firing of their CEO triggered a pullback in financial shares in Europe. Speaking of financial firms in hot water this morning, Wachovia announced that their 58 year-old top dog is “retiring,” and the outlook for their second quarter earnings report is not promising. Wachovia stock is indicated about 50 cents lower on the news.
One local stock that should bounce higher this morning is General Motors, after a very positive article in Barron’s magazine over the weekend. The article predicts that GM shares could more than double over the next two years. We’ll hear more from GM tomorrow.
The May ISM Report is due at 10 o’clock this morning and is expected to show a continuing contraction in the manufacturing sector. Expect a reading of 48½ following April’s 48.6.
Asian markets were generally higher overnight. Europe is lower. Adjusted for fair value, S&P 500 futures are down almost 7 points, the Dow futures are down 65, and the NASDAQ futures are now about 7½ points below fair value.
Daily Reports @ WJR
For an explanation of "fair value" please click here.