WJR June 2010 Reports
June 30, 2010
It’s the last day of the first half of the year. That’s about the only thing that’s certain as we look to recover from yesterday’s drubbing in our markets and then weakness in Asia overnight.
There is a ray of hope from Europe this morning. European banks did not borrow as much from the European Central Bank as expected, indicating that they may be in better shape than some expected.
Those focused on the domestic economy, specifically manufacturing in the Midwest, will look to the release of the June Chicago Purchasing Mangers Index at 9:45 this morning. Expect a reading of 59, which means that the manufacturing sector continued to expand, but not quite as much as in May.
ADP’s monthly employment report will be released just about 30 seconds from now. It may foreshadow the all-important Labor Department report that’s due Friday.
Asia lower overnight, but Europe is a bit higher. At this point, adjusted for fair value, the S&P 500 futures are up 3 points, the Dow futures are up 24, and the NASDAQ futures are almost 9 points above fair value.
Today’s initial public offering of shares of Tesla Motors priced last night at 17 bucks. That’s above the expected range. Tesla also increased the >
Investments in car companies do not have a great history of consistent returns to shareholders, let alone a company that has only one current vehicle, priced at over $100,000. The “mass market” version of the Tesla is tentatively due out by the end of next year, priced at around $50,000 and will soon after be >
At 10 o’clock, the Conference Board survey of June Consumer Confidence is expected to reflect a decline to a reading of 62.9 from last month’s 63.3.
Yesterday the Conference Board lowered its growth estimates for the Chinese economy. That, among other things sent the Shanghai Index lower by almost 5 percent. That, and strength in the dollar has Europe about 2 percent lower, and we are looking at a pretty tough open for our markets at 9:30. At this point, adjusted for fair value, the S&P 500 futures are down about 16 points, the Dow futures are down 110, and the NASDAQ futures are about 27 points below fair value.
Over the weekend, the G20 countries agreed that too much sovereign debt is bad, and that cutting today’s debt levels by half over the next 3 years is a good idea. However, they agreed that each country should go about the business of cutting their debt in their own particular way. One particular country, which shall go unnamed, appears to be planning subtraction by addition. But in any event, it was a nice weekend for everyone to spend in Toronto, and everyone was dressed very nicely for the pictures.
There are only three days left in the second quarter of the year, and so far, earnings warnings have been few and far between, which could portend some good news in a couple of weeks. But for this week, Friday’s Unemployment Report will get a lot of attention, and not many are particularly optimistic about the new-jobs number.
In just over ten minutes, we’ll get the May personal income and spending data. Expect income to have risen one-half of one percent and spending to have risen just one-tenths of a percent. Both of those numbers would be a bit higher than the April results.
Dow Chemical upgraded this morning, Amazon took a downgrade.
Asian markets were mixed, but Europe is generally higher. Our futures are a little higher, but have lost some steam during the past half hour.
At this point, adjusted for fair value, the S&P 500 futures are up about 3½ points, the Dow futures are up 27, and the NASDAQ futures are about 6 points above fair value.
Well, almost two years after the near-financial meltdown, it looks like we finally have a Financial Regulatory bill that will become law. The committee debate ended just before 6 this morning. It’s evidently a huge bill. However, it’s reportedly not big enough to do anything about Fannie Mae, or anything about Freddie Mac, or anything about mortgage underwriting standards. Evidently, those things didn’t have much to do with our problems. Also not included were any meaningful steps toward holding all people who call themselves financial advisers to a true fiduciary standard, where they are required to put their clients’ interests ahead of their own. That’s been punted to a “study” by the SEC.
The devil is, as always, in the details. However, count on a bigger government role on Wall Street and higher costs for the big banks. Of course, you know who eventually pays those costs. Keep an eye on your account statements in the months to come.
At 8:30 we’ll get the final read on fist quarter GDP. Expect no change in the earlier estimate of 3 percent. Then, just before 10 o’clock, the University of Michigan’s survey of Consumer Sentiment is also expected to come in unchanged at a reading of 75.5.
The Russell 3000 rebalances after the close today, so we could see some interesting action in certain companies such as Berkshire Hathaway.
Overseas markets are lower, but we’re looking to open a little bit higher on some strength in –guess what – big bank stocks. At this point, adjusted for fair value, the S&P 500 futures are up 3½ points, the Dow futures are up 24, and the NASDAQ futures are about 8½ points above fair value.
If there was any surprise in the Federal Reserve Open Market Committee’s remarks yesterday, it was just how negatively they reflected on prospects for the economy.
This morning we’re also looking at slightly lowered profit expectations from Bed Bath and Beyond and Nike. Also, home builder Lennar reported that sales dropped 10 percent after the federal home buyer tax credit expired at the end of April. Put that together with word that the Financial Regulatory Bill is nearing finalization (that means that the lobbyists are just about done writing it) and looks to be an absolute mess and it’s no wonder that we’re looking forward to lower stock prices this morning.
The two big data points that could, but are not likely to turn the tide prior to the open will roll out in just over 10 minutes from now. The weekly Jobless Claims report is expected to stay right in the 460,000 to 470,000 range (there were 472,000 claims last week.) We’ll also get the May Durable Goods Report, which is expected to reflect a decline in orders of about 1.3 percent.
On the brighter side, Best Buy hiked its dividend by 7 percent. Oracle reports earnings just after 4 this afternoon.
Asian markets were mixed overnight, but Europe is about one percent lower.
Adjusted for fair value, the S&P 500 futures are down 9 points, the Dow futures are down almost 71, and the NASDAQ futures are almost 17 points below fair value.
At 2:15 this afternoon, Ben Bernanke and the crew will once again do their Seinfeld impersonation, putting on “a show about nothing.” Interest rates will remain unchanged and the Fed is likely to again say that interest rates will remain at rock bottom for an “extended period of time.”
That will, of course will allow all of us to buy a new cell phone every year and a half or so, whether we need one or not. Today, Verizon and Motorola will unveil the “Droid X” while AT&T and Apple will unveil the latest generation of the iphone. The new iphone will feature not only one but two cameras, including video, reportedly enabling users to see each other while they talk, no doubt driving a car and eating a sandwich and doing makeup at the same time. More good news.
Releasing better than expected earnings news since the close of trading yesterday were Jabil Circuit, Carmax and Adobe. Red Hat matched expectations.
Mortgage applications fell almost 6 percent last week, in spite of very low interest rates.
Overseas markets are moderately lower, but we should get a little bounce-back this morning, after yesterday afternoon’s pullback. Adjusted for fair value, the S&P 500 futures are up 4 points, the Dow futures are up 39, and the NASDAQ futures are about 6½ points above fair value.
The Federal Reserve Open Market Committee starts a two-day meeting today. Apparently, they need the extra day to decide whether to keep short term interest rates unchanged or to leave them exactly where they are. We all know, of course that the Fed raises interest rates when the economy is getting stronger. In case you’ve forgotten by now, the last time they raised short term rates is almost exactly four years ago.
At 8:30 this morning, we’ll get the May existing homes sales report, which is expected to reflect an annualized rate of just over six million units. That would be a slight increase from the April number. Tomorrow, the New Home Sales Report is not expected to be nearly as pretty.
Walgreen’s reported fiscal 3rdquarter operating earnings of 54 cents. That missed estimates by a few cents.
Our yuan-related rally of yesterday morning evaporated in the afternoon on reports that big Chinese banks were stepping in to buy dollars.
The Shanghai Index in China was a smidgen higher overnight, but that’s about the only green arrow on the screen overseas. London is down more than one percent in anticipation of a new austerity budget in the U.K.
Our futures have improved a bit over the last couple of hours, and are indicating a whole lot of nothing at this point. Adjusted for fair value, the S&P 500 futures are pretty much flat, the Dow futures are down 23, and the NASDAQ futures are about a point and a half below fair value.
There’s a G-20 meeting coming up this weekend. Although that’s not normally something to get worked up about, some feared that the United States might try to pick a trade fight with China over the allegedly low valuation of the yuan. Not that there’s any desire to deflect our attention from the Gulf Oil disaster, mind you.
Anyway, yesterday the Chinese announced that they may be in a mood to drop the yuan’s peg to the U.S. dollar. That should defuse any trade war that U.S. politicians might want to instigate, and it has already this morning sparked a drop in the U.S. dollar, and a sharp rally in stock and oil prices around the globe.
Analyst upgrades for International Paper and Amylin Pharmaceuticals this morning. Late Friday, Anadarko was downgraded, but is indicated higher this morning on their statement refusing to admit liability in the Deepwater Horizon disaster. Anadarko says it was BP’s fault and they are not inclined to pony up and damage reimbursement. Sounds like one more lawsuit is the making, as if the pile wasn’t big enough.
Herman Miller will report its quarterly earnings today. Palm will report its quarterly losses.
There are only 8 trading days left in the second quarter, so if there is some bad earnings news in the offing, we should hear about it soon.
Chinese stocks were up 3 percent overnight. Russia is up 3½ percent. Most of Europe is one to two percent higher.
Adjusted for fair value, the S&P 500 futures are up almost 15 points, the Dow futures are up 102, and the NASDAQ futures are about 21 points above fair value.
Over the past decade, we’ve witnessed a series of televised Congressional hearings in which corporate executives are called to task for one reason or another. However, it’s hard to think of one that has been as ugly as the one we’ll be watching this morning. BP CEO Hayward will have a little chat with a House subcommittee. Yesterday, BP cancelled their current dividend and suspended the next two, agreeing to put aside 20 billion to satisfy claims from the Gulf oil spill.
By the way, Bank of America downgraded BP stock today. They perceive that something there is not quite right.
BP shares were trading higher in London this morning.
The weekly jobless claims report rolls at 8:30. Expect another 450,000 new claims. We’ll also get consumer inflation data, the Philadelphia Fed survey and the Leading Economic Indicators.
Asian markets were mixed overnight, but most European markets are solidly higher.
At this point, our futures are off their highest level of the morning, but are still pointing higher, pending the jobs and CPI reports at 8:30. Adjusted for fair value, the S&P 500 futures are up a little more than 4 points, the Dow futures are up 32, and the NASDAQ futures are about 10 points above fair value.
We’ll give back some of yesterday’s broad-based gains at the open today, which is not surprising after tacking on well over 2 percent yesterday. In fact almost all members of the S&P 500 saw share prices rise yesterday. Don’t look now, but with yesterday’s gains, the S&P 500 index closed at almost exactly the same level at which it started 2010.
This morning, FedEx is out with a decent warnings report, although traders probably won’t be impressed. Earnings for the 4thquarter came in at $1.33, which was a penny better than expected. Projected earnings for the 1stquarter and fiscal 2011 were within the range of estimates, but were both at the high end of that range. FedEx stock is indicated almost 4 percent lower pre-market.
Nokia will also be in the red this morning on a sales and earnings warning they issued minute ago.
If you’re traveling to France this summer, you may have to navigate around some striking public-sector workers. They’re reportedly upset about a government proposal to raise full retirement age to 62 from 60. Currently, public sector workers can leave at 60 and collect a pension equal to 75 percent of final salary. You wonder why governments are running fiscal deficits.
At 8:30 we’ll get the reports on May Housing starts and Producer Prices. The PPI is actually expected to show a headline decline of a half of one percent, due to declining energy prices (remember it’s May we’re talking about, back when energy prices were declining.)
It looks like stock prices will head lower early on. Adjusted for fair value, the S&P 500 futures are down about 8½ points, the Dow futures are down 65, and the NASDAQ futures are about 14 points below fair value.
We had a nice hundred-plus-point rally working on the Dow for much of the day yesterday until mid-afternoon. That’s when ratings agency Moody’s let the air out of the balloon with a four-notch credit downgrade of Greek sovereign debt. Now, hearing Greek debt referred to as “junk” is nothing new to traders. However, it was enough of an excuse for traders to sell into the rally yesterday, with the major indexes closing roughly unchanged.
This morning, the Fitch rating folks are getting into the act, with a multiple notch downgrade of the debt of BP, from AA to BBB. Nevertheless, BP stock is bid about 3 percent higher pre-market.
Best Buy just issued an earnings report that was simply not pretty. Operating earnings were 36 cents versus the expected 50 cents, on lower than expected revenues. Early bids on Best Buy stock had it lower by 7 percent or so.
The House of Representatives will put a big handful of oil company executives on the carpet this morning. Can’t imagine what they’ll be talking about. So, no matter how much you’re dreading YOUR morning meeting today – things could be worse.
Before the Best Buy disappointment about 20 minutes ago, the futures looked almost exactly as good as they did 24 hours ago. Although they’ve weakened a bit, we should still head higher at 9:30.
Adjusted for fair value, the S&P 500 futures are higher by about 6 points, the Dow futures are up 50, and the NASDAQ futures are 9 points above fair value.
It should be a moderately interesting week for financial news. Later in the week we’ll get inflation data as well as May’s leading economic indicators. On Thursday, BP’s CEO will have the treasured opportunity to respond to a variety of undoubtedly pleasant questions from a House of Representatives committee.
Today, however, should be relatively quiet. La-Z-Boy and Korn/Ferry report earnings, and SEC Chairman Mary Shapiro gives a speech a little later. Perhaps we’ll get some additional information on the SEC’s plans to tamp down a bit on the dangers brought on by high-frequency trading. In the “old days” people would consider stocks a share of an operating business. Today, shares of stock are sometimes little more than poker chips tossed around in a computer-driven casino. Making sure that the market functions rationally and fairly is indeed quite a challenge.
No chips were flying in Australia or Russia today, as those markets were closed.
Oil is higher by about a buck and a half per barrel, climbing over the 75 dollar level once again. The dollar is lower versus the euro this morning, and that’s been helping to push the stock futures higher all morning long.
Adjusted for fair value, the S&P 500 futures are higher by about 7 points, the Dow futures are up 63, and the NASDAQ futures are almost 12 points above fair value.
The bad news is that if you’re not a hedge fund or a high-frequency trader, you have no idea which way this stock market is headed day-to-day. The worse news is that the hedgies really don’t know either, but they seem happy to run hard in which ever direction they happen to be pointed. Yesterday’s three percent rally, with almost 9 stocks rising for each that fell, is giving hope that many stocks, in this zero-interest rate environment, have reached the level of being to cheap to ignore.
News is on the way in just about 5 minutes regarding May Retail sales. They are expected to have risen two-tenths of one percent. Just before 10 o’clock the University of Michigan first guess at June Consumer Sentiment is expected to rise just a point from May, to a reading of 74.6.
Danaher is the last of three big companies to split their shares 2 for 1 this week. Danaher will split after the close tonight.
Asian markets rose overnight. Although Germany was lower much of the morning, now is just about flat, while most of the rest of Europe is trading higher. Our futures have been rising over the past half-hour, but if trading were to start right now, we’d likely head just a bit lower. After you adjust for fair value, the S&P 500 futures are down almost 1½ points, the Dow futures are down 10, and the NASDAQ futures are about 7 points below fair value.
The good news for shareholders of BP is that the stock is being bid higher by more than 11 percent this morning. The bad news, of course, is that the stock fell more than 16 percent yesterday in a selling panic set off by some loose talk that included the word “bankruptcy.” For its part, a BP official said that he “saw no reason” for yesterday’s sell-off. Perhaps he hasn’t seen that live video shot from the bottom of the Gulf. Anyway,
Say what you will, BP does make prodigious amounts of money and is not likely to go away any time soon. However, BP’s dividend is under attack politically. If that dividend is cut or discontinued, the stock price will not be helped.
The Bank of England and the European Central Bank both left their short term interest rates unchanged this morning, to no one’s surprise. The ECB is holding a press conference this morning, where any wayward comment is likely to whip stock markets around.
Overnight, China reported a big increase in exports and a 12.4% year-over-year increase in land prices. Believe it or not, that’s actually a decrease from the prior rate.
Today’s the today a conference committee starts to try to reconcile the House and Senate versions of the mess otherwise known as the Financial Regulation Bill. Their goal is to have a bill to the President by the Fourth of July.
Weekly Jobless Claims at 8:30, but barring a really lousy number there, we should head higher at 9:30. At this point, adjusted for fair value, the S&P 500 futures are up more than 10 points, the Dow futures are up 83, and the NASDAQ futures are about 17 points above fair value.
Ben Bernanke goes front and center before the House Budget Committee at 10 o’clock. That, and the release of the Federal Reserve’s Beige Book this afternoon are pretty much the known highlights of the day to come. The Beige Book is the Fed’s survey of regional economic activity, and will be of special interest after last week’s very disappointing May Employment Report.
Last night, Texas Instruments raised the low end, and thus the midpoint, of their sales and earnings guidance for the current quarter. TI shares are quoted higher in the pre-market.
Chinese stocks rose about three percent overnight. The Russian market is lower, but most other markets overseas are seeing green arrows this morning.
The euro is actually up a bit and the dollar index is more than a half percent lower this morning, and that’s helping to boost our stock futures.
And speaking of the stock index futures, there is a pretty significant fair value adjustment this morning, so while our futures are higher, and have rallied from negative readings early the morning, they’re not quite as strong as they appear. Adjusted for fair value, the S&P 500 futures are up almost 5 points, the Dow futures are up 35, and the NASDAQ futures are about 8 points above fair value.
It took the big traders until the last hour to send the market decidedly lower after yesterday’s modestly higher start. It looks like another modestly higher start is in the offing today. Of course, the play isn’t over until the hedge funds move, so the day’s story probably won’t be told until the three o’clock hour once again.
Ben Bernanke, the Federal Reserve’s cheerleader-in-charge told Sam Donaldson last night that he hopes that the economy will get traction and that he doesn’t expect a double dip recession. He did admit, however, that 3 percent growth, after such a severe slump, isn’t going to get a lot of people back to work soon.
McDonald’s released May same store sales figures just over 20 minutes ago. In the United States, sales were up 3.4 percent, which was about one percent lower than expected. Overseas, however, sales were almost one percent higher than expected.
Corning received a broker upgrade this morning. But the downgrade list is a long one – CVS/Caremark, Intel, Broadcom, Baker Hughes, Diamond Offshore and Noble all suffering downgrades.
Our futures have been bobbing between slightly lower and modestly higher most of the morning. Right now, they’re bobbing higher. Adjusted for fair value, the S&P 500 futures are up 4½ points, the Dow futures are up 40, and the NASDAQ futures are about 5 points above fair value.
Last Friday’s three percent downdraft in our major stock indexes was triggered by a disappointing Jobs Report that basically told us that the 400,000 new Census Jobs created in May were just about the only new jobs created. Clearly the strategy should be to hold a new census every month. Maybe we could pay the workers with those newly extended unemployment benefits. But maybe I’m just over-thinking this.
Anyway, we’ll try to settle traders’ nerves this week, although there’s not a lot of important economic data on the docket until Friday.
Apple shares should be interesting to watch today. It’s widely expected that Steve Jobs will unveil a new version of the iphone at the Apple Developers conference later today. It may even be a 4G capable phone. But whatever it is, it’s bound to be interesting.
Express Scripts will split 2 for 1 after the close of trading, and a later this evening, Ben Bernanke and Sam Donaldson will chat on network television.
The Japanese market was deeply in the red overnight, losing almost 4 percent. China down less than two percent and most of Europe is just slightly lower at this hour.
At this point, adjusted for fair value, the S&P 500 futures are up 5 points, the Dow futures are up 40, and the NASDAQ futures are almost 6 points above fair value.
Depending on the stage of the business cycle, traders’ focus tends to shift between various economic indicators. Sometimes it’s the inflation numbers, sometimes housing starts. Right now, it’s all about jobs in the U.S. and sovereign debt overseas.
The monthly Jobs Report will roll at 8:30 this morning and the headline number is only part of the story. The average estimate is that 515,000 new non-farm jobs came into being last month. However, estimates range from less than 200,000 to over 700,000. Puffing up the May number are a lot of temporary census-related jobs, so we’ll have to drill down to the private-sector number to see how much the real job market might actually be improving. The overall unemployment rate is expected to improve a bit to 9.7 percent.
Our futures were mildly positive much of the morning, but took a big turn for the worse about an hour ago. That’s when rumors spread about a big derivative loss at a large European bank and a possible default on Hungarian sovereign debt. Now, you probably don’t have a portfolio chock full of Hungarian bonds, but that news is not helping the prices of your stock holdings one bit.
We’ll see what happens when the Employment Report rolls out in just about 8 minutes, but at this point, adjusted for fair value, the S&P 500 futures are down 7 points, the Dow futures are down 62, and the NASDAQ futures are about 14 points below fair value.
If you are long stocks, yesterday was certainly a breath of fresh air and we’re still breathing this morning.
A bunch of big retailers report May same-store sales this morning. So far, Limited Brands checked in with a 5 percent increase, which was better than expected. Costco had a 9 percent increase, which is great, except for the fact that analysts were expected something closer to 10 percent.
The May ISM non-manufacturing index is expected to tick higher at 8:30. We’ll also get the final 1stquarter productivity report, and then at 10 o’clock, the April Factory Orders, which are also expected to improve.
Good housing numbers yesterday, great auto sales numbers yesterday. If we would just resolve the oil problem in the Gulf and the Greece problem in Europe, we just might get stocks off their slippery slope and start talking sustainable rally.
Chinese stocks were lower on word that the Chinese government might impose a property tax on residential real estate. Wouldn’t it be nice NOT to have a tax on residential real estate, so that local property tax assessors could do something more productive? But, I digress.
Our 2½ percent rally yesterday sparked Japan to a 3½ percent gain overnight. The European markets that are open are mostly higher on the order of 1 to 2 plus percent. Our futures are still positive, but have slipped enough from their highest levels of the morning. At this point, adjusted for fair value, the S&P 500 futures are up 2½ points, the Dow futures are up 22, and the NASDAQ futures are about 1½ points above fair value.
The threat of leaking oil from the Deepwater Horizon well had the stock of BP down about 25% as we started yesterday’s trade. The threat of leaking oil and swarming lawyers took the stock down another 15 percent yesterday. Most of that decline came in the last half-hour of trading, as news spread about the Government’s upcoming civil and criminal investigation.
That late hour plunge took the rest of the market down with it yesterday, after we had spent more of the afternoon pretty close to even.
This morning, the Challenger layoff survey reported only about 38,000 announced job cuts in May. That’s pretty close to the April number and may be an indication that companies have cut their payrolls about as much as they’re going to cut them for this employment cycle.
May Car Sales reports will be rolling out today. Although sales increases may have cooled off, hurting the top line, incentives were reportedly down a lot in May, which should help the automakers’ bottom line.
Joseph A. Bank is out with a very good earnings report, with profit up 38 percent from a year ago on a 10 percent rise in same store sales.
Asian markets were mixed overnight. Europe is lower, generally on the order of one percent or less. We’re looking to open a bit higher, after the last-minute fade yesterday. At this point, adjusted for fair value, the S&P 500 futures are up almost 5 points, the Dow futures are up 44, and the NASDAQ futures are about 10 points above fair value.
The month of May turned out to be one of the worst "Mays" in decades, as our major indexes lost just about 8 percent of their value. We’re coming off a long weekend, which means we were able to accumulate three days chock full of bad news rather than the usual two.
BP’s failure to stop the Deepwater Horizon oil leak, the warning about a severe hurricane season (which starts today,) the nearly certain collapse of the deal to sell AIG’s Asian operations, more trouble between the Israelis and the Palestinians, and the slow motion collapse of the Euro – put it all together and it’s no big surprise that we’re likely to open more than one percent lower at 9:30 this morning.
We will get two economic reports at 10 o’clock and they are both expected to reflect a slight economic cool-down. The report on April Construction Spending should come in at a one tenth of a percent increase, down from March’s two tenths of a percent. We’ll also get the May ISM Index. Expect a reading of 59, which would indicate just a slightly slower rate of growth that the April number.
Two similar reports in China overnight indicated slower growth there, but growth nevertheless. However, you know that “no news is good news.” Well, this morning, all news is being taken as bad news.
All major markets overseas are lower. Spain is down 3 percent. At this point, adjusted for fair value, the S&P 500 futures are down almost 15 points, the Dow futures are down about 113, and the NASDAQ futures are 15 points below fair value.
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For an explanation of "fair value" please click here.