Please note that Ron Humenny and Starfire Investment Advisers, Inc. are not affiliated with, are not compensated by and do not endorse Flagstar Bank or any other sponsors of our daily WJR reports
March 31, 2005
It’s the last day of the quarter and the day before our absolutely favorite Holiday of the year. So far, so good with earnings warnings. Very few companies have admitted to fooling us with regard to first quarter earnings. Of course, official earnings reports are still a week or so off, so there’s still time.
Everybody loves a good soap opera, and it looks like a doozy is cooking at Morgan Stanley. Evidently a bunch of former and possibly current Morgan Stanley executives were mounting a quiet campaign to oust the CEO. Well, the CEO got wind of it and starting firing people left and right earlier this week. It’s all getting very ugly and very public. Lesson to be learned, young ones? Of course there is -- There’s nothing wrong with a palace coup – but you’ve got to kill the King.
The market may hold its breath today in front of tomorrow’s monthly jobs report. However, earlier today, Monster.com released their job search index, which showed pretty healthy growth in the jobs market.
March 30, 2005
What was good for Hewlett-Packard yesterday was big trouble for NCR. NCR’s stock slumped about 16 percent yesterday when word got out that Hewlett-Packard’s new CEO would be NCR’s current CEO. Hewlett-Packard, for its part rose about 2 bucks on the day. That’s about 10 percent.
Micron Technology stock is down about 20% since mid-February. But last night, Micron released quarterly results, beating estimates by three cents per share. DRAM chips are a tough business right now, but Micron should get a little boost this morning.
There are a couple of Federal Reserve governors running around out there giving speeches today and potentially stirring up trouble. But more importantly, Microsoft will hold a conference this morning to give stock analysts their view of the future.
Asian stocks were down a quarter percent or so overnight. God bless the Belgians. Not only do they make great chocolate, their stock market is up this morning, unlike the rest of Europe.
We’ll get the final reading on 4th quarter Gross Domestic Product at 8:30. But in front of that, our futures are indicating a positive open. Right now, adjusted for fair value, S&P futures are up about 4, the Dow futures are up 33, and the NASDAQ futures are about 6 points above fair value.
March 29, 2005
Going, going, gone. Hank Greenberg will be leaving the clubhouse at AIG Insurance completely, as the company continues to undergo regulatory scrutiny. Greenberg has been the big power hitter at AIG for 37 years. How long ago was that? Well, in Detroit Tiger terms it was two World Series wins ago. Yes, that’s a long, long time. However, it looks like this AIG regulatory story may only be in about the second or third inning.
Tomorrow is Microsoft analyst day. Thursday and Friday are big economic data days. But today, well today is just Tuesday. There’s only one moderately interesting report on the way.
March 28, 2005
It is Monday. That means there must be a company somewhere out there being bought. That somewhere today is at SunGard Data Systems. This one is going private, at least temporarily. It’s an 11 billion dollar leveraged buyout. That’s the largest LBO since 1989, when RJ Reynolds was bought. At 36 bucks per share it’s a 14 percent premium to Thursday’s closing price, but it’s 44% higher than SunGard closed a week ago Friday.
General Motors is taking another hit this morning. This time it’s from the big brokerage firm UBS. They are downgrading GM on fears of a dividend cut caused by a perceived lack of liquidity.
The big economic report of the week will be the March Jobs Report, but we’ll have to wait until April Fools Day for that. Nothing much in on the docket for today.
March 24, 2005
General Electric is out with revised earnings guidance this morning, and it’s good news, at the end of week that could use some good news. GE raised their earnings guidance for the current quarter buy a penny per share. That may not sound like a lot. But remember, GE has an awful lot of shares out there.
Northrup-Grumman is also raising operating earnings estimate this morning by three cents per share.
A couple of more data points will be out this morning to round out the trading week. AT 8:30, the February Durable Goods Report is expected to show an eight-tenths of a percent increase, reversing course form a 1.3% decrease in January.
Then at 10 o’clock the report on February New Home Sales is expected to report a slight uptick in sales. This will be an interesting report to watch over the next couple of months to see how much the recent rise in mortgage rates is starting to bite.
March 23, 2005
The genius of Alfred Hitchcock is that with just a few carefully selected words, he could scare the dickens out of you. So, maybe when he retires next year Alan Greenspan has a future in the movies.
The Federal Reserve Open Market Committee did what everybody expected when they raised short term interest rates yesterday by a quarter percent. But then, with just a few carefully selected words inserted into its accompanying statement, the Fed set the bond market on its ear, and converted a stock market rally into a pretty significant sell-off that stretched across the globe overnight. The Fed’s new wording gives the impression that we are far from the end of the line of interest rate increases. That, of course is good news for the dollar, but bad news for bonds and potentially for stocks.
Oracle beat their earnings number last night, but most of the income came from acquisitions, like PeopleSoft, rather than the mother-ship. Oracle is trading lower in the pre-market.
March 22, 2005
It would be nice to have a lead story OTHER than General Motors, especially if you’re a GM shareholder. This morning, word from the Financial Times is that GM is losing a 2 billion dollar credit facility from GE Capital. That has GM stock down about 5 percent in Europe this morning, after yesterday’s nearly 4 percent rally in the stock.
Speaking of stories that we’re getting a little tired of, Alan Greenspan and the Federal Reserve Open Market Committee get together to measure their paces this morning. At 2:15 we’ll get another quarter-point short-term interest rate hike. The only drama is whether the Fed will remove the “measured pace” prediction for the future of interest rate hikes.
There will be a little something for the Fed to chew on at 8:30. A big rise in the price of tobacco is expected to be the catalyst for a three-tenths of one percent increase in the Producer Price Index. The PPI is, of course, an indirect precursor to consumer inflation, which is presumably what the Fed is trying to avoid by raising rates. Suffice it to say that the lower the PPI number at 8:30, the better.
Stocks are trading lower across the globe this morning, and absent great news at 8:30, we’ll head lower at the open. Adjusted for fair value, S&P futures are down a little more than a point, the Dow futures are down 18, and the NASDAQ futures are about 3 points below fair value.
March 21, 2005
The big news in these parts again involves General Motors. The Wall Street Journal’s online edition reports that GM is undertaking a significant downsizing of salaried personnel. In some departments the cuts are estimated at 28%. During the past five years Ford and Chrysler have undertaken fairly dramatic plant closures and cost cuts. GM has been much more gradual in its approach. Those days may be done. It’s expected that the white-collar cuts are the warm-up act to a call to the UAW to get some concessions work force >
Several big mergers this morning. Interactive Corp will buy Ask Jeeves at about a 17% premium. Cosmetic implant maker Inamed’s price has ballooned from 20 to 66 over the past two years. Look for another augmentation today. Medicis is buying Inamed at a 13% premium in cash and stock.
March 18, 2005
We may have a “floating duck” market today. It may appear pretty calm on the sur>
Today is the day of the monthly expiration of stock futures, stock options, stock options on stock futures – it’s called “triple witching” day as a lot of big leveraged bets on the direction of the stock market get re-positioned. On top of that, the S&P 500 and some other indexes are rebalancing today. That means that a lot of stock will be bought and sold based on companies’ relative market capitalization. That’s probably not good news for stocks whose market cap has shrunken quite a bit lately.
Nike is out with good numbers this morning. Radio Shack, however, is cutting its quarterly forecast. At 9:45 this morning the University of Michigan’s preliminary Consumer Sentiment Index for March is expected to rise to just short of the 95 level. That would be up just a tad from February’s 94.1.
March 17, 2005 Happy St. Patrick's Day! No report -- We're at the party!
March 16, 2005
The stock futures were pointing toward a very nice open for the stock market until about 45 minutes ago. Right about then, General Motors, a member of the Dow Jones 30 Industrial Index, and, of course the S&P 500, issued a major earnings warning. In case you haven’t heard, here’s the word:
GM was expected to break even this quarter. Forget it. Expect a loss of a buck and a half per share. Remember when GM was projecting a 10 dollar per year profit? Last year they said, well maybe 4 to 5 bucks was more like it. Now they say we should expect maybe a dollar to two dollars per share of profit for the year. GM stock is bid at 31.29 in the pre-market. That’s down about 8 down percent from yesterday’s close. Not good news for GM, their suppliers, and quite frankly for Detroit in general.
So, outside of that, Mrs. Lincoln, or should I say Mrs. Cadillac, how did you enjoy the play? Outside of the GM news, the big news of the day is out of the Middle East. Saudi Arabia and Kuwait are set to increase oil output by 700,000 barrels per day immediately. That has oil prices down about 50 cents per barrel, which is good. Later this morning, we’ll get oil inventory data and at 8:30, February Housing starts are expected to be down about 5 percent.
March 15, 2005
If you owned a share of Genentech stock at 3 o’clock yesterday afternoon, you were worth 44 bucks. By 4 o’clock yesterday, you were worth 55 bucks. How’d you like that job 40 hours a week? Positive news on Avastin, a cancer drug, sent Genentech stock soaring.
The only other thing that’s been soaring lately, the price of oil, is holding steady this morning, just south of 55 dollars per barrel. OPEC will meet tomorrow to decide whether or not to go along with Saudi Arabia’s stated intention of raising output in front of the summer driving season.
In about ten minutes we’ll get reports on February Retail Sales, which are expected to be up 7 tenths of one percent, and January Business Inventories, which are expected to be up 9 tenths of one percent.
March 14, 2005
There’s a new King-in-waiting at the Magic Kingdom. Disney’s Number 2 will become Number 1 in October, as Bob Iger will replace Michael Eisner as CEO. Eisner’s departure was, of course accelerated by questions from pesky shareholders about the effectiveness of the business plan.
No challenging the effectiveness, but questions from pesky regulators about the ethics of the business plan will apparently drive Hank Greenberg from the Chairman’s chair at the big insurance company AIG.
Your may have never heard of Ascential Software. However, IBM has heard of it, they know it, and they bought it this morning for more than a billion dollars. That’s about an 18 percent premium to Friday’s closing price.
Not to be outdone on Merger Monday, Philip Morris spent 5 billion overnight to buy a tobacco company in Indonesia.
Lots of big economic numbers are coming this week, but there’s nothing on the schedule for today.
March 11, 2005
The stars are aligning for an itty-bitty little rally this morning. Last night Intel gave the public its mid-quarter update and the news was good. Intel is projecting higher gross margins – 57 percent versus the expected 55 percent. They are projecting revenue at the top end of estimates, and if they hit the midpoint of the new range, it will represent a 15 percent sales increase from last year.
That has chip stocks up across the globe in overnight trade. Couple that with yesterday’s rally in the ten year Treasury, which lowered the yield to under 4.46 percent, and couple that with the price of oil down under 53 bucks per barrel – well that’s a troika of good news for stock prices.
The last piece that needs to fall into place is some good news on the trade deficit. At 8:30, the January trade deficit numbers come out. It’s expected that the trade deficit grew just a tad to 56.5 billion dollars.
March 10, 2005
We all remember where we were on the day of certain events. President Kennedy’s assassination, the 1st moon landing, the wedding of Tiny Tim and Miss Vicki, you know, the major stuff.
So, do you must remember where you were 5 years ago today. The Nasdaq hit it’s all-time record high of 5,132.52, and it was perfectly obvious to some people that you didn’t really need a machine to print money – all you needed was to own technology stocks. Well, experience is the most effective teacher, and usually the most expensive teacher. A lot of people have learned a very expensive lesson. The Nasdaq closed yesterday at 2,062.
The ten and thirty year Treasury bonds took quite a drubbing yesterday, with the 10 year closing at a yield of 4.514%, and the stock markets didn’t like those rising rates much at all.
Intel gives its mid-quarter update after the close today, so expect some late-day antics in technology names.
March 9, 2005
Oil prices took control of the stock market once again yesterday, and it looks like oil may well whip us around again today. At 10:30 we’ll get the weekly update on oil and distillate inventories in the U.S. It’s expected that oil inventories rose during the past week. Meanwhile, oil prices are on the march again, nearing the 55 dollar level at $54.93.
For those of you who are romantically inclined, there are a couple more corporate marriage announcements this morning. Great Lakes Chemical is being bought by another specialty chemical company, Crompton. In Canada, a couple of metals companies hooking up with Noranda buying the rest of Falconbridge that they don’t already own.
Blockbuster reported earnings of 7 cents per share this morning. That beat estimates by 3 cents.
You may remember that a month ago today we talked about the dive in yield on the 10 and 30 year Treasury Bonds and how it might be the end of the road for low low-term rates. Since then Treasury yield are up almost a half percent. A spike this morning around 4.5% on the ten year bond sent a shiver through the stock futures.
March 8, 2005
Those big flat-screen televisions have been dropping, dropping, dropping in price. It looks like consumers are waiting for them to drop some more before
re-wallpapering the house with them. Texas Instruments said after the close of trading yesterday that TV manufacturers overestimated consumer demand a bit when they built all those TV’s last quarter. As a result, TI lowered the top end of their earnings estimate for the current quarter. Analysts are expecting 24 cents per share this quarter. The company is now projecting 22 to 24 cents. It looks like Texas Instruments will open lower by 50 cents or so.
There’s not a lot going on today as far as economic reports. Ben Bernacke, one of the Federal Reserve governors and William Poole, the President of the St. Louis Fed are out on the rubber chicken circuit today. We’ll see if they talk about the pace of future interest rate hikes.
In Japan, the Nikkei was down about a third of one percent overnight. Hong Kong bounced back after Monday’s losses, but European markets are weak at this hour. It looks like we have red arrows in our futures as well. In fact, the futures are almost exactly the mirror image of 24 hours ago. Adjusted for fair value, S&P futures are down 2, the Dow futures are down 13, and the NASDAQ futures are 5 ½ points below fair value.
March 7, 2005
It may be lonely at the top, but at least you don’t have to stay there long. It’s getting harder and harder for your typical CEO to hold on to his or her job. Sometimes it’s an accounting scandal. Sometimes it’s a decline in market share. That’s what did in Sony’s CEO over the weekend. Now, word is that 68 year old Harry Stonecipher is out at Boeing because of a consensual relationship with a female executive at the company. I don’t think those rules apply everywhere else, like for basketball players or some politicians.
Two big mergers this Monday; Hibernia Bank is being bought out by
Capital One at 33 bucks per share, that’s a 24 percent premium to Friday’s closing price. Europe’s largest defense contractor, BAE Systems is buying United Defense Industries for 4.2 billion dollars. UDI is the maker of the Bradley fighting vehicle.
March 4, 2005
Clear the desk, we have only two topics to consider this morning. In about eight minutes, one of the most closely watched economic reports each month will be announced. That’s the monthly jobs report. It’s expected that the unemployment rate in February held steady at 5.2 percent, and that about 245,000 new jobs were created by American businesses. Now that the presidential election is over, most of the silly spin on this number is behind us, and if we do see new jobs of 200,000 or more, it will reaffirm the steady improvement we’ve seen in the job market.
Our second big factor today is the price of oil. We’re at 53.51 per barrel this morning. It’s expected that OPEC will release a statement today reassuring the markets that supply will not be cut at its March meeting.
At 9:45, the University of Michigan Consumer Sentiment Index is expected to tick up just a tenth of a point at 94.3.
March 3, 2005
As anyone with school-aged children can tell you, influenza has been running rampant during the past few weeks. Apparently, the kids are also suffering from a severe stain of “affluenza.” A bunch of retailers that cater to the school-aged are putting up some over>
Walmart same store sales for February came in at a better-than-expected 4.1 percent. However, the flip side comes from company that’s become retailing’s basket case, every pun intended. Pier One’s sales were down over 15 percent in February, and they are again revising their guidance downward. Sharper Image and the Limited also saw sales decline.
The 14 billion dollar oil company Unocal may be in play. ChevronTexaco and other bidders are said to be interested. Unocal stock is up almost 20% in pre-market bidding.
At 8:30 unemployment claims are expected to be up 6,000 or so.
March 2, 2005
All ears on Alan Greenspan today, as he testifies before the House Budget Committee. There’s an undercurrent of concern that the Fed may be thinking about a half-percent hike in short term rates in the near future. We’ll see if Greenspan drops any hints.
There’s been a lot of company specific news since yesterday’s closing bell. Lear Corporation, a big auto supplier, says that car production cutbacks will take their toll this quarter. After that announcement, Lear stock dropped over 7% in after-hours trade yesterday, and is now off over 25% over the past year. Five brokerage firms, who evidently hadn’t heretofore detected any weakness in the auto industry, downgraded the stock this morning.
Costco reported that fourth quarter same store sales were up 7 percent, but earnings fell a penny short of estimates. That will likely not play well this morning for a retailer that goes out at 24 times earnings.
Compare that with a retailer that’s at 29 times earnings; namely American Eagle Outfitters. They reported February same store sales up over 32 percent. They beat last quarter’s earnings estimate by a penny per share.
Look for a pullback in prices at 9:30. Right now, adjusted for fair value, the S&P futures are down about 4, the Dow futures are down 31, and the NASDAQ futures are about 7 ½ points below fair value.
March 1, 2005
The market taught another of its never ending-lessons on the value of diversification yesterday. Irish eyes were smiling at Elan Corporation as the stock doubled over the past year. Unfortunately for those who had loaded up on the stock, yesterday’s withdrawal of the MS drug Tysabri sent Elan shares down 69 percent. Elan’s partner Biogen-Idec was down 42 percent on the day. Tysabri was approved under the FDA’s “fast-track” program, and as they say at the racetrack, gentlemen, start your lawsuits.
This morning, of course, brokerage houses are falling all over themselves to downgrade both stocks. Obviously, it would have been great to know the news about Tysabri a couple of weeks ago. Curiously, the SEC is looking into a couple of executives who dumped millions of dollars of stock oh………….a couple of weeks ago.
February car sales reports will be rolling out today. They are expected to be up a bit from January, but a new slew of incentives are also expected to be announced.
The Chicago PMI, a gauge of manufacturing activity came in above expectations yesterday. At ten o’clock, look for the February ISM Index to confirm that with a reading of 57 or above.
The futures are indicating a positive start for stocks. Adjusted for fair value, the S&P futures are up about 2½ , the Dow futures are up 17, and the NASDAQ futures are about 4½ points above fair value.
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For an explanation of "fair value" please click here.