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WJR May 2004 Reports

 

May 31, 2004 - No report -- Happy Memorial Day!
 
May 28, 2004
 
Here’s the theory:  When you go into recession, like we did about four years ago, you cut taxes, you lower interest rates.  That’s gives people extra purchasing power, which they spend until the economy recovers and jobs are created.  If that delicate dance works, by the time tax breaks run their course and interest rates head north, consumers are secure enough with their incomes to continue the spending. 
 
Well, with tax breaks running out and interest rates heading higher, today we’ll find out a lot about the consumer.  April personal income and consumption data will be announced in ten minutes.  Then at 9:45 the University of Michigan gives us the Consumer Confidence Index for May. At 10 o’clock, the Chicago Purchasing Managers Index will give us an idea of how much businesses are buying.
 
All that aside, it’s hard to imagine that traders will be willing to take big positions in front of the long Memorial Day weekend.  It’s also hard to imagine that they’ll be around all day.  The bond market closes early and I’d imagine that a few stock traders will get a head start for the beach.
 
The futures aren’t quite as bad as they look, but if the market were to open right now, it would open a little weaker.  Adjusted for fair value, the S&P futures are down about 2 points, Dow futures are down 12, and the Nasdaq futures are about 2 points below fair value.
 
May 27, 2004
 
The S.E.C.’s investigation of potential wrongdoing in the mutual fund industry continues.  The latest on the hit list is Wellington Management.  Wellington is reportedly under investigation for possible inappropriate trading in its mutual funds and hedge funds.  Wellington manages over 400 billion dollars - 120 billion of that in Vanguard funds.  Again, it’s just an investigation so far.  By the way, that mutual fund reform legislation, proposed a few months ago amid a whirlwind of publicity, appears to be going nowhere in Congress, and is generally regarded as pretty well dead.
 
Our economy is far from dead, however.  The advance number on 1st quarter Gross Domestic Product rolls at 8:30 this morning.  Expect an increase of 4 ½ percent.
 
Costco beat the street this morning.  They made 42 cents per share versus an expected 37 cents.  And a little good news in oil prices.  They’re down 60 cents to just a dime over the 40 dollar level.
 
Stocks in Hong Kong were up 2 ½ percent overnight.  Europe is up across the board.  We should start higher, pending the news on GDP and the weekly jobless claims in ten minutes.  Adjusted for fair value, the S&P futures are up 3, Dow futures are up 37, and the Nasdaq futures are about 3 points above fair value.
 
May 26, 2004
 
Thirty year mortgage rates went up on the order of a half percentage point in April.  But that didn’t slow down existing home sales.  In fact, sales bounced much higher than expected.  Evidently, those rising rates accelerated sales as a lot of people who were standing near the shore decided to jump before the low-interest-rate ship set sail.
 
In about an hour an a half we’ll find out about new home sales in April.  New home sales, of course, have a long tailwind for consumer purchases.  Washers, dryers, furniture and other durable goods all benefit from increasing new home sales.
 
Speaking of durable goods, that’s the other major report on the docket today.  The April Durable Goods report is expected to reflect about a half percent drop from March.  That number will be announced in about six minutes and could influence opening stock prices.
 
A bunch of Asian markets were closed for a holiday overnight, but Japanese stocks rose almost 2 percent on the heels of our rally yesterday.  We may pull back a bit at the open on reports of new terror threats.  Adjusted for fair value, the S&P futures are down a little more than a point, Dow futures are down 21, and the Nasdaq futures are about 5 points below fair value.
 
May 25, 2004
 
Earning season unofficially wraps up today as Heinz has announced their fourth quarter earnings. They met estimates of 58 cents pre share. This is also the day we get earnings reports from two companies you’d just love to see merge someday – Krispy Kreme and La-Z-Boy.  I think everyone can understand the potential synergy there.  Anyway, Krispy Kreme matched lowered expectations of 23 cents per share. 
 
At 10 o’clock, the Conference Board will release their May Consumer Confidence Survey.  It’s expected to come in at 94, which is up a touch from the April reading. The April existing home sales report also rolls at 10 o’clock.  We’ll see if rising mortgage rates had an impact last month.
 
The futures have recovered a bit from their lows of the morning.  But at this point, we’re still looking for slightly lower prices at 9:30.  Adjusted for fair value, the S&P futures are up down 2, Dow futures are down 19, and the Nasdaq futures are about 4 points below fair value.
 
May 24, 2004
 
It’s quiet.  Maybe too quiet.
 
The stock market endured one of the most boring weeks in memory last week, as traders tried to figure out far and how fast oil prices and interest rates were about to rise.  There’s apparent good news on both fronts. 
 
Late last week, a Federal Reserve Governor was going out of his way to assure us that the Fed is not likely to rapidly escalate short term interest rates. 
 
Over the weekend, although OPEC tried to hold the world in suspense until their meeting next week, Saudi Arabia said “it’s our oil, and we’ll pump if we want to”.  The Saudi’s will increase production by almost 30%.  On that news, crude prices dropped below 40 bucks a barrel this morning.
 
Earnings reports are on the way today from Campbell Soup, Medtronic and Novell.
 
Overseas markets are up across the board this morning.  Evidently, they use oil, too.  Our futures are up just about exactly as much as they were at this time Friday.  Adjusted for fair value, the S&P futures are up 5 ½, Dow futures are up 56, and the Nasdaq futures are about 10 points above fair value.
 
May 21, 2004
 
To say that the stock market was flatter than a pancake yesterday would require one VERY thin pancake.  The big mover among major indexes was the Nasdaq, which only lost a point and a half.  Volume was extremely light as well.  But things will be a little more exciting this morning.
 
Nothing much on the calendar today, so oil, once again, will be the focus.  Crude prices are down to $40.60 this morning, off about a buck from the high point of the week.  With an OPEC meeting on tap for the weekend, any rumor about a downward move in prices should meet with an upward move in stock prices.
 
Meeting with a downward move in its price today will be Nokia.  A major broker downgraded shares of Nokia this morning on concerns of a loss in market share.
 
Japan and Hong Kong were up about 2 percent overnight, European markets are up slightly at this hour.  Adjusted for fair value, the S&P futures are up 6, Dow futures are up 48, and the Nasdaq futures are about 12 points above fair value.
 
May 20, 2004
 
A nice rally hit an oil slick at about 2 o’clock yesterday afternoon.  Oil prices are down a penny this morning, at 41.44 per barrel.  OPEC will be meeting this weekend to decide on how wide to open the spigot.  But at this point, you have to wonder if the current price isn’t being influenced more by hedge funds and other speculators as opposed to real market forces.  No matter, those oil prices will have to come down before the overall market can make any significant headway.
 
In ten minutes the weekly jobless claims number rolls.  More importantly, at 10 o’clock, the April Leading Economic Indicators will be released.  That report is designed to predict how the economy will behave six to nine months down the road.  Expect an increase of 2 tenths of a percent. That’s down a touch from March.
 
Overseas, the Nikkei in Tokyo was off about one percent.  Most European markets are down about one percent.  However, India, Korea and most of the Asian Tiger markets continued to bounce back overnight.  Our futures have reversed their positive outlook from earlier this morning.  At this point, we’re looking for a slightly lower market at 9:30. Adjusted for fair value, the S&P futures are down a point and a half, Dow futures are down 9, and the Nasdaq futures are about 2 ½ points below fair value.
 
May 19, 2004
 
Yesterday was a good day for stock prices, but trading volume was on the light side.  We’ll see if this morning’s good news will lure some of the sidelines money back to market.  There’s a lot of good news to go around.
 
On the earnings front, Hewlett-Packard met earnings estimates on more than 20 billion dollars of revenue last quarter.  That’s their third solid quarter in a row.  Applied Materials beat both revenue and earnings estimates.  Sales were up over 80 percent.
 
Overseas, the Nikkei rose about 2 ½ percent overnight.  That extends yesterday’s rally.  The Indian stock market is bouncing back, as well, on the hopes that an economic reformer will be named Prime Minister, now that Sonia Gandhi has begged off the job.
 

There’s not a whole lot on the news docket for the rest of the day, but we’ll be getting off to a good start at 9:30.  At this point, adjusted for fair value, the S&P futures are up about 9 points, Dow futures are up 79, and the Nasdaq futures are about 17 points above fair value.

 
May 18, 2004
 
Things are looking up in Japan.  The Japanese Gross Domestic Product grew at an annualized rate of 5.6% during the past quarter.  That handily beat expectations. 
 
A bunch of retailers are out with earnings numbers this morning, and the cash registers have evidently been singing.  Home Depot leads the pack, earning 52 cents per share last quarter, versus and expected 43 cents.  They also raised profit guidance for the remainder of the year.  J. C. Penney beat estimates by 4 cents per share.  Staples beat estimates by 3 cents.
 
At 8:30, we’ll get the April housing starts.  Expect a slight decline from March, to just under the 2 million units.
 
The Nikkei in Tokyo was up 200 points overnight on that strong Japanese GDP report.  European markets have settled back to about even at this hour.  The futures are indicating that if the market opened now, we’d retrace more than half of yesterday’s loss right out of the gate.  At this point, adjusted for fair value, the S&P futures are up about 8 points, Dow futures are up 62, and the Nasdaq futures are almost 15 points above fair value.
 
May 17, 2004
 
 
Terrorism, Iraq, record oil prices, uncertainty about the policies of the new government in India – welcome to another-fun filled day for stock prices.
 
Not that is would matter in the >
 
It’s two in a row for Kmart.  Two quarters in a row of profitability.  Kmart made 94 cents per share in the 1st fiscal quarter.  This morning, Lowe’s reported earnings that beat estimates by 3 cents per share on a 22 percent increase in sales.  Limited Brands matched estimates for the last quarter.
 
Asian markets were down almost 3 percent overnight.  European markets are down about 2 percent at this hour.  It looks like we’ll be looking to re-test some of the 200 day moving average support we bounced off of last week.  At this point, adjusted for fair value, the S&P futures are down 12 points, Dow futures are down 114, and the Nasdaq futures are about 21 points below fair value.
 
May 14, 2004
 
 
It’s symbolic that the Monthly Producer Price Index is released a day before the Monthly Consumer Price Index.  Prices that rise at the wholesale level eventually make their way to the retail level.  Yesterday’s PPI increase of 7 tenths of one percent was twice as high as estimated, and not good news for stocks.  We’ll see if that surge hit the end consumer in April.  Given that most of the increase was in energy costs, the CPI announcement at 8:30 seems likely to exceed the three-tenths of a percent that’s expected.
 
Dell reported earnings last night that met estimates and they raised revenue estimates for next quarter.  However, rumor had gotten around Dell would beat estimates by a penny, and the failure to beat estimates is chipping away at the stock price in the pre-market this morning, with Dell off almost 4 percent.
 
Oil hit a record high this morning at more than 41 bucks per barrel. 
 
U of M’s preliminary number on May Consumer Sentiment is expected to come in at 96.  That number rolls at a little before 10 o’clock this morning.
 
The Nikkei Index in Tokyo was up a smidgen overnight, but other foreign indexes are down across the board.  At this point, adjusted for fair value, the S&P futures are down 8 ½ points, Dow futures are down 71, and the Nasdaq futures are about 15 points below fair value.
 
May 13, 2004
 
I somehow had the feeling that the Humenny family’s 1st Disneyworld vacation last March would have a big impact on Disney’s profits – I just didn’t think it would be this big.  Disney’s quarterly profit beat estimates by a full nickel per share last night.  That’s a 71% improvement from last year.
 
Speaking of roller coasters, how about stock prices yesterday.  We were in apparent free-fall until right around 2 o’clock.  At that point the S&P 500 Index hit its 200 day moving average like a superball hits a concrete floor.  The S&P shot up 2 percent during the next two hours and the Dow rose 200 points by the close to finish up 25 points on the day.
 
Also beating earnings expectations this morning were Walmart and Pep Boys.  Panera Bread met estimates, saying that rising butter prices are making profit margins a little slippery.
 

Weekly jobless claims will be announced this morning.  Of course, nowadays ALL the focus is on inflation, so traders will focus on the Producer Price Index report at 8:30.  Expect 3 tenths of one percent overall, and 2 tenths on the core rate. At this point, adjusted for fair value, the S&P futures are down less than a point, Dow futures are down 8, and the Nasdaq futures are about a point below fair value.

May 11, 2004
 
Yahoo! will become Ya and Hoo at the close of trading today.  They will split their shares two for one. 
 
If you’re long the stock market, it may have felt like all your stocks split yesterday.  Unfortunately, you didn’t get any additional shares.  We’ll start today below 10,000 on the Dow Jones Industrial Average for the first time this year.
 
Mylan Labs missed earnings estimates by 2 cents per share on a dip in revenue.  Two broker upgrades this morning for Symbol Technologies, one broker upgrade for Disney.
 
MCI, the company formerly known as Worldcom and even more formerly known as MCI made good on their warning of two weeks ago.  They came in with a larger than expected loss and will cut 7,500 jobs.  That’s 15% of their total workforce.
 
The futures aren’t quite as good as they look at first glance, but stock prices should recover a little at 9:30.  At this point, adjusted for fair value, the S&P futures are up almost 3, Dow futures are up 21, but the Nasdaq futures are 5 points above fair value.
 
May 10, 2004
 
A little over five years ago, investors were all revved up when the Dow Jones Industrial Average hit the 10,000 level for the first time.  Since then, the Dow has moved below and above 10,000 well over a dozen times.  Well, here we go again.  The Dow closed Friday at 10,117, but the prospect of rising U.S. interest rates could well push us below the 10,000 level shortly after stocks start trading this morning.
 
In our banking merger of the morning, SunTrust Banks is buying National Commerce Financial.  That’s a 7 billion dollar deal and will create the country’s seventh largest bank.
 
News of more efforts to cool down the hot Chinese economy had Japanese stocks down almost 5 percent overnight.  European markets are down on the order of 2 percent at this hour.  Our futures aren’t as bad as they were a couple of hours ago, but stock prices will still be down across the board at the open.  At this point, adjusted for fair value, the S&P futures are down 10, Dow futures are down 112, but the Nasdaq futures are 14 points below fair value.
 
May 7, 2004
 
Well, today’s the day.  In just about ten minutes we’ll find out whether or not the March Unemployment Report was for real.  A month ago the Department of Labor reported an increase of more than 300,000 jobs.  At 8:30, it’s expected that April Jobs Report will reflect 150,000 new non-farm jobs and an unemployment rate of 5.7%.  Lately, both good news and bad news has been bad for stock prices, so this one is hard to read.  However, long-term bonds have already priced in an upward move in interest rates.  So, it could be that a big number of new jobs will be interpreted as good news being good news for the economy and stock prices.
 
The news is not good out of Krispy Kreme.  They are lowering forecasts.  Evidently a lot of people on the Atkins and South Beach diets have figured out that one donut equals about a month and a half of allowable carbs. 
 
A major brokerage house this morning downgraded the entire auto and auto supply sector based of this week’s weak sales reports from the car makers and rising oil prices.
 
The direction of stock prices at the open will be determined by that jobs report at 8:30.  At this point, adjusted for fair value, the S&P futures are down 2, Dow futures are down 26, but the Nasdaq futures are just a fraction below fair value.
 
May 6, 2004
 
You may never say the words Costco and Nordstrom in the same sentence.  Unless, of course you were talking about retailers whose same store sales rose 10% in the month of April.  Walmart sales rose 4.4 percent.  J.C. Penney raised earnings guidance this morning. The big retail downer of the morning is Pier One.  They warned that their quarterly profits won’t come close to expectations.
 
The overriding theme of the morning is oil.  Fears of terrorist disruptions of supply and lack of capacity to meet reviving economies in the U.S. and Japan have oil futures for June delivery near 40 bucks a barrel this morning.  This, of course, is especially ominous for any auto companies that specialize selling lots of big gas eating vehicles.
 
The Bank of England raised short term interest rates a quarter percent this morning.  The European Central Bank kept rates steady.  Both of those actions were expected.
 
The futures aren’t as bad as they look, but they are still painting a pretty ugly canvas for the market open.  At this point, adjusted for fair value, the S&P futures are down almost 5, Dow futures are down 37, but the Nasdaq futures are about 10 points below fair value.
 
May 5, 2004
 
Happy Cinco de Mayo.  The Federal Reserve statement wasn’t exactly music to the stock market’s ears yesterday, but it was about as close as you can get.  Yes interest rates will be going up, and probably going up soon, but probably going up slowly, which should be good for stocks.  You can’t say the same for bonds, although a good bit of the bad news is already priced in.
 
One thing is pretty clear.  If you have a lot of variable rate debt, like credit cards or variable rate mortgages, be careful.  We’ve likely seen the bottom of interest rates for a long time to come.
 
Another big bank merger this morning.  Charter One, which has a good number of branches in these parts, is being bought be Citizens Bank, which is a subsidiary of Royal Bank of Scotland, for about 10 ½ billion dollars.
 
CVS beat estimates by 3 cents.
 
Japanese markets were closed AGAIN for a holiday overnight.  They know how to party over there.  Our futures have been down across the board all morning long, but they’ve improved just in the past ten minutes.  At this point, adjusted for fair value, the S&P futures are down a point, Dow futures are down 18, but the Nasdaq futures are about just a fraction of a point above fair value.
 
May 4, 2004
 
The Federal Reserve Open Market Committee may not be losing its patience.  But it’s a pretty good bet that the word “patience” will be missing from the Fed's statement this afternoon.  Everyone agrees that short term interest rates must start to rise.  The two big unknowns are when the Fed will pull the trigger, and how will rising rates impact stock prices.  Historically, the first Fed rate increase does not signal an imminent stock market decline.  In fact, slowly rising rates in a slowly inflating economy are often good for corporate pricing power and profits.  However, if the Fed gets too far behind the curve, and has to raise rates rapidly – it won’t be a pretty picture.
 
Either way, if you believe that rates will rise from here, look to pay down your variable rate debt.  It may be affordable now, but if rates are significantly higher a few years down the road, your credit card balances and those “variable rate” mortgages could lead to substantial trouble.
 
Earnings from Tyco, Emerson and Clear Channel all beat estimates.  Dean Foods met estimates but warned that the balance of the year will come in at the low end of expectations due to rising prices for milk, fuel and other commodities.
 
Japanese and Chinese markets were closed overnight. European stocks are mixed.  Don’t look for our markets to move a whole bunch in either direction in front of the Fed announcement at 2:15.  At this point, adjusted for fair value, the S&P futures are up a point and a half, Dow futures are up 12, and the Nasdaq futures are about a point above fair value. 
 
May 3, 2004
 
Stock prices have been in a funk for a month now.  Suddenly, investors fear rapidly rising interest rates, an economic slowdown in China and no significant number of new jobs in the U.S.  First of all, it’s unlikely that all three things can happen at once.  Secondly, it’s not clear that two out of those three things would actually be bad things.  However, this is the week of clarification on at least two of the three.
 
Tomorrow we should get some clues from the Federal Reserve Open Market Committee on just how soon they’ll be closing down the interest rate spigot they opened up with a vengeance almost three years ago.  On Friday, the April jobs report will tell us whether or not the March number of over 300,000 new jobs was a fluke.
 
For today, we’ll settle for a reading on the expansion in the manufacturing sector of the economy.  At 10 o’clock, the ISM Manufacturing Index is expected to come in at 62.7.  That’s almost unchanged from last month.  However, anything over 50 indicates economic expansion.
 

Tokyo and London markets were closed for the May Day Holiday.  Other overseas markets were pretty tame overnight.  Our futures are pointing toward higher prices at 9:30.  At this point, adjusted for fair value, the S&P futures are up 2 ½  points, Dow futures are up 26, and the Nasdaq futures are about 5 points above fair value.

WJR June 2004 Reports
WJR April 2004 Reports

Daily Reports @ WJR

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