Please note that Ron Humenny and Starfire Investment Advisers, Inc. are not affiliated with, are not compensated by and do not endorse Flagstar Bank any of the sponsors of our daily WJR reports
May 31, 2005
We’re bracing for a couple of disappointing economic reports this morning. Of course, if you’re already braced for ugly news, even bad news can sound good. We’ll see how traders react.
At 10 o’clock, the May Consumer Confidence Index from the Conference Board is expected to be down to 96 from 97.7 last month. Also at 10 o’clock, the Chicago Purchasing Manager’s Index, which is a gauge of future Midwestern manufacturing activity is expected to drop to 61.8, from 65.6. Anything above 50 indicates expansion. However, a slower rate of expansion is what’s expected.
Overseas stock markets went nowhere fast overnight. Not a lot of movement in either direction. Our futures have been wobbling around in slightly negative territory all morning long. Right now, adjusted for fair value, the S&P futures are down about 1 ½ points, the Dow futures are down 12 ½, and the NASDAQ futures are about 1 ½ points below fair value.
May 27, 2005
We’ve had quite a little string of late day rallies in the stock market over the past couple of weeks. We’ll see what happens today. It’ll be 77 degrees and sunny in New York City this afternoon. It’s the day before a three-day weekend. The trading floor might be a pretty lonely place by 3 o’clock.
The University of Michigan will release the second and final revision to the May Consumer Confidence Index at 9:45. I sure wish that I had had three chances to get my term papers right. Anyway, the number is expected to come in at 86, which is down about a point from April.
At 8:30, the April Consumer income and spending data will be released, and both numbers are expected to show pretty healthy increases.
Asian stock markets tacked on some healthy gains overnight, with both Tokyo and Hong Kong up more than one percent. European markets are mixed at this hour. Our futures are negative, but not by so much that some good economic numbers couldn’t turn things around by 9:30.
At this point, adjusted for fair value, the S&P futures are down less than a half point, the Dow futures are down 6, and the NASDAQ futures are about 2 points below fair value.
May 26, 2005
Soft patch? What soft patch? That’s what we may be saying in about 7 minutes. The 1st revision of the 1st quarter Gross Domestic Product number is expected to come in at 3.6%, which would be a full half percent above the original estimate. If that happens, worries about recession should be put to bed for awhile. That way we can limit our fears to other dangers that may never show up, like inflation, 100 dollar oil and Shaquille O’Neal.
No big disappointments on the earnings front this morning. Costco beat lowered expectations by a penny, although revenue was a little light. Heinz beat estimates by a penny. Home builder Toll Brothers continues to crank out enormous profits. They made $2.01 per share last quarter versus the expected $1.79.
Most European markets are up between a half and one percent at this hour, except for those cranky Belgians. They’re market is down about three quarters of a percent.
Pending that GDP number at 8:30, we will start with higher prices today. At this hour, adjusted for fair value, the S&P futures are up more than 4, the Dow futures
are up 43, and the NASDAQ futures are about 7 points above fair value.
May 25, 2005
The official announcement finally came in a press release about an hour ago. Visteon and Ford have agreed to a memorandum of understanding on a relief package for Visteon. It’s a complex deal, but here are the highlights: Ford will get warrants to purchase 25 million shares of Visteon stock at the price of $6.90 per share. Visteon will get relief from about 2 billion dollars of employee costs, including post-retirement health care. Visteon also gets reimbursement for up to $550 million of future restructuring costs. Visteon will also shed 24 different units, including 15 plants. Two of the plants will go directly to Ford, and 13 to a Ford controlled entity.
There’s a lot more to the agreement, which it is hoped can be completed by the end of September.
The April Durable Goods number rolls at 8:30 this morning. Expect a 1.3% increase.
Stocks are not trading in Moscow this morning. There’s a big power blackout there. They could have used a day off in Asia, where stocks were down over one percent. We’re looking for a lower open as well. At this hour, adjusted for fair value, the S&P futures are down 4 points, the Dow futures are down 34, and the NASDAQ futures are about 7 points below fair value.
May 24, 2005
It’s been about ten months since Google started trading as a public company. If you bought it back then at 85 bucks and still have it, it has to feel like a slot machine than just keeps paying off. And you know how often that happens. Google closed at 255 dollars last night. That’s a market capitalization of about 71 billion dollars. Comparatively speaking, if you take the combined market caps of General Motors and Ford, the total is almost exactly half that of Google.
The big news of the day will be the 2 o’clock release of the minutes of the May 3rd meeting of the Federal Reserve Open Market Committee. There’s a lot of speculation that the Fed may only hike short term rates another half percent or so. However, Mr. Greenspan has been making noises lately about his concern about a possible bubble in housing prices. Traders will be looking for any sign that the end of the rate hikes is near.
Speaking of housing, the report on April existing home sales is expected to show a very slight increase from the March level at 10 o’clock. But in front of that, we’ll see lower stock prices at the open.
At this hour, adjusted for fair value, the S&P futures are down almost 3, the Dow futures are down 29, and the Nasdaq futures are about 6 ½ points below fair value.
May 23, 2005
Stocks had their best week of the year last week, and the rally continues in Europe this morning on the prospect of a change to a more business-friendly government in Germany. Japanese stocks were up overnight as well, although stocks in Hong Kong were down just a bit.
With earnings season just about wrapped up, this pre-Holiday week should be a fairly quiet one for economic news.
There is big news in the movie business. The latest Star Wars film has already grossed over 300 million dollars worldwide, with over half of that coming in this past weekend in the U.S. Later this week, computer movie-maker Dreamworks will release their latest film, Madagascar, and they could use some good news. Dreamworks stock had the Shrek beat out of it last week on news that Shrek 2 DVD sales were much lower than expected.
The futures had been indicating a slightly lower open for stocks. However, during the past hour they have turned the ship around. That was right around the time Goldman Sachs issued an upgrade of the entire software sector. At this hour, adjusted for fair value, the S&P futures are up just a point, the Dow futures are up 10, and the Nasdaq futures are about a half point above fair value.
May 17, 2005
In about fifteen minutes, we’ll get word on how much raw materials and other Producer Prices rose in April. Economists are predicting an overall rise in the PPI of three tenths of one percent, and just like in March, an increase of one tenth of a percent if you exclude the volatile food and energy components. The stock market, of course, would like to see numbers even lower than those.
A bunch of retailers made more money than expected last quarter. Home Depot, JC Penney, Staples, BJ’s Wholesale and Zale are all out with higher numbers than expected.
Asian stocks were lower overnight. European markets are mixed, but generally lower.
And unless we get some really good news from the Producer Price Index at 8:30, we’ll get some bad news from the market 9:30. Right now, adjusted for fair value, the S&P futures down almost 4 points, the Dow futures are down about 29, and the Nasdaq futures are about 8 ½ points below fair value.
May 16, 2005
The price of oil continues to drop this morning, as OPEC says that they’ll keep pumping as long as the world keeps gulping. Light sweet crude is down another 54 cents this morning at $48.13 per barrel.
Earnings misses this morning; from Lowe’s and The Limited. Limited also lowered earnings guidance for the rest of the year.
At 9 o’clock this morning, the Treasury Department will report on the level of international investment in U.S. financial markets. This is a long-time report that has gotten more attention lately. Massive foreign investment has supported the U.S. bond market and kept long term interest rates nice and low, even as short term rates have been going up. We’ll see if those inflows continue to support the bond market and dollar.
Generally, overseas stocks are lower. However, trading is light in Europe for the Monday-after-Pentecost Holiday, known as Whit Monday. Hong Kong markets were closed for Buddha’s birthday. Wall Street is celebrating a positive futures picture. Right now, adjusted for fair value, the S&P futures up about 2½ points, the Dow futures are up about 21, and the Nasdaq futures are about a point above fair value.
May 13, 2005
Earnings reports range from the good to the fine to the really pretty ugly this morning. Computer graphics company Nvidia tripled their income from last year and beat estimates pretty handily. Dell Computer continued to grow at a solid rate for a company their >
And what about the ugly? In last year’s first quarter Delphi produced a 22 cent profit. This year, a 30 cent loss was expected. The actual loss? 68 cents per share and a lowered forward estimate for sales to GM. While less than 50% of Delphi’s sales are to GM, it’s still a big chunk.
At 9:45, the University of Michigan’s preliminary Consumer Sentiment Index for May is expected to read 88. The price of light sweet crude oil is up a bit this morning, but is still below $49 dollars per barrel after yesterday’s big decline.
For some reason, Swedish stocks are trading higher this morning. Maybe the cold weather is leading to more sauna sales. Whatever. Stock markets everywhere else overseas are lower at this hour.
We’re looking for a little uptick at 9:30. Adjusted for fair value, the S&P futures are up 1 ½ , the Dow futures are up about 19, and on that good report from Dell, the Nasdaq futures are about 5 points above fair value.
May 12, 2005
The April Retail Sales Report at 8:30 this morning is expected to reflect a rise of 7 tenths of one percent. If you strip out car sales, the increase is expected to be 4 tenths of a percent.
One fairly important retailer had some disappointing earnings news this morning. Walmart made 55 cents per share last quarter. That’s a lot of money, but Wall Street was expecting a penny per share more.
On the flip side, Disney beat estimates by a penny per share and Mylan Labs beat by two cents. After the close of trading today, Dell Computer is expected to report profits of 37 cents per share, which would be up about 32% from a year ago.
The futures were pointing to a higher open a couple of hours ago, but the bad news from Walmart put the kibosh on that idea, inspite of lower oil prices. At this hour, adjusted for fair value, the S&P futures are down a point or so, the Dow futures are down about 16, and the Nasdaq futures are about 4 points below fair value.
May 11, 2005
The PBGC is officially taking over the United Airlines pension plan. That means that United is off the hook for about 6.6 billion dollars of pension liability, and the maximum a United retiree can expect in pension benefits is capped at around $45,000 per year. However, most will receive much less, especially if they retire before age 65.
Pay attention, folks. At the end of last year over 80% of the S&P 500 companies had underfunded pension plans. That up from about 5% in 1999. Just because a plan is underfunded doesn’t mean you’ll lose your pension. But if your employer is in financial trouble, you’d better be saving your pennies.
Cisco Systems beat estimates by a penny last night. China may or may not be getting ready to unpeg its currency from the dollar. A story in the online version of official Chinese newspaper reported that the peg would be loosened next week, however the story has now been removed from the web site.
Oil’s down 58 cents at $51.49 per barrel. We’re looking for a pretty flat open. Right now, adjusted for fair value, the S&P futures are up less than a point, the Dow futures are down 1, and the Nasdaq futures are about 2 points above fair value.
May 10, 2005
The results of a survey of allegedly top-flight economists, called the “Blue Chip” survey, were released this morning, and evidently the survey participants had some salt poured in their sugar bowl last month. The consensus calls for the U.S. economy to slow down this year.
We have good news and bad from The Great Atlantic and Pacific Tea Company this morning. You may know them as A&P or Farmer Jack or Food Basics. Losses last quarter were narrower than expected. In addition, the losses will come to and end in Michigan and Ohio and possibly in Canada as well. That because the Michigan and Ohio operations will be closed or sold and Canada is apparently being shopped.
Cisco Systems is the big earnings report of the day. Analysts are expecting 22 cents per share in earnings. Domino’s Pizza with better than expected earnings this morning, but El Paso made only 17 cents per share versus and expected 21 cents.
Oil is holding above 52 dollars per barrel. It looks like we’ll see some significantly lower stock prices at the open of trading. Right now, adjusted for fair value, the S&P futures are down almost 5 ½, the Dow futures are down 34, and the Nasdaq futures are about 9 points below fair value.
May 9, 2005
General Motors’ Board meets today. Oh, to be a fly on the wall for that one!
It’s Monday. There must be a merger or two out there. Duke Energy is buying Ohio-based Cinergy in a stock swap at about a 13% premium. It’s about a 9 billion dollar deal. Meanwhile, the online brokerage industry continues to consolidate. Ameritrade has reportedly been in talks for a couple years or more with an eye toward buying TD Waterhouse from Toronto Dominion. Now, E-Trade is making an unsolicited bid to acquire Ameritrade. As the internet has eliminated many middlemen and reduced the commissions others can charge in industries that aren’t state-protected, consolidation will continue.
Given all the price pressure on commissions, you may wonder why you’re still stuck paying a fixed 6% commission when you sell your home. Well, the Justice Department is finally asking the same question. The Wall Street Journal reports that the government is preparing to sue the National Association of Realtors for anti-competitive practices.
We’re looking for a flat open for stocks at this point. Right now, adjusted for fair value, the S&P futures are flat, the Dow futures are up a point and a half, and the Nasdaq futures are about 2 ½ points below fair value.
May 6, 2005
At some point in your life, you’ve probably driven a “junker.” But you probably didn’t expect the same kind of ride when you bought a bond from a Detroit automaker. As we all know, Standard & Poors added insult AND injury yesterday, downgrading GM and Ford debt to “junk” status. Although that step had been widely expected, the downgrade came a lot faster than a lot of people had thought it would.
The big economic number of the day is the monthly employment report. In March, the economy only generated 110,000 new jobs. That was the slowest job growth in eight months. Expect the April report to reflect 190,000 new jobs. This is probably one of those numbers that we’d like to see not too high, but not to low. Anything in the 175,000 to 200,000 range should be well received.
The futures got a little lift last hour as General Electric raised their earnings estimate for the quarter by a penny per share. But, we’ll have to wait for the jobs
number at 8:30 to know how stocks will open at 9:30. At this point, adjusted for fair value, the S&P futures are up about 4 points, the Dow futures are up 19, and the Nasdaq futures are about 3 points above fair value.
May 5, 2005
Happy Cinco de Mayo. It was certainly a happy “cuarto de Mayo” if you hold General Motors stock. GM rose over 18 percent yesterday after the 28 million share tender from Kirk Kikorian. Kikorian insists that he will remain a “passive” investor in General Motors, and is not trying to take control of the company. That may well be. However, if he rolls up to the Ren Cen with a new vehicle design that looks like a big wooden horse, I’d be ready for anything.
If you work for IBM in Europe, keep that resume on the hard drive. Ten to thirteen thousand jobs will be sent to the recycle bin. Most of those deletions will be in Europe. IBM employs about 300,000 people worldwide.
Costco is out with a strong sales report this morning. Same store sales up 8 percent. Sales at Walmart stores inched up only a tenth of a percent. Sam’s Club saved the day for Walmart. Sales there were up 4.9%. JC Penney beat expectations for the 1st quarter, but appears to have lowered their guidance for the rest of the year.
At 8:30 the report on first quarter productivity is expected to be up about 1.8%. We’ll also get the weekly jobs report. Absent any big surprises, we’re looking for slightly lower prices at 9:30. Adjusted for fair value, the S&P futures are down less than 2 points, the Dow futures are down 16, and the Nasdaq futures are about 4 points below fair value.
May 4, 2005
Kirk Kikorian’s Tricinda Corporation is making a tender offer to acquire 28 million shares of General Motors stock at 31 dollars per share. GM closed at 27.77 last night. This purchase would leave Kirkorian owning just a little less than 9% of General Motors. He already owns about 4 percent. GM shares will pop at the open of trading.
You know, you look at Alan Greenspan and say – “What a jokester. What a riot he would be on “open mike” night.”
Mr. Greenspan and his Open Market Committee have one very public job. Every six weeks or so they set short term interest rates and then publish a statement. It’s only nine or ten sentences, but the change of a word or two can send stock prices to gyrating. Yesterday, the Committee did the expected. The raised short term rates a quarter point. In their statement, they reiterated a “measured” approach to further rate increases. However, they deleted an entire sentence that in the March statement told us that long-term inflation was not a big problem.
The stock market dropped immediately.
Then, six minutes before the 4 o’clock close of trading, the Committee said “Oh, come on – we were just kidding!” Turns out that the inflation line was inadvertently omitted. The market promptly rallied to close at a slight gain.
They have got to switch back to soft drinks at those Committee luncheons.
Stock futures are weaker than they were a couple hours ago, but if you think they’re indicating a lower open for stocks, well, you’re wrong. After you adjust for fair value, the S&P futures are up 4 points, the Dow futures are up 11, and the Nasdaq futures are about 5 points above fair value.
May 3, 2005
They come back every six weeks or so – kind of like that really, really bad heartburn you get in the middle of the night after you eat a pepperoni pizza. Alan Greenspan and his big band of bodacious bankers meet again today. At 2:15 they will raise short-term interest rates a quarter of a percent, to 3 percent. Hopefully, they will not get too creative with their accompanying statement. For months now, they have said that they will be raising rates at a “measured” pace. Should they remove that “measured” language from the memo, and not replace it with other comforting words, like “we’re done now,” stock prices will not react well.
Earnings continue to roll. Locally, Masco missed their number and warned about the rest of the year. EDS beat estimates. Tyco beat estimates, but lowered their guidance, blaming higher raw material costs. Tyco stock is bid about 10 percent lower this morning.+
Yesterday’s late day rally came on pretty thin volume. In this current back-and-forth market environment, well you know what’s likely the day after the market goes “forth.” We’ll probably take a step back at 9:30. Adjusted for fair value, the S&P futures are down almost 2 points, the Dow futures are down 17, and the Nasdaq futures are 2 ½ points below fair value.
May 2, 2005
Can it hold? The oil futures are setting the price for a barrel of light sweet crude oil at 49.23. That is down 49 cents on the morning. That’s also a 2 ½ month low. Stock futures have shifted into rally mode as a result.
At 10 o’clock, we get the April ISM report, which measures strength in the manufacturing sector of the economy. Expect a reading of 55, which is down slightly from March’s 55.2, but still reflects growth in manufacturing nationwide.
So far, we have earnings reports from Avon and health management company Humana. Both companies have better than expected bottom lines last quarter, although Avon was a little light on revenue.
It’s Monday, do we have to mention mergers and acquisitions. Neiman Marcus is being bought at about 100 bucks per share by a private equity firm. Verizon has upped the ante again in its ping pong match against Qwest for MCI.
European stocks are up on the order of a half percent to one percent right now. At this point, adjusted for fair value, the S&P futures are up about 3 ½ points, the Dow futures are up 34 ½, and the Nasdaq futures are about 7 points above fair value.
June 28, 2005
How about that Bob Dylan? First a deal with Victoria’s Secret, and now an exclusive deal with Starbucks? Oh, the times they a change-ed. Starbucks will be the exclusive source of a new Bob Dylan CD for the next sixteen months. The price will be $13.95 for the CD, which I believe is still slightly higher than a cup of the house-brand coffee, although I’m not sure about that.
We’ll go into the trading day with the wind blowin’ at our back today. The price of oil has slipped below 60 dollars per barrel, currently $59.89, and that has markets overseas bubbling up.
On Friday of this week, we’ll get the University of Michigan’s Consumer Confidence Index. But at 10 o’clock this morning, it’ll be the June Consumer Confidence Index from the Conference Board. Expect a reading around 104. That would be up a couple points from the May number.
A little later today, Congress will consider the Central American Free Trade Agreement, which gives them a chance to do something that might actually HELP stock prices for a change, but don’t bet on it.
Asian markets were up about one percent. European markets are up about a half percent, on average. We’ll get started on the right foot as well. Adjusted for fair value, the S&P futures are up more than 4 points, the Dow futures are up 34, and the NASDAQ futures are almost 7 points above fair value.
June 27, 2005
You can look at the monthly oil futures this morning, and month by month by month, as far as you can see, they all start with the number “6.” The August contract for light sweet crude hit 60 dollars and 64 cents per barrel overnight and that is not good news.
General Motors is reportedly restricting certain employee stock trading, now that their earnings guidance to the outside world is a lot less extensive. GM wants no trading in their stock by any GM employee who may know something that you don’t know. That idea, like gravity, is not only a good idea, it’s the law.
There’s nothing much cooking on the economic calendar today. Of course later this week we have some consumer confidence readings as well as a two-day meeting of the Alan Greenspan coffee klatch.
Nike beat estimates by 3 cents per share this morning. Walgreen also beat estimates.
Markets around the world are lower on the news of 60 dollar oil. Futures on our major stock indexes have improved during the past hour, but are still indicating lower prices at the market open. Adjusted for fair value, the S&P futures are down about 1 ½ points, the Dow futures are down 13, and the NASDAQ futures are about 2 points below fair value.
June 24, 2005
As they say, “Sticks and stones will break my bones, but Congressional hearings can cause incredible damage.” You can pin yesterday’s 166 point loss in the Dow squarely at the feet of the Senate Finance Committee. Yesterday, the Committee held a hearing, which included testimony from economic experts Alan Greenspan and John Snow about trade with China. While the testimony from those two suggested that Congress keep its hands off the China, there was a lot of very protectionist talk flowing from the mouths of the non-experts in the room. There’s nothing that spooks stock prices quite like fears of a good old-fashioned trade war.
The May Durable Goods report, due out in a few minutes, is expected to show an increase of 1.3 percent. There’s less than a week left in the second quarter, so keep an eye out as well for any earnings warnings that someone may try to leak out on a slow summer Friday afternoon.
Asian markets finished mixed. Most European markets are down ½ to 1 percent at this hour. We’re looking for a mixed market at 9:30. Adjusted for fair value, the S&P futures are up less than a half point, the Dow futures are down 5, and the NASDAQ futures are about 2 points above fair value.
June 23, 2005
Federal Express is out with their earnings report this morning. They missed Wall Street’s revenue and earnings estimates for the 4th quarter and issued guidance for the 1st quarter that’s not all that rosy. It’s a tough business when energy costs are up so much.
Speaking of energy, as expected, CNOOC is bidding 18 ½ billion dollars in cash to acquire Unocal. Chevron had bid about 17 billion for Unocal recently. Given that CNOOC is 70% owned by the Chinese Government, this offer may pour gasoline on some potentially fiery Congressional debate about trade sanctions against China.
Homebuilder D.R. Horton will be going into the S&P 500 Index, replacing Veritas Software, which is being acquired.
It’s one of those funny mornings when the futures have been negative most of the morning, but at this point, they are actually predicting a rise in stock prices. After you adjust for fair value, the S&P futures are up a fraction, the Dow futures are up 8, and the NASDAQ futures are a little less than a point above fair value.
June 22, 2005
Bye-bye to salaried bonuses and bye-bye to 401(k) matching funds, and for some 1,750 Ford salaried employees, well, it’s just bye-bye altogether. Shortly after the market closed yesterday, Ford Motor lowered their earnings estimates once again, and announced a barrage of cost cutting which is not likely to help the purchasing power of a lot of local households. Profits for the year are now estimated to come in at a buck to a buck and a quarter per share. Ford stock traded down about 5% in the after hours last night. This morning, in Europe, there has been some recovery. However, look for Ford to open a 9:30 about 3 percent or so lower than yesterday’s close.
Coca-Cola and the European Economic Commission have settled a six-year-old dispute over trade practices. Coke won’t be subject to a big fine, but will have to change their sales practices. So, if you’re traveling to Europe, you may be able to enjoy a wider variety of “fizzy drinks” than before.
Stocks in Hong Kong went vertical last night; the Hang Seng was up almost 181 points. Most European markets area positive this morning. That’s where we’re headed as well. Right now, adjusted for fair value, the S&P futures are up about 4 ½ points, the Dow futures are up 40, and the NASDAQ futures are about 8 points above fair value.
June 21, 2005
Obviously, with a billion or so people, China’s potential as a consumer nation is huge. But as a growing economic power, you can look for more Chinese investors assembling Chinese-owned companies to sell stuff to those consumers.
Two potential examples this morning; Maytag, which has been offered 14 dollars per share by Ripplewood Holdings, may be offered 16 bucks by an investment consortium that includes China’s Haier American Trading. There’s also speculation that China’s CNOOC may offer $71.50 per share in cash for the big oil firm Unocal, which would easily trump Chevron’s cash and stock offer.
Homebuilder Lennar reported terrific earnings this morning. They beat estimates by 29 cents per share and raising guidance for the year by almost 10 percent.
Overseas, most markets are up about a quarter percent at this hour. Our futures have been pointing toward a lower open all morning long, but at this point they’re not terribly bad.
Adjusted for fair value, the S&P futures are down about a point and a half, the Dow futures are down 17, and the NASDAQ futures are about 2 ½ points below fair value.
June 20, 2005
Throughout the first three months of this year, when the price of oil zigged, the stock market zagged. Hour after hour, it seemed to be an almost perfectly inverse correlation. So far this second quarter, stock prices have pretty much decoupled from that relationship. However, today’s oil prices may get the stock market’s attention again.
The August contract for light sweet crude breeched the 60 dollar level overnight, and although we’re back down to 59.66 right now, many overseas stock markets and our futures are seeing red.
If you own shares of Cablevision, you are about to be bought out. In a complex deal that involves spinning off some assets and spitting up 21 bucks per share in cash, the Dolan family is taking Cablevision private in what amounts to a 25 percent premium to the little people. Excuse me, I mean “other shareholders.”
At 10 o’clock, the May Leading Economic Indicators are expected to be down 3 tenths of a percent. Adjusted for fair value, S&P futures are down almost 5 ½ , Dow futures are down 38 points, and the Nasdaq futures are just about 7 ½ points below fair value.
June 16, 2005
If you’ve never heard of a company called Vicuron, you’re not alone. It’s a company that makes anti-infective and anti-fungal medical products. It’s a stock that you could have picked up for well under 9 dollars per share last summer. This morning, in a 2 billion dollar deal, drug giant Pfizer is buying all shares of Vicuron for more than 29 cash dough dollars per share. That’s a 74% premium from yesterday’s closing price.
There’s a story in the Wall Street Journal this morning that the Justice Department is weighing obstruction of justice charges against accounting firm KPMG. However, it may never come to that. You’ll remember that DOJ put Arthur Andersen out of business by indicting that firm on a charge that was later overturned. No matter how strong the case against KPMG, there are only four big accounting firms left. Potentially eliminating one of them, especially given the demand for their services created by Sarbanes-Oxley, may not be deemed to be in the public’s best interest.
May Housing start numbers are expected to be up slightly at 8:30. Stocks in Hong Kong were down overnight, but most other overseas markets are in the green. We’re looking for a light shade of green at 9:30. Adjusted for fair value, the S&P futures are up a less than a point, the Dow futures are up 10, and the NASDAQ futures are about 2 points above fair value.
June 15, 2005
We may have discovered a great new way to raise a lot of money. Today, JP Morgan announced that, without admitting that they did anything wrong in the Enron matter, they are forking over $2.2 billion dollars. Now that’s generosity. Just a couple of days ago, Citigroup paid 2 billion dollars in the same matter, again without admitting that they did anything wrong. You know, 2 billion here, 2 billion there…. this could totally replace bake sales as a way to raise some cash. By the way, for accused firms that don’t settle with the lead plaintiff, the University of California, the trial starts in October of 2006.
OPEC did the expected this morning. They announced an increase in the production quota by 500,000 barrels per day. It hasn’t helped much so far. Oil futures are up 51 cents at $55.51 per barrel.
At 8:30, look for the May Consumer Price Index to come in at a one-tenth of a percent increase. We’ll also get industrial production and capacity utilization numbers at 9:15.
In front of all that stock futures are pretty flat. Adjusted for fair value, the S&P futures are up a fraction, the Dow futures are up 7, and the NASDAQ futures are about 2 ½ points above fair value.
June 14, 2005
A couple of big economic reports will be released in ten minutes or so. The May Producer Price Index is expected to have declined 2 tenths of one percent. BUT, if you exclude the food and energy components, it’s expected to show a 2 tenths of one percent INcrease.
Likewise, it’s expected that May Retail sales declined by 2 tenths of a percent, BUT if you exclude declining automobile sales, the core index is expected to be UP 2 tenths of a percent.
Of course, if all businesses could include all the revenue But exclude all the expenses they would always be wildly profitable. But, I digress…
The Manpower Job survey is out and for the sixth quarter in a row, it reports that more businesses are planning to add workers this year than the number that are planning to trim their workforce.
We have an earnings warning from Knight-Ridder and disappointing results (so what else is new) from Pier One this morning. Best Buy announced great quarterly results just a few minutes ago and they are raising their yearly guidance.
The futures are indicating slightly higher prices at this point. Adjusted for fair value, the S&P futures are up a point and a half, the Dow futures up 6, and the NASDAQ futures are 3 ½ points above fair value.
June 13, 2005
It seemed like a good idea at the time. Let’s merge a white shoe investment banking firm, Morgan Stanley, and a retail stock broker, Dean Witter. Never mind that apparent culture clash – they’ll work things out. Well after some very messy and very public disputes and after dozens of firings and defections, it appears that the turmoil surrounding the head honcho at Morgan Stanley is entering a final stage.
This morning Morgan Stanley announced that Phil Purcell, the embattled CEO will step down as soon as a replacement can be found, and you can bet that the headhunter has been given orders to make it snappy. Morgan Stanley stock is up 6% in pre-market bidding on that report.
News Corp will be buying back 3 billion dollars of company stock. Procter & Gamble is cutting their upfront television ad spending by 5% and their cable spending is going down faster than Mike Tyson on pay-per-view. They’re cutting cable by 25%.
Stock futures, which were positive earlier this morning have been backtracking pretty steadily and are pointing to slightly lower prices at 9:30. At this point, adjusted for fair value, the S&P futures are down a point and change, the Dow futures down almost 7, and the NASDAQ futures are about a point below fair value.
June 10, 2005
Intel’s stock price has been running up of late, in anticipation that the quarter was going well. Well, Intel came through with that anticipated good news last night. Sales of computer chips for laptops will power Intel’s sales to the high end and beyond prior expectations. That news will be good news for stocks this morning. Except, of course, for Intel. It will be a case of buy on the rumor and sell on the news, as Intel is down about one percent on Europe this morning.
Yesterday Alan Greenspan played his favorite verbal game, called “Ring around the Congress,” no doubt leaving them more befuddled than before. The upshot, however, is that he gave no indication that the Fed is done (or close to being done) raising short-term interest rates. In reaction, interest rates on the 10 year Treasury Bond are backing up to 3.97 percent this morning. They had been below 3.90 earlier this week.
We’ll get some trade data at 8:30 and some Treasury Budget data at 2 o’clock, but all in all it should be a pretty quiet trading day. Adjusted for fair value, the S&P futures are up about a point, the Dow futures are up 16 but the NASDAQ futures, no doubt reflecting the pullback in Intel, are about 2 points below fair value.
June 9, 2005
There’s big doings on Capitol Hill today. Alan Greenspan will be there to play baseball with the Joint Economic Committee of Congress. Expect him to catch the usual flurry of wild curveballs, as investors strain to find out whether the interest rate tightening cycle is in the sixth inning, the seventh inning, or the ninth inning. Or maybe, like the National Champion Michigan softball team, he planning a 10th inning home run. In any event, the stock market will likely hang on his every word today.
The other major announcement of the day will come after the market closes when Intel issues their mid-quarter update. They are expected to reaffirm prior guidance, but if they surprise to the upside, like Texas Instruments did earlier this week, tech stocks should get off to a good start tomorrow.
Tokyo was off 1 percent overnight. Most European markets are marginally lower. The Bank of England held interest rates steady today.
Futures on our major stock indexes have rallied during the past hour and are pointing toward a flat open for stocks at this point. Adjusted for fair value, the S&P futures are up a point, the Dow futures are up 3 and the NASDAQ futures are 4 points above fair value.
June 8, 2005
Kirk Kikorian only got about 19 million of the 28 million shares of General Motors he was looking for yesterday in his tender offer. Don’t cry any tears for him. With GM trading below his offer price of 31 bucks, he can now just go out into the open market and pick up more shares on the cheap.
There’s nothing quite like good news from a technology company and lower oil prices to light a little fire under stock prices. So bring your marshmallows and get ready for a rally at 9:30.
Last night Texas Instruments raised their earnings and revenue guidance for the current quarter. They reported strong demand for calculators and cell phones. Apparently, a lot of people are trying to calculate how much home equity they can still borrow against, and then calling their mortgage broker before an opportunity to go further in debt slips away.
As I mentioned, oil prices are down this morning at $53.10. But at 10:30, we’ll get the weekly report on crude oil and distillate inventories. Expect a rise of about a million barrels in each.
Caterpillar landed a broker upgrade this morning and is looking to open higher as is Altria, on hopes for lower potential liability with respect to an on-going trial.
Stock futures have cooled a bit, but are still looking pretty good. At this point, adjusted for fair value, the S&P futures are up almost 5 points, the Dow futures are up 47 and the NASDAQ futures are 8 ½ points above fair value.
June 7, 2005
Some days, it’s just not much fun going in to work. Or at least, it’s not as much fun as it is on other days. I don’t know how much fun Rick Wagoner has had at work lately. But, I can’t imagine that he was terribly happy to hear the alarm go off this morning.
General Motors will be holding a shareholders’ meeting. Your run of the mill shareholders’ meeting will often have a sharp question or two directed at company management. This meeting may serve up a couple more than that.
For the general stock market, it’s another Alan Greenspan week. Yesterday, he spoke in China about the interest rate conundrum. On Thursday, he will testify before Congress about the economy. Yesterday his comments calmed a jittery market and we ended the day with a small gain.
European markets are mostly positive at this point. Our futures have been steady creeping higher all morning long. At this point, adjusted for fair value, the S&P futures are up almost 3 ½ , the Dow futures are up 29 and the NASDAQ futures are almost 5 points above fair value.
June 6, 2005
It’s Monday. There must be mergers to talk about. Washington Mutual is buying Providian Financial, which one of the biggest credit card companies out there. It’s about a 6 ½ billion dollar deal.
A couple of real estate companies are also getting together, as ProLogis is buying Catellus at about a 16 percent premium.
The music is playing a little faster in the three member waltz between E-Trade, Ameritrade and TD Waterhouse. E-Trade is raising their bid for Ameritrade, which is reportedly in late-stage talks to buy TD Waterhouse from Toronto Dominion.
Apple is reportedly switching suppliers for at least some of their chips it uses in its computers. Word is that Apple will start buying chips from Intel. Currently, IBM and Freescale Semicomductor are the providers.
Oil futures are up again, at $55.22 per barrel.
Stock futures have been positive all morning, but not by a lot. So, it looks like we’ll see a little net buying at 9:30. At this point, adjusted for fair value, the S&P futures are up less than a point, the Dow futures are up 12 and the NASDAQ futures are 3½ points above fair value.
June 3, 2005
The monthly jobs report will be released in about 10 minutes. It should hold the key to how stocks trade at 9:30. The yield on long term bonds dropping like a stone recently. The ten year treasury yield this morning is at 3.89%. It could well be that the bond boys and girls are signaling an upcoming economic slowdown. A weak jobs report would add fuel to that fire. The consensus estimate is the addition of 185,000 new jobs last month. Any significant shortfall should add duel to that fire. The unemployment rate is expected to hold firm at 5.2 percent.
There’s a merger in the defense industry this morning, although this one has been widely anticipated. L-3 is buying Titan in a 2 billion dollar deal.
Intel stock has been on a little run lately and this morning two major brokerage firms have upgraded their rating on the stock.
Overseas markets are mostly positive, but only by a very tiny margin. Our futures are pointing slightly lower, but this morning everything depends on the jobs report at 9:30. At this point, adjusted for fair value, the S&P futures are down a point, the Dow futures are down 7 ½, and the NASDAQ futures are just about even with fair value.
June 2, 2005
At 10:30 this morning, we’ll get the weekly inventory data on gasoline and crude oil stocks in the U.S. Don’t look now, but light sweet crude prices are over 54 dollars a barrel again. They are down 25 cents this morning, but they’re still at $54.35.
On the flip side of the consumer pocketbook, long term interest rates plummeted again yesterday. The ten year Treasury that started the day around 4 percent ended the day at 3.9%. Either the bond market is predicting a really lousy economy in the future, or, a lot of hedge funds are busy covering short positions in the ten year bond and are driving that yield down. Either way, is you are about to lock in a mortgage or refinance, this is a very good thing. But, look out for the employment report tomorrow. A really strong number could give us a quick about->
Walmart same store sales were up 2 ½ % in May, Costco sales were up 3% domestically and 12% overseas. That works out to 5% overall.
There may never be a European Union, but there is a European Central Bank. They met this morning and decided to leave interest rates unchanged.