May 31, 2006
It’s been almost two years since we had a day in which all 30 of the Dow Industrials declined in value. But, that’s what yesterday was all about as the market jitters that started a couple of weeks ago continued.
The last two hours of trading will be the ones to watch today. At 2 o’clock the minutes of the latest meeting of the Federal Reserve Open Market Committee will be released. They will then be read, examined, studied, parsed, broken down, dissected, dismembered, ground up and virtually pulverized as traders look for any hint that the Fed might stop hiking short-term rates any time soon.
Any evidence of strong sentiment within the Committee for a pause should give stocks prices a boost.
Costco’s earnings rose 12% last quarter, with worldwide same-store sales up 10%. Unfortunately, revenue was a little lighter that expected and earnings were a penny shy of estimates. As a result, Costco shares will be on sale at 9:30.
At 10 this morning, the Chicago Purchasing Managers Index is expected to slide to 56, from 57.2 last month.
May 30, 2006
General Motors shares had a great week last week after a couple of broker upgrades. Well, not so fast. One of those brokers has changed its mind and has now downgraded GM, saying that the price run-up has now over-priced the shares. GM is off about 2 ½ percent in Europe as Wall Street continues to agree to disagree about prospects for GM.
Disappointing news from Walmart yesterday. They estimate that May sales will be up only 2.3 percent. That’s at the low end of expectations. They also pointed out that their sales are spiking near the 1st and 15th of the month. Presumably, more consumers are living paycheck to paycheck, and while that’s no surprise to most financial planners out there, it’s not very encouraging to have Walmart confirming it.
The management of oil services firm Kinder Morgan has offered to take the firm private at an 18% premium to Friday’s closing price. We’ll see if that attracts some other bidders.
At 10 o’clock this morning The Conference Board will tell us how confident all we consumers have been this month. Expect a reading of only 100 after April’s 109.6.
May 26, 2006
There’s a little more good news for General Motors shareholders this morning as GM received its second broker upgrade in a week. Also upgraded by various brokers this morning were – well – other brokers Merrill Lynch, Charles Schwab and Goldman Sachs.
It’s a split decision for the week’s big IPOs. Mastercard came public yesterday at 39 bucks and closed the day at 46, for a seven dollar gain. But, for those who were lucky enough to get shares of Vonage on Wednesday at 17 bucks per share have lost about 25% of their money in just two days.
Some much-watched inflation data will be out this morning. At 8:30 the April personal income and consumption data is expected to show wages up seven tenths of a percent and spending up six tenths. And at 9:45, the University of Michigan’s final Consumer Sentiment number for May is expected in at 79.
It’s the day before a long holiday weekend, so trading volume will likely dry up as the day wears on, and given the skittishness of the market lately, you might expect a little profit-taking after yesterday’s rally.
Overseas markets are up, but we’ll start in a holding pattern Adjusted for fair value, the S&P, Dow and Nasdaq futures are just about even with fair value.
May 24, 2006
Nike and Apple held a news conference yesterday. They will now be offering a sensor in Nike running shoes that can transmit data about your workout, like duration and calories burned, directly to you through the earphones of your ipod. Personally, I’m waiting for a sensor they can implant in the cushion of my couch. Anyway, Nike and Apple shares could get a little action this morning.
In case you were worried that traders weren’t paying attention to the bid flu threat, put your mind at ease. European markets are down 1 ½ to 2 percent this morning on word of a possible human to human transmission of the avian flu in Indonesia. That will hit our stocks at the open as well.
Medtronic came in with a good earnings report last night, and raised their guidance for the rest of the year.
General Motors shares are up about 4 percent in the pre-market on an upgrade from a major broker.
May 23, 2006
It looks like we’ll have a little bounce back in equities this morning. Asian markets were mixed, but there’s a solid rally taking hold in Europe.
One stock may have a hard time rallying this morning and the reason hits very close to home. Luxury home builder Toll Brothers earned $1.06 last quarter versus the expected $1.03, but warned that the next quarter won’t be as good as expected. The problem? Rising costs and inventory write downs. Writedowns in Vegas? No. In Florida? No. In California? No. Toll Brothers specifically blamed writedowns caused by declining real estate prices in the metropolitan Detroit for its downbeat outlook.
Medtronic, the big medical device maker will report earnings after the close of trading tonight. Also, shares of the internet phone service Vonage will price tonight and begin trading tomorrow.
May 22, 2006
Stocks, oil, gold, many commodities, it doesn’t matter. We’re looking at a long line of red arrows this morning.
Oil is down about a dollar per barrel, gold, which traded at $720 an ounce a week or so ago is around $645 an ounce this morning. Stocks in India dropped the limit of 10 percent overnight, forcing a halt in trading. When the Indian exchange reopened, stocks recovered somewhat, to close off about 4 percent. Hong Kong was off 3 percent and Japan was 2 percent lower.
Lowe’s shares will, on the famous other hand, will be moving higher at 9:30. Lowe’s reported $1.06 in quarterly earnings on a 20% increase in revenue. That beat estimates by 12 cents per share. They did not, however, raise guidance for the upcoming quarter.
May 19, 2006
Yesterday, once again, we just couldn’t get those Chatty Cathys from the Federal Reserve to shut up. Ben Bernanke gave a speech. Alan Greenspan gave a speech. A handful of other Fed governors were running around on the rubber chicken circuit.
Just before noon, one of them said that the recent inflation data would “make it harder” for the Fed to stop raising rates. The bond market immediately raised that odds of a June rate hike from 42% to 62% and the stock market gave up the ghost on a comeback rally to close lower once again.
There’s a fresh batch of earnings news this morning, and hopefully, no new speaking engagements on the agenda.
Dell matched their lowered estimates and gave Advanced Micro Devices shares an after-hours boost by announcing that the insides of Dell servers will be Intel-exclusive no more. GAP, Nordstrom and Ann Taylor are all out with better than expected numbers this morning and the overall market should start that way as well.
May 18, 2006
It’s been a week now since the last Open Market Committee meeting, and on the whole it’s been a week we could have done without. The Dow had its worst daily point loss in over three years yesterday, although it was down less than 2 percent. The NASDAQ is now negative for the year, which is pretty remarkable after the strong first quarter.
Data on the way today include the weekly job claims number at 8:30, but perhaps more importantly, the April Leading Economic Indicators, which are expected to rise by a tenth of a percent, and at noon, the Philly Fed Survey. That survey of regional economic conditions is expected to have dropped to a level of 12.5 from last month’s 13.2.
Asian markets took a bit of a pounding overnight. European markets are moderately lower at this hour. Our futures were pointing to a nice rally a couple of hours ago. But now – well, it’s still a positive outlook – just not quite as positive.
May 17, 2006
Dow component Hewlett-Packard gave us a five cent per share surprise last night and they raised their earnings guidance for the remainder of the year. That should get the Dow and the Nasdaq off to a positive start today – pending, of course -- what happens at 8:30.
That’s when the April Consumer Price Index is expected to come in at an overall rate of 6 tenths of one percent. The core rate is expected to have risen by 2 tenths of a percent. Yesterday’s one-tenth of a percent rise in the core Producer Price Index helped stocks battle the current correction to a standoff. Once again, lower CPI numbers at 8:30 would lead to higher stock prices an hour later.
Compuware beat estimates this morning by 2 cents per share. ADP received a broker upgrade.
May 16, 2006
In just about 12 minutes we’ll get the most highly anticipated data point of the day. Stock prices have been buffeted by inflation expectations during the past couple of weeks. At 8:30 will find out how much inflation has impacted producer prices in April. A big rise in energy prices is expected to have pushed the PPI up 8 tenths of a percent. Absent food and energy, it’s expected that price rose only 2 tenths of a percent. Obviously, the lower the numbers the better for stocks.
A little flurry of better than expected earnings reports are meeting with that old military hero, General Indifference this morning. Home Depot, Walmart and Staples all beat estimates by two or three cents per share. However, revenues, especially at Walmart were really not up to expectations (although Walmart’s sales were up 12%) and guidance for the current quarter was somewhat uninspiring.
May 15, 2006
We’re looking for a little stability after a couple of pretty ugly days last Thursday and Friday. Unfortunately, we’re not getting a lot of help from overseas. Hong Kong was off almost 2 ½ percent overnight. European markets are down anywhere between 1 and 2 ½ percent lower.
Inflation is the big bugaboo that has stocks in a bit of a tizzy, and later this week we’ll get the April readings on producer and consumer prices.
Inflation worries have been driving the price of gold skyward this year. Not so this morning. An ounce of gold that went for almost 730 dollars last Friday is going out at about 690 dollars this morning. Light sweet crude is also down more than 2 dollars at less than 70 bucks per barrel.
Target and Agilent headline the earnings reports today, but no matter, we’ll start the day with lower stock prices once again.
May 12, 2006
During the bull run of the past 3 ½ years, we’ve seen plenty of me-too rallies. Well, overseas markets are having a me-too decline today. Yesterday, of course, the U.S. stock market had its worst day since January, with the major averages falling on the order of a percent and a half. Although some southeast Asian markets were closed overnight for a Buddhist holiday, most other overseas markets – surprise, surprise – are down on the order of 1 ½ percent.
Expedia will be taking a trip south this morning. At 15 cents per share of earnings, they missed their earnings number by 7 cents pre share and guided lower for the remainder of the year. Look for a 15 to 20% haircut on Expedia shares this morning.
At 9:45, the University of Michigan’s preliminary number for May Consumer Sentiment is expected to come in at 86.5, which would be slightly lower than last month.
May 10, 2006
Yesterday the Dow Jones Industrials rode a 9 ½ percent rise in General Motors shares yesterday to a half-percent overall gain. But, the broader indexes went absolutely nowhere, and that’s exactly where they are likely to sit until 2:15 this afternoon.
At 2:15, we’ll get another quarter point increase in short-term interest rates. But more importantly, we’ll get the Open Market Committee’s statement. Any indication that this is the end of the road for rate increases could give stocks and bonds a boost. However, most analysts believe that there is still one more rate hike coming in late June.
Good news on the income tax front. A joint Congressional Committee agreed to extend the beneficial rates on dividend and capital gain income tax rates yesterday and patch the alternative minimum tax problem for another year. The agreement still needs approval by both the Senate and the House and a signature from the President. But all of that is expected to happen.
Disney shares will head higher that morning on a good earnings report and earlier this morning DaimlerChrysler, like GM yesterday, received a broker upgrade.
May 9, 2006
Not a lot of movement in U.S. stock prices yesterday, and it’s likely to be more if the same today in front of the Fed meeting tomorrow.
There was an unusual, and some would say long overdue, amount of finger pointing yesterday involving the financial services industry.
The Securities and Exchange Commission added some brochures to its website and initiated a campaign to inform elder investors about the dangers of many of those “free lunch” and “free dinner” investment seminars offered by so-called “senior specialists.” The SEC says that while only 15% of investors are seniors, seniors are victims of 30% of the investment fraud perpetrated.
Then we had Warren Buffett and Charlie Munger of Berkshire Hathaway likening what they called the “ridiculous credit” extended in the U.S. housing market to an epidemic that isn’t apparent until it’s too late.
Finally, Eliot Spitzer was at it again, extending his complaint against H&R Block for allegedly pressuring their tax preparers to sell fee-laden and money losing IRA’s to small investors.
Be careful out there, people!
A major broker upgraded General Motors from a “sell” to a “hold” this morning, and GM shares are looking to open about 3% higher. Dell, after a warning last night, won’t be so lucky. McDonald’s April same store sales were up 6.2% versus an expected 4 percent.
May 8, 2006
It’s back to work in China as “Golden Week” is over. You see, last week everyone in the country HAD to take vacation, unless, of course, you work in the vacation industry. So, Shanghai stock market, which was closed during the rest of the world’s big rally last week, had a lot of catching up to do. Which of course, it did overnight rising by about 4 percent.
We’ll have a Federal Reserve meeting later in the week. But for now, it’s a Merger Monday in full swing. Wachovia is buying Golden West Financial. That’s a 26 billion dollar deal. Fisher Scientific will be mo more. It’s being bought by Thermo Electron for 10 billion worth of stock. And Emmis Broadcasting, a stock that’s been pretty much cut in half over the past nine months may be going private on an offer of a 13 percent premium from the company’s CEO.
Light sweet crude is down below 70 bucks at $69.40, and European markets are flat to slightly higher on that news.
May 5, 2006
More trouble is luxury housing land. Toll Brothers lowered their estimates for new home sales for the remainder of the year, saying that they are now in the ninth month of declining demand. Signed contracts are down 29 percent from a year ago. Speculators have quit the house-flipping game and other buyers are being a lot more cautious in the >
Which leads us to the biggest economic report of the week. At 8:30, the Labor Department will release the April Jobs Report. Expect about 200,000 new non-farm jobs, an unemployment rate of 4.7 percent and an increase of 3 tenths of a percent in average hourly earnings.
On the one hand, fewer jobs and small hourly earnings increases may lead the Federal Reserve to stop raising interest rates. However, on the ever-popular other hand, more jobs and higher wages will be needed to prop up the slumping housing market. The best we can hope for are numbers that come in pretty much as expected.
May 4, 2006
The big earnings reports for the quarter are pretty much wrapped up, and on average, a good first quarter it has been. Of course, there have been big disappointments, ala Microsoft. However, generally the numbers have been better than expected.
Today’s a day for the April retail sales reports. Once again, on the whole, things look pretty good. Costco and Walmart lead the parade with 7 percent and 6.8 percent same store sales increases respectively. Both are better than earlier expectations and both were helped by an Easter that fell in April this year.
The Limited sales rose 9 percent versus an expected 5.2 percent. The big sales declines are no surprises – namely Pier One and Sharper Image. Kodak also reported disappointing sales.
Oil prices are down over a buck this morning, so the economic focus may turn again to interest rates. On that score, watch the preliminary 1st quarter Productivity report at 8:30. Expect a 2.8 percent increase, after last quarter’s decline of a half-percent. The higher the productivity increase, that better the prospects for continued low inflation.
May 3, 2006
Beauty, as they say, is in the eye of the beholder. A beautiful earnings report, however, is all in the eye of the analyst. Procter & Gamble reported earnings that on the sur>
Oil inventory data is due out at 10:30. But most of the big economic data will be released tomorrow and Friday, including the April Jobs data of Friday. However, a new report, called the ADP National Employment Report, debuted about 3 minutes ago. We’ll see if Friday’s report correlates. However, according to ADP, the private sector generated 178,000 new jobs in April.Hong Kong was up about 1 percent overnight. Europe is slightly lower. Our futures started the morning in a significant hole, but have been marching steadily upward for the past couple of hours. At this point, it looks like a mixed market open is on the way. Adjusted for fair value, the S&P futures are down a point and a half, the Dow futures are down 18, and the Nasdaq futures are actually fraction above fair value.
May 2, 2006
It sure was frustrating when Alan Greenspan was head of the Fed. No one really could read his mind, or for that matter, listen to him speak, and be able to tell exactly what he was thinking. So, analysts generally welcomed Ben Bernanke. Widely regarded as much more plain-spoken and policy-transparent, everybody figured we’d get a better read on the Fed’s thinking.
No such luck. A CNBC reporter disclosed an over-the-weekend comment from Bernanke late yesterday afternoon, the market turned on a dime from rally to sell-off. Bernanke said that the public is wrong to conclude that the Fed is almost done raising rates. Conclude only that they will be more “flexible” in the future. Which of course means that anything can happen. I’m sure that Mr. Greenspan is grinning.
April auto sales reports will happen later today, and it’s not expected to be particularly good news. Expect an annualized rate of 16.6 million units, down from 17.2 last year.
Asian stocks did well overnight, as are stocks in Europe at this hour. At this point, our futures are just about in the same place they were 24 hours ago. Adjusted for fair value, the S&P futures are up almost 3 points, the Dow futures are up about 20, and the Nasdaq futures are about 3 points above fair value.
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