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May 29, 2009
Dell issued an earnings report last night that was like so many others this quarter. Earnings were down over 60 percent from a year ago, but were a little better than expected. Still Dell won’t say that the economic bottom is in, although we may have a major computer upgrade cycle around this corner with this fall’s expected release of Windows 7.
At 8:30, we’ll get the 1st revision of 1st quarter Gross Domestic Product, and it’s expected to look a little better than the first time they swagged it. Expect a revision to a decline of 5.5 percent, which would be an improvement of six tenths of a percent.
The Chicago Purchasing Managers Index and the final reading on Consumer Sentiment from the University of Michigan are both on the way before 10 o’clock and are both also expected to be a bit better.
Major markets overseas are higher, generally on the order of 1 to 2 percent. We’re looking to start the day in pretty good shape, as stock prices look to cap off three consecutive months of gains.
May 28, 2009
Several pieces of economic data could influence stock prices that are trying to recover from a big downdraft yesterday.
In just about 7 minutes, the weekly jobless claims report will come along with the April Durable Goods Report. Durables are expected to have risen four-tenths of a percent. They were eight-tenths of a percent lower in March.
We’ll also get the April New Home Sales report at 10 o’clock, which is expected to be pretty much unchanged from the March number of 356,000. It’s hard to sell the new stuff with so much cheap inventory on the market.
Costco reported a 29 percent drop in earnings from a year ago. Same store sales were off 7 percent, although if you adjust for declining gasoline prices, same store sales were pretty much unchanged.
Dell will report earnings after the close tonight.
The futures appear to be taking the Visteon bankruptcy filing in stride, as well as the breakdown in GM’s efforts to sell its Opel unit. However, the futures are well off their highs of the morning, after Procter & Gamble lowered their earnings guidance. At this point, futures are just slightly higher in front of the economic reports at 8:30.
May 27, 2009
The bond-for-stock offer at Government Motors has officially expired and two things are pretty much a given – the offer was turned down by bondholders and a bankruptcy filing is right around the corner. Word is that before it’s all over, the Feds will have an investment of some 70 billion dollars in GM.
PNC Bank announced this morning that it has issued another 15,000,000 shares of stock and raised over 600 million dollars to put it in position to get the Government out of its hair, as soon as the Government decides to leave.
On the earnings front, Staples reported earnings that were a penny better than expected this morning on in-line revenues.
At 10 o’clock, we’ll get the report on April Existing Home sales.
Stocks rallied big-time yesterday after the Conference Board’s survey of Consumer Sentiment scored a much-better-than-expected increase. That means, of course, that they interviewed people who still had jobs and were evidently too busy to pay attention to everything else.
The Hang Seng Index in Hong Kong was more than 5 percent higher overnight. Most other markets overseas are higher, but by much more modest amounts.
May 26, 2009
Take some worries about the Government’s credit rating, GM on the brink of a bankruptcy filing, an OPEC meeting. Throw in the prospect of a nuclear North Korea and you have a pretty good recipe for lower stock prices at the open this morning.
A couple of data points are on the way. We’ll get the S&P/Case-Shiller home index, which is expected to show what we already know – that home prices nationwide continued to decline in February. At 10 o’clock, the Conference Board will bring us their May Consumer Confidence Index, which is expected to rise almost 4 points to a reading of 42.8.
Apple shares will benefit from a broker upgrade this morning. Bank of America and Toyota also received upgrades. Microsoft is expected to unveil a new version of its internet search engine today.
The Australian market rose overnight, but other major overseas markets are a little lower.Our futures are lower as well, but are in a whole lot better shape than they were in a couple of hours ago. Adjusted for fair value, the S&P 500 futures are down about 2 points, the Dow futures are down 16, and the NASDAQ futures are about 12 points below fair value.
May 22, 2009
It was on light volume, but a big rally in the last half-hour of trading yesterday turned an awful day into, well, just and ugly one. That late momentum looks like it will continue into the early trade today. However, it’s hard to believe that traders will do anything too bold in front of a three-day weekend.
Yesterday, it wasn’t so much Standard & Poor’s concern about United Kingdom bonds that gave the market fits. It was the epiphany that United States debt may not, by definition, be a Triple-A credit. No lighting bolts yet, but there are clouds on the horizon.
Two retailers checked in with better-than-expected earnings last night and as a result, shares of Gap and Sears Holdings should trade higher.
UnitedBank in Florida officially failed yesterday, costing the FDIC almost 5 billion dollars. Oh, those option-ARM mortgages were beautifully marketed, weren’t they?
Ben Bernanke speaks to Boston College Law School grads later today who may be looking for employment. Hopefully they specialized in the bankruptcy rules, or at least the ones that the Administration hasn’t yet changed.
The bond market closes at 2 o’clock. Asia down overnight, Europe is up this morning.
May 21, 2009
We’re starting the wind-down into a three-day market weekend, and volume should follow traders out the door as early as this afternoon.
The weekly jobless claims number has garnered more attention lately as traders look for signs of an economic bottom. Expect a reading of around 625,000 at 8:30 this morning. Then a 10 o’clock, the April Leading Economic Indicators Index is expected to tick up to a positive 0.8, after falling three-tenths in March.
Rating firm Standard and Poor’s reiterated Great Britain’s “triple A” long-term credit rating this morning, but put the U.K. on “negative” credit watch. They seem to have a problem with a country whose debt might reach 100% of Gross Domestic Product. Don’t look now, but we’re getting closer to that kind of ratio on this side of the pond, as well.
A number of stocks received broker upgrades this morning. Hormel Foods reported better than expected earnings. But, it looks like in the early going, stock prices will head a little bit lower.
May 20, 2009
With so many things in life, the secret to happiness is sufficiently low expectations. Stocks rose in Japan overnight, even as the Japanese government announced a 15.2 percent drop in economic output in the first quarter. Yes, that is the largest drop on record for the Japanese economy. But, it was better than expected, and the export-driven Japanese economy is showing signs of bottoming out.
Speaking of bottoming out, the government fund that pays pension benefits to employees of companies that go belly-up is reported that they are now running a deficit of over 33 billion dollars. Just six months ago, that deficit was only 11 billion. In case you’re wondering, it’s estimated that pensions in the automotive industry alone are underfunded by some 77 billion dollars. In case you’re wondering where the next government bailout will be needed – well, there you go.
Deere is out with better-than-expected results. Procter & Gamble received an upgrade this morning. Last night, Hewlett-Packard met earnings estimates, but warned that the rest of the year won’t be pretty. Even though HP isn’t a NASDAQ stock, that report isn’t helping the NASDAQ futures.
May 19, 2009
As of last night, 28 of the Dow Jones 30 Industrial companies had reported 1st quarter earnings and the last two report today. Home Depot checked in this morning with operating earnings of 35 cents per share. That was a full 6 cents better than expected. They reaffirmed guidance for the full year. However, Home Depot stock is indicated slightly lower in the pre-market after a big gain yesterday. The final Dow 30 member, Hewlett-Packard will report after the close of trading today.
At 8:30 we’ll get the April Housing Starts report, which are expected to be slightly better than the March report, climbing to an annualized rate of 520,000 units.
American Express will cut another 4,000 jobs, which amounts to 6 percent of their workforce.
We haven’t mentioned this lately, but it’s worth noting that the 3-month LIBOR benchmark lending rate, that spiked to over 4 percent in the midst of the financial crisis last fall, has fallen to just about three-quarters of one percent this morning. That’s very good news for anyone with a loan benchmarked to the index, and a healthy sign for lending in general.
All major overseas markets are higher after our big rally yesterday, including the Indian market, which rose over 17 percent yesterday.
May 18, 2009
The S&P 500 index fell by about 5 percent last week, as 1st quarter earnings season pretty much ended. Some significant economic indicators are getting worse as a slower rate, and that has sparked the spring rally. Eventually they have to actually start getting better if that rally is to continue.
Speaking of rallies, the Indian stock market opened overnight for the first time since their national election. Trading was suspended for a couple hours after the market surged 10 percent and eventually stopped altogether for the day, as stock prices finished about 17 percent higher. That will be an interesting market to watch when it reopens tonight.
Meanwhile, Lowe’s announced first quarter earnings that beat expectations, although same store sales fell 6.6 percent from a year ago. They also raised guidance for the remainder of the year and Lowe’s stock is indicated almost 10 percent higher in the pre-market.
The National Association of Home Builders releases their May housing index today, which is actually expected to rise to its highest level since September.
May 15, 2009
If you own stock in a big insurance company that sells variable annuities, your stock will likely be higher this morning. If you OWN one of their variable annuities, you have some reassurance that the insurer may actually be there to make good on their promise someday.
Just as a lot of banks are trying to give back their TARP funds to get the Government out of their hair, insurers Ameriprise, Hartford, Principal Financial, Allstate, Lincoln National and Prudential have beeen approved to dip into the TARP pool for up to 22 billion dollars.
The bad news regarding Chrysler dealership closings yesterday will likely be compounded with the dealer closing list from General Motors today. We’ll also get the April Consumer Price Index at 8:30 and the May University of Michigan Consumer Sentiment Index just before 10 o’clock. Expect it to rise to a level of 66.5, from April’s 65.1.
J.C. Penny reported better than expected results for the first quarter, but guided significantly lower for the year. Abercrombie and Fitch lost 31 cents per share for the quarter, which was more than twice the expected loss.
May 14, 2009
The weekly jobless claims number comes at 8:30 this morning and will draw more than the normal amount of attention. The unemployment numbers continue to worsen, but lately have done so at a decreasing rate. That’s giving some hope that the light at the end of the tunnel is getting brighter, although there’s no doubt that we’re still in the tunnel.
Walmart tunneled out 77 cents of operating earnings last quarter. That was exactly in line with estimates, even though revenue came up a little short. Walmart estimates 83 to 88 cents for the current quarter, which is also in line with expectations.
Kohl’s beat estimates by a couple cents on higher-than-expected sales. They also raised estimates for the current quarter, although not quite as high as analysts expected.
April Producer Prices are expected to have risen a tenth of a percent. We’ll find out in about ten minutes.
May 12, 2009
A few days ago, amid much ballyhoo, President Obama announced 17 billion dollars of projected cuts in government spending. Yesterday, without any bally (or any hoo) the Government announced an increase in the projected current year deficit that will run more than five times higher than that 17 billion. The federal government, according to current projections, will have to borrow almost half of what it spends this year.
If you’re in the mood to buy some shares in Ford Motor, there will soon be plenty to go around. Ford will issue another 300 million shares, which at the current price, would raise about 1.7 billion dollars. That current price, however, will be lower this morning, because when you cut the cake into a lot more pieces, the pieces will be worth less – unless, of course, you increase the >
MBIA and Applied Materials report earnings today. The big economic numbers of the week start to roll out tomorrow.
May 11, 2009
“Sell in May and go Away” certainly didn’t work very well in the first full trading week of the month. The Dow Jones 30 Industrials rose almost 4½ percent during the week. The S&P 500 rose nearly 6 percent.
BB&T, Capital One and U.S. Bancorp all announced plans to sell stock this morning in order to pay back TARP funds, so that the Government can focus on meddling in OTHER businesses.
Earnings season is winding down, although Ambac Financial, Flour and King Pharmaceuticals and a handful of other companies report in later today.
We’ll get a restructuring update from General Motors at 9:30 this morning. Then tonight, Ben Bernanke will speak at the Atlanta Fed’s conference on financial markets.
Japanese stocks rose slightly overnight, but all other major overseas markets are lower.
May 8, 2009
Stock prices have been on a run for almost 9 weeks now, and although yesterday’s 100 point drop in the Dow was a back-step, we may get that back and more right at the open this morning.
The official word came last night. Ten of the country’s largest 19 banks will need to raise capital to offset potential write-downs. That’s the bad news, but the good news is that there appears to be plenty of private market demand for new equity in the banks, and those who are short the financials appear to be running to cover this morning.
The rest of us appear to be running to McDonald’s. Same store sales are up again at McDonald’s, and by the way, they have now risen every month for six straight years. Global same-store sales rose 6.9 percent versus the expected 5 percent, and that new coffee initiative hadn’t even started yet.
The big economic number of the week rolls in at 8:30 this morning. April job losses are expected to drop to around the 600,000 level or lower, with the unemployment rate rising to 8.9 percent.
May 6, 2009
It might be a rough morning for the big bank stocks, on a New York Times report that Bank of America may need an additional 34 billion of tangible capital to pass the Government’s stress test. That’s a bit confusing, in that it doesn’t count the 45 billion already pumped in by the Feds in the form of preferred stock. We’re in for more big-bank stress-testing tomorrow when the powers that be are due to name the other names that have turned up lame.
Disney and Marsh McLennan issued unrelated earnings reports that just coincidentally sound like the inverse of each other. Disney was expected to earn 40 cents last quarter, and instead made 43 cents. Marsh, which was expected to earn 43 cents, only managed 40 cents per share.
A 1 for 100 reverse stock split may be in store for General Motors. Reverse splits make the remaining shares appear to be more valuable, but at the end of the day, that “hot-and ready” pizza is still only worth 5 bucks, no matter how many pieces into which the pie is cut.
Ben Bernanke and FDIC head Sheila Bair offer speeches a bit later today.
May 5, 2009
Happy Cinco de Mayo. Yesterday’s rally was the best that we’ve seen in almost a month, and pushed the Standard & Poor’s 500 Index into positive territory for the year-to-date. That’s great news for your 401(k). Of course, that’s assuming you didn’t panic out of stocks a couple months ago.
We haven’t mentioned the 3-month LIBOR rate in a while. But it has continued to improve, and this morning has broken below one percent. That benchmark borrowing rate was over 4 percent in the financial crisis of last fall. It’s still high, relative to the cost of funds, but it continues to move in the right direction.
Kraft and CVS Caremark have earnings moving in the right direction this morning. Both beat estimates. Duke Energy, however, reported only 28 cents per share versus the expected 32 cents. Avon Products also missed the mark.
Rumor has it that when the Government finally announces the results of the “bank stress test” on Thursday, as many as ten big banks may need to raise capital. If true, let’s hope that they can raise it from the private sector, rather than playing bookkeeping games with their capital structure that gives the government an even stronger equity position.
May 4, 2009
It will be a light week for economic news, as most of the buzz will hover around the big bank “stress” test. That will come Thursday along with the Weekly Jobless Claims.
This morning, we’ll likely get about a 2 percent drop in March Construction spending. We’ll also get a report on pending home sales.
Sprint-Nextel reported a surprising three-cent-per-share profit this morning. They were expected to lose 4 cents, and the stock is indicated almost 10 percent higher in the pre-market.
Burger King, Research in Motion and Mastercard were all awarded upgrades by various brokerage firms this morning. One brokerage firm was awarded a name upgrade as Wachovia will become “Wells Fargo Advisors” later this month.
The Japanese was closed overnight, and will be closed through Wednesday. Other Asian markets rose again. Taiwan was up about 6 percent overnight. Great Britain is closed, but European markets are, on the whole, slightly higher. We should start “slightly higher” as well, as the rally continues.
May 1, 2009
Every May 1st, we revisit the old stock market saying, “Sell in May and Go Away!” Yes, the long term returns of the stock market are lower between April and November than between October and May. However, if we’ve learned anything during the past couple of years, it’s that every year is different and that no one rule works all the time. BY the way, last month was the best April the S&P 500 has enjoyed in over 70 years.
One thing to count on today, however, is that the April Auto Sales reports are not likely to look a lot better than the dismal March numbers.
At 9:55 the University of Michigan releases their final reading of April Consumer Confidence, and we’ll get April Factory Orders and the ISM index a little later.
More stress-test news will come next week. This morning, Citigroup, one of the big banks that is reportedly short of equity, announced that it will raise 2½ billion of tangible equity by selling its Japanese securities business for nearly 8 billion dollars.
Fortune Brands announced better than expected results, as did Dean Foods and Mastercard. Insurance giant Aon missed the expected 87 cents of operating earnings by 11 cents.
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