May 31, 2011
The old saying is “sell in May and go away.” Well, it’s the 31st, so here’s your last chance if you believe in that old saw. While it’s true that stock prices tend to do worse between June and October than between November and May, it doesn’t work every year, it certainly wasn’t true last year, and we’ll be looking at significantly higher prices at 9:30 today.
We’ll pack five days of economic reports into four days this week, and we’ll kick it off with the Chicago Purchasing Managers Index at 9:45. Expect a May number of 63. That still indicates business expansion, but at a slower rate than April’s 67.6 and March’s 70. Then at 10 o’clock, the Conference Board’s reading on May Consumer Confidence is expected to rise a little more than a point to 66.5.
In the great American Tradition of “kicking the can down the road,” Germany has reportedly backed off its desire that Greece restructure its debt right now. In all likelihood, it just means that they’ll have to default later on. But in the meantime, the party continues. Euro up, dollar down, stock prices higher. Outside of Portugal, all overseas markets are higher and we will follow suit early on.
Japan, China and most of Europe are higher by one to two percent. Greek stocks are up 4 percent. Our futures are off their highs, but are still nothing to sneeze at. Adjusted for fair value, the S&P futures are higher by almost 12, Dow futures are up 96 points, and the NASDAQ futures are almost 20 points above fair value.
It’s the Friday before a long weekend, so get your hits in early. The Bond Market closes at 1 o’clock. Stocks will trade all day, but you’ll likely see so many traders leaving early, it will look like Comerica Park yesterday afternoon.
In any event, three economic reports will be up to bat this morning, although none are expected to hit one over the fence.
At 8:30, the personal income and spending report is not expected to be particularly encouraging. Income expected to be down a tenth of a percent to a four-tenths of a percent increase. Spending is likewise expected to be off a tenth of a percent from March, and the Core Price Indicator, the PCE inflation index, is expected to increase from one tenth of a percent to two-tenths.
The University of Michigan’s final reading on May Consumer Confidence is expected just before 10 o’clock to be unchanged from the early estimate of 72.4. We’ll also get the April Pending Home Sales Report. But, that’s that, and home we’ll go to finish building the Ark and hope we won’t have to start rounding up the animals two-by-two.
Chinese stocks were again one percent lower. Japan was off a half-percent, but other major overseas markets are higher.
It’s one of those mornings when the futures look pretty flat at first glance. But adjusted for fair value they’re looking better than you’d think. Adjusted for fair value, the S&P futures are actually up almost 5 points, Dow futures are up 32, and the NASDAQ futures are about 4½ points above fair value. Have a long and sunny Memorial Day weekend.
Today’s the data day of the week. A little earnings news, a little economic news and little IPO news – we have it all.
On the earnings front, diamonds are a stock’s best friend as the little blue boxes are still tumbling out the door at Tiffany’s. The high-end retailer reported operating profit of 67 cents, which was a full 10 cents higher than expected. Sales beat estimates by more than 8 percent. Of the famous other hand, things are not quite as rosy in ketchup-land. Heinz missed the 72 cent estimate by a penny. In Japan-land, Sony says that they’ll return to a profit this year after three straight years of losses.
At 8:30, the Government takes its second swing at 1stquarter at Gross Domestic Product. The first guess was 1.8 percent growth. Expect that to be raised a bit today to about 2.1 percent. We’ll also find out whether the recovery remains a jobless one as the weekly Jobless Claims number is expected to remain just a bit above 400,000.
Delphi has filed the paperwork to raise about 100 million from an initial public offering.
Also on the way today are details of a new Republican tax-cut proposal. Good luck with that one.
Chinese stocks were off a half percent overnight, but most other overseas markets are pretty flat. After a pretty sleepy morning, our stock futures took a little turn to the upside just in the past fifteen minutes or so. At this point, adjusted for fair value, the S&P futures are up almost 2 points, Dow futures are up 16, and the NASDAQ futures are about 3½ points above fair value.
We haven’t seen four consecutive down days for stock prices in about nine months, but that’s what we might have on tap today. Stock futures were decidedly down earlier on a rumor that Greece was going to hold a special referendum to ask their people whether they wanted the government to stop spending more than they’re taking in. Of course, we’ve seen that idea fail miserably on this side of the Atlantic, but the market would hate to see the morning-after election headlines in black and white. Anyway, no need to worry, the Greek Government dispelled the rumor and stock futures immediately rebounded a bit.
California Pizza Kitchen may be the winner of the morning. The stock is indicated about 12 percent higher on a takeover bid from a private equity firm. Hormel reported earnings in line with estimates and raised their outlook, although the stock looks slightly weaker pre-market, and Costco reported 73 cents in earnings, after a 7 cent inventory charge. That’s a 6% increase year-over-year.
The April Durable Goods Report was just announced and it's not good. a 3.6 percent decline was larger than the 3 percent expected decline and it brings to an end a 3 month winning streak.
Last night AIG priced 300 million shares at 29 dollars apiece. We’ll see if traders agree with that valuation in a little over an hour.
China was one percent lower overnight. European markets are just slightly lower. Our futures were rallying back to even, but have relapsed a bit this half-hour. At this point, adjusted for fair value, the S&P futures are down 4½ points, Dow futures are down 35, and the NASDAQ futures are now more than 6 points below fair value.
It looks like stock prices will make at least a partial recovery this morning after yesterday’s downdraft. The dollar index is down a bit as the euro has gained strength. Not that there’s a clear reason why. Credit Default Spreads on Greek debt are at a record high this morning. Guaranteeing 5 year Greek debt from default now carries a cost of about 14½ percent.
It’s another relatively quiet day for economic reports. At 10 o’clock, the April New Home Sales are expected to match the March annualized rate of 300,000.
A couple of hits, along with a swing and a miss on the earnings scorecard this morning. GT Solar crushed the 34 cent earnings estimate by 7 cents on an almost 40% rise in sales. AutoZone also checked in with a good report, earning $5.29 per share, which was 32 cents better than expected.
Medtronic is the miss of the morning, although not by much. Earnings of 90 cents missed the mark by 2 cents. Revenue came in just about as expected.
The Government’s latest attempt to free itself from ownership of AIG takes another step forward later today when underwriters price another dollop of shares to be offered to the public.
Australian stocks were lower overnight, but most other overseas markets are higher. Our futures have been picking up steam over the past half hour. Right now, adjusted for fair value, the S&P futures are higher by 4½ points, Dow futures are up 39, and the NASDAQ futures are now 7½ points above fair value.
After three weeks in a row of lower stock prices, we could use a little good news. Outside of the world not coming to an end last Friday, we’re still waiting.
The big economic reports are stuffed into the back end of the week. In the meantime, more worries about Greece, Italy and some weaker than expected economic data out of Germany has the dollar index up over one percent. And, as surely as day follows night, a stronger dollar will make for weaker stock prices.
Last Friday, ratings agency Fitch downgraded Greek sovereign debt and Standard & Poor’s lowered its outlook on Italy. That led to a 3 percent drop in Italian stocks this morning, with greater Europe off about a percent and a half. China was 3 percent lower and India is off 2 percent.
If you’re looking for good news this morning, a barrel of light sweet crude oil is more than 3 percent lower. If that goes on much longer we might be able to afford the drive to the gas station for a fill up.
Campbell’s and Krispy Kreme report earnings today, but no matter how much tomato soup and how many glazed donuts we’ve been eating, we’ll be eating into our accumulated stock market gains at 9:30.
The stock futures are just about at their lows of the morning. Right now, adjusted for fair value, the S&P futures are lower by about 16 points, Dow futures are down 150, and the NASDAQ futures are more than 31 points below fair value.
Traders will have a chance to pause and reflect today. No big economic reports are scheduled and no earth-shattering earnings reports are expected. With the first quarter earnings season pretty much wrapped up, it’s safe to say that although two-thirds of the big companies reported earnings that were better than expected, well -- one-third didn’t. That’s the worst overall performance we’ve seen since the financial crisis was in full bloom a couple of years ago. Whether or not companies can inflate their prices enough or squeeze even more cost out of their operations to offset higher input costs will be the big question as we look down the road.
One company that sees a road-block ahead is The GAP. Gap reported earnings of 40 cents, which was a penny better than expected, but estimated full-year earnings at about $1.45, which is fully 45 cents short of what analysts were expecting. Software provider Intuit reported $2.33, which was a 6 cent beat. However, sales of flagship TurboTax were softer than expected. The winner of the morning is Foot Locker, earning 60 cents – 16 cents better than expected on better than expected sales and a nearly 13 percent rise in same store sales.
The Bank of Japan held monetary policy unchanged overnight. Liberty Media is bidding a billion dollars (that’s 17 bucks per share) for Barnes and Noble. That a better than 20 percent premium. Barnes & Noble stock is being bid over at more than $18½ dollars pre-market.
Not a lot of movement overseas this morning. Our futures are mildly negative as we head toward the open. Right now, adjusted for fair value, the S&P futures are lower by about 4 points, Dow futures are down 28, and the NASDAQ futures are 6 points below fair value.
We’ll be jamming all the week’s remaining economic reports into the next couple of hours.
First off will be the weekly jobless claims at 8:30, which have recently shown a disturbingly upward trend as of late. Expect 425,000 new claims as opposed to 434,000 last week.
At 10 o’clock, the Philadelphia Fed Survey is expected to recover to a reading of 23. As recently as March, this index read over 43. Hopefully the April reading of 18½ will prove to be an aberration.
The Conference Board will also release the Leading Indicator for April. Expect a reading of zero here as consumer expectations continue to drag the number lower.
Sears warned that the quarter gone by would be a stinker, and they nailed it. The operating loss of $1.39 per share was 40% more than the estimated loss of 99 cents. Revenue fell under 10 billion, now officially less than one-tenth the revenue of their once-upon-a-time rival Wal-Mart. Gap and GameStop will report in today. William Sonoma beat the earnings estimate by a penny per share and confirmed guidance.
Oil is hanging right around the 100 dollar per barrel level this morning after a strong rally yesterday. Asian markets were mixed overnight, but Europe is nicely higher and we should rise just a bit at the open as well.
Right now, adjusted for fair value, the S&P futures are up about 3½ points, Dow futures are up 27, and the NASDAQ futures are 4½ points above fair value.
The recently-slumping market really needed a big company to issue a good earnings report after the Hewlett-Packard train wreck yesterday. Last night it got one with the report from Dell. Profit almost tripled from a year ago, earnings handily beat estimates and the outlook was raised. So, Dell may be the star of the morning, but it doesn’t look like it will be able to carry the rest of the market on its back.
Target shares are also indicated higher this morning after they beat the 94 cent estimate by a nickel. Revenue was a little light and the profit boost had more to do with the credit card operations rather than the retail sales. But nevertheless, Target is looking to open a couple percent higher.
On the famous other hand, Staples missed the 32 cent estimate by 4 cents and guided lower for the remainder of the year.
At 2 o’clock this afternoon, we’ll get the minutes from the Fed meeting of three weeks ago, although with the Fed’s new level of transparency and its post-meeting press conference, we might not learn much that isn’t already out there.
We’re seen a repeat performance in the futures. That is, what looked like a stronger market a couple of hours ago has pretty much slipped away as we head toward the open at 9:30, although oil and other commodity futures and European markets are trading higher.
At this point, adjusted for fair value, the S&P futures are now down almost a point, Dow futures are down 6, but the NASDAQ futures are 6½ points below fair value.
Until the last hour or two it looked like stocks might gain back some of their recent losses. That was before we heard a troika of earnings reports that left a bit to be desired.
The good news of the morning came from Wal-Mart. Ninety-eight cents of operating earnings beat the estimate by 3 cents on 104 billion dollars of revenue. In fact, for the first time Wal-Mart is expected to record over 100 billion in revenue in each and every quarter of the year.
Home Depot also beat estimates, earning 50 cents versus 49. However, revenue was a little light and although they raised guidance for the remainder of the year, they raised it short of what Wall Street was already expecting.
Hewlett-Packard will take most of the heart this morning. Although they beat the $1.21 estimate by 3 cents, a gloomy outlook for next quarter has the stock about 5% lower pre-market.
At 8:30, April Housing Starts are expected to check in at 570,000 which would be an improvement from March’s 549,000.
There’s not much movement overseas, although Europe is about a quarter percent lower. Our futures have lost their earlier gains. Right now, adjusted for fair value, S&P futures are down a point, Down futures are off 15 and the NASDAQ futures are about 4½ points below fair value.May 16, 2011
Just when you thought that the European and International Monetary situation couldn’t get more confusing – well, now this. The head of the IMF was arrested yesterday and accused of attempted rape at a New York hotel. The IMF has named an acting replacement. However, the additional confusion led to more weakness in the Euro overnight, more strengthening of the U.S. dollar, and predictably, more pressure on the U.S. stock futures this morning.
Not helping the situation at all was this morning’s earnings report from Lowe’s. Earnings of 34 cents fell 2 cents short of estimates. Revenues were also disappointing. Lowe’s shares are indicated about 5 percent lower pre-market. A lot of major retailers will be reporting earnings throughout the coming week.
At 8:30 this morning the Empire Manufacturing Survey, which is a measure of activity in the manufacturing sector on the East Coast is expected to ease off to a reading of 20. That would be down from the April reading of 21.7. However, remember that break-even on this index is zero – so anything in the 20 plus range is pretty good.
Overseas sees nothing but red numbers this morning, following two consecutive weeks of declining stock prices. On the bright side, even though our futures are indicating lower prices, they are well off their lows of the morning and have been steadily improving over the past half hour.
At this point, adjusted for fair value, the S&P futures are lower by about 3 ½ points, Dow futures are down 24 and NASDAQ futures are 7½ points below fair value.
With the first quarter earnings season pretty much in the books, the focus turns to economic reports today, and we’ll get a couple of big ones before 10 o’clock. In ten minutes, the Government’s estimate (whether you believe it or not) of April consumer inflation is expected to come in lower than in March. Expect a reported four-tenths of a percent in the overall inflation rate, but only one-tenth of a percent in the core rate, which is the one they publish for people who don’t drive or eat.
Then, just before 10, the results of the University of Michigan’s latest survey of Consumer Sentiment is expected to nudge just a bit higher to a reading of 70 from last month’s 69.8. There could be a bit of slippage in that report, since U of M’s survey of 500 families includes about 500 families that do have to buy gasoline and food.
Most European markets are having a good day, outside of Spain, which is one percent lower. Eurozone GDP was reported at eight-tenths of a percent for the quarter and 2½ percent year-over-year. That’s better than expected, and is specifically the result of strength on the German economy.
Chinese and Indian stocks rese about one percent overnight and we should follow up yesterday positive reversal with a little rally reinforcement.
At this point, adjusted for fair value, the S&P futures are higher by about 4½ points, Dow futures are up 32 and NASDAQ futures are almost 5 points above fair value.
As much fun as it can be to watch stock prices all day long, today may be a day to keep one eye on commodities. So far, oil is lower by $2.73 per barrel, gold futures are again under $1,500 per ounce, that’s down about 15 bucks this morning, and silver, everyone’s favorite speculation, is down another 7 percent after a two day rally.
It’s a combination of problems for commodities – a weaker euro, a stronger dollar, and another hike in the banking reserve requirements in China and tightening margin requirements - it looks like a wild day on the way.
A troika of economic reports will arrive in eleven minutes. The April Producer Price Index is expected to have risen six-tenths of a percent, which is pretty hot. However, stripping out food and energy, the core PPI is expected to have risen a much more manageable two-tenths of a percent.
April Retail Sales are expected to have also risen six-tenths of a percent. Also expected are 430,000 new claims for unemployment benefits, which would be a lot better than last week’s surprisingly large 476,000.
A broker downgrade for Cisco Systems this morning after their weaker guidance that was announces last night. Upgrades go to CVS, Symantec and Vail Resorts.
Major Asian markets were down around a percent and a half overnight, Europe is also down more than one percent. At this point, adjusted for fair value, the S&P futures are down about 7 points, Dow futures are down 52 and NASDAQ futures are about 13 points below fair value.
Soon, that deficit might be $6 billion dollars lower as the Government announced another stock offering for AIG. If all goes according to plan, the Feds will get two-thirds of the $9,000,000,000 in proceeds.
All did not go according to plan for Disney’s film business last quarter. I didn’t see “Mars Needs Moms,” but evidently no one else did either. Underperformance in the film division caused Disney to report lower than expected results last night.
Three Federal Reserve Bank Presidents are out on the rubber-chicken circuit today. We’ll stay tuned for hints on the future of Fed policy. Tomorrow, their boss will be chatting with Congress regarding the Dodd-Frank bill.
Chinese stocks were off about a quarter of a percent overnight, but most other major markets overseas are a little bit higher. Our stock futures were positive earlier, but have been on the slide all morning long, and we may well get slightly lower prices at 9:30. At this point, adjusted for fair value, the S&P futures are down a point, Dow futures are down 14 and NASDAQ futures are about 3½ points below fair value.
The big deal of the day was just announced about 15 minutes ago, as Microsoft is to use 7 billion dollars of their considerable cash hoard and take on one and a half billion of debt to acquire internet communications company Skype.
As we like to say, a lot of satisfaction in life is rooted in sufficiently low expectations. That’s the case with Dean Foods this morning. Earnings at the dairy product producer were expected to crater to 6 cents per share. Well, Dean more than doubled that last quarter, making 14 cents and Dean Foods stock is indicated 7 percent higher pre-market.
Enterprise Product Partners also beat estimates this morning.
Small business optimism continues to decline, albeit at a slower rate, according to the National Federation of Independent Businesses. Their May survey resulted in a reading of 91.2. That’s seven-tenths of a percent lower than April, but much better than the 2.6 point decline in the April number.
Stocks in Australia and Portugal are a bit lower this morning, but other overseas markets that are trading are generally trading higher at this hour. Our futures have been solidly in the green all morning.
At this point, adjusted for fair value, the S&P futures are up about 6 points, Dow futures are up 41, and NASDAQ futures are almost 12 points above fair value.
A surprisingly strong Jobs Report last Friday gave stock prices some relief from what had been a pretty ugly week. This week, the big economic reports are packed into the back end of the week.
If you own shares of Citigroup, your shares are about 10 times more valuable this morning. Of course, you only have one-tenth of the number of shares you had last week. That sounds like pretty much a wash, unless of course you were looking forward to the same amount of income from you next Citigroup dividend.
Hertz is raising its offer for Dollar-Thrifty. The new 72 dollar bid is 24% higher than the rival bid from Avis.
Tyson Foods missed their quarterly earnings target by a penny per share this morning, warning that rising commodity prices would put the squeeze on profit margins from here on out. With better news, MacDonald’s worldwide same-store sales were up 6 percent, which was 50% better than expected.
Our futures are well off their highs of the morning, but we’re still looking to open a bit higher. At this point, adjusted for fair value, the S&P futures are up a point, Dow futures are up only 7, and NASDAQ futures are about 2½ points above fair value.
Daily Reports @ WJR
For an explanation of "fair value" please click here.