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WJR November 2008 Reports

Ron's on Thanksgiving Break.  Have a great weekend.  See you Monday!
 
 
The Government’s latest component to the economic rescue quilt (you really can’t call it a PLAN anymore, given the way it’s being patched together) is 600 billion dollars of Federal Reserve loan purchases related to mortgages and 200 billion of additional loans to back consumer debt, like credit card, student loans and car loans.  That move, which was announced just about 24 hours ago, did boost stock prices and did result in significantly lower mortgage rates.  Unfortunately,  that was yesterday – this is today – and here we go again.
 
 
 
A couple of big economic numbers are on the way this morning.  The first is the “preliminary,” which means the Government’s second guess, at 3rd Quarter Gross Domestic Product.  Expect a negative six-tenths of a percent, versus the “advance” figure of three-tenths of a percent.  At 10 o’clock, the Conference Board’s reading on November Consumer Confidence is widely expected to have held steady from October’s reading of 38.  However, another dip in that index would not be headline news.
 
Also at 10 o’clock, Treasury Secretary Paulson will give another scintillating, dramatic and awe-inspiring speech to describe what the latest (meaning today’s) version of the TARP means to him. Don’t be surprised if stocks pull back, like they usually do when Paulson speaks.
Starbucks pulled back 7 percent in Europe this morning after warning last night that same store sales will slip next year.  
 
Insurance company AXA lowered their earnings estimate by a quarter this morning, blaming lower fees and higher costs making good on the “guarantees” they made when selling annuities.
 
The last two trading days have given us the biggest rally in the Dow that we’ve seen in about 20 years.  Of course, that only gets back the ground we lost in the two prior trading days.  Fittingly, our futures have been all over the place this morning, and we’re looking at a mixed picture this morning.  At this point, adjusted for fair value, S&P futures are down 6, the Dow futures are down 95, and the NASDAQ futures are almost 16 points below fair value.
 
 
It will be a shortened trading week, but there’s certainly a lot going on and it started going on last night.
 
The current Treasury Department rode to the rescue of Citigroup last night.  Funny, we didn’t have to see a business plan, nor does Citigroup have to get rid of their corporate jets or change management.  Oh, it’s good to have friends in high places. 
 
Anyway, the government will buy 20 billion dollars of Citigroup preferred with an 8 percent coupon AND guarantee oh – roughly 300 billion dollars of garbage loans.  Note, the government is STILL not buying the garbage, which is what they originally said that they would do with the TARP program.  That, of course, might get us to the root of the problem.  Citigroup will have to limit their dividend to no more than a penny per share for the next three years.
 
At 10 o’clock, we’ll find out about October Existing Home Sales.  Expect an annualized rate of 5 million homes.   Earnings are also on the way from Campbell Soup and Hewlett-Packard.  However, any news details of the next Administration’s stimulus plan, should such details emerge at a noon press conference, will be the big market mover.
 
Japanese stocks didn’t trade overnight due to a holiday. Stocks elsewhere in Asia were mainly lower, but Europe is higher, generally on the order of 3 to 5 percent.  At this point, adjusted for fair value, S&P futures are up 13 points, the Dow futures are up 122, and the NASDAQ futures are 22 points above fair value.
 
November 21, 2008

There’s almost nothing on the menu today as far as economic reports, earnings reports, political speeches, pleas for bailouts – you know, the kind of stuff that has had the market in freefall all week.

People may not be buying cars and houses, but catsup and strawberry jam are moving pretty well, as more people elect to eat at home. Heinz reported 87 cents versus the expected 74. That’s a 21 percent increase from last year. Smucker’s profit of 94 cents missed estimates by 6 percent, but it’s still 8 percent higher than a year ago.

Last night, Dell checked in with earnings that were way above expectations. Dell made 37 cents per share versus the expected 31 cents. However, that’s a 5 percent drop from last year, which means that it’s a beat that resulted from cost cutting. And I think we’ve learned the lesson around these parts that cost cutting is great, but you can’t cost cut your way to growth. Dell is not providing future guidance, admitting that they just don’t know how slow things are going to get. Still, the news has put a little spark in the futures this morning.

Citigroup’s Board meets today and will reportedly discuss selling off pieces of itself or possibly the whole shebang. Citi shares closed at $4.71 per share yesterday.

The futures are off their highs, but are pointing higher. At this point, adjusted for fair value, S&P futures are up 15 points, the Dow futures are up 139, and the NASDAQ futures are almost 17 points above fair value.
 
 
It will be another fun-filled day on Capitol Hill for the heads of the Big Three Detroit automakers and UAW President Gettelfinger.  Unfortunately, we’re watching a political football get kicked backland forth while the livelihoods of a whole lot of people around here hang in the balance.
 
Another discount retailer is doing just fine, thank you.  BJ’s Wholesale Club reported earnings or 48 cents per share, which was a couple of cents better than expected.  Profits were up 37% from a year ago.
 
At 8:30, we’ll get the monthly inflation check-up.  It’s expected that retail prices fell by eight-tenths of a percent in October.  Yesterday, wholesale prices fell much more than expected, falling 2.8 percent.  The October Housing Starts, also at 8:30, are expected to come in at 780,000, which would be down 37,000 from September.
 
Markets overseas are off anywhere between one-half and two and one-half percent.  We’ll head lower at the open as well.  Right now, adjusted for fair value, S&P futures are about 6 points lower, the Dow futures are down 76 and the NASDAQ futures are about 6 points below fair value.
 
November 18, 2008

It’s a bad-news, good-news, bad-news story out of Home Depot this morning. Earnings were down 31 percent from last year’s third quarter. But, they beat estimates by seven cents per share. Nevertheless, Home Depot is not raising their full-year guidance, warning that the home improvement and building businesses will remain soft for the foreseeable future.

Hey, how about this - Hewlett-Packard just raised their guidance for the fourth quarter and for the full year of 2009. HP stock is bid more than 10 percent higher in the pre-market.

Plenty going on in Washington later today. We’ll get TARP testimony from Paulson and Bernanke. And later on, the heads of the Detroit 3 will be on the collective hot seat before a Senate committee as they put in their best pitch for survival funding.

October wholesale inflation data is due at 8:30. Expect a decrease of 1.8 percent after a four-tenths of a percent decrease last month.

Overseas markets are lower across the board after our late-day sell-off yesterday, and we’ll be starting lower at 9:30, although the futures are very much off their worst levels of the morning, as they started to perk up on the Hewlett-Packard announcement.

Right now, adjusted for fair value, S&P futures are down 7, the Dow futures are down 35 and the NASDAQ futures are now actually a fraction of a point above fair value.
November 17, 2008
 
It’s a new week, but it looks like we’ll pick up right where we left off Friday – and that’s not a good thing.
 
Top of the docket for Congress will of course be requested aid for the Detroit Three.  Of course now the auto parts companies are looking for help, the City of Atlanta is looking for TARP funds, troubled insurance companies like Genworth and Hartford are buying banks so that they can qualify.  I you haven’t made out your Christmas list yet, you might as well give it a shot.
 
Just keeping your job might be on the list if you’re a Citigroup employee.  Citi has reportedly confirmed plans to shed 50,000 jobs soon.  There’s a town hall meeting scheduled with employees later today to announce their exact plans.
 
Goldman Sachs executives will not be granted their customary bonuses this year and will have to get by on their $600,000 salaries.  Expect similar announcements soon from other former investment banks that have received government loans.
 
Target and Lowe’s will announce third quarter earnings today.  But more importantly, they may give us their views of the all-important fourth quarter.
 
Hong Kong and Japan were up overnight.  But Europe is one to two percent lower.  On their >
 
November 14, 2008

Over the past couple of months, just about every speech by an Administration official has sparked a sell-off in stocks. So yesterday’s rally, which started just about at the same time as President Bush’s speech was quite the surprise. Maybe it was coincidence, but whatever it was, we’ll take it.

The S&P 500 broke through its October 10th inta-day low but then stocks reversed course big-time. The Dow Jones Industrials, tough to peak, was up over 900 points.

More speeches are on the way today. Ben Bernanke begins chirping in Germany in about 15 minutes. At just about the same time we’ll get the October Retail Sales report which is expected to reflect a decline of 2.1 percent.

J.C. Penny is with slightly better than expected earnings, but not surprisingly, they’re warning about sales in the current quarter.

Citigroup’s stock almost touched 8 bucks per share yesterday. It rebounded late in the day on word of some significant purchases by Citi executives. This morning, Citi announced another10,000 jobs cuts. Sun Micro will be saying good-bye to at least 15 percent of their workers.

Overseas markets are 2 or 3 percent higher after our surge yesterday. Bu, the rally may stop here. Right now, adjusted for fair value, S&P futures are down almost 19 points, the Dow futures are down 147 and the NASDAQ futures are just about 26 points below fair value.
 
 
There is some earnings news to chew on this morning.  Some of it is tougher to chew than the other.  Last night Intel reported that chip sales have pretty much fallen off a cliff.  Intel cut its quarterly earnings guidance by 14 percent as 17 percent of this quarter’s sales have suddenly disappeared.
 
Countering that news, the quarterly earnings news from Walmart was pretty good.  Earnings from operations were 77 cents per share versus the expected 76 cents.  Walmart did guide earnings expectations lower for the fourth quarter.  However, the culprit isn’t declining sales.   It’s currency conversion issues from overseas operations due to the strong U.S. dollar.
 
Heading for the discount rack this morning is the once high-flying Crox.  After reporting losses of $1.79 per share and warning of more loses to come, shares of Crox, which closed at $1.90 yesterday, dropped about 30 percent or so after-hours.
 
Overnight, Asian markets were lower roughly in line with our 5 percent decline yesterday,.  Europe is also lower, but only by one percent or so.  Our futures are indicating a mixed open.  However, the weekly Jobless Claims number at 8:30 could push sentiment around.
 
Right now, adjusted for fair value, S&P futures and the Dow futures are just about flat. However, on the Intel news, the NASDAQ futures are just about 13 points below fair value.
 
 
There’s nothing much on the economic calendar until Friday as traders look for some news to pull the market out of its current funk.  It looked like we had something to go on yesterday when Fannie Mae and Freddie Mac announced a mortgage assistance program.  But the devil was in the details, and the details revealed that the proposed mortgage fix would not go nearly far enough to really help the housing market’s problems.
 
Dutch insurer ING reported its first-ever loss this morning after taking write-downs of almost 2 billion dollars related to the credit crisis.  The net loss was a little lower than predicted in October.  But still, it’s not a pretty picture.
 
Macy’s just reported a net 8 cent per share loss for the 3rd quarter versus an 8 cent profit a year ago.  It was a lower loss than the 19 cent loss expected, though and Macy’s stock is bid a touch higher in the pre-market.
 
To no one’s surprise, Best Buy just cut its earnings guidance for 2009, citing, of course, weaker consumer spending.  They are looking for a same-store-sales decline of 5 to 15 percent for the rest of the year.
 
Our futures were positive, but took a sharp turn for the worse about a half hour ago.  Right now, adjusted for fair value, futures on the S&P 500 are down 8 points the Dow futures are down 96 points, and the NASDAQ futures are just about 15 points below fair value.

November 11, 2008

Yesterday’s China-induced rally faded quickly after the open yesterday. Stocks closed with moderate losses as traders turned their focus to domestic problems and the federal government’s apparent indecision about how to fight them.

Financial aid for the Detroit Three remains the hot topic of economic debate, although the urgency of the matter appears to be appreciated a lot more in Detroit than in Washington. President Bush appears willing to listen, reportedly if Democrats support a free-trade deal with Columbia. Don’t you just love politics? (ED.note: the Bush administration subsequently denied this condition.)

Citigroup announced a program through which it will contact a half-billion Citigroup mortgagees to make sure that they can stay in their homes and avoid foreclosure. Those 500,000 mortgages total about 20 billion dollars. Citi stock is indicated lower in the pre-market on the news.

On the earnings front, Starbuck’s reported operating earnings of only 10 cents per share versus the expected 13 cents, as those 4 dollar coffees don’t seen to be selling as well nowadays.

It’s Veteran’s Day, and although the bond market is closed stocks will trade and at the open, at least, they will trade lower. Right now, adjusted for fair value, futures on the S&P 500 are down 13 points the Dow futures are down 115 points, and the NASDAQ futures are just about 18 points below fair value.

November 10, 2008

While Washington mulls over expanded assistance for the auto industry, another 40 billion of assistance is going to insurer AIG, including a re-structuring of the original terms of the AIG loans that drops the interest rate taxpayers receive by 5 percent. It’s further evidence that the Government is feeling their way through the economic crisis step-by-step. We’re in uncharted waters here and a lot of the rules will be rewritten as needed.

China re-wrote a lot of rules overnight. They announced a nearly 600 billion dollar stimulus package that includes a lot of infrastructure spending as well as a restructuring of the tax rules that will result in a tax cut amounting to about 3 percent of the total package. That, in an economy that’s still growing at 9 percent per year.

You may have driven by a 20% off sale at Circuit City over the weekend. Well, this morning, the stock of Circuit City is on the half-off rack, but that doesn’t mean it’s a bargain. Circuit City has reportedly filed for bankruptcy protection.

Somebody’s profiting as consumers scale back. October sales at McDonald’s were up 5.3 percent and their European comps were up almost 10 percent. McDonald’s stock is indicted higher in the pre-market.

The domestic bond market closes early today and will be closed in observance of Veteran’s Day tomorrow, but stock will continue to trade. And at the open this morning, stocks will trade higher. Right now, adjusted for fair value, futures on the S&P 500 are up 27 points the Dow futures are up 236 points, and the NASDAQ futures are just about 40 points above fair value.

November 7, 2008

Stocks are looking to bounce back a bit from a nearly thousand point drop in the last 48 hours, but they’ll have some dangerous waters to tread.

In just about ten minutes the Labor Department will announce the October Employment numbers. On average, analysts expect that 200,000 non-farm jobs went bye-bye, pushing the Unemployment Rate up two-tenths of a percent to 6.3 percent.

Yesterday the auto execs went to Washington to make their case for help. Today, they’re taking their case to the media after announcing 3rd quarter results. Ford revenue was higher than expected. However, the quarterly loss from operations was $1.31 per share versus the expected loss of 94 cents. Ford will be again cutting white-collar salary costs, this time by 10 percent, by the end of January. Ford stock is indicated just a few cents per share higher in the pre-market, after closing at $1.98 yesterday.

GM’s numbers come a little later this morning.

The Nikkei in Japan lost 3½ percent overnight, but most other markets overseas are higher. Our futures are positive, but are well off their best levels of the morning, and all bets are off after the Jobs number comes at 8:30. At this point, adjusted for fair value, futures on the S&P 500 are up 8 points the Dow futures are up 98 points, and the NASDAQ futures are just about 15 points above fair value.

November 4, 2008

It’s hard to focus on financial news in light of today’s election. So far, the futures appear to be in a great mood, and it’s not because we’ve gotten any great economic news.

Yes, Australia cut interest rates by a larger-than-expected three-quarters of a percent, and European markets are higher for the sixth straight session. And we have had a couple of better than expected earnings reports out of Mastercard and Archer Daniels Midland.

But after yesterday dismal car sales reports, BMW announced a 40,000 unit production cut overnight after sales slumped and profits dropped over 60 percent. BMW shares were off about 4 percent in European trade.

The only economic report on the docket is a ho-hummer – the September Report of factory Orders, which is expected to decline by one percent.

Three-month LIBOR is down again - that’s a good thing - to just over 2.7 percent. Japanese stocks rose over 6 percent overnight, Europe is up strongly and our futures are close to their highs of the morning.

At this point, adjusted for fair value, futures on the S&P 500 are up 27 points the Dow futures are up 250, and the NASDAQ futures are just about 32 points above fair value.

November 3, 2008

Plain and simple, October was an awful month for stock prices. However, last week was the best performance stocks have turned in since 1974. So, is it dead-cat bounce, or the beginning of the big comeback? We’ll find out, but it’s a week chock full of potentially bad news.

The big number of the week comes Friday, when the October Employment Report is expected to reflect an Unemployment rate of 6.3 percent. But at 10 o’clock this morning, the October ISM Index, which measures business activity, is expected to decline to a reading of 41.5 from 43.5 last month.

Lots of earnings news still coming this week. Goodyear Tire surprised this morning, making 10 cents per share more than expected last quarter.

Once again this morning, the three-month LIBOR rate is down another 17 basis points, to 2.86 percent. That’s a continuation of what is a very good, and very important trend.

Japanese stocks did not trade overnight, but markets elsewhere are following our Friday rally higher.

And for a change, our futures have been relatively quiet this morning, and just turned a bit lower within the past 5 minutes. At this point, adjusted for fair value, futures on the S&P 500 are down 3½, the Dow futures are down 31, and the NASDAQ futures are just about 1½ points below fair value

 

WJR December 2008 Reports
WJR October 2008 Reports

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