WJR November 2009 Reports
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November 30, 2009
It’s Cyber Monday, one of the biggest days of the year for online shopping. Statistics from over the weekend indicate that a lot of people aren’t waiting to shop online. About a quarter of last weekend’s shopping was accomplished online and while there were more shoppers both online and in the malls than last year, those shoppers appear to be spending less per person.
At 9:45 this morning, November’s Chicago Purchasing Manger’s Index is expected to read 53.3, which would be a point lower than last month, but still a reflection of business getting a little bit better.
Goldman Sachs upgraded the entire steel sector this morning, as they opine that steel prices have bottomed.
Asian stocks rose nicely overnight, but European markets are widely lower this morning. It’s becoming evident that Abu Dhabi and the other Emirates will eventually backstop or resolve the debt default in Dubai, Europe’s banks have nothing to gain and certainly a lot more to lose than anyone else.
Our futures are pointing to a slightly lower open for stocks. However, the futures have been rising over the past couple of hours and by the time we get to 9:30, we may be looking even better. At this point, the S&P futures are lower by about two points, the Dow futures are down only 7, and the NASDAQ futures are about 6 points below fair value.
The Wednesday before Thanksgiving is traditionally a good day for stocks, in the middle of what is usually a good week for stocks. Doing its best to uphold that tradition, the dollar is falling this morning, and that should push stock prices higher at the open.
With the market closed tomorrow and only open a half-day on Friday, we’ll cram every last major weekly economic report in by 10 o’clock this morning. Headlining is the October Durable Goods Report which is expected to reflect an increase of a half of one percent, which is almost a full percent lower than in September. Personal income and consumption data will also come at 8:30, the final November Consumer Confidence number from U of M at 9:55 and then the October New Home Sales figure at 10 o’clock. No major changes are expected in any of those readings from last month.
Tiffany reported much better than expected results this morning, earning 33 cents versus the expected 24 cents, and they also raised guidance for the full year. Deere and J Crew also issued good earnings reports this morning.
Most overseas markets are higher this morning, the standout being China, which is higher by more than 2 percent. At this point, the S&P futures are higher by 4 points, the Dow futures are up 25, and the NASDAQ futures are about 8½ points above fair value.
The big economic report of the week rolls out in just over 10 minutes with the “preliminary” estimate of 3rd quarter gross domestic product. The consensus view is an increase of 2.9 percent. That would be a lesser increase than the advance estimate of 3½ percent, but still an indication that economic activity is on the mend from the dire straights of a year ago.
Hormel reported earnings of 77 cents per share, which was 9 cents better than expected. Heinz also beat estimates handily, although their future guidance only matched analyst estimates. Guiding higher, after a three cent beat was Medtronic. And last night, Hewlett-Packard reported declining revenue but earnings pretty much in line with expectations, as HP beefs up the profitable services component of their business. They also announced a big share re-purchase program.
Shares in Shanghai sold off by over 3 percent overnight. Our story, as we look to the futures, is a familiar one. The dollar index was higher this morning, and the futures were lower. The dollar has since pulled back to an unchanged level, and guess what; the futures have settled right back to just about flat as well. We’ll see if the GDP number at 8:30 gives us some direction.
At this point, the S&P, the Dow and the NASDAQ futures are all within a point or so of fair value.
November 23, 2009
Over the weekend, the President of the St. Louis Fed said that the Fed’s purchases of mortgage backed securities should go on past next March, when they are scheduled to end. That’s potentially good news for low mortgage rates, but its bad news this morning for the value of the dollar, which, in turn is good news for the prices of oil, gold and stocks. Confused yet? Just stick around.
Suffice it to say that the dollar index is lower by about eight-tenths of a percent, and stock prices, at least in terms of dollars will be higher at 9:30. Gold is up around $1,165 per ounce.
Tyson Foods reported 28 cents per share of quarterly profit. That beats estimates by 2 cents. Later today, we’ll hear from Campbell Soup, Hewlett Packard and Analog Devices.
Broker upgrades are out this morning for Starbucks, Deere, Cigna and Wellpoint.
Stocks did not trade in Tokyo, but other overseas markets were generally higher overnight, with major European markets up about a percent and a half.
At this point adjusted for fair value the S&P futures are higher by almost 10½ points, the Dow futures are up 91, and NASDAQ futures are about 15 points above fair value.
You may recall that yesterday morning, the entire semiconductor industry was downgraded by a brokerage firm. Right on cue last night, Dell issued its quarterly earnings report and it was pretty much a mess. Revenue, profit and margins were all worse than expected. Profit was actually off 54 percent. Dell’s strength is the corporate market, and it could be that businesses just stopped buying to await the release of Windows 7. When Hewlett Packard reports next week, we’ll get a better indication of how consumer computer sales are holding up.
The yield on very short term Treasury Bills actually went negative yesterday. The last time that happened was last December during the Great Repression, and the time before that was during the Great Depression. Lots of money is running for cover as, in spite of the big run in stocks and bonds, investors are still pretty skittish.
Builder DR Horton is out with a worse than expected report this morning, but if houses aren’t selling, at least peanut butter and jelly is. JM Smucker reported $1.22 in profit versus the expected $1.04.
The dollar index is up three-quarters of a percent, and that, of course means lower prices for everything else. Gold is lower. Oil is lower. Stocks overseas are lower.
Our futures have been pretty much locked in at lower levels all morning long. At this point, they’re almost exactly as negative as they were 24 hours ago. Adjusted for fair value, the S&P futures are down 6 points, the Dow futures are down 45, and the NASDAQ futures are about 12 points below fair value.
Sears Holdings is the operational report of the morning. You’ll notice I didn’t say use the word “earnings.” Sears lost 81 cents per share. That was almost 30 cents per share less than expected, as sales at Kmart have picked up a bit. However, the loss is comparable to last year’s loss, so it’s not like you can point toward any trend toward break-even at Sears.
At 8:30 this morning we’ll get the weekly jobless claims number and then at 10, the October Leading Indicators and the Philly Fed Survey. The Leading Indicators are expected to be up four-tenths of a percent, versus last month’s one percent rise, but the Philly Fed, which is a survey of economic conditions on the East Coast, is expected to improve to a reading of 12, after October’s 11½.
The entire semiconductor sector and Intel and Texas Instruments in particular were downgraded by a major broker this morning. The fear is that inventory levels have risen in excess of the ability of next year’s new purchase cycle to absorb. We’ll see how it’s going at Dell when they report earnings after 4 o’clock today.
If you’re an AOL employee, look to your colleague on the right, then the worker on your left. According to an 8k filing, one of you will soon be unemployed.
Yesterday, although stocks finished lower, we rallied nicely into the close as traders again “bought the dip.” Well, they’ll have a bigger dip to consider at 9:30 this morning as the dollar has risen to its highest level in a week. Right now, adjusted for fair value, the S&P futures are down 8½ points, the Dow futures are down 58, and the NASDAQ futures are about 13 points below fair value.
There are a couple of significant economic reports to watch this morning. In just about 15 minutes, the October Consumer Price Index is expected to tell us that prices rose about two-tenths of a percent last month, which would match the September price increase.
Also at 8:30, the October Housing Starts report is expected to improve just a bit from September’s annualized rate of 590,000 – perhaps budging up to a 600,000 rate.
In the midst of a whole bunch of criticism of their large executive pay packages, the CEO of Goldman Sachs has officially apologized for the role his firm played in the financial crisis. Goldman Sachs then announced that it will offer 100 million dollars per year for the next five years to small business in the form of loans, scholarships and management education. The Financial Times points out that there were 36 days in the third quarter when Goldman MADE more than 100 million dollars in a single day. I suppose that one day’s pay is better than nothing. Of course part of it will be loans that must be repaid. Still, it’s nice to see that SOMEONE out there is willing to lend money to small businesses. Maybe the idea will catch on.
Asian markets were mixed overnight, but Europe is having its fifth positive day out of the last six.
We’re looking for the CPI release and the October Housing Starts to give us some direction in the early going. Right now, adjusted for fair value, the S&P futures are up a point and the Dow futures are up 8, although the NASDAQ futures are about 3 points below fair value.
Earnings reporting season is pretty much in the rear view mirror at this point. But this morning Home Depot checked out with a third quarter profit of 41 cents. That was a nickel per share better than estimates. Home Depot said that fully year profits will be higher, but their fourth quarter estimated profit is a few cents shy of analyst estimates. Home Depot stock is looking a little lower pre-market.
Federal Express is expecting a pick up in business for the Holiday season as more and more retail sales move online. Until someone finds a way to deliver the product through your computer, Fed Ex is likely to benefit. I like mine delivered directly down the chimney by an alternative carrier, thank you very much.
Richmond Fed President Lacker will speak later on about the economic outlook, but the Fed-heads that have spoken this week have given no indication that inflation is even a slight concern.
At 8:30, the October Producer Price Index will shed a little statistical light on that debate. Expect an increase of a half-percent. Prices dropped six-tenths of a percent last month.
Stocks in Japan dropped about a half-percent over night. Other markets overseas are narrowly mixed. The U.S. Dollar Index is higher by about a half percent this morning, and you know what that means - we should give a little of yesterday’s stock market rally back at 9:30. At this point adjusted for fair value the S&P futures are down almost 4 points, the Dow futures are down 31, and NASDAQ futures are more than 8 points below fair value.
The big news of the morning, of course, is the plan from General Motors to start paying back government loans next month and possible paying it all back by 2011. The idea of an IPO by the end of next year is still on the table, although there is admittedly a lot of ground to cover between now and then.
At 8:30 this morning, the domestic retail sales figures roll out, and it’s expected to be good news. October retail sales are expected to have risen almost one percent, after diving a percent and a half in September.
A new spear was thrown this morning in the battle of big cholesterol drugs. A study funded by drug maker Abbott, admittedly a very small study, nevertheless concluded that Abbott’s Niaspan was preferable to Merck’s drug Zetia. Abbott stock is on the move higher in the premarket on that news.
Lowe’s earnings report matched profit estimates on slightly better than expected sales.
Ben Bernanke will speak to the New York Economic Club just after noon today.
We’re looking at the same old song this morning, that is -- dollar down in value – everything else – gold, oil, stocks moving higher.
Overseas there’s a sea of green numbers and absent a really bad retail sales number at 8:30, 9:30 should take stocks higher.
At this point adjusted for fair value the S&P futures are up almost 10 points, the Dow futures are up 80, and NASDAQ futures are 12½ points above fair value.
November 13, 2009
You don’t get many weeks as devoid of economic data as this one. But, we will get a smattering of economic news today and it started in Europe with the Eurozone’s Gross Domestic Product. It was a little lighter than expected. However, it was positive by four-tenths of a percent after five straight quarterly declines. So, tentative though it may be, it looks like Europe’s economy has emerged from the Great Recession.
Just before 10 o’clock this morning, the University of Michigan is expected to announce a slightly increasing amount of optimism among consumers in November. Expect a reading of 71 there.
More retailers reported earnings this morning. Abercromie & Fitch beat estimates by a surprisingly strong 10 cents per share and J.C. Penney made 30 cents versus the expected 12 cents. Nordstrom missed their number by a penny, and Blockbuster continues to bleed, losing 60 cents per share last quarter, with revenue falling 20 percent.
Last night, after the close Disney reported 46 cents of profit, which was a nickel better than expected.
Chinese stocks rose about one percent overnight, but other overseas markets aren’t showing any consistent direction. We should head a bit higher at 9:30, although the futures have been losing ground during the past couple of hours. At this point, adjusted for fair value the S&P futures are up a little more than 3 points, the Dow futures are up 35, and NASDAQ futures are a little less than 5 points above fair value.
If you’re one of those folks with nothing better to do than trade stock, it’s one of those earnings reports that drives you crazy. Walmart, the 800 pound retailer in the room, reported earnings of 84 cents for the quarter gone by. That was three cents better than expected, on an increase in margins, and an increase in market share. Walmart raised earnings guidance for the year. However, revenues were lower than expected by less than one-half of one percent, and that is the apparent reason Walmart shares are indicated lower in the pre-market.
Kohl’s also beat earnings estimates by three cents per share this morning.
Put this one in the “Gosh, maybe somebody knew something” category -- the stock of network equipment maker 3Com was up over 5 percent yesterday on extremely heavy volume. Consider the options action – yesterday over 8,000 call contracts traded yesterday, versus only 8 puts. Options volume was 17 times normal.. After the close of trading last night, Hewlett-Packard announced that it will buy 3Com at a 39 percent premium to 3Com’s closing price.
At 8:30 the weekly jobless claims number may influence the opening level for stocks, and although the futures have steadily improved during the past hour, stocks are looking to open just a bit lower.
Adjusted for fair value the S&P futures are down less than 3 points, the Dow futures are down 23, and NASDAQ futures are less than 2 points below fair value.
November 11, 2009
Without a lot of economic data either yesterday, or due today, traders are focusing on the comments of several Federal Reserve Regional Presidents yesterday. Those comments gave no hint that interest rate were headed higher anytime in the foreseeable future. That, and some interesting economic data out of China overnight should keep the stock rally going this morning.
Think about these numbers – Chinese industrial production AND retail sales in October rose over 16 percent from a year ago. Consider also that demand for Chinese exports was actually pretty week. Read from that the fact that infrastructure and consumer spending in China continues to pick up steam. Yet, producer and consumer prices in China continued to fall in October, making it unlikely that the Chinese government will tap of the economic brakes any time soon.
Macy’s reported a loss of three cents, which was less than half as much as expected. They did issue slightly higher guidance for the full year, but it’s lower than analysts were expecting and that has Macy’s stock indicated about 5% lower in the pre-market.
Not a lot of movement in Asian stock prices overnight, but Europe is nicely higher. The bond market is closed today in honor of our Veterans Day. And thank you, members of the military, for all you’ve done, and continue to do for all of us. At this point, it looks like we’ll start the day with nicely higher stock prices, although the futures are well off their high point of the morning. Adjusted for fair value the S&P futures are up about 8½ points, the Dow futures are up 71, and NASDAQ futures are almost 17 points above fair value.
Earnings reports switch over to the retailers later in the week. But this morning, the larger story appears to be on the jobs front.
Three companies announced big layoff plans this morning. Lloyd’s of London will cut 5,000 positions, Sprint/Nextel will shed 2,500 and Electronic Arts will also cut staffing levels after a disappointing earnings report. EA made 6 cents per share last quarter, which came up a penny shy of estimates.
On the brighter side, Tyco reported better than expected revenue and made 61 cents per share verses the expected 54 cents.
Several Fed Presidents are running around picking up free lunches today. We’ll see if any of them have anything interesting to say about the Fed’s intentions about removing the punch bowl from the party. Outside of that, it should be a moderately quiet day for earnings and economic news.
Asian stocks followed our big rally yesterday by rising overnight. Europe is more of a mixed picture. We’re looking to give back a little at the open this morning, although the futures have been pretty stable over the past couple of hours. At this point, adjusted for fair value the S&P futures are down about a point and a half, the Dow futures are down 18, and NASDAQ futures are about 5 points below fair value.
Today was the deadline for Kraft to sweeten its proposal to Cadbury. Although no competitors have emerged to Kraft’s original offer for Cadbury, Cadbury shares are trading at a premium to the original offer. So, Kraft crafted a new deal, rather than go away until the ninth of May as they would have been required to do under U.K. takeover rules. 717 pence is the new deal, which is better than the original, nit not quite as much as some were expecting.
McDonald’s just reported October same store sales up 3.3 percent, versus the expected 1.4%. Asian and European sales increases carried the water, as domestic same store sales fell a tenth of a percent. But even those domestic results were better than expected.
General Electric stock looks to open higher, on reports that GE and Comcast have agreed to put a 30 billion dollar value on NBC/Universal as they continue to pursue a joint venture.
Adobe stock was upgraded by a major broker this morning. Downgrades are out for for GAP and Red Hat.
As has been the case for the past few months, when the dollar goes down, stock prices go up. After a big no-comment out of the G20 meeting this weekend, the dollar is down below the $1.50 per euro level, and the means stock prices are on the way higher.
At this point, adjusted for fair value the S&P futures are up about 10½ points, the Dow futures are up 78, and NASDAQ futures are almost 16 points above fair value.
The third quarter corporate earnings reports have been outstanding, by almost any measure. Productivity numbers are up, interest rates are about as low as they’ve ever been. So, when can everybody go back to work?
It’s the first Friday of the month. That means that we’re about 10 minutes away from the Department of Labor’s monthly employment report, and stock futures are not going to move much off the flat line until those numbers are either announced or leaked.
The consensus estimate calls for a loss of 175,000 non-farm jobs in October. That would be down from 263,000 last month. The unemployment rate is expected to creep just a tenth of a percentage point shy of 10 percent.
AIG, the poster child for everything that led us close to financial disaster a year ago reported a very complicated earnings report this morning. But the pre-market traders would have figured it out don’t like it much, and AIG stock is looking to open a dollar to two lower.
A couple of broker upgrades this morning for General Electric. Also getting favorable comments were Amazon and Macy’s. After a lousy earnings report and lowered guidance yesterday, Aeropostale was slapped with a downgrade this morning.
Motorola’s Droid Smartphone, a potential iphone killer, or at least worthy competitor, goes on sale through Verizon this morning.
Overseas markets are understandably higher after our 2 percent plus rally yesterday. At this point, adjusted for fair value the S&P futures are up a about 2½ points, the Dow futures are up 10, and NASDAQ futures are almost 5 points above fair value.
The Federal Reserve Open Market Committee spoke fairly clearly yesterday afternoon. In spite of all the inflationary dangers inherent in keeping interest rates too long for too long – it will be a lot longer before they risk killing the economic recovery by raising rates. That’s not good news for the value of the dollar in the short term, and it’s even worse news if you’re stuck in money markets and CDs. But the lessons of the Depression, at least as far as interest rates are concerned, have been well-learned at the Fed. Let’s hope that others in Washington remember the chapters regarding protectionism and higher taxes.
Retailers report their October sales results today, and leading the parade was Costco. Same store sales were up 5 percent, which was a touch better than expected. GAP also reported a 4 percent sales increase. That’s double the expected increase. Margins were better and GAP has raised earnings guidance for the remainder of the year. Sales at Macy’s and American Eagle dropped more than expected. Aeropostale came in well short of estimates.
Toyota announced that they’ll lose only half as much as expected this year – a lot of that thanks to the U.S. taxpayer through “cash for clunkers,” but they say that unsubsidized sales are firming up as well.
Interest rates in the U.K. and Europe were held steady this morning by the Bank of England and the ECB, although both expanded their quantitative easing programs.
Overseas markets were mostly lower overnight. Our futures are slightly positive on their >
The Federal Reserve Open Market Committee is once again in focus. At 2:15 this afternoon, it will again be a case of “Not what they do, but what they say.” The Fed is widely expected to hold short term interest rates steady at near-zero. What they say about their commitment to keeping rates there will have a direct impact on the value of the dollar, and conversely, the direction of stock prices. They can’t stay at zero forever, but the timing and pace of the coming rate increases will be where the art meets the science of good economic policy.
A number of earnings reports are out this morning, and as usual, almost all of our children are above average. Devon Energy reported $1.12 in operating profit per share versus the expected 90 cents. March & McLennan earned 48 cents which beat estimates by almost 50%. Comcast, Garmin and Time Warner also did better than expected.
On the flip side, and unfortunately, the local side, Pulte Homes lost $1.15 last quarter, which was a 36 cent miss. The ADP employment report just 3 minutes ago reflected continuing job losses, although it showed the seventh straight month that jobs losses occurred at a declining rate.
Outside of Russia, overseas markets are all higher. Indian stocks rose more than 3 percent overnight. We should head a bit higher at 9:30, as well.
At this point, adjusted for fair value the S&P futures are up 5½ points, the Dow futures are up 52, and NASDAQ futures are about 2½ points above fair value.
If you were missing an occasional roller coaster ride, now that summer is gone, look no further than your local stock market. Volatility is back in a big way, as stock prices changed direction at least a half dozen times yesterday.
Warren Buffett has made some waves over his long investing career, but his Berkshire Hathaway firm announced its biggest-ever acquisition this morning. Berkshire will acquire railroad company Burlington Northern for 100 dollars per share. Burlington closed around 76 bucks last night, so it’s a big payday for Burlington shareholders but perhaps more importantly, it’s a big vote of confidence by Warren Buffett in the future of the railroad business, and by extension, the domestic economy.
Speaking of extension, Ford Motor, on the heels of their big earnings announcement yesterday, announced that they’re looking to extend the maturity of a bunch of its obligations from 2011 to 2013. In order to due that, Ford will be selling 3.3 billion dollars in stock and debt. That will dilute existing shareholders, but it will relieve the pressure of some of the debt that Ford, unlike its bankrupt competitors, is still required to repay.
Johnson & Johnson is restructuring and will cut up to 7 percent of its global workforce.
Archer Daniels Midland and Viacom are out with better than expected numbers this morning. But on a rising dollar, our stock futures have been lower all morning, although they did improve a lot after the Burlington Deal was announced.
Chinese stocks were higher, but everybody else is lower, and at this point, adjusted for fair value the S&P futures are down about 6½ points, the Dow futures are down 64, and NASDAQ futures are 11 points below fair value.
Of course, the news of the morning, especially in these parts, the third quarter earnings report from Ford Motor Company. Ford made an operating profit of 26 cents per share, versus an expected 13 cent per share loss. More importantly, Ford has taken a billion dollars of structural costs out of car-making and actually generated free cash flow during the quarter. Unanswered at this point, is how much of an artificial boost came from the cash-for-clunkers program. We’ll learn the extent of the pull-ahead factor over the next year. However, this report is a big step up the tall mountain that Ford is trying to climb.
Ford stock is looking to open about 8 percent higher this morning.
In the other big story of the morning, CIT Group, the big small-business lender, has filed a pre-packaged bankruptcy plan, which will lower its debt-load by 10 billion dollars or so. By the way, the U.S. taxpayers’ 2.3 billion dollar investment in CIT preferred will likely be worth – oh – about zero. Wonder if our loss is tax deductible?
Anyway, Chinese stocks rose strongly overnight, Europe is mainly higher. The dollar is lower against other major currencies – and you know what that means – gold, oil and stocks are headed higher this morning.
At this point, adjusted for fair value the S&P futures are up almost 5 points, the Dow futures are up 44, and NASDAQ futures are 3½ points above fair value.
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