November 30, 2011
There’s big news this morning. Just twenty minutes ago, the Federal Reserve and other major central banks around the world have agreed to take coordinated action to lower prices on U.S. dollar liquidity swap arrangements.
And overnight, the Chinese Government took their first step in almost 3 years to lower reserve requirements on their banks. It could be that the Chinese feel that they’ve achieve the “soft landing” that they’ve been seeking, or it could be that they’re just trying to play catch-up with the easier-money policies that have spread from here to Europe.
The news from the Challenger Jobs Report wasn’t bad this morning. 42,500 new Job Cuts were announced in November, which is a little better than last month, with 18,500 of those to be cut are Government jobs. Still, layoff announcements for the year to date are up from 2010.
The Chicago PMI rolls out at 9:45 this morning and the Fed’s Beige Book, a survey of regional economic conditions should prove a little more interesting than normal this mid-afternoon.
Our futures and European markets were looking good after the Chinese Central Bank announcement, but they really took off after the big Central Bank announcement at 8 o’clock this morning.
At this point, adjusted for fair value, the S&P futures are higher by about 33 points, the Dow futures are up 276, and the NASDAQ futures are about 55 points above fair value.
Yesterday’s big surge in stock prices was a fairly effective pain reliever for injuries suffered in last week’s fall. But while we should get off to a decent start this morning, keep in mind that yesterday’s rally came on light trading volume and the mess otherwise known as Europe is still a mess. Let’s not even talk about Washington. Of course, now we have possibility of Maxine Waters taking charge of the House Financial Services Committee someday. That should fix things.
Speaking of fixing things, if you’ll be flying American Airlines today, all is expected to run normally, even though American’s parent AMR has filed for Chapter 11 bankruptcy protection. American is the last major carrier still operating at a loss, and the last of the majors to go through the bankruptcy process to get uncompetitive labor cost under control.
Tiffany reported 70 cents of operating profit this morning, which was 9 cents better than expected. However, Tiffany guided lower for the current quarter and traders are guiding the stock about 2 or 3 bucks lower pre-market
At 10 o’clock, the Conference Board’s reading on November Consumer Confidence is expected to rise to 45 from just under 40 last month.
Our futures are higher right now, but have been losing their mojo over the past couple of hours, and we still have 70 minutes to go before the market opens. At this point, adjusted for fair value, the S&P futures are higher by about 6 points, the Dow futures are up 41, and the NASDAQ futures are about 3 points above fair value.
The day after Thanksgiving is usually a pretty good one for stock prices. However, last Friday, it seemed that everyone was shopping somewhere else. In fact, last week was the WORST Thanksgiving week for stock prices was during the Great Depression almost 80 years ago.
The good news is that everyone WAS shopping somewhere else. Various surveys estimate that Black Friday weekend sales were up more than 16% over last year. As many stores open earlier and earlier, the consumer has responded. Perhaps we’ll see Black Friday sales start sometime in October by next year.
At 10 o’clock, we’ll find out if anyone was buying new homes in October. Expect the number to be relatively unchanged from the annualized 313,000 we saw in September.
Earlier rumors about an IMF bailout in Europe and other hoped-for quick-fix sovereign debt solutions have been pretty much debunked at this hour, but European stocks are higher nonetheless. Great Britain is up more than 2 percent, Germany up 3½ percent, and France is up about 4 percent.
Our futures are off their highs from early this morning, but we still should head north in a hurry at 9:30. At this point, adjusted for fair value, the S&P futures are higher by about 28, the Dow futures are up 225 points, and the NASDAQ futures are about 48 points above fair value.
Sometimes you wish the earth would spin in the opposite direction, so that we wouldn’t have to start the day with the latest news from Europe. But, spin as we do, the latest scoop is the worst German bond auction since the invention of the Euro. The German 10 year bond now carries a yield just a touch below 2 percent yield. 10 year bonds in France over 3½ percent, Belgium is at 5.2, Spain at 6.68 and Italy at 6.94. Suffice it to say that demand for European bonds of all stripes is not particularly strong, and that’s not particularly good.
On this side of the Atlantic, we’ll get the weekly jobless claims number a day early. At 8:30, expect new claims of 390,000. We’ll also get the October Durable Goods number, expected to be a minus one percent, and at 9:55, the University of Michigan’s final read on November Consumer Sentiment. Expect that to tick up to 64.5 from 64.2.
Shares of Deere look to open a bit higher after a good earnings report. Yesterday, DSW and Hormel raised guidance, while TiVo warned about profits in the year to come.
Overseas markets are lower. Our futures started the morning lower and have been losing ground steadily. At this point, adjusted for fair value, the S&P futures are down 13 points, the Dow futures are down 107, and the NASDAQ futures are about 18 points below fair value.
So the question is: “Why are stock prices under siege, why are people nervous, when the U.S. economy, by almost every measure, appears to be improving?” Well, potential economic doom in Europe is the excuse of the month. And while there are no big headlines out of Europe this morning, we will get another glimpse of the health of the domestic economy at 8:30.
The Government’s preliminary estimate (that’s number two out of three) of third quarter Gross Domestic Product is expected to hold at an increase of 2.5%.
Better than expected earnings are reported this morning by Medtronic, Collective Brands, Hormel and Hewlett-Packard. HP did lower guidance for the current quarter, and their shares are looking to open one to 2 percent lower.
Later today, the Federal Reserve will release the minutes from their last big confab, and it should be more interesting reading than the norm, as the mood of the committee seemed to shift to a view that further stimulus of the economy would be a good idea.
Overseas markets are narrowly mixed, and the strength we saw in the futures a couple of hours ago has pretty much dissipated, in fact they just turned negative about 43 minutes ago.
At this point, adjusted for fair value, the S&P futures are down a point and a half, the Dow futures are down 16, and the NASDAQ futures are about 7 points below fair value.
It’s a mini-merger Monday today. The most significant deal is for about 11 billion dollars as Gilead Pharmaceutical is buying Pharmasset. Pharmasset’s pipeline includes a
Hepatitis C drug, and it’s paying off nicely this morning. The buyout price is $137 per share. Pharmasset closed Friday around 72 bucks per share.
Earnings are on the way from Hewlett-Packard, Tyson Foods and Analog Devices.
The October Existing Home Sales will be announced at 10 o’clock.
Chinese stocks were flat overnight, but other major markets overseas are lower. European stocks are off 2 percent or more and we’ll likely get off to a rough start as well.
At this point, adjusted for fair value, the S&P futures are lower by about 19 points, the Dow futures are down about 157, and the NASDAQ futures are about 27 points below fair value.
Just as we all tiring of stock price declines because of political circus in Europe, our good friends in Washington appear ready to go Europe one up. As the so-called “super-committee” deadline approaches without any apparent hope of compromise, it appears that we’ll have dual problems to deal with during the short trading week coming up.
Meanwhile as we wrap up this week (which has seemed longer than most) they 10 o’clock reading on the October Leading Indicators is the big economic report on the agenda. A pretty good number is expected, in that gas prices were lower and stock prices were higher most of last month.
Oil retreated along with stocks yesterday, but this morning we’re again approaching 100 dollars per barrel for light sweet crude. Asian markets were lower overnight, but Europe is more of a mixed picture.
We should recover a chunk of yesterday’s losses in the early going. At this point, adjusted for fair value, the S&P futures are higher by 9 points, the Dow futures are up about 75, and the NASDAQ futures are about 10 points above fair value.
November 16, 2011
A pretty good retail sales report and a surprisingly strong Empire Manufacturing Survey pulled us out of our European hole yesterday. Of course today is another day, and last I checked, Europe is still there. And they may be “holier” than ever.
Italy’s largest bank is reportedly looking for emergency funding from the ECB and the European Commission chief said this morning that the European Union is facing a “systemic crisis.” The European Central Bank did intervene in defense of Italian debt this morning, temporarily driving down European interest rates. However, “temporarily” is the operative word. Interest rates on the Italian 10 year are again over 7 percent, the euro lower, the dollar higher, and that has our futures pointing lower again.
So, while the Europeans decide whether or not to get their act together, let’s take a quick look at earnings news. Tyco reported operating earnings of 92 cents. That was 6 cents better than expected. The star of the morning is Target. 87 cents in profit versus the 74 cent estimate. Target shares are indicated about 2 ½ percent higher. The miss of the morning comes from Abercrombie and Fitch. 57 cents missed the mark by 14 cents per share.
Asian markets were lower overnight. Europe is more of a mixed picture, but we will head lower at 9:30. At this point, adjusted for fair value, the S&P futures are down 11 points, the Dow futures are down about 82, and the NASDAQ futures are about 12 points below fair value.
If you’re looking for a recovery day after yesterday’s losses – well, you may have to wait a little longer. Sovereign debt of a lot of European countries is falling in value and rising in yield this morning. The interest rate on 10 year Italian sovereign debt breeched the 7 percent level again this morning, reigniting doubts that the Italians and the Greeks and the Spaniards will be able to get new austerity measures to stick.
Sticking out stateside this morning are a couple of conflicting earnings reports. Home Depot reported operating earnings of 60 cents for last quarter. That was a 2 cent beat. They also raised full year guidance and raised their dividend 16%.
Not as good, yet not so bad – Walmart reported 97 cents, which hit their internal target but missed Wall Street estimates by a penny. Revenue was higher than expected with same store sales up 2.6 percent.
At 8:30 we’ll get the October Retail Sales Report, which is expected to show a two-tenths of a percent increase, getting back to more normal levels from last month’s 1.1 percent spike. We’ll also hear about producer Prices, expected to be down a tenths of a percent headline, but up a tenth of a percent core. Perhaps more importantly to traders, the Empire State Manufacturing Index is expected to improve to a -2.1 from last month’s -8.48.
China was flat overnight, but other major markets overseas are lower. At this point, adjusted for fair value, the S&P futures are down 10 points, the Dow futures are down about 96, and the NASDAQ futures are about 16 points below fair value.
Now that Italy has settled on Mario Monti as its interim Prime Minister and a set of austerity measures have been approved by Italian legislators, traders may focus their attention on something a little closer to home. Unfortunately, on the way back, their attention may have to pass through France and Washington D.C., two places not known for good economic news.
Good news for Boeing this morning. They’ve landed an 18 billion dollar order from Emirates Airlines for the new 777 Dreamliner. IBM shares may also get a boost on word that Berkshire Hathaway has accumulated a more than 5% interest in IBM, buying more than 10 billion dollars of IBM this year.
A couple of retailers checked in with better than expected results this morning, namely, Lowe’s and J.C. Penney. A number of other retailers report in later, including Limited and Urban Outfitters.
Asian markets were mostly higher overnight, but Europe has, along with our futures, turned a bit lower.
At this point, adjusted for fair value, the S&P futures are down 4½ points, the Dow futures are down 8, and the NASDAQ futures are just a bit more than 4 points below fair value.
We’re continuing to climb our way back from Wednesday’s drubbing with the attention still on Europe and any news out of Italy regarding fiscal reform.
Meanwhile, a lot of people are evidently saying “the heck with it” and going to Disneyworld. Disney posted profits of 59 cents for last quarter. That’s a 5 cent beat and a profit increase of 30% over a year ago. Higher cable revenue and higher ticket prices at theme parks get the credit. Disney shares are indicated almost 4 percent higher pre-market.
On the famous flip-side may be shares of E-Trade. The long-rumored acquisition target hung out the “not for sale” sign last night. Traders, of course, immediately started selling the shares they had. E-Trade shares are indicated almost 7 percent lower this morning.
Asian markets painted a mixed picture overnight.
At 9:55, the University of Michigan’s first read on November Consumer Sentiment is expected to rise just a bit to 61.5 from October’s 60.9. However, given the big upward revision from October’s first read to the final, it may shoot a bit higher. That is, of course, unless people are really paying attention.
Although Russia is lower, major European markets are higher on the order of one to two percent. Stocks should head moderately higher as well at 9:30, although the bond market is closed in honor of Veterans Day. At this point, adjusted for fair value, the S&P futures are higher by 13, the Dow futures are up 101, and the NASDAQ futures are about 16 points above fair value.
The price of Italian bonds. Like, who cares, right? Well, nowadays it looks like everybody does. Yesterday, the yield on 10 year Italian debt shot above 7½ percent and stocks prices around the world sunk like a stone. This morning, the 10 year Italian bond is below 6.9 percent. Add to that the news that the Greeks have finally decided on a new Prime Minister and we’ll have a rally on our hands at 9:30.
After the close last night, Cisco systems beat estimates for the second quarter in a row, beating the 40 cent estimate by 3 cents. This morning, retailer Kohl’s reported 80 cents, which was a one-cent beat.
We have upbeat guidance this morning from the afore-mentioned Cisco, Advance Auto Parts and SodaStream among others. Among those guiding lower are Macy’s and Computer Sciences. Viacom will expand their share buyback program and it looks like they’ll buy those shares at lower prices, as Viacom stock is indicated about 4 percent lower pre-market
The Bank of England left their short term interest rate at ½ of 1 percent this morning. Of course, it’s been there for over 2½ years now. They did leave their quantitative easing program in place.
Asia lower, Europe higher, futures higher. At this point, adjusted for fair value, the S&P futures are higher by nearly 17 points, the Dow futures are up 126, and the NASDAQ futures are almost 28 points above fair value.
Stock prices rallied a bit yesterday afternoon when Italian Prime Minister Berlesconi announced that he would step aside soon. Unfortunately, this morning, Italian bond holders are apparently bailing out on the justifiable concern that the next guy in line won’t be able to magically restore solvency to an over-leveraged country. Greece was an appetizer, Italy appears to be the second course. Hopefully somebody wakes up before dinner is served in Washington, D.C.
In the meantime, Italian 2 year and 10 year bonds are going off at a 7½ percent yield this morning, and looking to head higher.
General Motors announced third quarter earnings this morning. The good news is that GM made $1.03 on an operating basis, which was 7 cents more than expected. However, there’s no further guidance on GM’s underfunded pension plan. Moreover, GM’s profit margin is down to 6 percent from 6.7 percent last year. GM shares, which first traded at 35 at the IPO 51 weeks ago, are looking about 5½% lower this morning, at about 23.62 per share.
Activision/Blizzard with better than expected results last night, but Adobe disappointed and will layoff and restructure in response.
Our futures have improved during the past hour, but we’re still looking at a pretty ugly open for stock prices. At this point, adjusted for fair value, the S&P futures are down about 28 points, the Dow futures are down 214, and the NASDAQ futures are about 47 points below fair value.
No need to wait in line for a video game. Welcome to Modern Economic Warfare 3. Today’s battleground shifts from Greece to Italy.
The Italian Parliament should be getting around to voting on the 2010 Italian budget just about the same time as the market opens in New York this morning. Should the vote go the wrong way, we might see the Italian Prime Minister >
Priceline answered their earnings question last night, reporting $9.85 per share of quarterly earnings. That was 55 cents better than expected.
The economic cupboard is pretty bare today. However, earlier this morning, the National Federation of Small Business survey of small businesses rose only a point to 90.2. That’s still below the year-to-date average and reflects small-business pessimism regarding improvement in future business prospects. If you want jobs, they will come from small businesses, and until those businesses foresee more opportunity than obstruction, they’ll likely continue to sit on their current payroll levels, at best.
European markets are higher on the order of 2 to 2½ percent, out futures have been drifting higher most of the morning.
At this point, adjusted for fair value, the S&P futures are higher by about 8 points, the Dow futures are up 77, and the NASDAQ futures are about 23 points above fair value.
This weekend’s announcement of a power-sharing agreement in Greece has traders more confident that the Greek bailout plan may actually come to pass. Pass though it may, attention now shifts to a much bigger potential problem, which is the solvency of the Italian government. Rumors that the Italian Prime Minister was about to resign were refuted on Berlusconi’s Facebook page this morning. However, the Wall Street Journal is now saying that Berlusconi is meeting with his family to discuss stepping down, like he actually has a choice. Whether he stays or goes, yields on Italian debt continue to rise, and that’s not good if you’re looking for stability in the Eurozone.
Over here, the big rush of corporate earnings is over, and the scorecard is pretty good. About 80 percent of companies issued good news, and sooner or later, that’s going to start to matter.
Delphi Automotive announced the terms of its upcoming IPO this morning. They’ll sell about 24 million at about 23 bucks each, raising a little over a half billion dollars.
Markets are closed in many Muslim countries today, as they will be for much of the week. European markets have been flip-flopping all morning based on the latest resignation rumors. Our futures are indicating a lower open for stocks, but they have improved a great deal over the past couple of hours.
At this point, adjusted for fair value, the S&P futures are down about 5 points, the Dow futures are down 33, and the NASDAQ futures are about 10 points below fair value.
November 3, 2011
Traders are again hanging on every quote coming out of Europe this morning, and unfortunately, we’re not talking stock quotes, but the words of the political leaders. It now appears that we may well see a Greek referendum as early as December 4th, if it happens. Prime Minister Papandreou may still be in power by then – or not. But it now does appear that the rest of the European Union members are stiffening their backbone regarding cutting Greece loose from the euro should that vote - if it happens - goes the wrong way.
Of course, managing a default of Greek proportions should be manageable. It’s when the conversation turns to Italy, things get more troubling. But, that’s likely a December discussion.
Today, we’ll get the preliminary read on 3rdquarter productivity at 8:30. Expect a 2.8 percent increase. At the same time, weekly jobless claims are expected to (once again) check in right around the 400,000 level. At 10 o’clock, the October ISM Services index is expected to show growth at a slightly slower pace than in September, with a reading of about 53.
Duke Energy and CVS Caremark both reported better than expected operating earnings this morning. Kraft raised their earnings guidance.
Asia was mostly lower overnight, but Europe is mostly higher, and we are likely to head north at 9:30 as well. At this point, adjusted for fair value, the S&P futures are higher by nearly 9 points, the Dow futures are up 72, and the NASDAQ futures are about 8 points above fair value.
Some days are just more interesting than others when it comes to market moving news, and this may be one of them.
Let’s start in Europe, where it’s almost mid-day. Most European markets are higher, after a couple of horrible days that were triggered by the Greek Prime Minister’s threat to hold a national referendum on the European Bailout Plan. See? It’s not just here that politicians pander to the masses rather than fix problems. Anyway, the leaders of Germany and France have called a meeting today to re-fix the problem, and you have to wonder how long the lenders are going to keep putting up with the lendees.
Over here, the Fed will wrap up a two day meeting and Ben Bernanke will play “meet the press” this afternoon. We’ll see if there’s any hint of QE3 on his breath.
Comcast, Time Warner and Discovery Communication are all out with better than expected earnings this morning.
The Challenger Job Cut survey for October showed only about 43,000 layoff announcements, which is much more the norm than the horrible number they reported for September, when a lot of government and financial sector jobs hit the chopping block.
Markets are closed in Mexico and Brazil today. Our prices should open higher. At this point, adjusted for fair value, the S&P futures are higher by 17½ points, the Dow futures are up 133, and the NASDAQ futures are almost 20 points above fair value.
The stock market’s already bad day took a turn for the worse in the last fifteen minutes of trade yesterday, and that downdraft continues this morning. Can you imagine? It’s bad news out of Greece, of all places. Last week, of course, the European Union announced the framework of a bailout plan. Now, word is that the Greeks want to hold a referendum on the plan. Not that they have an alternative, mind you. So, the Euro crisis continues to twist in the wind, and stock prices twist lower along with.
Nevertheless, October turned out to be the best month for the S&P in almost 20 years, in spite of the lousy price action yesterday.
The Fed’s Open Market Committee starts a two day confab today. In the meantime, Pfizer reported third quarter operating earnings of 62 cents. That was 6 cents better than expected. Tenet Healthcare, which was expected to break even, reported a two cent per share profit.
We talked about brokerage firm MF Global and their possible bankruptcy yesterday. Well, the bankruptcy filing happened, and now word is that some 700 million dollars may be missing from customer accounts. Imagine that the regulators are just looking into it now. There must be some mistake.
The U.K. is lower by more than 3 percent. France is off more than 4 percent. Germany, down more than 5 percent. Italy, down about 6 percent. Our futures aren’t that bad, but they’re not very good. At this point, adjusted for fair value, the S&P futures are down about 30 points, the Dow futures are down 206, and the NASDAQ futures are 47 points below fair value.
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