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WJR October 2005 Reports

Please note that Ron Humenny and Starfire Investment Advisers, Inc. are not affiliated with, are not compensated by and do not endorse Flagstar Bank or any of the sponsors of our daily WJR reports
 
November 30, 2005
 
The results for Cyber Monday are in, and they serve to prove that this whole computer and internet thing is really just a fad that will just fade away.  Right.
 
Visa spending on the internet was reportedly up 26 percent this Cyber Monday over last.  Ebay ruled the roost with the most distinct visitors.  Walmart.com and Target.com also drew a lot of traffic.
 
Traffic in shares of Google may have finally come to a “stop” sign.  Google is back down to 400 bucks from 435 on a couple analyst downgrades. Yahoo took its second downgrade this week this morning as well.
 
Lots of data points on the way today.  It’s Oil Inventory day.  The Chicago Purchasing Manager’s Index comes out at 10, and later today, the Fed’s Beige Book will be released.  The last time out that was a significant market mover.
 
The government’s second estimate of 3rd quarter Gross Domestic Product at 8:30 could set the early tone. It’s expected to be revised upward to 4.1% from the advance number of 3.8%. Too much of an upward revision could actually be a market drag, as traders continue to focus on future interest rate hikes.
 
Overseas markets are down at this hour.  In front of the GDP data, our futures are pretty much in wait-and-see mode.  S&P, Dow and NASDAQ futures are all just about even with fair value.
 
November 29, 2005
 
Yesterday the stock market’s winning streak ran into a disappointing home sales number like it was a brick wall.  It’s not news around these parts, but now it seems that nationally there are plenty of used homes on the market.  The thinking is that a slowdown in housing sales will likely trigger a slowdown in related consumer sales as well.
 
Today it could be déjà vu all over again.  The futures are up strongly at this hour, but at 10 o’clock we’ll get the October New Home Sales.  Early forecasts put the number at an annualized 1.2 million units, but given the used home data yesterday, we could fall well short of that.
 
Durable Goods Orders are expected to have risen 1.5 percent in October.  We’ll get that report in about 10 minutes.
 
Gold broke over the $500 dollar an ounce level over night, although it’s pulled back some at this point.  The last time gold spent any significant time above 500 bucks was about 22 years ago.
 
In front of that durable goods number, the futures are looking pretty good.  Adjusted for fair value, the S&P futures are up more than 6 points, the Dow futures are up 40, and the NASDAQ futures are more than 9 points above fair value.
 
November 28, 2005
 
There may be heavy pockets on area freeways, but there were evidently lighter pockets leaving area malls over the weekend.  According to the National Retail Federation, the average shopper spent more than $302 over the weekend, as Thanksgiving Holiday retail sales were up 22 percent over last year.  That number is questionable to some, and it may be an unbelievable number to a lot of autoworkers who are expecting tougher times ahead.  But, whether the figure is completely accurate or not, it’s a reminder that nationally at least, the consumer is feeling just fine, thank you.
 
Automakers aren’t the only manufacturers about to do some restructuring.  Drug-maker Merck will eliminate 7,000 jobs by 2008 and will close 5 of their 31 manufacturing facilities.
 
This week will be loaded with economic data.  Today, the October existing home sales number comes at 10 o’clock.  Sales are expected to have declined just a bit to an annualized rate of 7.2 million units.
 
The Wednesday before and the Friday and Monday after Thanksgiving are traditionally good days for the market, and it looks like 2005 will be no exception. 
 
Overseas markets are in rally mode, as we will be at 9:30. Adjusted for fair value, the S&P futures are up almost 2 points, the Dow futures are up 32, and the NASDAQ futures are about 3 points above fair value.
 
November 23, 2005
 
The futures are indicating a pretty flat open for stocks, but take heart – the Wednesday before and the Friday after Thanksgiving are traditionally pretty good days for the market.
 
We got a little Holiday gift yesterday when the minutes of the Federal Reserve Open Market Committee’s most recent meeting were released.  The minutes showed that the Committee members DID actually talk about the economy during their meeting, presumably because golf season was just about over.  Some Fed members expressed concern that they not go too far in raising interest rates.  That gave stocks an immediate shot in the arm, adding day number 5 to the current market rally.
 
At 9:45, the U of M’s Consumer Confidence number for November is expected to come in at 81, as investor depression over tropical depressions wears off.
 
Oil, gasoline, and distillate inventories are all expected to have risen in the past week.  We’ll find out at 10:30, and we’re also expecting a rise in natural gas inventories.  That’s fairly unusual for this time of year.  That data is coming out a day early due to the Thanksgiving Holiday.
 
Japanese markets were closed today, but outside of Belgium, where they must have bitten into some sour chocolate, overseas markets are up.  Adjusted for fair value, the S&P futures are down about a half point, the Dow futures are down 8 ½, and the NASDAQ futures are just about even with fair value. Happy Thanksgiving, everybody!
 
November 22, 2005
 
Xbox 360 hit the market at midnight.  Microsoft calls the new machine a critical component of its future strategy, so it’s an important product to watch.  Some analyst estimates that Microsoft will sell 2 million of them this year, but estimates vary widely as to how many will be available during the next few weeks.  Hey, maybe we can start building them at some of those auto plants we don’t need anymore.
 
For the market in general, the Dow Jones 30 Industrials Index finally closed in positive territory for the year yesterday.  The Nasdaq and the S&P 500 are at 4 ½ year highs.  But there are some uncomfortable little details rearing their ugly little heads.  Gold is just a smidgen below the $500 dollar an ounce level, as rising fast.  The Treasury Bond yield curve is about as flat as flat can be and will very likely invert before the end of the year.  An inverted yield curve is an almost certain indicator of an upcoming recession.  Finally, light sweet crude is up almost a buck today at $58.61 per barrel. 
 
Markets around the world are little changed at this hour, but in light of all those ugly little details, we’ll see lower stock prices at 9:30. Adjusted for fair value, the S&P futures are down almost 3, Dow futures are down 17 and the NASDAQ futures are about 5 points below fair value.
 
November 21, 2005
 
There was a day when General Motors could rally it stock by announcing some new models with big sales potential.  Last Friday, GM shares rallied 17 percent from their intra-day low, just because Rick Waggoner said “we’re not going bankrupt.”
 
In about 10 minutes, GM’s head honcho will have more to say.  At an 8:30 press conference, Mr. Waggoner is expected to announce some plant closings and possibly some other cost cutting measures that could help him keep last Friday’s promise.
 
Usually the mother names the child.  Today, the child will actually assume its mother’s name.  SBC will start using the AT&T name, assume the ticker symbol ‘T’ and will make a lot of sign makers and stationery suppliers very, very happy.
 
Cold weather is about to spread across the Midwest and Northeast, and surprise, surprise, oil and natural gas prices are again on the rise.  Light sweet crude is up 75 cents to just shy of 58 bucks per barrel.  That could weigh down the sleigh of the little Santa Claus rally we’ve been enjoying.
 
Asian markets were positive again overnight.  Mainland Europe is in the green, but London’s FSTE Index is down just a touch.  Our stock futures have been trying to climb back to even all morning, and they’re just about there. So, at this point, it looks like a pretty quiet open is on the way.  Adjusted for fair value, the S&P and Dow futures are flat but the NASDAQ futures are about 2 points below fair value.
 
November 18, 2005
 
There’s not much on the economic report calendar today, so it will likely be a deals, earnings and oil kind of day. 
 
Let’s take them in reverse order.  Light sweet crude is down 3 cents after a steep slide yesterday afternoon.  Yesterday’s drop gave a nice boost to overseas markets overnight.  Most of Europe is up about one percent at this hour.  Overnight, the Nikkei 225 in Japan was up almost a percent and a half.
 
Earnings reports are a mixed bag.   We’re looking at better than expected reports from Hewlett-Packard and Starbucks.  However, there are less than wonderful profits and/or forecasts from Gap, H&R Block and Disney.
 
A couple more big deals as companies continue to find ways to sop up all that darn cash lying around.  SwissRe is buying General Electric’s insurance business and Cisco Systems is buying Scientific Atlanta.  Both of those deals are in the 7 to 9 billion dollar range.  GE is also raising their dividend by 14%.
 
Stock futures have been positive all morning and have been quietly creeping even higher. Adjusted for fair value, S&P futures are up about 3 points, Dow futures are up 17 and the Nasdaq futures are about 6 points above fair value.
 
November 17, 2005
 
The story stock of the day nationwide has to be General Motors, and the story is not a comedy.  GM lost almost 6 percent of its value yesterday, and another 17 cents in the after-hours market.  Closing in on 21 bucks a share, you have to go back to the Crash of 1987 to remember GM trading much below that level.  The stock has lost almost 40 percent of its value over the past three months.
 
How about some happier stories?  It you’re long gold, it’s been a great year.  Gold is at 483 dollars an ounce mark this morning.  That’s an 18 year high.
 
Today is the last big data day of the week.  Weekly jobless claims are expected to have fallen by just 2,000.    October housing starts are expected to be down 2.8 percent.  Industrial production, on the other hand, is expected to show a one percent pickup as we recover from the hurricanes.  Finally, at noon, the Philly Fed survey will be closely watched.  Expect a decline of 3 tenths of a percent in that forecast.
 
Two broker downgrades this morning – one for Altria and one for ConocoPhillips.  Hewlett-Packard will report earnings later today.
 
It’s a great day to be invested overseas.  Hong Kong and European markets are up almost one percent, Japan closed up 1.7 percent.  We should get off on the right side of the sod as well.  Adjusted for fair value, S&P futures are up 4 ½ , Dow futures are up 28 and the Nasdaq futures are about 9 ½ points above fair value.
 
November 16, 2005
 
There’s been a lot of discussion and speculation about the health of the housing market lately.  Rising interest rates, the theory goes, have to start biting into sales soon, and may even cause people who can’t handle their suddenly-expensive ARM loans into an unexpected move.
 
The jury on this one is apparently still out. A few days ago, home builder Toll Brothers gave investors disappointing guidance for 2006.  However, this morning, D. H. Horton beat estimates for their fourth quarter by 14 cents, and guided toward the high end of expectations for next year. So, all may not be so horrible in house building land.  However, Horton did guide slightly lower for next quarter.
 
Tyco is also being cautious for next quarter, although last quarter’s earnings were pretty good.
 
It’s all about the CPI for traders this morning.  In 15 minutes the October Consumer Price Index is expected to come in unchanged.  The core rate, which excludes food and energy prices, is expected to have risen 2 tenths of a percent.
 
Asians markets were up a little overnight, European markets are down about ¾ of a percent.  Our direction will be taken from the CPI announcement at 8:30.  Right now S&P, Dow and Nasdaq futures are all within a point or two of fair value.
 
November 11, 2005
 
A big drop in oil prices didn’t help energy stocks yesterday, but it sure gave the rest of the market a shot in the arm.  This morning, light sweet crude is down another 16 cents per barrel in the mid-57’s, and that has European stock markets in a very good mood.
 
Bond traders in the U.S. should be in a good mood – they have the day off for Veteran’s Day.
 
If you hold shares in Dell…well…..maybe you won’t be in such a good mood.  Dell warned that earnings were going to disappoint.  So, their earnings number last night was no big surprise.  However, the revenue number for last quarter was also on the light side, and the outlook for next quarter was disappointing.  So, after gaining 19 cents in yesterday’s market, Dell lost 35 cents in the after-market and should open lower this morning.
 
Don’t look now, but after yesterday’s plunge in the stock price, the dividend yield on General Motors is over 8 ½ percent this morning.  Assuming, of course, that you believe the payout rate is sustainable.
 
It’s pretty much whatcha see is whatcha get with the futures, and at this point, watcha gonna get is a slightly positive open for stocks.  S&P futures are up a tiny fraction of a point, the Dow futures are up 2 and Nasdaq futures are now about 3 ½ points above fair value.
 
November 9, 2005
 
There will be a lot of hot oil-related news in the market today.  First hot data from the Energy Information Institute, then a lot of hot air from Capitol Hill.
 
At 10:30, the Energy Information industry will issue its weekly report on fuel inventories.  Crude oil, gasoline and distillate inventories are all expected to rise.  Perhaps most importantly, distillate inventories are expected to rise by about 600,000 barrels after a week of very mild weather in the Northeast, where a lot of residential heating oil is used.
 
If you are the head honcho of a big oil company, you will be tied to the whipping post in Washington today. Members of the Senate will hold a hearing to find out just how in the world the oil companies have collected so much money from everybody without actually having the power to raise taxes.
 
Big insurer AIG will be restating earnings again, as they seem to be having some trouble shaking their accounting problems.  Home Depot gets a brokerage firm upgrade this morning after losing over 2 percent of its value yesterday.
 
Stock futures were solidly positive earlier this morning, but have been on the slide for a while.  At this point, adjusted for fair value, they are indicating a very slightly positive open for the market.  S&P futures are up a almost a point, the Dow futures are still up 4 and Nasdaq futures are now about 2 ½ points above fair value.
 
November 4, 2005
 
This morning, it’s all about the October Jobs Report.  The consensus estimate calls for job growth of 124,000.  The employment picture is still a moving target given the thousands of jobs that were washed away by the hurricanes.  Of course, that’s probably offset by the millions of attorneys who have put themselves to work suing Merck over Vioxx.
 
Round 2 in the Vioxx war went to Merck yesterday as a New Jersey jury found Merck not guilty of evil doing. Merck stock popped up a bit midday, but gave up the bulk to that gain by 4 o’clock.  That’s two lawsuits done and about 6,400 to go. That is, if no new suits are filed.
 
Apple Computer took a downgrade from a major brokerage house this morning.  The analyst is arguing that it’s time to harvest some of Apple’s tremendous price appreciation.
 
The Japanese Nikkei Index shot up another 1.3 percent overnight, but markets elsewhere are decidedly undecided.
 
We will find out which way the U.S. market will decide to move this morning in about 10 minutes with the release of the October Unemployment Report. At this point, after you adjust for fair value, there is absolutely nothing going on.  S&P, Dow and Nasdaq futures are all within a couple points of fair value.
 
November 3, 2005
 
Lots of stuff going on today.  Retailers are reporting their October numbers this morning and generally, it looks like consumers continue to party like its 1999.  Walmart confirmed their earlier guidance that October same store sales were up 4.3%.  They see 3 to 5 percent growth in November as well.  Costco same store sales were up 10 percent.  Granted, without the big run-up in gasoline prices it would have only been 8 percent.  But that’s still a big number.
 
Comcast revenues for the quarter gone by came in as expected, but profits missed estimates by about 40%.  Comcast is also guiding lower for 2006.
 
At 10 o’clock, Alan Greenspan will be forced to sit through another visit with the Congressional Joint Economic Committee.  Say what you will about him, the man knows how to have a good time.
 
Also at 10 o’clock, the Durable Goods Report is expected to show a 1 percent decline. And lookout – light sweet crude is up above 60 bucks again at $60.48.
 
Asian markets were up slightly overnight.  European markets are up on the order of a half to one percent.  We should get off to a quietly positive start as long as the unemployment claims don’t throw us a curve.  At this point, adjusted for fair value, the S&P futures are up a fraction, the Dow futures are up a point, and the NASDAQ futures are about 3 points above fair value. 
 
November 2, 2005
 
Yesterday, the Federal Reserve Open Market Committee said rising energy costs and recent hurricanes have depressed economic growth and job growth.  Not to be outdone by those freaks of nature, the Fed raised short term rates another quarter percent, which should of course, depress economic growth and job growth even more.  The good news is that hurricane season is almost over.  Alan Greenspan will be around until February. 
 
October auto sales numbers were released yesterday and were scarier than anything you might have seen the night before.  DaimlerChrysler sales were off 3 percent, General Motors off 23 percent and Ford off 26 percent.  The annual combined car sales rate fell to 14.7 million units. A year ago, it was nearly 17 million.  Speaking of industries that are changing, Deutsche Telecom will cut 32,000 jobs over the next three years due to changes in the German communications industry.
 
This morning Time Warner beat earnings estimates and raised their share buyback program. EDS also beat estimates as that turnaround continues.  Oil distillate inventory data later this morning is expected to show a drawdown.  That’s a potential market mover.  But so far today – not much is moving anywhere.
 
Overseas markets are mixed.  Our futures started off the morning in good shape, but that was then and this is now.  Adjusted for fair value, the S&P futures are now down 2 points, the Dow futures are down 5, and the NASDAQ futures are about 5 ½ points below fair value. 
 
November 1, 2005
 
Later today, Treasury Secretary John Snow will finally receive a couple of proposals, developed by a special commission, on how to reform the income tax system in the U.S.  There’s a striking similarity of this exercise to the proposed Social Security reforms.  Two big wealth re-distribution systems, both horribly flawed.  And both will go “unreformed” for the foreseeable future.  Not that these new tax system proposals are bad – they’re actually very good.  Unfortunately, people don’t evaluate these things based on “right or wrong.”  They make up their mind based on “how will it effect me.”  That will likely render this proposal, like the badly needed Social Security reform, dead on arrival at Congress.
 
Short-term interest rates will head north by another quarter of a percent at 2:15 this afternoon.  That makes it 12 increases in a row, with at least one or two more to go.
 
The big earnings news of the morning is a big warning from Dell computer.  Sales and earnings for the quarter will come in at the low end of expectations and Dell shares, and by implication the NASDAQ, will be under some pressure.
 
Adjusted for fair value, the S&P futures are down about 2 points, the Dow futures are down 11, and the NASDAQ futures are almost 8 points below fair value. 
Please note that Ron Humenny and Starfire Investment Advisers, Inc. are not affiliated with, are not compensated by and do not endorse Flagstar Bank or any of the sponsors of our daily WJR reports
 
December 30, 2005
 
It looks like Santa Claus had a vacation planned, because he took off right after his day job was done last weekend. We started out the week with visions of Dow 11,000.  If this morning’s futures are any indication, it looks like 2005 may go in the books as a DOWN year for the Dow Jones Industrials.  The Dow closed last night up only 1 point for the year, and we’ll almost certainly open well below that this morning.
 
A lot of overseas markets are closed already.  The UK and Germany closed early, and all major foreign markets are down at this hour.  France is down over one percent.
 
One data point is on the way.  At 10 o’clock the November Chicago Purchasing Manager’s Index is expected to slip a little to a level of 60.
 
Lock in those capital losses today, if you need them.  Remember the bond market closes early.  They’ll be done at 2 o’clock. But the best thing to do for your financial health may be to use the weekend to review where your investments stand.  Make sure that your investments are diversified, make sure that you are spending within your means, and make sure that you a saving enough for your future goals.
 
As we head toward the final session of the year, adjusted for fair value, the S&P futures are down about 4, Dow futures are down 30 and the Nasdaq futures are about 5 points below fair value.  Happy New Year!
 
December 29, 2005
 
It should be a quiet day of trading as we wind down toward the end of the year.  Just remember, it’s today and tomorrow if you need to realize some tax losses before the end of the year.
 
The weekly jobless claims number should, once again, be roundly ignored at 8:30.  The big number of the day will be the report of just how many used homes were sold nationwide in November.  We’re expecting a slowdown of only 4 percent, which would still mean home sales are at a very high level.  That seems realistic.  Unless, of course you’re trying to sell your house around here nowadays.
 
Oil prices are backing off a bit this morning after a big run-up yesterday on fears that OPEC will start cutting production next year.  Light sweet crude is going for $59.64 per barrel.
 
European markets have a modest rally in progress.  They’re up about a quarter of a percent.  Our futures must have had a late night, as they are still sound asleep at this hour. The S&P, Dow and Nasdaq futures are all within a point or two of fair value. 
 
December 28, 2005
 
Japan is all done for the year.  Tomorrow and Friday are year end holidays, so the Nikkei Index closed out the year overnight at 16,194.  For the year 2005, the Nikkei rose more than 31 percent.  That’s a five-year high.
 
There are a lot of well respected warning signs on Wall Street.  One of them is called “the inverted yield curve.”  The “yield curve” is simply a line graph that depicts the current interest rate you receive by investing in Treasury bonds of different durations.  Normally, you’d expect that the longer-term the bond you buy, the higher the interest rate you receive.  So the line graph normally slopes up from bottom left to top right.  An INVERTED yield curve slopes the other way, meaning that short term yields are higher than long-term.  Just about all recessions are preceded by inverted curves.  However, not all inverted curves precede a recession.  No matter – yesterday the yield curve inverted ever so slightly several times through the trading day and it threw the market for a low-volume loop.  A lot of market watchers think an inverted curve is no big deal this time around, because of the generally low level of interest rates.  However, the three four most dangerous words in investing are “It’s different this time.”
 
Nothing remarkable in the overseas markets outside of the big rise in Japan.  We’ll get off the December Consumer Confidence number at 10 o’clock, but in front of that, we should get off on the right foot.
 
Right now, adjusted for fair value, S&P futures are up 3 points the Dow futures are up 31, and the Nasdaq futures are almost 4 points above fair value.
 
December 27, 2005
 
The week between Christmas and New Year’s Day is usually an interesting one.  Trading volumes are light, and a little good news can go a long way.  We’ll see if the Dow takes a run at the 11,000 mark by the end of the week.
 
Bristol-Myers Squibb got a little something in their stocking on Friday.  The Food and Drug Administration has approved Orencia, which is an intravenous drug for the treatment of rheumatoid arthritis.  Orencia has been effective for patients who haven’t responded to conventional treatments.  Bristol-Myers stock is responding very well so far, up almost 5% in the pre-market.
 
Depending on what survey you believe, it looks like Holiday season sales were up somewhere between 7 and 9 percent, although some retailers definitely took the lion’s share of the gains.
 
A lot of overseas markets are closed in observance of Boxing Day.  Japan was down overnight, but it looks like we will start to the upside at 9:30.  Right now, adjusted for fair value, S&P futures are up 3 points the Dow futures are up 29, and the Nasdaq futures are about 7 points above fair value.
 
December 23, 2005
 
The bond market closes at 2 o’clock this afternoon.  Japanese stocks did not trade at all overnight, and if there wasn’t a rule against keeping our financial markets closed for four days in a row, our stock market might just as well take the day off today as well.
 
If anything raises eyebrows today it may be the report on November New Home sales.  It’s expected to drop to an annualized rate of 1.31 million units.  That would be down from a rate of 1.42 million last month and set the tongue to wagging again about just how soft housing might get in 2006.
 
We’ll also get the December Durable Goods number in about 15 minutes and the University of Michigan’s final reading on Consumer Sentiment at 9:45.
 
Ford shares were 4 cents higher in the after-hours yesterday on word that the UAW rank and file did approve those health care concessions, albeit by a 51 to 49 majority.
 
The futures are barely awake at this hour.  Right now, adjusted for fair value, the S&P futures are up just a fraction, the Dow futures are up 2 and Nasdaq futures are just about even with fair value.
 
December 22, 2005
 
It’s a good day to finish up your Holiday shopping, or in my case, start it.  Not only that, it’s still a long walk to work if you work at the New York Stock Exchange.  Add it all up, and we’re probably in for a light day of stock trading today.
 
There’s somefinancial data coming out this morning, as well as the weekly oil, gasoline and distillate inventory numbers, but outside of that there’s just not a lot shaking.
 
“Four-tenths” appears to be the number of the day.  At 8:30, we should hear that personal income rose about 4 tenths of a percent in November, personal spending should rise 4 tenths of a percent. At 10 o’clock the Conference Board is expected to tell us that the Leading Economic Indicators are up – you guessed it – about 4 tenths of a percent.
 
Asian markets were down just a bit overnight – I’d like to say “4 tenths of a percent” -- but it’s not that much.  European markets are narrowly mixed at this hour.  Right now, adjusted for fair value, S&P futures are up about ¾ of a point, the Dow futures are up 7, but the Nasdaq futures are about 2 ½  points below fair value.
 
December 21, 2005
 
Oh Boy.  Now even Kirk Kirkorian is selling shares of General Motors.  Mr. Kirkorian, who not long ago, raised his stake to General Motors to 9.9%, mostly at a price of 31 bucks per share, has reportedly sold shares, which are now below 20 dollars to bring his stake to under 8 percent.  Not exactly one of those deft investment moves on which Mr. K built his reputation.
 
A bunch of deals this morning.  IBM is buying MicroMuse.  It’s a cash deal at a 38 percent premium.  How about a 60% premium?  Shareholders of Maxtor will be getting that in a buyout by Seagate Technology.  Allergan is also paying 3 billion to acquire Inamed.
 
Federal Express delivered its quarterly report about a half hour ago, and the quarter was a good one.  Earnings of $1.53 per share beat the dollar-forty estimate handily.  FedEx also reaffirmed guidance for their third quarter.
 
The final reading on 3rd quarter GDP is expected to come in unrevised at 4.3 percent.  We’ll find out at 8:30.
 
At 9:30, we should be seeing little green arrows.  Right now, adjusted for fair value, S&P futures are up almost 4 points, the Dow futures are up 30, and the Nasdaq futures are about 4 ½  points above fair value.
 
December 20, 2005
 
New York is an exciting place to be this time of year.  Wouldn’t you be excited if you had to walk to work this morning?  It will be interesting to see how smoothly the trading goes in light of the big transit strike in the City.  However, sales at New York City coffee shops will no doubt be up this morning.
 
Also going up is the price of shares of Morgan Stanley after a good earnings report this morning.  What may not be going up is the Producer Price Index.  We’ll find out just how prices are doing at the wholesale level in about 10 minutes. Due to a big drop in energy prices, it’s expected that the overall rate dropped about a half percent in November.
 
There’s word of a pending real estate purchase in central Tokyo.  AIG is said to be negotiating to buy a little spot for about 3.5 billion dollars.  That news set off a little real estate rally in Japan that took the Nikkei index up over a percent and a half overnight.
 
Most of the rest of the overseas markets and our futures look just downright uninteresting at this point.  Adjusted for fair value, S&P futures are up a point, the Dow futures are up 6, and the Nasdaq futures are just a touch more than a point above fair value.
 
December 19, 2005
 
The deal between FPL and Constellation Energy that we talked about last week is done.  It will be an 11 billion dollar merger with energy assets in about half of the states in the country.
 
If there are shareholders, outside of the auto industry shareholders, could use some good news, it’s the owners of big pharmaceutical companies.  And just in time for Christmas, a U.S. judge has issued a ruling that will protect Pfizer’s patent on Lipitor until 2011.  Pfizer shares, which were at $20.60 just over a week ago, should open north of 25 bucks per share this morning.  In fact, all the big pharmaceutical stocks should rally this morning.
 
Circuit City beat estimates of 4 cents by making 6 cents in the quarter gone by. Circuit City shares are looking to open up a buck or two as well. 
 
Pepsi Bottling reaffirmed their guidance this morning.
 
Asian markets rallied strongly overnight, but Europe is kind of a mixed bag at this hour. Adjusted for fair value, S&P futures are up more than 2 points, the Dow futures are up 23, and the Nasdaq futures are now about 5 points above fair value.
 
December 16, 2005
 
It seems odd this week to not have a big merger to talk about.  However, one is getting close.  Albertson’s is reportedly close to unloading its drug stores to CVS and selling off everything else to a consortium of buyers that includes Supervalu stores.  It will be close to a 10 billion dollar deal.
 
Rick Waggoner with some optimistic words about GM’s 2006 prospects last night at a holiday party.  Waggoner says that the rollout of a new line of big SUVs will help revenue early in the year.  Let’s hope he’s right, and wasn’t just spending a little too much time next to the egg nog.
 
It’s a quadruple witching Friday as options, futures and options on futures will expire.  That used to mean be volatility in prices, although things have quieted down a lot in recent months.  Things might even be quieter in New York as traders use a pending transit strike as a good excuse to get in a little Holiday shopping this afternoon.
 
The only economic report of the day will be the Current Account Deficit figure, and if you can get excited about that one, you really need a little vacation.
 
European markets are firmly in the green at this hour, and we should head higher at 9:30 as well.  Adjusted for fair value, S&P futures are up almost 3, the Dow futures are up 31, and the Nasdaq futures are now about 2 ½  points above fair value.
 
December 15, 2005
 
Another day, another big merger this morning, and whether you own the acquirer or the acquiree, your stock price is on the rise.  Biotech companies Amgen and Abgenics are getting together.  Abgenics stock was up 55% in the after hours on news of the deal, and Amgen, after a one percent sell-off late in the regular session, came rallying back more than 3 percent last night.
 
Everybody knows that the air is leaking out of the housing bubble, but it’s not yet obvious to home builder Lennar.  They reported $3.54 in earnings this morning versus an estimated $3.34 and the reiterated their 2006 guidance.
 
The big number of the day and the week will come in about 10 minutes with the release of the November Consumer Price Index.  Due to a big drop in gas prices, it’s expected that the headline number fell 4 tenths of a percent, which would be the biggest drop in almost 20 years.  The core rate is expected to rise 2 tenths of a percent.
 
The S&P 500 will start the day at a 4 ½ year high this morning.  Hong Kong was up a half percent, but most other overseas markets are down a bit.  Ahead of that important CPI data at 8:30 our futures are at a standstill. Adjusted for fair value, S&P futures are up a half point, the Dow futures are down 7, and the Nasdaq futures are now about 2 ½  points above fair value.
 
December 14, 2005
 
In you know anyone who does due diligence work for a mergers and acquisitions practice, don’t expect them spend a lot of time shopping for your Holiday gift. Word is that there are a lot of deals in the hopper as companies try to figure out what to do with all the cash that’s been piling up on their balance sheets.
 
Two new deals are in the spotlight this morning. General Dynamics is buying Anteon for $55.50 per share in cash, which is a 36 percent premium to yesterday’s closing price. Also FPL, the old Florida Power and Light is thinking of linking up with Constellation Energy, which is the old Baltimore power company. That would be an 11 billion dollar deal.
 
Short term rates moved up again yesterday, but the market loved the Federal Reserve’s statement yesterday.  Of course, truth be told, nobody really knows what it meant.  For the first time in memory, the Committee did not describe its monetary policy as “accommodative.”  Unfortunately, they didn’t promise that their policy wouldn’t get “un-accommodative.”  Nevertheless, Wall Street loves an excuse to rally and that’s what we got.
 
Tokyo was hit with a 2 percent decline on a disappointing Tankan survey of business conditions.  European markets are off a quarter-percent or so at this hour.  We should see a little profit taking at 9:30 as well.
 
Adjusted for fair value, S&P futures are down a point and a half, the Dow futures are down 6, and the Nasdaq futures are now about 3 points below fair value.
 
December 13, 2005
 
At 2:15 this afternoon, the Fed will announce yet another hike in short term interest rates.  Odds are it will be another quarter point, and odds are that the Fed’s statement will be changed very little, if at all from last month.  However, any hint in that statement that the Fed is near the end of the road for rate hikes would likely give stock prices a big boost.  This is the second-to-last meeting for Chairman Greenspan.  He may not want to wait for his finale to shift gears in that statement.
 
The potential ConocoPhillips acquisition of Burlington Resources is potential no more.  The 36 billion dollar deal is done and will create another mega-company in oil and natural gas.
 
Lehman Brothers announced earnings that beat estimates by 12 cents per share this morning. Best Buy with a miss and a warning this morning.
 
S&P doing General Motors no favors yesterday as they dropped GM’s credit rating 2 notches and said that a GM bankruptcy isn’t farfetched.
 
With those less-than-kind words, GM shares will open lower at 9:30, but the market should move a bit higher.  At this point, adjusted for fair value, S&P futures are up a fraction, Dow futures are up 20, and the Nasdaq futures are now about a point above fair value.
 
December 12, 2005
 
If you spend a lot of time on the road working for a big company, today’s announcement from Hewlett-Packard could mean that you’ll soon get to see what your spouse and your kids look like again.  Hewlett has partnered up with a Hollywood animation company, most probably Dreamworks, a soon-to-be division of Paramount Pictures, and will unveil a new high-end video conferencing system that is reportedly unlike anything else.  It will be somewhat short of “Beam-Me-Up, Scottie,” but is said to be so good, that the high-end corporate customer may be able to vaporize its corporate travel budget.
 
The two big economic events this week will be tomorrow’s meeting of the Federal Reserve Open Market Committee and Thursday’s release of the Consumer Price Index for November.  Although the CPI probably fell last month due to declining oil prices, short-term interest rates will no doubt be rising by another quarter percent tomorrow.  We’ll all be watching for any hint of a change in the wording of their Statement at 2:15 tomorrow.
 
There’s a potential 30 billion dollar deal cooking in the oil and natural gas sector.  ConocoPhillips is reportedly looking to buy Burlington Resources.
 
Japanese stocks were up over 2 percent once again overnight, and we’re looking to open with higher prices as well.  Adjusted for fair value, S&P futures are up 4, Dow futures are up almost 35, and the Nasdaq futures are now about 6 points above fair value.
 
December 9, 2005
 
The University of Michigan goes center stage at 9:45 with their preliminary reading on December Consumer Sentiment.  As the impact of the hurricanes fades, it’s expected that that reading will come in around 85, which would be a nice jump from last month’s 81.6.
 
Intel’s mid-quarter update wasn’t exactly the shot in the arm we were hoping for.  Intel narrowed its sales forecast with the midpoint falling a tad lower than analysts had hoped.  Gross margins are still in good shape at 63% and year-over year earnings growth is over 9%.  But, Intel shares are lower in Europe by 2 percent or so.
 
IBM was hit with a broker downgrade this morning, based on valuation.  And Merck will also be under pressure this morning after an article in the New England Journal of Medicine accused Merck scientists of playing fast and loose with the facts regarding Vioxx. Not exactly great PR when you have 700 lawsuits pending against you.
 
Stock futures, which were in pretty good shape early this morning, have been on the slide ever since.  If the market were to open right now, well, you probably wouldn’t notice.  Adjusted for fair value, S&P futures are up a point, Dow futures are flat, and the Nasdaq futures are now about a point and a half below fair value.
 
December 8, 2005
 
11,000 should be just another number on the Dow Jones Industrial Average.  Nothing special -- no big deal.  But every time prices threaten that 11,000 level, the bears seem to take over and push the Dow down into that 10,200 to 10,800 trading range that it seems we’ve been in for about a million years now.
 
Expect the day to start with another step backward on the heels of some pretty ugly results overseas.  The red-hot Japanese market, for instance, took a cold shower to the tune of about 2 percent overnight.
 
Yes, last quarter was great, but luxury home builder Toll Brothers is now uncertain about fiscal 2007 profits and admits that the real estate market is softening.  They beat last quarter’s estimates handily, but said that for 2007 they might “beat or miss” estimates.  How’s that for uncertainty?
 
Texas Instruments and Xilinx with great mid-quarter guidance last night in computer chip-land.  Intel will release its mid-quarter report card later today.
 
The futures are a little improved over the past half hour, but we’re still looking for little red arrows at 9:30.  At this point, adjusted for fair value, S&P futures are down 3, Dow futures are down 30, and the Nasdaq futures are now a little less than a point below fair value.
 
December 7, 2005
 
There’ll be a new resident at the Renaissance Center next month, or should I say a return resident, as Fritz Henderson will assume the CFO and Vice-Charman positions at General Motors.  Henderson has been the head of just about every other big GM unit worldwide over the years, most recently GM-Europe.  It’s a return to the Ren Cen because Fritz worked there years ago when he was with Price Waterhouse.  Actually he and I worked there together and I can tell you, he’s one sharp individual.
 
Texas Instruments stock is up almost 65% since January, and after the market closes today they’ll give us a mid-quarter update.  We’ll also get the weekly oil inventory numbers at 10:30 this morning.  But in the meantime, oil is again floating above 60 bucks per barrel.  Light sweet crude has been over 60 bucks every day this week, but hasn’t closed above 60.  Should it clear 60, we may see a little more bad news in short order.
 
Gold is at $516 an ounce this morning.  Outside of a slight downtick in the German DAX Index, all major overseas markets are in the green.  We’ll likely start off in the yellow this morning.  At this point, S&P, Dow and Nasdaq futures are all within a point or so of fair value.
 
December 6, 2005
 
For stock traders, it’s all about oil prices and interest rates. Oil prices are down a little this morning, on the news that the East Coast escaped a big winter storm, and a hint as to future interest rates is on the way at 8:30. 
 
Presumably, the Fed will stop raising interest rates when they perceive no threat of inflation.  The biggest component of inflation pressure is rising wages.  The most beneficial way to avoid inflation yet provide good wages is to increase productivity.  The Government’s final reading on third quarter productivity is expected to be revised upward to 4.6 percent.  Unit labor costs are expected to have fallen by almost one percent.   Anything higher on productivity or lower on unit costs will be good news.
 
Apple Computer gets a broker upgrade this morning and is likely to open higher.
 
It’s a split decision overseas, with Asian markets down and European markets up on the order of a half-percent or so. As long as the productivity report behaves itself, we should get off to a stronger start as well.  At this point, adjusted for fair value, S&P futures are up about 2, the Dow futures are up 20 and the NASDAQ futures are 4 points above fair value.
 
December 5, 2005
 
We’ll see if this is the week that the Dow Jones Industrial Average revisits the 11,000 level.  It teased us back in March before falling back.   The Dow starts this morning at 10,877.
 
Just when Johnson & Johnson thought that it had successfully renegotiated the price of Guidant, Boston Scientific is saying, “not so fast.”  Boston Scientific is offering 72 bucks in cash and stock for Guidant this morning.  That is 14% more than the J&J offer and 16 % higher than Guidant’s Friday close.
 
The ISM non-manufacturing index is the only scheduled data point of the morning.  It’s expected that the services industry expanded at a slower rate in November, but this time of year, that index is pretty volatile and hard to take too seriously.  The number that the market will be watching is the final revision to the 3rd quarter productivity numbers.  That report comes out tomorrow.
 
Wal-Mart continues to rack up some serious Holiday sales.  They reaffirmed their estimate of this morning for 2 to 4 percent same store sales growth in December.
 
Japan was up almost another one percent overnight.  Most other overseas markets are a little lower as they and our futures have been following oil prices around.  Light sweet crude is up over 60 bucks once again, and that has the stock futures pointing a little lower.  At this point, adjusted for fair value, S&P futures are down about a point, the Dow futures are down 10 ½ but the NASDAQ futures are a half point above fair value.
 
December 2, 2005
 
Like those five dollar coffees?  Starbucks’ November same store sales were up another 7 percent, as we just can’t seem to get caffeinated enough.
 
It’s all about the jobs report this morning.  At 8:30 we’ll get the report, and the expectation is that the U.S. economy added 223,000 new non-farm jobs.  It’s expected that the unemployment rate held steady at 5 percent.  Perhaps more eagerly watched will be the average hourly wage.  Last month it spiked up by a half percent.  Analysts expect an increase of a far more moderate 2 tenths of a percent in November.
 
You may not be able to afford a meal at Morton’s, but you will soon be able to buy a share or two of their stock and chew on that.  Morton’s, which has 69 restaurants nationwide, announced this morning that they will soon have an IPO on the menu.
 
Overseas, the screens are all green this morning.  We’re up another 2 percent in Japan over night, another one percent in Hong Kong, another half percent or so in European markets.  Although our futures have been positive all morning, they were below fair value until an hour or so ago.  But in front of the jobs report at 8:30, things are about as flat as flat can be.  Adjusted for fair value, S&P futures are down a quarter-point, the Dow futures are flat and the NASDAQ futures are a point and a half below fair value.
 
December 1, 2005
 
Retailers and the car companies are reporting November sales today and there’s another wave of economic data coming as well, we could get some twists and turns as the day unfolds.  But at least the open should be a turn to the positive after the big blue chips took a tumble yesterday.
 
The early retail numbers are a mixed bag.  Costco reported a 6 percent increase in same store sales.  That’s great.  Unfortunately, analysts were expecting more like 7.2 percent.  American Eagle Outfitters also missed their same store sales target by a bunch.  That’s the bad news.  The worse news is that there is widespread suspicion that the retailers that hit their sales targets did so by slashing prices.  So sales may be great, but profits may be hard to come by.
 
Speaking of which, car sales in November, spurred by incentives that supposedly weren’t needed anymore, are expected to have gone back up to an annualized rate of 15.7 million units from October’s 14.7.
 
Personal income and spending data at 8:30 and the November ISM index at 10 may influence the market a bit more than all that.  The ISM is expected to decline to a reading of 58.
 
The Nikkei in Japan closed above 15,000 for the first time in 5 years.  Europe is also positive at this hour.  Adjusted for fair value, S&P futures are up 5 1/2, the Dow futures are up 57 and the NASDAQ futures are 9 points above fair value.
Please note that Ron Humenny and Starfire Investment Advisers, Inc. are not affiliated with, are not compensated by and do not endorse Flagstar Bank or any of the sponsors of our daily WJR reports
 
October 31, 2005
 
Happy Halloween!  At 8:30, we’ll find out how scared consumers were to spend last month.  Expect that personal spending was up about a half percent, while personal income was up only about 3 tenths of a percent.  Of course, if you do the math on that one, it probably means that consumers are still unafraid to borrow, even at interest rates starting to look a little spooky.  At some point, my little witches and warlocks, that could get really scary.
 
There are three big mergers this morning. Novartis is buying the 58 % of Chiron that they don’t already own at about 45 bucks per share.  Spain’s Telefonica is buying British mobile phone operator O2 for 31 billion and in a much smaller deal, Susquehanna, the biggest privately held radio station owner in the U.S. is selling out to Cumulus Media, some private equity firms and Comcast for about 2 billion dollars.
 
Walmart is projecting that October same-store sales came in above the high end of estimates.  We’ll find out for sure on Thursday. 
 
Crude oil is down 62 cents per barrel.
 
Put it all together with big gains in the overseas markets and we should get off to a good start this morning.  Adjusted for fair value, the S&P futures are up about 3 points, the Dow futures are up 14, and the NASDAQ futures are about 5 points above fair value. 
 
October 28, 2005
 
A couple of big economic reports are due this morning that could move the market.  At 8:30 we’ll get the “advanced” number on 3rd quarter Gross Domestic Product.  It’s expected to come in at 3.6 percent.  The second quarter GDP was 3.3 percent.  Then fifteen minutes after the market opens, the University of Michigan is expected to revise their October Consumer Sentiment number up to 76.  Positive consumer sentiment has been in pretty short supply during the past few months.
 
Last night Microsoft, like so many companies, reported a pretty good third quarter, but downplayed expectations for the rest of the year.  Microsoft is known to be conservative with its guidance, but a weak second quarter would a big surprise to a lot of observers, who are expecting good things for Microsoft due to the unveiling of Xbox 360 next month.  So expect a little selling pressure on Microsoft at 9:30.
 
The FTSE Index in London is up a bit, but all other major overseas markets are down at this hour, but we may well buck the trend at 9:30.   At this point, adjusted for fair value, the S&P futures are up 3 points, the Dow futures are up 31, and the NASDAQ futures are almost 4 points above fair value. 
 
October 27, 2005
 
When I used to work at the Renaissance Center, I remember putting in some pretty late nights.  But I don’t remember ever having to issue a press release at 1:30 in the morning.  Unfortunately, that’s what General Motors had to do this morning, to counter rumors of an impending bankruptcy filing.  Never mind that GM probably wouldn’t even be eligible for protection at this point.  The SEC is investigating GM’s accounting for its pension obligations and supplier business arrangements, especially those with Delphi.  That investigation sparked bankruptcy rumors that roiled debt markets overnight.
 
In ten minutes, the September Durable Goods report is expected to reflect a decline of about 1.2 percent. At 10 o’clock, the September New Home Sales report is expected to show a very slight increase.
 
Earnings reports this morning are almost universally good, but fourth quarter estimates are a mixed bag.  That’s part of the reason we’re likely to see a weaker market at the open.
 
At this point, adjusted for fair value, the S&P futures are down about 3 points, the Dow futures are down about 21, and the NASDAQ futures are more than 4 points below fair value. 
 
October 26, 2005
 
Boeing checked in with their quarterly report within the hour.  It’s a tough one to figure out due to a bunch of special one-time charges and credits.  However, it appears that Boeing sales came up short, and even though they boosted guidance for next year, it may not be enough to avoid a little selling pressure this morning.
 
You might say that the selling pressure will be flowing down the Amazon this morning.  The internet retailer reported lower margins than expected last night, and they also guided lower for the upcoming Holiday season.  They’re still making lots of sales, but sooner or later, investors would like to see a little detail called profits.  Look for Amazon shares to open about 9 percent lower this morning.
 
The price of light sweet crude has backed off about a quarter of a dollar after a 2-dollar-plus increase yesterday.  Overseas markets are pretty much all positive, and by pretty healthy margins.
 
We should get mixed results at 9:#0.  At this point, adjusted for fair value, the S&P futures are down a fraction, the Dow futures are up 21, but the NASDAQ futures, reflecting the impending decline of Amazon, are more than 3 points below fair value. 
 
October 25, 2005
 
The market’s been looking for an excuse to rally for a week or two now and finally found it yesterday.  The nomination of Ben Bernanke as the reincarnation of Alan Greenspan gave the Dow Industrial average its best day since April.
 
Today, as they say, is another day.  We’ll get a little profit taking at the open, although it’s hard to find a disappointing profit report out there.  Dominos Pizza just checked in, beating estimates by 3 cents per share.  Other companies meeting or beating estimates include DuPont, Lockheed Martin. Southern, Legg Mason and Texas Instruments.  However, TI said that demand is so strong, they may not have all of the inventory they need next quarter.  That will hurt the stock this morning.
 
Japanese stock rose sharply on the heels of our rally, but most European markets are slightly lower at this hour.  We’ll get at latest Consumer Confidence Index from the Conference Board at 10 o’clock.  Expect a rise to 88, from 86.6 last month. 
 
But in front of that news, we will open lower this morning. Adjusted for fair value, the S&P futures are down 4 points, Dow futures are down 33, and the NASDAQ futures are about 6 points below fair value. 
 
October 24, 2005
 
We have about another week before the Fed raises interest rates once again.  Later this week, we’ll get a lot of economic data that could influence their decision.  That is, if their collective mind wasn’t already made up – which it is.
 
Today will be pretty quiet for economic news.  But, we’ll still have a good list of corporate earnings reports to keep us entertained.  Johnson Controls beat estimates by a penny on lower than expected revenue.  Drug maker ScheringPlough earned 2 cents per share more than expected.  Merck beat estimates by 3 cents, but revenue there came up short due to the Vioxx withdrawal.
 
Kimberly Clark had a good quarter, but warned that the fourth quarter will fall short due to increasing energy costs.  Speaking of which, crude oil is off more than a dollar per barrel this morning, as it is now clear that Hurricane Wilma has missed the already damaged oil facilities in the Gulf of Mexico.
 
European markets are doing well, and it looks like a good start for us as well. At this point, adjusted for fair value, the S&P futures are up more than 3 points, Dow futures are up 33 points, and the NASDAQ futures are 4 points above fair value. 
 
October 20, 2005
 
Yesterday was, of course, the 18th anniversary of the stock market crash of 1987.  While yesterday never looked quite THAT bad, it was pretty ugly until the middle of the afternoon, when a powerful rally kicked in.  Maybe it’s just a bear market rally, maybe the bottom is now in.  It doesn’t look like the open this morning will give us any substantial indication.
 
Earnings reports continue to pour in, and in contrast to yesterday morning, this morning they’re not so great.  Yes, Coca-Cola beat estimates on rising revenue. Look for Coke to rise about 4% at the open. However, Ford Motor lost a penny more on an operating basis than expected.  They indicated that full year results would come in at the low end of their one dollar to buck and a quarter estimate. 
 
Pfizer beat earnings estimates, but sales were off, on shall we say, soft Viagra sales.  Pfizer guided lower for the rest of the year and withdrew their 2006 and 2007 guidance.  Pfizer is look to open down about 4 percent.  Ebay also lowered guidance and Amgen’s sales were disappointing.  McDonald’s matched expectations.
 
Sum it all up, and it looks like a market that wants to rally, but can’t find a good reason.  At this point, adjusted for fair value, the S&P futures are down less than 2 points, Dow futures are down only 2, and the NASDAQ futures are a point and a half below fair value. 
 
October 19, 2005
 
We’ll get earnings reports from at least 30 of the S&P 500 companies today.  Here’s the frustration of the day – earnings are coming through in fine shape, but it looks like stock prices are going to take it on the nose again this morning.
 
The Producer Price Index pop to 1.9% yesterday and its future interest rate ramifications sent stocks lower overnight worldwide.  Stocks are down on the order of 2 percent on just about all markets overseas.
 
Meanwhile, back at the ranch, earnings are on the whole, pretty good. 
 
Beating estimates or raising guidance this morning, Motorola, JP Morgan Chase, Honeywell, EMC, Altria, Bank of America, Roche -- and how about this one – Continental Airlines.
 
The misses of the morning are Intel, Kraft and Michaels Stores.
 
Finally, we have a warning from the Chairman of the FDIC about the number of people who are buying way too much house by using what he terms as “risky”mortgages.  He says that there is rising risk not only to the borrowers, but to the lenders as well.  We get data on September Housing starts at 8:30.
 
Hang on to your hats at the open this morning.  At this point, adjusted for fair value, the S&P futures are down 6, Dow futures are down 53, and the NASDAQ futures are 10 ½ points below fair value. 
 
October 18, 2005
 
Hopefully your stock portfolio is doing well, but even if it’s not, rest assured that your broker is probably doing well.  Merrill Lynch reported a 38% increase in their 3rd quarter revenue and a 51% increase in income.  They have added 1,800 employees and beat earnings estimates by a whopping 22 cents per share.
 
IBM’s quarterly report was a pretty good one last night, beating estimates.  Although they did it by cutting costs rather than growing revenue, IBM is looking to open a couple percent higher this morning.  United Technologies, Wells Fargo, Johnson & Johnson and 3M all with better than expected reports. Motorola and Yahoo report tonight.
 
At 8:30 this morning we’ll find out how much rising energy prices goosed the Producer Price index in September.  Expect 1.4% in the overall rate, but only 2 tenths of a percent in the core rate, which applies to producers who don’t eat or use energy.
 
Overseas markets are mixed this morning, and pending a big surprise out of the PPI number, we should go slightly higher at 9:30.  Adjusted for fair value, the S&P futures are up only a quarter of a point, Dow futures are up 18, and the NASDAQ futures are pretty much even with fair value. 
 
October 17, 2005
 
About a quarter of the companies in the S&P 500 will report earnings this week. General Motors is on the schedule to announce their quarterly loss today.  However, as we all know by now, at 8:30 this morning Rick Waggoner will be addressing GM employees.  As we all heard minutes ago on WJR, GM and the UAW have reached an agreement to cut health care costs.  No dollar amount is available, and of course, that’s where Wall Street will focus, but presumably we’ll learn that at 8:30.
 
Citigroup posted earnings this morning that were right about at expectations.  Whether they beat or missed depends on whether you regard Hurricane Katrina as a recurring event, or just part of normal operations.
 
Later today, IBM and Wachovia, among others, will report.
 
Oil prices are up over a dollar per barrel as Tropical storm Wilma begins getting her act together, nearing the Cayman Islands and potentially threatening the Gulf of Mexico.  Current models have it posing the greatest threat to southwestern coast of Florida, and then possibly crossing over for a trip up the Atlantic coast next week.
 
Overseas markets are fairly flat.  We’ll likely head south at the open on news of those higher oil prices.  Adjusted for fair value, the S&P futures are down 1 ½, Dow futures are down 27, and the NASDAQ futures are only about a point below fair value. 
 
October 14, 2005
 
There’s more economic data coming today than you can throw a short stack at.  First and foremost will be the September Consumer Price Index.  If you are already collecting Social Security checks, you should have more than a passing interest this month.  It’s expected that the CPI rose nine tenths of one percent in September.  That would give us a year-over-year inflation rate of 4.4%.  That would be the highest in 14 years.  And, since next year’s Social Security benefits are adjusted for annual inflation at the end of each September, the average Social Security check could be in for a big boost in January.  Not as big a boost as your home heating bill, mind you, but, a boost nonetheless.
 
Retail sales numbers, industrial capacity and utilization numbers, all come out before the market opens, and at 9:45 we’ll get the University of Michigan’s preliminary Consumer Confidence Index for October is expected to recover to a level of 80.
 
Don’t look now, but the yield on the 10 year Treasury Bond, that’s the one an awful lot of mortgages are based on, is up to 4.47%.  That’s up a full half percent in the past six weeks.
 
The futures have been rallying during the past couple of hours, and although they are positive, they are still struggling to get back to fair value.  Adjusted for that ever-lovin’ fair value, the S&P futures are up almost a half point, the Dow futures are down 8, and the NASDAQ futures have just gone to a point and change above fair value. 
 
October 13, 2005
 
McDonald’s is serving up a happy meal for shareholders this morning.  Same store sales are up and it looks like Mickey D’s will make 2 cents more per share on the quarter than expected.
 
The weekly jobless claims number at 8:30 will be pretty hard to interpret as the post Rita-Katrina job picture remains foggy at best.  Of a little more import will be the weekly report on oil and distillate inventories.  That report was delayed a day by the Columbus Day holiday, but when it rolls out this morning, it is expected to show a build up in crude oil, but another decline in gasoline and heating oil inventories.
 
Freddie Mac will report on weekly mortgage rates today.  Expect the average rate on a 30 year loan to have gone above 6 percent for the first time in well over a year, and this time in may not be turning back.
 
Trading volume should be on the light side today due to the Yom Kippur holiday.  It’s one of those curious mornings when the futures are positive, but are still indicating a lower open for most stock prices, because after you adjusted for fair value, the S&P futures are down 3 ½  points and the Dow futures are down 24, and the NASDAQ futures are about a point below fair value. 
 
October 12, 2005
 
There will be about 650 new homes built in North Carolina through the collaboration of KB Home and Martha Stewart.  There is no truth to the rumor that these homes will be marketed under the name “The Big House.”
 
Shares, or slices, if you will, of Apple Computer have risen about 400 percent over the past two years, and were pretty much priced for perfection.  Well, last night’s earnings report was good, but it wasn’t perfection, and Apple shares will be under pressure this morning.  Earnings beat estimates by a penny, but iPod sales were short of estimates, as was overall revenue.  Apple should be unveiling its long-awaited video-iPod later today, so that may mitigate the losses, but the pre-market indicates Apple shares down about 8 percent.
 
In about 15 minutes, Alan Greenspan will be giving a speech that will give traders something to chew on before 9:30.  Yesterday the minutes of the latest Fed meeting were released and gave us absolutely no hope the interest rate hikes would end anytime soon.
 
Hong Kong stocks were off over 2 percent overnight.  Most all overseas markets are lower at this hour, and we should start the day weaker as well.  Adjusted for fair value, the S&P futures are down almost 4 points, the Dow futures are down 27, and the NASDAQ futures are almost 9 points below fair value. 
 
October 11, 2005
 
The Dow Jones 30 Industrials lost over 50 points yesterday.  Almost about a third of that was directly thanks to General Motors, which dropped 10%.  Of course, that looked like a winner compared to a 34% decline in Dana and a more than 70% loss in Delphi shares.  Delphi shares closed last night at 33 cents per share, as they make their way down their eventual value of zero.
 
3rd quarter earnings season got off to a pretty good start last night, with Alcoa and Genentech beating earnings estimates.  Shares of Genentech, which have cooled considerably after more than doubling during a six-month hot streak, are looking to open a few bucks higher this morning.  Publisher Gannett met estimates this morning, and Johnson Controls raised their earnings guidance.
 
At 2 o’clock we’ll get a peak at what was said behind closed doors at the latest Federal Reserve Open Market Committee Meeting.
 
And there’s a big merger in Canada this morning, as metals company Inco will get control of metals company Falconbridge at a 10% premium to yesterday’s closing price.
 
Japanese stocks, which didn’t trade yesterday opened the week with a bang, rising about 2 ½ percent.   Outside of Australia, all other major foreign markets are in the green.  We’ll see if our markets can hold on to early gains for a change. At this point, adjusted for fair value, the S&P futures are up a little more than 2 points, the Dow futures are up 27, and the NASDAQ futures are 3 ½  points above fair value. 
 
October 10, 2005
 
It’s a whole new ballgame for Detroit this morning after Delphi’s Chapter 11 filing.  For some suppliers there will be ripple effects, for others a tsunami that will likely roll through the Detroit economy for years to come.  Dana has just withdrawn its 2005 earnings guidance, reportedly due to accounting issues.  There’s an analyst at Bank of America this morning, who estimates that the likelihood of a General Motors bankruptcy has gone up to 30 percent.
 
Delphi will be spending its last day as a member of the S&P 500 today.  They will be replaced by Paterson Dental tomorrow.  
 
Stocks will trade today, but the bond market is closed for Columbus Day.
 
There’s one big merger this morning.  In about a 7 billion dollar deal as Lincoln National will but insurance company Jefferson-Pilot at about an 11% premium to Friday’s closing price.
 
There’s a lot of economic data on tap later in the week, but there’s nothing cooking today due to the holiday.
 
Japanese stocks did not trade overnight, but most all other overseas markets are up a half percent or more at this hour.  Adjusted for fair value, the S&P futures are up 2 ½ points, the Dow futures are up 32 and the NASDAQ futures are almost 3 points above fair value. 
 
October 7, 2005
 
Wouldn’t you just love it if you had the power to move the stock market whenever you’d like?  The President of the Dallas Federal Reserve Bank must be lovin’ his job.  A few months ago, Richard Fisher blurted out a comment that the Fed “was in the eighth inning” of hiking interest rates.  The market took off in a powerful rally.  This week, Fisher has been spouting off about the big inflation threat and how the Fed has to keep raising rates.  The stock market has of course, tanked.
 
Mr. Fisher, in case you’re listening this morning, here are two words of advice usually reserved for my children: “Shut up!”
 
Delphi shares are off about 15% in the pre-market on the story in the Detroit News reporting that a Chapter 11 filing may come as early as today.
 
In ten minutes, the first post-Katrina monthly jobs report is expected to reflect a loss of 175,000 jobs, although that number could be a lot better or a lot worse.  Nobody has a real firm estimate on that one.
 
Most overseas markets are flat to down a half percent or so.  However, we’re looking for a firmer open.  At this point, adjusted for fair value, the S&P futures are up a little more than 2 points, the Dow futures are up 18, and the NASDAQ futures are almost 2 points above fair value. 
 
October 6, 2005
 
Just as in baseball, the stock market is looking for a stopper this morning.  The good news is that we have finally gotten something to break the market’s fear of rising oil prices.  The bad news is it has been replaced by a fear of future inflation, which is an enemy that is best defeated before it ever shows up to fight.  The last time the Federal Reserve decided to shadow-box with inflation was 1999.  Inflation never did show up, but the Fed wound up sucker punching the economy instead.
 
The big retailers are reporting in this morning. Although Walmart says that hurricanes will trim a penny per share from profits this year, same store sales were up 3.8 percent in September. Walmart pumps a lot of gasoline, but even if gas prices had not gone up, sales would have been up 3.2 percent.   Costco beat earnings estimates for the quarter by 2 cents per share and plans to buy back a billion dollars worth of its own stock.
 
Marriott International also beat estimates and raised their earnings guidance this morning.
 
Asian markets were generally down 2 percent or more overnight.  European markets are down 1 to 2 percent.
 
Our stock futures have rallied a good bit just during the last 15 minutes after starting the morning in a little hole. Adjusted for fair value, the S&P futures are up a point and a half, the Dow futures are down 11, and the NASDAQ futures are now just a fraction below fair value. 
 
October 5, 2005
 
It’s not a parade yet, but a little line of companies warning about quarterly earnings is starting to form on Wall Street.  Locally, Lazy-Boy says that their quarterly earnings will significantly miss estimates, and they are lowering guidance for the year.  They’re blaming rising prices and lack of supply of certain chemicals and resins that are used to make upholstery.  That shortage, of course, is due to the Rita-Katrina storms.  For much the same reason this morning, a major broker is downgrading its rating on Lear Corporation.
 
On the flip side, we have better than expected reports and heightened guidance for the year from Yum Brands (you know them and Pizza Hut, KFC and Taco Bell) as well as Wolverine World Wide.
 
The weekly oil inventory data rolls out at 10:30 this morning. 
 
Comments out of no less than three of the Federal Reserve Bank Presidents sent stocks prices south yesterday, as they made it pretty clear that short term interest rates will continue to rise for the foreseeable future.  On the heels of that, markets around the world are lower this morning.
 
Stock futures have been rallying a bit during the past half hour, but they’ve been down all morning and at this point are still indicating a lower open.  Adjusted for fair value, the S&P futures are down about 2 points, the Dow futures are down 11, and the NASDAQ futures are about 1 ½  points below fair value. 
 
October 4, 2005
 
It seems like summer outside, and it seems like we’ve seen this kind of stock market action for the past four months as well – oil prices up, stocks down – oil prices down, stocks up.  This morning, crude oil is down under 65 bucks per barrel, although the price of natural gas, excuse the pun, continues to explode.
 
At 10 o’clock this morning, the August report on factory orders is expected to show an increase of 2.2 percent.  Yesterday, a much larger than expected increase in the ISM Manufacturing Index got traders worried about additional interest rate increases.  If we come in a lot larger than 2.2 percent on factory orders, we’ll probably see more of the same today.   The July factory orders were actually down from the June level.
 
Natural gas is hot, and Chesapeake Energy knows it.  They are going to use 2.2 billion of accumulated pocket change to buy Columbia Natural Resources.  That will make them the third largest natural gas produced in the country.
 
There are a couple of earnings warnings out this morning.  The most significant is from printer company Lexmark.  They will likely make less than half of what analysts expected in the third quarter and they warned for the fourth quarter as well.  Lexmark is indicated down almost 15% in the pre-market.
 
Stock futures were in negative territory a couple of hours ago, but have rallied as the price of oil has declined.  Right now, it looks like we’ll edge slightly higher at 9:30.  Adjusted for fair value, the S&P futures are up about a half point, the Dow futures are up 9, and the NASDAQ futures are just about even with fair value. 
 
October 3, 2005
 
It’s a new quarter, and during the past couple weeks, earnings warnings have been few and far between.  That’s surprised a lot of people who expected that hurricane-related business interruptions would knock a lot of earnings projections out of whack.  Of course, it could just be that companies are still trying to assess the damage.  Whatever, it looks like Walmart is going to come through in good shape.  Same store sales in September were up 3.8 percent.  That’s at the high end of expectations.
 
The New York Times reported this morning that the federal government has calculated the termination value of General Motors pension plan.  That is, what kind of shape would the plan be in IF the plan terminated today.  On that basis, the plan’s assets would come up short by about 31 billion dollars.  Of course, the plan ISN’T going to terminate today, and on an ongoing basis, GM estimates that the plan is actually OVERfunded by a couple billion.  However, there’s some pressure building in Congress to make companies report pensions on a termination basis – so, it’s an interesting number to keep an eye on.
 
Asian markets were off just a little after a slight miss in the Japanese Tankan business index.  European markets are up nicely, and it looks like we’ll tick upwards just a bit at 9:30.
 
Adjusted for fair value, the S&P futures are up about a half point, the Dow futures are up 13, and the NASDAQ futures are about 2 points above fair value. 
WJR November 2005 Reports
WJR September 2005 Reports

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