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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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