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WJR October 2006 Reports

October 31, 2006
In the spirit of Halloween, we’ll be looking for two big economic numbers to pull a Dr. Jekyl and Mr. Hyde routine at 10 o’clock this morning.  The Chicago Purchasing Managers Index is expected to cool off to a level of 58 from last month’s 62.1.  A reading of 58 would reflect a rise in manufacturing activity, but not at such a strong pace as to ignite inflation.  Mr. Hyde would be the October Consumer Confidence number, Dropping gas prices and a rising stock market  are expected to goose that reading to 108 from 104½ last month.
If you owned Sirna Therapeutics as of yesterday, you’re a happy camper as of today.  Merck is buying Sirna at about a 100% premium.
Procter & Gamble beat estimates for their first quarter by a penny per share and raised profit guidance slightly.  Masco beat estimates by 2 cents, but lowered full-year guidance a bit.
Overseas markets are mostly higher, but not by much, and that’s our story as well as we head toward 9:30.  Adjusted for fair value, the S&P futures are up not quite 2 points, The Dow futures are up 14 ½, and the NASDAQ futures are now a about a point above fair value.
October 30, 2006
The futures have recovered some ground in the past hour.  We were off to a rather bumpy start when Walmart announced that October same store sales are going to rise only one half of one percent.  Evidently all that high fashion women’s clothing Walmart has been stocking hasn’t been moving all that well.  Imagine that.
Anyway, an earnings out-performance and an upbeat 2007 outlook from another Dow 30 company, Verizon, has lifted the futures back up to the point of predicting a mixed open for stock prices.
September personal income and consumption numbers come out at 8:30.  Expect three-tenths and two-tenths of a percent increase, respectively.   Light sweet crude is down about 90 cents per barrel, once again just under 60 bucks.
Overseas stock markets are down across the board, as they follow our little adventure in profit-taking last Friday.
As I mentioned earlier, were looking at a mixed open for prices.  Adjusted for fair value, the S&P futures are down about a half point, The Dow futures are down 6, and the NASDAQ futures are now actually a point above fair value.
October 26, 2006
The S&P 500, true to form, was dead even on the day at 2:15 yesterday when the Fed announced no change in short-term interest rates.  After some dips and surges, stock prices generally rose on that news and a long line of better-than-expected earnings reports.

The September Durable Goods report rolls out at 8:30 this morning and it’s expected to reflect a 9 tenths of a percent increase after last month’s half percent dip.  A little later, at 10 o’clock, the September New Home Sales report is expected to show a slight decrease in home sales to an annualized rate of 1.045 million units, but it would not be a big surprise if that number came in weaker.
The loser of the morning may be AstraZeneca.  Their earnings were fine, but they are discontinuing development of a drug to treat stokes.  The stock is stroking more than 4 bucks lower in the pre-market.
Among the companies with better than expected earnings this morning are ExxonMobil, Bristol-Myers, Aetna, Comcast and L3 Communications.  Microsoft reports tonight.
It looks like the bulls will continue to run at 9:30.  At this point, adjusted for fair value, the S&P futures are up about 4½, The Dow futures are up 35, and the NASDAQ futures are more almost 7 points above fair value.
October 25, 2006
Recent history tells us that stocks should trade pretty close to the flat-line until 2:15 this afternoon, when the Fed’s decision on interest rates is announced.
The report of local interest this morning is, of course, General Motors.  GM lost 20 cents per share last quarter versus last year’s $2.94.  Operating earnings, you know, the number you get when you ignore the stuff you don’t want to talk about, was 93 cents per share versus the expected 49 cents.  There is some controversy among analysts as to how good those numbers really are.  GM stock is actually down a touch in pre-market quotes.
Boeing, Colgate and a host of others are out with better than expected results.  And after Amazon reported a 24% sales increase last night, a number of brokers are reevaluating the stock.  Citigroup, for instance, raised its price target from 30 to $35 on Amazon this morning.  Thanks, guys.  Amazon traded at over 38 bucks after-hours last night.
The Nikkei in Japan lost a half percent overnight, but most other markets overseas are in the green.  At this point, adjusted for fair value, the S&P futures are up a half-point, The Dow futures are up 8½ , and the NASDAQ futures are just about even with fair value.
October 24, 2006
We’ll see some good old fashioned profit-taking this morning, after the Dow closed at a record level for the 10th time in the last 15 tries.  Look no further than corporate earnings reports if you’re looking for an explanation for this rally.  A lot of analysts expected earnings to increase only in the high single digits.  So far, we’re looking at closer to a 15% average earnings increase.
So far this morning, DuPont checked in with a 4 cent better-than-expected report.  Amgen beat estimates handily and raised guidance.  Lockheed Martin made $1.46 last quarter versus the expected $1.24 and they raised guidance.
Last night, Texas Instruments reported a good quarter gone by, but lowered expectations for the current quarter.  TDAmeritrade reported profits 3 cents higher than expected.
The good news is that Ford Motor was upgraded from “sell” to “neutral” at a major brokerage house.  The bad news is that the broker reset their target price from 7 buck to 8 bucks. Ford closed last night at $7.90.
Overseas markets are narrowly mixed.  We will likely take a step backward at 9:30.  At this point, adjusted for fair value, the S&P futures are down about 4 ½ points, The Dow futures are down 26, and the NASDAQ futures are about 6 ½ points below fair value.
October 23, 2006
We’ve got it all going on this week – the last big surge of third quarter earnings reports, a two-day Fed meeting, GDP numbers, consumer sentiment numbers, the World Series.  We even get an extra hour of sleep next weekend to let it all sink in.
Ford Motor checked in this morning with their quarterly report.  Operating losses were a penny more per share than the 61 cent estimate on sales that were pretty much in line.  Overall however, the loss was over 3 dollars per share and Ford says that they will be restating some prior results due to improper derivative reporting and they also say that profits are at least three years away.
AT&T’s report actually perked up the Dow futures this morning when they reported a nickel ahead of estimates.  Halliburton and Kimberly Clark also beat guidance.
Japanese stocks were up almost one percent overnight, but stock markets are pretty much flat everywhere else, and that’s the way we’ll start as well.  At this point, adjusted for fair value, the S&P futures are down about a point, The Dow futures are up 5, but the NASDAQ futures are about 3 points below fair value.
October 20, 2006
It seems only fitting that the Dow Jones Industrial Average closed above 12,000 for the first time in history yesterday, 19 years to the day after the stock market crash of 1987.  So here we sit, after a great September and so far a great October – a time of year that has traditionally been a stinker for stocks.  So, once again, conventional wisdom may be conventional, but is not always very smart.
Caterpillar shareholders will be smarting at the open of trading this morning.  Cat reported better than expected revenue, but the bottom line missed badly, at $1.25 versus an expected $1.35.  Caterpillar stock is bid about $5 to $6 lower in the pre-market.
On the flip side of that news, Google shares are being bid up about 7 percent and may make a run toward $500 per share after a great earnings report last night.
Merck and 3M but beat estimates slightly when they reported in less than an hour ago.
Overseas markets are pretty much all higher, but not by a lot.  We’ll get off to a schizophrenic open.  At this point, adjusted for fair value, the S&P futures are down about a point, The Dow futures are down 37 on the Caterpillar miss, but on the Google report the NASDAQ futures are about 3 points above fair value.
October 18, 2006
A hot reading in the core Producer Price number sent the market on its ear yesterday.  Although stocks almost fought their way back to even by 4 o’clock, one thing is certain:  the Consumer Price Index that comes our way in only 6 minutes or so will set the tone for stock prices in the early going, if not for the rest of the week.
The core number is expected to come in at 2 tenths of a percent.  Anything higher than that could be trouble.  The overall CPI is expected to decline by 3 tenths of a percent mainly because of the decrease in oil prices.
No trouble at IBM last quarter, well, maybe a little trouble as services revenue fell a little short.  But earnings were 10 cents ahead of estimates.  Intel and JPMorgan Chase are also out with better than expected earnings reports.
General Motors is reportedly restoring a match on 401k contributions by salaried employees.  It’s not as generous as the match of once upon a time.  But times have changed, and it’s a step in the right direction.
Stocks overseas are modestly higher across the board.  We’ll get our direction from the CPI number at 8:30.  At this point, adjusted for fair value, the S&P futures are up a point, The Dow futures are up 32 but the NASDAQ futures are a little more than a point below fair value.
October 17, 2006
It will be geopolitics versus domestic earnings today, and there’s plenty of ammunition on both sides.  So far, rising oil prices in front of this week’s OPEC meeting and nervousness about another possible North Korean nuclear test have our futures in a hole.  A brokerage downgrade of Intel isn’t helping either.
However, corporate earnings are fighting back and this morning, they’re looking pretty good.  Office Depot, Merrill Lynch, EMC, Key Corp, SunTrust, National City and Johnson & Johnson all beat estimates.  United Technologies beat estimates and raised their guidance for the entire year.  Target reported same store sales up 6 to 7 percent, which is way above expectations.
If you’re into commodities, note that the Chicago Mercantile Exchange is buying the Chicago Board of Trade at about a 15% premium.  In pharmaceuticals, Eli Lilly is buying ICOS at an 18% premium to last night’s close.
Hong Kong was flat overnight, but just about everybody else is off about a half-percent.  Adjusted for fair value, the S&P futures are down 4 ½  points, The Dow futures are down 26 and the NASDAQ futures are about 8 ½ points below fair value.
October 16, 2006
The first of two big earnings reports this morning came from Mattel, which beat estimates by a penny per share.  Barbie sales have apparently stabilized and the new Tickle-me-Elmo extreme edition appears to be a big pre-Holiday hit.
In the other featured report, Wachovia met estimates for earnings, but revenue fell short of expectations. 
A lot of Fed governors are running around giving speeches today, but no major economic reports are due as we wait for important inflation data tomorrow and Wednesday.
The Dow 12,000 watch is on.  We’re 40 points away, and we’ll see if we can tack another good week onto last week’s solid gains.
Just a little reminder – if your 2005 income tax return is on extension – you’re at the end of your extended rope.  Get that return filed today!
General Electric was downgraded by a major broker this morning, and that’s putting a little pressure on the futures this morning.
At this point, we’re still looking at a slightly positive open for stocks.  Adjusted for fair value, the S&P futures are up about a half point, the Dow futures are up 9 ½ and the NASDAQ futures are just about a half point above fair value.
October 13, 2006
General Electric, the 800 pound gorilla of this week’s earnings reports checked in with a solid report this morning.  GE matched earnings estimates of 49 cents per share, with revenue about a billion dollars higher than expected.
Even if we get through the 2006 hurricane season without major damage, last year’s storms are still causing problems.  Word that damage from Hurricane Wilma will reduce this year’s orange crop sent orange juice futures 17% higher.  Even if you don’t play in the futures market, this news will soon visit a grocery store near you.
Oil is up almost a buck this morning.  Japanese stocks rose one percent overnight.  Most other overseas markets are modestly higher after our big rally yesterday.  We’ll probably be steady as she goes at 9:30 as we wait for the University of Michigan’s preliminary October Sentiment number at 9:45.  Expect a reading of 86.4/ 
Right now, adjusted for fair value, the S&P futures are down a point and a half, Dow futures are down 9 and the NASDAQ futures are just about dead even with fair value.
October 12, 2006
Stocks had to fight off a lot of bad news yesterday, and they almost did.   Prices took a big dip in the afternoon on terrorism fears that were raised on the New York City plane crash, but we almost recovered all of the loss just before 4 o’clock when the crash was confirmed to be an accident.
We’ll get off to a better start this morning.  Costco is the first big retailer with quarterly earnings news.  Costco beat their own lowered forecast of 73 cents by 2 cents, on an 8% increase in same store sales. Better margins on gasoline sales helped out there.  Or maybe people are just buying more Pepsi products at Costco, as Pepsico raised their guidance this morning.  Pepsi beat estimates for last quarter by 2 cents per share on a 9 percent increase in revenue.
And in a surprise announcement about 20 minutes ago, McDonalds raised its estimated profit for the current quarter by a nickel to 68 cents per share.
The Fed shares its Beige Book with us this afternoon.  That gives us their view of regional economic conditions.
Most overseas markets are mildly positive at this hour, and that’s where we’ll start the morning as well.  Adjusted for fair value, the S&P futures are more than 2 ½ points, Dow futures are up 23 and the NASDAQ futures are more than 3 points above fair value.
October 11, 2006
For the past few weeks we’ve had a stock market that just WANTED to go higher.  No matter what the news, stock prices have found away to recover from early losses and, at least for the Dow Industrial Average, set record after record.
Some, if not a lot of that optimism, is pinned on hopes for strong third quarter profits.  Now that the reports have started to roll, we’ll see if those hopes were justified.  And so far, not so good.
Alcoa missed their umbers for revenue and profit last night.  Profit of 62 cents was well below estimates of 79 cents.  Legg
Mason guided lower and although Genentech beat estimates of 51 cents by 8 cents last night, sales of the colorectal cancer fighting drug Avastin were below expectations.  All three stocks will take some heat when trading starts today.
A little later today the Federal Reserve Open Market Committee minutes from their September 29th meeting will be released.  Any hint that that Fed will be staying on hold for a while could give stocks a boost.
Overseas stocks are mainly lower, and that’s the way we’ll start as well. Adjusted for fair value, the S&P futures are down about 5 ½  points, Dow futures are down 50 and the NASDAQ futures are 8 ½  points below fair value.
October 9, 2006
North Korea’s reported nuclear test shook some Asian markets overnight. But in general, markets around then world have absorbed the news without a lot of concern.  There is, after all, a big difference between a new nuclear country that has a lot of oil and one that doesn’t.
Third quarter earnings reports start rolling out tomorrow and it looks like we’ve gotten through earnings warning season with only minimal damage.  Speaking of steady-as-she-goes, Johnson Controls this morning confirmed earnings estimates for the quarter and the year.
It’s Monday, so there must be some deals in the works.  PNC Bank is buying Mercantile Bank, which operates on the East Coast, for about a 25 % premium to Friday’s close.  And word is that possibly as soon as tonight, Google will be buying YouTube for about $1.6 billion.
Japanese stocks did not trade overnight.  Other Asian markets were lower, but Europe is fairly flat at this hour.  Our bond market is closed today, but stocks will trade at 9:30, and when they do, they’ll likely trade lower. Adjusted for fair value, the S&P futures are down about 2 ½ points, Dow futures are down 25, and the NASDAQ futures are more than 7 points below fair value.
October 6, 2006
Just in case there is not currently a Starbucks store within a block or two of your home, there may be one there soon.  Starbucks Wednesday raised earnings estimates and yesterday said that they are looking to add 40,000 new stores to their current collection of 12,000.  20,000 of those 40,000 new stores will be in the U.S., where people will gladly spend 4 bucks for coffee, but for some reason, can’t afford to save money for retirement.
Stocks futures have been pointing lower all morning, but in about ten minutes we’ll get the September Jobs Report, which has the potential to turn things around.  Expect that 125,000 new non-farm jobs were added in September, with the unemployment rate holding at 4.7% and the average hourly wage rising 3 tenths of a percent.  That average hourly wage number may hold the key.  If the number is anything above 3 tenths of a percent is would signal rising cost and inflationary pressures, as well as declining corporate profits.  Anything under might not signal good things for your paycheck, but may well help your portfolio.
Bonds trade only until 2 o’clock today, in front of Monday’s Columbus Day holiday.  Although banks will be closed Monday, the stock markets will be open.
Overseas markets are fairly flat at this hour, and if we’re going to again move higher today we have our work cut out for us.  Adjusted for fair value, the S&P futures are down about 3 points, Dow futures are down 21, and the NASDAQ futures are about 5 points below fair value.
October 3, 2006
Hard landing vs. soft landing continues to be the controversy tugging at stock prices.  Declining commodity prices and oil prices raise the hope of the soft-landing proponents.  Oil prices are down again this morning, and are once again approaching the 60 dollar per barrel level we broached briefly a week or so ago.  Merrill Lynch downgraded the entire energy sector this morning.  We’ll see how that call plays out in the months ahead.
September car sales numbers will be announced throughout the day today.  It’s expected that General Motors and Ford pretty much held their own compared with last year.  However, the DaimlerChrysler numbers are not expected to be pretty.
Corporate job cuts soared 54 percent in September, according to Challenger, Gray & Christmas, due mainly to the latest Way Forward at Ford Motor.
A lot of Asian markets that were closed yesterday re-opened today, but didn’t move very much.  European stocks are down across the board at this hour, and we should head slightly lower at 9:30 as well.  Adjusted for fair value, the S&P futures are down about 2 points, Dow futures are down 7, and the NASDAQ futures are about 6 points below fair value.
October 2, 2006
Trading may be a little muted today as we kick off the fourth quarter of the year, thanks to the Yom Kippur Holiday.
Things may have also been a little muted in September for the manufacturing sector of the U.S. economy.  We’ll find out at 10 o’clock when the September ISM Index is reported.  Anything over 50 indicates expansion in manufacturing activity.  The August number was 54.5 and analysts are expecting a cooling off to a reading 53.7 for September.  While a “cooling off” is consistent with hopes for a “soft landing” for the economy, anything under 51 or 52 might spook the market as an indication of a “hard landing,” which would not be so well received.
Our merger of the morning is Gilead Sciences buying Myogen for 2 ½ billion dollars.  Look for Myogen, which closed around 35 on Friday to open this morning at around 50 dollars per share.
How’s this for an interesting, but perhaps meaningless statistic:  According to Birinyi and Associates, since the current bull market began, the first trading day of the month has given us higher stock prices 74 percent of the time.  If that trend is to continue, we’ll need a bit of a rally as the day goes on.  At this point, adjusted for fair value, the S&P futures are down almost 2 points, Dow futures are down 14, and the  NASDAQ futures are about 3 points below fair value.
WJR November 2006 Reports
WJR September 2006 Reports

Daily Reports @ WJR





















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