October 31, 2007
Everybody’s focus is, of course, the Federal Reserve Open Market Committee. They end their two-day meeting at 2:15 this afternoon and they are likely to end it with either a quarter-point or a half-point cut in the Fed Funds rate.
But careful, there’s one more major data point to come before their meeting ends. At 8:30, we’ll find out what the Committee no doubt already knows – the preliminary estimate of 3rd quarter Gross Domestic Product. Expect a GDP of 3.1%. That would be lower than the second quarter’s 3.8% and would give support to the concept of further rate cuts. A hotter number – 4% or more could really upset the Fed’s apple cart.
Earlier today, the Bank of Japan held interest rates steady and cut their estimate of economic growth.
The good news is that light sweet crude oil dropped about 4 dollars yesterday afternoon. The bad news is that we’re up 31 cents and still over 90 bucks a barrel this morning.
October 29, 2007
The Federal Reserve Open Market Committee gets together tomorrow for one of their twice-a-year two-day meetings. So by Wednesday, we’ll know how much short term interest rates will be going down, but odds are good that down they will be-a-going.
Humana stock will likely be going up to an all time high this morning on a better than expected earnings report. Verizon also beat estimates on better than expected revenues.
Swiss banking firm UBS warned this morning that further write-offs in the fourth quarter are on the way due to exposure to the U.S. mortgage market.
Speaking of write-offs, Stan O’Neil, the head guy at Merrill Lynch is reportedly about to be written off. Evidently either the 8 billion dollar write-off in the third quarter did him in, or there are more write-offs to come that convinced the Board that they really weren’t getting full value out of the 50 million dollars the CEO was paid last year.
October 26, 2007
The big buzz in the computer world today was supposed to come from that buzz-maker Apple. Apple will begin shipping their new Leopard operating system today, which has been given very favorable reviews.
But the big story of the morning comes from Apple competitor Microsoft. Microsoft had their best first quarter in 8 years, with earnings up 23 percent. Earnings per share checked in at 45 percent versus the expected 39. Every division did well, but especially Microsoft’s entertainment division, on the strength of the Halo 3 video game.
Unfortunately, the other big story this morning is the price of oil. The good news is that a barrel of light sweet crude is down almost a dollar from earlier this morning. The bad news is that it’s down from a record price of $92.20 per barrel.
October 25, 2007
The earnings continue to roll in, and this morning it’s another mixed, but mainly positive bag.
Among the companies with better than expected earnings were Raytheon, Motorola and Bristol-Myers. Matching expectations were EMC and Comcast. Imclone missed their number and looks to open about 6% lower, and although Celgene made 29 cents versus the expected 28, revenue came up short and Celgene shares are indicated lower.
After the close tonight, Microsoft will report in. Last night, they announced a nearly quarter-billion dollar investment in Facebook. Multiply it out, and that would suggest an overall value of $15 billion for Facebook. For a quick reality check, compare that 15 billion to Ford Motor’s market cap of 17 billion dollars and GM’s 22 billion.
Stocks in China fell about 5% overnight as the Chinese 3rd GDP grew “only” at 11.5%, down from 11.9%. That would be higher than U.S. GDP by a factor of 4 or 5 times.
October 24, 2007
If you run a business, and at times feel frustrated because you feel that you don’t have a good idea of exactly what’s going on - well don’t feel so bad. Apparently there’s a lot of that going on.
Just a few weeks ago, Merrill Lynch warned that they might lose 45 cents per share for the third quarter due to the write off of 4½ billion dollars of bad loans. At 7:30 this morning, that 45 cent per share loss became a loss of $2.85 and the write down of 4½ billion became almost $8 billion. Granted, Merrill is a big company. But 3 ½ billion dollars are hard to miss. You wonder what’s coming next quarter.
Adding to the selling pressure this morning is Amazon’s report from last night. Profit was great for the quarter gone by, and sales for the Holiday quarter should be healthy. But Amazon’s projected profit for next quarter is one the lean side, and concern about those profit margins sent Amazon shares about 8 percent lower after the close yesterday.
On the flip side, Boeing reported $1.44 per share in quarterly profit versus the expected $1.24. Boeing stock should rise a buck or two at the open.
At 10 o’clock we’ll get word on sales of existing homes in September. Expect an annualized rate of 5 ¼ million units.
October 23, 2007
We started trading in a downward panic yesterday. But, when the emotion subsided, the bargain hunting began and we finished the day with solid gains. Granted, we’re a long way from recovering from last Friday, but we should take another step in the right direction this morning.
A host of big companies are reporting better than expected earnings this morning, led by Apple. A 67 percent jump in earnings on strong sales of computers has the shares of Apple up on the order 8 percent in the pre-market. Dupont and Lockheed also beat estimates by wide margins. Lockheed raised earnings guidance for the year. AT&T matched expectations.
The downers of the day are Biogen Idec, which made 58 cents versus the expected 65, and Texas Instruments. They are out with a soft outlook for next quarter, as is Coach, who warned that domestic store traffic is slowing down.
Countrywide Financial reports in Friday. But today they announced a plan to refinance 80,000 of their adjustable rate mortgages. Look for more of that in the future as everyone realizes the foreclosures don’t really help anyone.
October 22, 2007
It’s going to be a rough morning for stock prices as traders appear fascinated by their memories of 20 years ago. Back in 1987, a bad Friday was followed by a horrible Monday. Fast forward to last Friday, and a 367 point loss on the Dow certainly qualifies as a bad day. Today will turn from a bad start into something worse or a nice buying opportunity. But there’s little doubt that we’ll start off weaker.
Two earnings reports from two pharmaceutical companies this morning, with two different stories to tell. Schering Plough made 28 cents per share versus the expected 30 cents. A healthier report is out from Merck this morning. 75 cents in profit beat the 69 cent estimate. Revenue was up 12 percent, and full year guidance is raised to $3.11 cents from $3.05.
There are more big name earnings on the way today including American Express, Texas Instruments and Apple. But in front of that there are choppy waters ahead.
October 19, 2007
“It was twenty years ago today, Sergeant Pepper taught the band to play.” Twenty years ago today, the band was playing a pretty sad song. There’s been a a lot written this week about parallels between 1987 and 2007 and whether the stock market could crash again. The answer, of course, is that anything can happen. But interest rates and earnings reports don’t know and don’t care about what happened 20 years ago. It’s not the calendar, but those rates and those reports that we should watching.
This morning, the earnings reports are again a mixed bag. The best of the bunch was last night’s report from Google. They made $3.91 per share versus the $3.78 estimate.
3M also beat estimates and surprisingly, so did a bank. Fifth Third made 71 cents versus the expected 68 cents. MacDonald’s and Honeywell’s earnings both matched expectations.
On the unfortunate flip side, Wachovia missed the target by about 13%, Caterpillar made $1.40 versus the expected $1.43
Oil briefly hit 90 bucks per barrel overnight. It’s just slightly below that right now.
October 18, 2007
There are another big bunch of earnings reports out this morning. Most of them are positive, but the one that was not sent stock futures for a loop.
First, the good news. Pfizer, Nokia, McGraw-Hill and Eli Lilly all checked in with better than expected earnings.
Wyeth and Southwest Airlines were right in line with expectations.
However, the report that caught everyone’s attention this morning was a big miss from the number two U.S. bank, the Bank of America. With operations nationwide, B of A’s results are seen as a pretty good indication of what the U.S. consumer is up to. And last quarter, they were up to no good. Earnings of 82 cents per share missed estimates by a whopping 24 cents. Revenue at 16.3 billion was more than 2 billion dollars short.
Light sweet crude is still hanging right around 88 bucks per barrel after briefly touching 89 yesterday.
Stocks futures had been fairly positive until that Bank of America report hit. But now it looks like we’ll be digging out of a hole at 9:30.
October 17, 2007
Earnings season kicks into high gear this morning. And this morning the kick is up and the kick is good!
Let’s run down the list – Last night, Yahoo announced 11 cents in profit versus the 8 cent expectation that stock is up about 6% in Europe. Intel is up around 5%. Profit at Intel was up 43 percent. IBM beat estimates. This morning, United Technologies made $1.21 last quarter. That beat estimates by a nickel and they reaffirmed 4th quarter guidance. JPMorgan Chase beat estimates by 7 cents, as did Altria, the parent of Philip Morris.
At 8:30 we’ll get September Housing starts and more importantly, we’ll also get the September Consumer Price Index. Look for an increase in the overall number of 2 tenths of a percent, after a 1 tenth of a percent decline last month.
October 16, 2007
After the close of trading tonight we’ll get earnings reports from IBM, Intel and Yahoo. But in front of that, there’s a lot of news, and not a lot of it is good news.
In Europe, shares of the world’s largest wireless network maker Ericsson lost over a quarter of their value this morning after Ericsson warned about a 3rd quarter shortfall in revenue and profit.
Add to that less-than-happy news an $87.47 per barrel price on light sweet crude. That’s up about 13 percent over the past week, and 41 percent higher since the beginning of the year.
General Motors stock was downgraded this morning by a major brokerage firm.
Okay, how about some better news; Microsoft and Viacom were upgraded, and Johnson & Johnson reported earnings of $1.06 versus the expected 99 cents. J&J also raised their guidance for the year.
October 15, 2007
As any grade schooler can tell you, the only way to make a ‘C’ look like and ‘A’ is if everyone was expecting you to fail completely. Well, Citigroup warned a couple of weeks ago that they would write off well over 3 billion dollars of mortgage related securities, and warned that their quarterly earnings would be about 42 cents per share. This morning, Citi announced earnings of 47 cents per share. That’s a 57% drop from last year. However, the stock is bid higher in the pre-market, presumable on rumors of a change in top management.
One Monday merger this morning as Danaher is buying Tektronics at a 34 percent premium to Friday’s price.
Eaton announced $1.67 per share in profit this morning. That matched estimates for the quarter. However, Eaton warned that next quarter’s earnings may fall about 14 cents short of the $1.84 estimate. Expect Eaton to open 2 or 3 bucks lower this morning.
Light sweet crude is knocking on the door of 85 dollars per barrel this morning.
October 12, 2007
General Electric checked in with a solid earnings report this morning. Profits were up 14 percent from a year ago at 50 cents per share, right in line with analyst estimates. GE also reaffirmed estimates for the full year.
Oracle, the serial acquirer of the software world is at it again. Oracle is reportedly set to offer 17 dollars a share in cash for BEA Systems. BEA shares closed at $13.62 yesterday and are actually bid at more than 18 dollars per share in the pre-market.
There are a couple of interesting bits of economic data on the way today. At 8:30, we’re expecting the September Producer Price Index to reflect a 4 tenths of a percent increase, with the core rate rising 2 tenths of a percent. The lower those number, the better. We’ll also get the report on September Retail Sales. Then at 10, the University of Michigan’s preliminary look at Consumer Sentiment is expected to show a slight increase from last month’s reading of 83.4.
Fed head Bernanke will speak at a Fed conference in Texas later today.
October 10, 2007
Once again, we’re at all time highs on the S&P 500 and the Dow after yesterday’s rally. And rally stocks did after the minutes of the latest Fed meeting were released. The vote on the 50 basis point cut in interest rates was unanimous. That gives hope to further reductions, which of course is bullish for stocks.
But interest rate speculation will take a back seat to earnings news for at least the next week or two, and at least so far the earnings driver has shifted into reverse.
Chevron shares will open a couple of percent lower this morning after Chevron warned that profits for the quarter will miss estimates. Yes, the price of oil is up, but the price of gasoline is not and that’s putting the pressure on earnings. Valero and International Paper also warned this morning.
Alcoa led off earnings season last night with a report that missed estimates by a penny, This morning, Monsanto repoted a wider loss than expected.
The positive report of the morning - well kind of positive - comes from Costco. Costco’s revenue was a bit lower than expected for the quarter gone by, but earnings beat estimates by 8 cents per share on better gross margins.
October 9, 2007
We’re on the cusp of earnings season, which Alcoa kicks off after the close of trading this afternoon. Expect Alcoa to check in with profits of 65 cents per share, which would be higher than last year, in spite of the declining price of aluminum. We’ve been accustomed to double digit earnings growth quarter after quarter after quarter. This quarter, however, the prevailing wisdom is that S&P 500 earnings will be flat to up 5% or so. Over the next couple of weeks we’ll find out if profits are coming down, or if the analysts have been sandbagged again.
One big report jumped the gun last night as Yum Brands beat expectations handily, as overseas growth boosted profits.
Two Federal Reserve Presidents will be out on the speaking circuit today. We’ll also get a peek at the minutes of the Fed’s August 16th call and their September meeting, which may hold some hints as to the likelihood of future short term interest rates.
Overseas markets are generally a bit higher. Oil is once again a bit lower, at $78.80 per barrel.
October 8, 2007
It’s a bad news/good news story out of business intelligence firm Business Objects. They will miss their quarterly earnings estimate by a mile, making about a nickel per share versus the expected 16 cents. However, the good news is that “Hey, who cares?” German software firm SAP has offered to buy Business objects at a 20% premium to Friday’s closing price. Traders in Germany are not impressed with the move, at least as far as SAP is concerned. SAP the shares are off about 5 percent.
Third quarter earnings season officially kicks off after the close of trading tomorrow when Alcoa reports. We will get a good bit of economic data this week, but we’ll have to wait until Friday for most of it. That’s when we’ll get the September Retail Sales report and the September Producer Price Index.
October 5, 2007
It’s all about the Jobs Report this morning. At 8:30, we’ll get the Labor Department’s Report on September Employment. Although there’s a fair amount of controversy about the numbers this month, most market observers feel that any reasonable number will be interpreted as bullish for stock prices.
Non-farm payrolls are expected to have risen by about 100,000. If the number runs hotter, it will provide reassurance for those who fear recession. If the number runs weaker, it will provide hope that the Fed will cut interest rates again at the end of the month. So, the futures seem to be taking a “heads I win, tails you lose” attitude so far. The unemployment rate is expected to tick up a tenth of a percent to 4.7 percent. Perhaps the only danger is another outright decline in jobs, like we saw in August.
The weekend starts at 2 o’clock this afternoon if you’re a bond trader. That makes it a nice long weekend when you consider that Monday is Columbus Day, which will close stock and bond markets.
October 4, 2007
The Bank of England ended a two-day meeting by holding interest rates steady at 5 ¾ percent. That’s their first rate decision since the bailout of Northern Rock. So, it appears that the Bank of England regards that as an isolated problem, but not yet a problem that will slow the economy in general. Stocks in the UK are up slightly after that announcement.
We should have a relatively uneventful day after yesterday’s bout of profit-taking. At 10 o’clock, the report on August Factory Orders is due to show a 2.6% decline. However, the big number of the week comes tomorrow Monday with the September Jobs Report.
Here’s something we haven’t seen in a while; oil is down for the fifth day in a row. Light sweet crude is now back to about 79 ½ bucks per barrel.
Asian markets were lower overnight. European markets are mixed.
October 3, 2007
Deutche Bank is the latest investment bank with a bad news/good news story. They will write down 3 billion dollars on bad loans, but will still show a profit. That is actually regarded as good news by traders who are bidding the stock a few percent higher in the pre-market.
We’ll spend a good part of the rest of the day on pins and needles waiting for more earnings warnings to drop.
There are a bunch of broker downgrades out this morning, including downgrades on Intel and Advanced Micro Devices. And then there’s Bank of America, raising their opinion on General Motors stock. In January, when GM was under 30 bucks, they oput a “sell” rating in the stock. Now that it’s over 37, they’ve raised it to a “hold.” So, if you were fortunate enough to ignore the “sell” rating, I guess it’s time to pay attention to the “hold” rating.
Overseas markets are mixed, with the Hang Seng Index in Hong Kong losing 2 ½ percent overnight after gaining almost 4 percent the day before.
October 2, 2007
We’ll get updates on two big economic indicators, car sales and existing home sales later today. Don’t expect a lot of good news. Pending existing home sales are expected to have declined about 4 ½ percent in August, after a 12 percent decline in July.
For the car guys, expect GM sales to be off about 3 percent. Ford and Chrysler are expected to have fared much worse. Ford sales are expected to be lower by about 15 percent.
On the earnings front, Pepsi Bottling beat estimates handily and raised guidance. On the flip side, Palm missed estimates and warned for the remainder of the year. Dean Foods also warned that future earnings will not meet estimates.
There’s one good->
Overseas markets are solidly higher in the wake of our big rally yesterday. In fact, the Hang Seng Index in Hong Kong was up almost 4 percent overnight. We should follow up yesterday’s gains with more of the same at 9:30. At this point, adjusted for fair value, the S&P futures are up about 3 points, the Dow futures are up 34, and the NASDAQ futures are almost 4 points above fair value.
October 1, 2007
It’s the first day of a new quarter. That means it’s the last week of earnings warning season for the old quarter. Most of the news in that regard is coming from the financial sector. Citigroup announced write-downs of 3.3 billion dollars due to problems in its mortgage and investment bank financing businesses. Citi stock is looking to open at least a dollar lower. Not to be outdone, Swiss banking giant UBS warned this morning that it will report a loss in the third quarter thanks to (guess what?) their sub-prime mortgage business. The write-off at UBS is $3.4 billion. About 1,500 UBS employees will be looking for work elsewhere.
At 10 this morning, the September ISM Index, is expected to reflect modest expansion in the manufacturing sector. Expect a reading of 52.5, just slightly lower than the August reading of 52.9.
Johnson Controls has been on a roll for the past year and a half. If you’re a JCI shareholder, don’t be shocked when you look at the price tomorrow morning. After the close tonight, Johnson Controls will split its stock 3 for 1. Parker-Hannifin will also split tonight by a factor of 3 for 2.
Stocks did not trade in Australia or Hong Kong overnight. Chinese markets are closed all week in celebration of National Day. That is one serious holiday.
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