WJR October 2010 Reports
October 29, 2010
It’s one of those magic dates you never totally forget – like 1987’s crash day on October 19, or 2008’s collapse of Lehman Brothers on September 14th. Here we are on the 81stanniversary of the 1929 stock market collapse which, with some help from ill-advised Congressional action, ushered in what is generally recognized as the last Great Depression.
But, let’s start by thinking happier thoughts. Merck, Microsoft, Estee Lauder and Cigna are all out with better-than-expected results this morning. Disappointing numbers came from Dominion, missing the $1.07 estimate by 3 cents.
There’s a fair bit of economic data on the way this morning. In about 10 minutes, we’ll get the Government’s first guess as the Gross Domestic Product number fro the third quarter. Estimates generally range between 2 to 2 ½ percent. The second quarter growth rate ended up 1.7 percent. At 9:45 the Chicago PMI is expected to show moderating growth, with a reading of 58 versus last month’s 60.4. And then just before 10 o’clock, the University of Michigan’s final verdict on October Consumer Confidence is expected to read 68.
All that being said, the current direction of stock prices remains the inverse of the direction of the dollar. This morning, the dollar index is higher by about a third of a percent, so here we go again.
Overseas markets are generally lower, and adjusted for fair value, the S&P 500 futures are down about 5 points, Dow futures are down 38, and the NASDAQ futures are about 5½ points below fair value.
As expected, the Bank of Japan did not change their interest rate target overnight. Not-so-expectedly, they moved their next meeting up to November 4th. Of course, that has nothing to do with the fact that the next Federal Reserve Open Market Committee meeting will conclude November 3rd, as central banks continue to pursue their semi-coordinated dance of destruction with respect to the value of their currencies.
Weekly Jobless Claims numbers at 8:30 are expected to fall somewhere in the 450,000 to 460,000 range, where they’ve been pretty much sitting since the end of last year.
ExxonMobil earned $1.44 per share last quarter. That beat estimates by a nickel. Companies also beating estimates on better than expected revenue are Dow Chemical, Motorola, Raytheon, Cardinal Health and Noble Energy. Three big companies actually missed the mark this morning including Allstate, Autonation and Waste Management.
Lawsuits have been filed in federal court charging HSBC and JP Morgan Chase with illegally manipulating the price of silver. Kind of takes you back to 1980, doesn’t it? Some things never change.
What is changing is the price of stocks in Europe. They’re higher a half-percent or so, and we’ll likely start on the plus side, barring a blow up in the Jobless Claims number.
Adjusted for fair value, the S&P 500 futures are up about 3½ points, Dow futures are up 23, and the NASDAQ futures are about 5½ points above fair value.
October 27, 2010
Another mid-afternoon rally dug us out of a hole once again yesterday. Don’t put that rally shovel away, ‘cause it looks like we’re going to need it again.
Earnings reports continue to beat estimates by about a 4 to 1 ratio, but if you’re looking for what’s moving the stock and commodities markets, look no farther than the value of the dollar.
This morning, a story in the Wall Street Journal suggests that the Federal Reserve’s next approach to “quantitative easing” will take a “go-slow” approach, perhaps employing asset purchases of as little as a few hundred billion dollars, rather than the 2 trillion dollar “Shock and Awe” campaign we saw the last time around. Result? The dollar index is up another 30 basis points or so and our futures have been weak all morning.
Procter&Gamble, Comcast and Brinker all beat estimates this morning. Sprint/Nextel with a bigger loss than expected, and shares of software maker SAP are lower in Europe after they maintained – but did not raise – their full-year guidance.
Most major markets overseas are a bit lower. Ditto for our futures. Adjusted for fair value, the S&P 500 futures are down almost 4½ points, Dow futures are down 32, and the NASDAQ futures are about 8 points below fair value.
The only significant economic number of the day, the Conference Board’s 10 o’clock report on October Consumer Confidence, is expected to be stuck in neutral – unchanged from last month’s 49.5.
Not stuck in neutral this morning is Ford Motor. Last quarter’s operating earnings of 48 cents beat the estimate by a dime. However, more importantly, when you’re competing with companies that were able to stiff their creditors via bankruptcy, Ford is now on track to have the ability to actually repay off their creditors by the end of the year. Getting that financial monkey off their back is a big plus going forward. Ford stock, however, is bid about 1½ percent lower the pre-market.
Also returning better-than-expected operating results were Texas Instruments, Dupont, Wyndham Worldwide, Johnson Controls, Bristol Myers, Under Armour, Coach, Cummins, Biogen-Idec, McGraw-Hill, and Lexmark.
The only major companies missing the earnings mark this morning are Kimberly Clark and TD Ameritrade.
If you’re in Portugal, your stock market is a little higher this morning, but if you’re anywhere else, things don’t look so good.
The dollar index is about thirty basis points higher this morning, and you know what that means – stock futures are pointing lower. Adjusted for fair value, the S&P 500 futures are down 2½ points, Dow futures are down 26, and the NASDAQ futures are about 7 points below fair value.
The finance chiefs from the Group of 20 nations agreed to not engage in competitive currency devaluations over the weekend. That decision came after a lecture from our own Treasury chief Timothy Geithner who warned other countries not to devalue their currencies. Perhaps a case of do what we say, not what we do? Geithner’s rumored follow-up speech warning against cheating on your taxes was evidently left off the agenda.
Speaking of speeches, Ben Bernanke will chat up a joint Fed/FDIC forum in about 10 minutes. His speech is entitled “Mortgages and the Future of Housing Finance” might be an interesting look at what some point to as the “root of all evil” with respect to our recent economic distress.
Earnings reports are on the way from Amgen and Texas Instruments later today. Overall, more than 81 percent of the big boys reporting third quarter earnings have beaten expectations. At 10 o’clock, the annualized September existing Home Sales rate is expected to inch up from 4.13 million to 4.3 million units.
Home Depot and Microsoft suffered downgrades this morning. Citigroup was upgraded.
The Japanese yen was higher against the dollar overnight. Accordingly, Japanese stocks were lower. Major markets elsewhere once again cheered the lower dollar and the cheerleaders in New York are just getting warmed up. At this point, adjusted for fair value, the S&P 500 futures are higher by about 8½ points, Dow futures are up 63, and the NASDAQ futures are about 13 points above fair value.
Finance ministers and central bank officials meet in Seoul, South Korea today to talk about who can devalue their currency the fastest. Publicly, of course, our beloved Treasury Secretary Geithner has been busy lecturing the rest of the world to defend their currencies, even as the Fed prepares to pile more monetary easing on the rapidly declining dollar.
Interestingly, stock prices, which have been running in an almost exactly inverse correlation to the dollar, decoupled around mid-day yesterday. Traders seemed pretty lost until the market gained some traction in the last few minutes.
The dollar is unchanged this morning, so maybe someone will pay attention to the earnings news, which continues to impress. Schlumberger, American Express, Honeywell, Verizon and Amazon all had higher operating earnings than expected. Amazon shares, however, look to open 3 or 4 percent lower this morning. Their operating expenses spiked last quarter. Operating margins will suffer going forward as Amazon spends more to hopefully make more.
Chinese stocks slipped a bit overnight. Major European markets are mixed, but trending higher.
Our futures had been indicating a lower open until about an hour ago. At this point, we’re looking for slightly higher prices at 9:30. Adjusted for fair value, the S&P 500 futures are up a bit less than 2 points, the Dow futures are up 9, and the NASDAQ futures are a fraction of a point above fair value.
Things may not be getting better if you’re out of a job, but if you run a big business, it appears that the economic winds are no longer in your >
Companies beating their bogey this morning include McDonald’s, Travelers, Ebay, Netflix, UPS, Southwest Airlines, Nokia and Caterpillar. AT&T’s 55 cent profit matched the estimate. We actually have a couple of misses. Credit card processor Alliance Data earned $1.40. That was 15 cents short. Seagate Technology, which may be taken private soon, earned 37 cents, which was a nine-cent miss. Not-so-good news as well from Battle Creek as Kellogg is lowering its full-year estimate, and they are now looking for a decline in third quarter sales of 4 percent.
Weekly jobless claims at 8:30 are expected to stick stubbornly close to the 450,000 to 460,000 range. At 10 o’clock the September Leading Economic Indicators are likely to be three-tenths of a percent higher, just like in August, and the Philly Fed Survey is expected to crawl out of negative territory to be up one percent.
Chinawas lower overnight, Japan was flat, but just about all other markets overseas were higher and we’re heading for a pretty nice open ourselves. At this point, adjusted for fair value, the S&P 500 futures are higher by about 5½ points, Dow futures are up 59, and the NASDAQ futures are a little more than 14 points above fair value.
In spite of a bunch of good earnings news, the Chinese interest rate hike yesterday spooked our stock market into its worst day in a couple of months.
This morning, the focus is back on earnings, and they’re coming in by the truckload. Once again, it appears to be a “Lake Wobegone” story, as all of our children are above average. Beating their estimated earnings numbers for last quarter are U.S. Bancorp, Yahoo, Wells Fargo, Altria, United Technologies, Blackrock, Stanley Black & Decker, and Delta Airlines. Thus far, as far as I’ve seen, no major companies reported disappointing earnings.
The financial stocks were hit pretty hard yesterday. Today, there’s word that the FBI is getting involved in the mortgage foreclosure mess. They’re looking to see if the mistakes that were made were made due to simple incompetence or if perhaps, there was criminal intent.
At 2 o’clock this afternoon, the Federal Reserve’s Beige Book, a survey of regional economic conditions may give us some insight on why Fed officials have been chirping so much about the perceived need for quantitative easing.
Outside of China, which rose a half-percent, Asian markets followed us lower overnight. Major European markets, however, are higher. That will also be our direction at 9:30. At this point, adjusted for fair value, the S&P 500 futures are higher by about 5 points, Dow futures are up 38, and the NASDAQ futures are about 9 points above fair value.
It’s a classic case of “buy the rumor and sell the news” this morning. Quarterly earnings reports continue to beat analyst expectations, and beat them rather handily. However, stocks that have run up in anticipation of those great earnings are taking a bit of a whack this morning.
Case in point is market-darling Apple. Apple reported $4.64 of quarterly profit, which easily beat the $4.10 estimate. Trouble is, Apple’s guidance was a bit conservative and ipad sales really didn’t live up to expectations. Expect about a 5 to 6% bite out of Apple’s shares this morning, down to around the $300 level. IBM also beat estimates last night, although revenue from services could have been a bit stronger.
Bank of America, Coca-Cola, United Health, State Street Bank, Goldman Sachs and Johnson & Johnson ALL checked in with better-than-expected earnings this morning, and most of those shares are looking to open a bit higher.
Giving the overall market a little indigestion this morning is news that China has raised the benchmark interest rate on one-year deposits by one-quarter of one percent.
Overseas markets are mixed, but we’ll hit some rough waters at the open. Right now, adjusted for fair value, the S&P 500 futures are down 10½ points, Dow futures are down 83, and the NASDAQ futures are more than 32 points below fair value.
The big guns will start firing out earnings reports this week, as we get our first sense of whether estimated earnings will again be beaten to a pulp by 70 or 80 percent of big companies. So far this morning, Citigroup reported and 8 cent profit, which was 2 cents better than expected. However, the stock appears to be pretty much unchanged in the pre-market. Also, toy-maker Hasbro reported $1.09 of operating earnings, that’s up 10 percent from last year and a full nickel per share higher than expected.
Later on today, IBM and Halliburton check in. Perhaps the most highly anticipated report of the quarter comes just after 4 o’clock, when Apple is expected to report $4.06 of operating earnings, which would be almost 50% higher that a year ago.
There’s one merger on this Monday. Northeast Utilities and NStar are getting together to create one really big utility. That’s a 4.3 billion dollar deal.
Asian markets were mixed overnight. Europe is just a bit higher. Our futures have stayed at slightly lower levels all morning, but have improved just in the past 10 minutes. Right now, adjusted for fair value, the S&P 500 futures are down less than a point, Dow futures are down only 2, although the NASDAQ futures are now more than a point above fair value.
Traders feast on the news of the day to place their bets. But if you’re not a trader, but an investor, a longer-term outlook and a long-term memory are important. For instance, let’s go back two years. Lehman Brothers had just failed, the stock market was swooning and the credit markets were frozen. Many people bailed out of stocks ran to the money markets, where some of them still sit. Well, it was two years ago tomorrow that Warren Buffett wrote an op-ed in the New York Times entitled “Buy American – I am.” Buffett encouraged investors to buy stocks – to “be greedy when others are fearful and fearful when others are greedy.” Since then, the S&P 500 index is higher by over 29%, and that doesn’t even count dividends, which have been paying much more than have the money markets. Basic lesson learned – again. And again. And Again.
Ben Bernanke is speaking (again) this morning at a Fed Conference in Boston. In fact, he should be starting the speech any minute now. Last night, Google spoke about their earnings and that speech met with rousing applause. Google stock is indicated about 10% higher pre-market.
General Electric beat estimates by 2 cents this morning, but will likely open lower on a revenue miss. Seagate Technology, on the other hand, should rise about 20 percent on word that an investor group wants to take the company private.
The futures have looked lower on their >
October 13, 2010
Yesterday’s release of the Fed’s meeting minutes confirmed Chairman Bernanke’s comments that we will likely get more quantitative easing in the near future as the Fed continues to push harder on the economic string that, if nothing else, has certainly succeeded at shrinking the value of the American dollar.
Meanwhile, the third quarter earnings reports that have come in - have come in better than expected. This morning, railroader CSX beat estimates, as did JP Morgan Chase. Chase reported $1.01 versus the expected 90 cents. Last night Intel reported that quarterly sales exceeded the 11 billion dollar mark for the first time. Operating profit was 52 cents, which beat expectations by tow cents. Intel is trading about one percent higher pre-market. Also one percent higher pre-market is Apple, now trading north of $300 per share.
Major overseas markets are higher, generally by one to two percent.
Gold is higher by another 13 dollars this morning, at almost $1,360. Light sweet crude oil is up over 82 bucks per barrel, and stock prices are headed in the same direction, and fairly strongly so.
Adjusted for fair value, the S&P 500 futures are up 7 points, Dow futures are up 71 and the NASDAQ futures are about 15 points above fair value.
The National Federation of Independent Businesses conducts a monthly survey in search of small business optimism. Lately, it’s been a tough search. The September number, released this morning, read 89. That’s up from August’s 88.8. However, it’s under the score of 90, which generally indicates a weak or recession-mired economy. The index has been under 90 for 26 of the last 32 months and under 93 for all of those 32 months. Interestingly, only 33 percent of small businesses said they are borrowing, and 91% of small businesses say that their borrowing needs, if they have any, are being met. Perhaps there is something else impeding small business optimism other than lack of a good banking relationship.
Shares of Avon are being bid close to 10 percent higher pre-market on a published rumor that L’Oreal is lining up the financing to make a bid for Avon.
One deal IS happening. Pfizer is buying King Pharmaceuticals for $14.25 in cash. That’s a 40% premium to last night’s closing price. Pfizer says that deal will be accretive as early as next year.
After the close of trading today, Intel is expected to report operating earnings of 50 cents per share, which would be about a 50% increase from a year ago.
Chinese stocks were up one percent overnight, but that about the only green arrow on the board. The rest of Asia and Europe are trading lower. Our futures look a lot better than they did a couple of hours ago, but they’re still pointing toward a lower open at 9:30. Adjusted for fair value, the S&P 500 futures are down about 5 points, Dow futures are down 36 and the NASDAQ futures are about 6½ points below fair value.
Bonds will not trade today, banks will be closed and there’s no mail delivery. Of the three, we might miss the bond traders. Anyway, stock trading volume will probably be on the light side as well.
Microsoft makes its latest attempt to play catch-up in the Smartphone market today with the unveiling of the Windows 7 mobile operating system. Just how quickly Microsoft can attract app development for the new system will likely determine just how much market share they can get back from the iphone, Blackberry and the latest Droid phone.
This will be the first full week of the third quarter earnings season. There’s nothing major on the docket for today. We’ll hear from CSX and Intel tomorrow. Analysts are expecting about a 25% year-over-year increase in earnings for the S&P 500. If that happens, we’ll have pretty much made a round trip from the big dive of 2008.
China is putting some of our former dollars to work. CNOOC, the Chinese oil company, is buying a third of one of Chesapeake Energy’s Texas oil fields for 2.2 billion dollars.
Japan was down one percent overnight. China was up two percent. Europe is slightly higher, and that’s where we’re headed as well.
Adjusted for fair value, the S&P 500 futures are up a little less than 2 points, the Dow futures are up 18, and the NASDAQ futures are just a fraction of a point above fair value.
Normally we get the monthly Jobless Claims Report on the first Friday of the month. However, the Labor Department evidently needed a little more time to get the number “right” this month. Accordingly, we’ll get the September Claims number at 8:30 this morning. The consensus estimate calls for a loss of 8,000 non-farm jobs and an Unemployment Rate of 9.7 percent. This is, by the way, the last monthly Unemployment Report before the November Congressional election. Not that that might influence a better-than-expected number, mind you.
Yesterday, Alcoa semi-officially kicked off third quarter earnings season, reporting an operating profit of nine cents per share, which beat the six-cent estimate by 50 percent. Alcoa also raised their estimate for aluminum demand for the year to come. After hours, Alcoa stock rose almost 3 percent.
Chinese stock traded for the first time in a week after their “Golden Week” holiday and stocks in Shanghai rose over 3 percent. However, for the most part, other overseas markets are lower.
Our futures are lower, but they’re not as bad as you might think. There’s a significant difference in starting point between the futures and the cash market this morning, most likely due to the timing of Alcoa’s earnings announcement last night. That means that this morning, paying attention to fair value makes a difference. After you adjust for fair value, the S&P 500 futures are only down about 2½ points, Dow futures are down 21 and the NASDAQ futures are about 4½ points below fair value.
Both the employment data and the earnings data start to flow today. The weekly Jobless Claims number, which has taken on an inordinate degree of importance lately, arrives in just about 4 minutes and is expected to be firmly stuck at the level of 450,000 new claims. The more important monthly number comes tomorrow. Earlier this morning the Monster Employment Index, which measures the level of online job openings, once again showed a little improvement, reading 138 versus the August number of 136.
Just in front of that, Alcoa will kick off third quarter earnings season shortly after 4 o’clock this afternoon. Expect a six cent per share operating profit, which would be a 50% increase from a year ago. Pepsico jumped ahead this morning, by announcing quarterly profits of $1.22 per share, which was right in line with expectations on better than expected sales.
September sales reports from the big retailers will be coming all morning. So far, it looks like Target is the big disappointment, with sales up only 1.3 percent.
The Bank of England and the European Central Bank both decided that short term interest rates are best not changed this month. England’s rate is one-half of one percent. The ECB’s rate is at one percent.
Better keep that tank full. Light sweet crude continues to move higher, along with the price of gold. Oil is nearing $84 per barrel and gold touched $1,366 earlier this morning.
There’s not a lot of movement overseas, and there’s no indication yet that we’ll be much different, pending a surprise in the Jobless number at 8:30.
At this point, the S&P and Dow futures are hovering right around fair value. The NASDAQ futures are about 2½ points below.
The Bank of Japan surprised the markets overnight. Evidently, the Japanese economy is so weak that the central bank there has decided that short term interest rate of one-tenth of one percent were just too great a burden to bear. Accordingly, the target interest rate will now be ‘zero’ and the Bank of Japan will be buying all kinds of assets, both government bonds and private sector assets. Japanese stocks, which had been lower, reversed course and rallied on the move, finishing up almost a percent and a half. Of course, that’s the knee-jerk. The longer-term issue is whether Japan’s famous “lost decade” is turning into a “lost century.”
The ISM non-manufacturing index will be released at 10 o’clock. The consensus estimate calls for almost imperceptible growth in the domestic services sector, rising to a level of 52 from the August level of 51.5.
We should be getting earnings reports from Michigan based Wolverine World Wide as well as Yum!Brands.
Don’t look now, but the price of gold broke over $1,325 per ounce this morning. Oil is also higher, at nearly 82 bucks per barrel.
Major European markets are higher. There’s another hour to go before the exchanges open here, but if the futures are any indication, we might get most of yesterday’s losses back right out of the chute. At this point, adjusted for fair value, the S&P futures are up about 8 points, Dow futures are up 61, and NASDAQ futures are more than 14 points above fair value.
It’s the first full week of October, which is, of course, famous for stock market volatility. Now, people don’t tend to mind UPWARD stock market volatility, like we saw in September. It’s the OTHER kind for which October is most remembered.
There won’t be any major third quarter earnings reports coming until next week. However, this coming Friday we’ll get the last Monthly Unemployment Report in front of the November elections. Many suspect that optimism about a change in the power balance in Washington was the driving force behind the September market surge. The consensus estimate has the September Unemployment Rate rising to 9.7 percent.
The Financial Times reported this morning that the General Motors IPO may be scaled down to about $8 billion from $12 billion. Perhaps the appetite for GM shares isn’t as high as was hoped. The estimated value of the entire enterprise would be about $60 billion.
Downgrades are out for Microsoft and Kellogg this morning.
The Chinese stock market was closed overnight, and will be closed all week. Europe is a bit lower. Our futures are looking a lot better than they did a couple of hours ago, but they’re still indicating a lower open at 9:30. At this point, adjusted for fair value, the S&P futures are lower by almost 4 points, Dow futures are down 31, and NASDAQ futures are 7½ points below fair value.
Let start by stepping back a month. You may remember the beginning of September. A time when so-called stock market “experts” warned that September is historically the worst month of the year for stocks. Sell your stocks, go hide in the closet. Well, once again, the market demonstrated that it doesn’t have a calendar, as the S&P 500 and the Dow turned in their best September since 1939. The S&P 500, not even counting dividends, rose 8 percent.
It is the first Friday of the month, so you would expect the monthly Jobs Report. However, we’ll have to wait until next Friday for the Labor Department to get their act together on that number. Perhaps they need to hire more people at Labor to get the job done on time.
That doesn’t mean we’re lacking for economic reports. Overnight the Chinese Purchasing Managers Index came in at 53.8. That’s up more than 2 points from August and is almost 2 points higher than expected. That has Asian markets generally higher, although Europe is more of a mixed picture.
Still to come are personal income and consumption numbers at 8:30 a final U of M sentiment report at 9:55 and then at 10 o’clock, the September ISM Index, which is expected to dip to 54.5 from the August level of 56.3
Our futures are off their best levels of the morning, but we’re still looking at little green arrows. At this point, adjusted for fair value, the S&P 500 futures are up 6 points, the Dow futures are up 43 and NASDAQ futures are 14½ points above fair value.
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WJR October 2010 Reports
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