October 31, 2012
The stock exchanges are scheduled to open on time this morning, although they may be working with skeleton crews as New Yorkers try to function without mass-transit. Heck, we could show them how to do that, although I wouldn’t want to trade circumstances.
While the storm’s damage has taken a horrible human toll, big natural disasters are not necessarily bad for businesses, especially certain businesses. Take Generac Holdings, for instance. Generac makes generators and that stock is understandably higher by about 9 percent pre-market.
Closer to home, General Motors shares are looking to open at least 5 percent higher this morning. GM’s quarterly earnings checked in at 85 cents per share. That was a full 25 cents higher than expected on revenue that was more than 2 billion dollars higher than expected. Ford Motor reported blow-out earnings yesterday, and Ford shares are indicated about 3 ½ percent higher this morning.
October Car Sales will be reported later this week and are expected to show a more than 11 percent increase.
Disney is buying LucasFilms for over 4 billion dollars and PVH (the old Phillips VanHeusen) is buying Warnaco at a 34% premium.
Most overseas markets are mostly higher and out futures are looking good right now. At this point, adjusted for fair value, the S&P futures are up almost 8 points, the Dow futures are up about 67, and the NASDAQ futures are 9 points above fair value.
You may have had to re-shuffle your schedule for the rest of the week, in that you won’t have the opportunity to suffer through any additional World Series Games. However, you’ve got nothing on the schedule re-shuffling that’s going on in the financial center of New York, due to Hurricane Sandy.
The New York Stock Exchange first considered going electronic-only for today and tomorrow. However, upon further review, they decided to throw in the towel altogether for today and probably tomorrow. The bond market will still be open, but will close early and the futures market closes for the day at 9:15.
The four-week Treasury Bond auction, originally scheduled for tomorrow will be held this morning, and a bunch of earnings reports are being delayed until later in the week or even next week, including reports form Pfizer, Entergy, Thomson-Reuters and NRG Energy.
There’s no hurricane in Japan today, where Honda lowered their sales forecast for the rest of the year due to slowing sales in China.
At 8:30, the September personal income and spending are expected to rise four-tenths and six tenths of a percent respectively. But that’s it for the day’s expected news.
Once again, there will be no stock trading in New York today on the NYSE or the NASDAQ, but if there were, stock prices would be lower. At this point, adjusted for fair value, the S&P futures are down 8½ points, the Dow futures are down 78, and the NASDAQ futures are about 23 points below fair value.
The Forrest Gump portfolio is hurting a bit this morning. Most companies, especially after reaching the >
Not helping matters yesterday, Amazon posted a larger-than-expected third quarter loss (that’s their first loss in about a decade) and Amazon shares, like Apple have dropped about 15% over the past five or six weeks.
This morning, Comcast matched profit estimates. Drug maker Merck earned 95 cents per share, which was a 3 cent beat.
The Government’s second guess at third quarter Gross Domestic Product comes in 16 minutes. Expect a pre-election revision upward to the paltry level of 1.8% from the rather ugly advance reading of 1.3 percent.
Then, just before 10, the University of Michigan’s final results regarding October Consumer Sentiment is expected to come in at an even 83.
The Indian market was up a bit overnight, but everybody else overseas is seeing red. Our futures have improved steadily during the past hour, but are still is a fair >
The last few trading sessions have been, well, let’s just say that they put us in the right mood for the Tigers game last night.
However, things could be back on the upswing this morning on the back of some decent earnings reports. Procter & Gamble reported $1.06 of operating profit this morning, which was a dime better than expected. Sprint/Nextel lost 26 cents per share, but that was 16 cents less of a loss than expected.
Shares of Honeywell rose on a rise in price target by a major broker. Hewlett Packard shares also looking to rise on word of a new corporate growth plan. And Microsoft officially unveils Windows 8 today in a move to de-rail Apple’s death grip on the mobile computing market. Why unveil Windows 8 today? Gosh, I don’t know, but Apple’s quarterly earnings report comes to us just after 4 o’clock.
The Bank of Japan announced yet another round of fiscal stimulus overnight. That pushed the Nikkei higher by more than one percent. European stocks are also higher, in spite of a messy day in the Greek Parliament, where the only agreement seems to be that everyone agrees that they don’t know what they’re agreeing to regarding austerity measures.
The Durable Goods Report at 8:30 is expected to show 7 to 8 percent growth and stock prices should be growing at 9:30 as well. Right now, adjusted for fair value, the S&P futures are higher by almost 10 points, the Dow futures are up 72, and the NASDAQ futures are about 19½ points above fair value.
We’re just about halfway through the third quarter earnings season, but the writing is on the proverbial wall. Corporate earnings, if they ARE holding up, are holding up on lower than expected sales, not that expectations were very good in the first place. In the second place, guidance for the rest of the year is slipping as well.
This morning, DuPont shares look to open more than 5 percent lower. Earnings of 44 cents came in two cents short of expectations. Revenue missed and DuPont will be cutting 1,500 jobs. Radio Shack lost 33 cents per share, which was almost twice as bad as expected. 3M reported $1.65 in operating profit. While that wasn’t a disappointment, revenue was light and 3M guided lower for the rest of the year. Same story at UPS. Earnings were in line, but revenue missed, and was lower than last year.
As if things weren’t ugly enough this morning, Moody’s downgraded the credit worthiness of 5 Spanish Regions, and that’s not a good thing given that Spain is pretty much at the end of its current line of credit.
Perhaps Apple will give us a little spark with the expected introduction of an ipad mini later today. But, in the meantime, stock prices will be heading south.
Our stock index futures started the morning in a big hole and have gotten worse since then. At this point, adjusted for fair value, the S&P futures are down almost 15 points, the Dow futures are down 126, and the NASDAQ futures are about 25½ points below fair value.
We’ve moved into the heart of third quarter earnings season, and that heart is thumping on the downbeat so far.
About 20 percent of the S&P 500 companies have reported, and only a bit more than 40 percent of those companies have reported sales that were better than expected. Over the past four years, we’ve seen, on average, 60 percent of big companies report better than expected sales. And while it’s not unusual for companies to lower future guidance, this time around, 95% have lowered, and that’s NOT exactly a sign of an economy that’s doing well at all.
On Friday, MagicJack was the only well-known name to raise guidance. Parker-Hannifin, Ingersol-Rand and Air Products all lowered earnings guidance.
Dow Industrials component Caterpillar reported better than expected earnings for last quarter, but surprise, surprise, missed on the top line and lowered future guidance. CAT stock is indicated about one percent lower.
Asian markets were mixed overnight, but Europe is mostly a bit higher. Our futures have slipped during the past hour, and just turned negative with the last ten minutes. At this point, adjusted for fair value, the S&P futures are down 2 points, the Dow futures are down 7, although the NASDAQ futures are still about 2 points above fair value.
For people of a certain age, there are some days that are indelibly burned into memory. You remember where you were when President Kennedy was killed, when the Challenger exploded and, of course, on September 11, 2001. Some people even remember their wedding day. Or days.
But if you’re an investor of a certain age, you’ll never forget October 19, 1987. The Crash of ’87 took the Dow Jones Industrial Average down about 23 percent in one day. Put in current day terms, that would be the equivalent of a 3,000 point point in the index. While the stock market recovered and then some over the years, for those who panicked out at the time of greatest fear learned a pretty expensive lesson.
There’s a little fear in the market this morning, based on some of the earnings news we’ve received. Honeywell earned $1.20 last quarter, which was 6 cents better than expected, but revenue was light and the stock is indicated about one percent lower. Google reported, rather prematurely (in the middle of the afternoon) yesterday afternoon that their profit was 20 percent lower and although the stock is looking to add one percent this morning, it was 8 percent lower yesterday. Not to be outdone, Microsoft reported a 22 percent decline in profit as we await the debut of Windows 8. McDonald’s missed the profit forecast by 4 cents per share, and is looking to open more than 2 percent lower.
Overseas stocks are generally lower, but not by a lot, and that’s reflected in our futures as well. At this point, adjusted for fair value, the S&P futures are lower by about 4 points, the Dow futures are down 38, and the NASDAQ futures are about 10½ points below fair value.
The earnings reports continue to roll. Pepsico reported $1.20 of operating profit, which beat estimates by 4 cents. CSX, the railroad company beat estimates by a penny. And Bank of America reported essentially break-even operations for last quarter, which is 52 cents per share lower than a year ago. However, Bank of America was expected to lose 7 cents per share. Trading revenue was again disappointing, but a robust mortgage business saved the day.
At 8:30, expect September Housing starts to have ticked up to 770,000 from 750,000 in August.
In the media, the Dow Jones Industrial Average is the most frequently quoted market barometer, and a lot of people refer to Dow Index as “the market.” This morning, we’re getting a reminder of how misleading that can be, in that the Dow is made up of only 30 stocks, and they are weighted in the index by price. That makes IBM, at over 200 bucks per share the 800 pound gorilla in the room, and on a morning like this, when IBM is indicated about 4 percent lower, the Dow Index looks a lot worse than the market as a whole. IBM beat estimates by a penny last night, but sales were light.
By the way, Intel is also a Dow component and it is also indicated about 4 percent lower this morning. They earned more than expected last quarter, but offered a weak outlook. So while the Dow futures look weak, the S&P 500 futures, like most overseas markets, are actually higher.
At this point, adjusted for fair value, the S&P futures are higher by about 2 points, even though the Dow futures are down 27, and the NASDAQ futures, thanks in good part to the Intel forecast, are about 12 points below fair value.
Four years ago this morning, the S&P 500 started the day at around 908. It was that morning, October 16, 2008 that Warren Buffett wrote an op-ed in the New York Times entitled “Buy America – I Am.” He advised us to being greedy when others are fearful, and fearful when others are greedy.” A lot of people figured he was a sentimental old man past his prime. Since then, the S&P 500 has returned almost 70%.
As of last night, less than a tenth of those S&P 500 companies had reported earnings this quarter with a little less than two-thirds beating (generally lowered) estimates. This morning, United Health announced a profit of a dollar and a half per share, which was a 16 cent beat. PNC Bank reported $1.64, a nickel better than expected. Mattel also beat by a nickel. Johnson & Johnson 2 cents better than expected. Domino’s Pizza also with a 2 cent beat and Goldman Sachs crushed the $2.12 estimate, earning $2.85. Goldman also raised their dividend. Coca-Cola matched the 51 cent estimate.
Citigroup shares are indicated more than 2 percent lower pre-market on word that CEO Vikram Pandit is stepping down.
A Treasury Bill auction in Spain went pretty well this morning.
Indian stocks were lower overnight, but outside of there and Malaysia, overseas markets are higher. At this point, adjusted for fair value, the S&P futures are higher by almost 8 points, the Dow futures are up 66, and the NASDAQ futures are about 13 points above fair value.
It’s another merger Monday, although this deal was known to be in the works last week. Japan’s third-largest wireless carrier Softbank will pay 8 billion dollars to gain a 70 percent interest in Sprint/Nextel. Current shareholders that sell under the deal will receive $7.30 per share. However, not all shares will be bought and the deal still must be approved by shareholders, which explains why Sprint shares are bid less than 6 bucks apiece pre-market.
Earnings news is on the way later today from Charles Schwab. Citigroup reported $1.06 of operating profit per share, which was 10 cents better than expected on revenue that came in about 5% higher than expected.
The September Retail Sales Report rolls at 8:30, and is expected to reflect an eight-tenths of a percent increase, helped by rising gas prices and decent auto sales.
Last week was the worst week for stocks since spring. However, stock prices should get off to a good start this morning, thanks at least in part to the cover story in Barron’s over the weekend. That story suggested that the current stagnation in stock prices is simply a consolidation before stocks will rise to all-time highs.
Asian markets were mixed overnight, but Europe is mostly higher. At this point, adjusted for fair value, the S&P futures are higher by almost 6 points, the Dow futures are up 36, and the NASDAQ futures are more than 14 points above fair value.
Central Banks around the world continue policies that make currencies cheaper and cheaper. Retail investors continue to pour money into bond funds. Theoretically, that’s all well and good in the name of spurring moribund economies. However, when growth does reignite, the inflation side of the balloon will bulge, and that will likely be the next game-changer.
We’re not there yet, of course. But keeping one eye on inflation rates is an eye well-kept. At 8:30 this morning, the September Producer Price Index is expected to show that wholesale-level inflation rose eight-tenths of percent, after spiking 1.4 percent in August. Core inflation, after you exclude stuff that nobody needs (like food and energy) is expected to settle back to a two-tenths of a percent increase.
The University of Michigan will give its first look at October Consumer Sentiment just before ten o’clock. Expect no change from September’s lowered reading of 78.3.
JP Morgan Chase and Wells Fargo both reported better-than-expected earnings this morning, although Well Fargo revenue looks a little light.
Overseas stock prices were little changed overnight, but ours should change a little higher at 9:30, as our futures have improved after the release of the bank earnings reports.
At this point, adjusted for fair value, the S&P futures are higher by about 5½ points, the Dow futures are up 47, and the NASDAQ futures are 7½ points above fair value.
We should see some recovery of yesterday’s losses at the open today. Overnight, the President of the World Bank predicted that China will pursue an even more aggressive monetary policy in 2013 to help boost their economy. It was The World Bank that just within the past week lowered their growth estimates for China and the rest of Asia. However, the prospect of more easy money is like mother’s milk to thirsty stock traders.
Safeway stores and Fastenal will report earnings today, while some of the biggest banks in the country will check in tomorrow. Expect 37 cents in profit from Fastenal and 43 cents from Safeway. Sprint Nextel is the stock to watch this morning. It’s up about 18% pre-market on buyout rumors.
Later this morning, the Energy Information Agency will report the level of domestic oil and gas inventories, which will draw more interest than usual due to the recent rise in gasoline prices, especially in California.
Asian markets were mixed overnight, but mostly lower. European markets are mixed, but mostly higher. Our futures are pointing north, but not by as much as earlier this morning. At this point, adjusted for fair value, the S&P futures are higher by about 4 ½ points, the Dow futures are up 31, and the NASDAQ futures are 12½ points above fair value.
Ten years ago this morning, we were staring at the absolute bottom of the bear market that followed the bursting of the famous “internet bubble.” The S&P 500 started that day at 777. Today, that index will start the day at around 1,435.
Last night, earnings season got off to a decent start, although the two major companies that reported are getting mixed reviews this morning. Alcoa, which was expected to break even, earned 2 cents per share. However, they reported a slight slowdown in the rate of increase in Chinese sales. That has Alcoa stock lower by about three-quarters of a percent pre-market.
Yum Brands, the parent of KFC and Taco Bell and Pizza Hut, beat the 97 cent estimate by 2 cents. Yum stock is looking to open 4 or 5 percent higher. Costco stock also higher on a better than expected report this morning.
The winner of the morning may be True Religion. You know, that’s the company that makes the ridiculously expensive blue jeans that have been marked down to still ridiculously expensive prices. Apparently a lot of consumers have gotten true religion about their budgets lately, which have gotten tighter than the jeans. True Religion said this morning that they will investigate “strategic alternatives” for the company. That probably means they’ll be looking for some private equity firm to buy their stock at a ridiculous price. In that hope, True Religion shares are indicated about 25% higher pre-market.
Chinese stocks are a little higher. Just about everybody else is a little lower. At this point, adjusted for fair value, the S&P, the Dow, and the NASDAQ futures are all pretty much even with fair value.
It comes four times per year, and here it is again. Earnings reporting season unofficially begins just after 4 o’clock this afternoon when Alcoa is expected to report break-even operations for the quarter gone by. Yum Brands will also report in. Expect a 97 cent per share profit from the big fast-food restaurant outfit.
The vast majority of pre-announcements have been negative. More companies have lowered earnings guidance than in any quarter since 2001. The question is, have they lowered expectations SO much that most companies will be able to report positive surprises. You know, some say that the secret to happiness is sufficiently low expectations. Over the next six weeks, we’ll see if expectations are low enough.
The International Monetary Fund is expecting lower economic growth worldwide. Overnight, they lower their 2012 estimate from 3.5 percent to 3.3 percent and their 2013 number from 3.9 to 3.6.
Johnson and Johnson gets a broker downgrade this morning, while Eli Lilly and RadioShack shares are upgraded.
Earlier this morning, the ICSC-Goldman Retail Same store sales index came in better than expected, while the National Federation of Small Business Optimism survey wasn’t as optimistic as most had thought.
Overseas markets are mixed, our futures are fairly uncommitted. At this point, adjusted for fair value, the S&P futures are down a fraction, the Dow futures are down 9, and the NASDAQ futures are about 6 points below fair value.
Third quarter earnings reports will start to roll out this week, with Alcoa coming front and center after the market close tomorrow. We all know that, in general, earnings have peaked and are headed lower, thanks to a punk economy. Warnings of estimates that will be missed are on the rise. The big question really is “How bad will it be?” FedEx, Hewlett Packard and Caterpillar are among the big firms that warned in September. In fact, of the pre-announcements we’ve gotten so far, more than 3 out of 4 are negative.
This morning, former bio-tech darling Affymetrix is telling us that their quarter might not be so healthy. Revenue looks to be 5 million dollars short of the 85 million dollar estimate.
There are conflicting headlines regarding China this morning. The HSBC services index perked up to 54.3, which indicates expansion. However, the World Bank cut its forecast for Chinese GDP from 8.2 percent to 7.7 percent. Of course, if you’re felling badly for China, compare that to our paltry GDP of 1.3 percent.
Japanese stocks did not trade overnight, and that makes Tokyo the only overseas market, other than New Zealand, that’s not lower this morning. Our futures have improved over the past couple of hours, but they’re still not pretty.
At this point, adjusted for fair value, the S&P futures are down about 5 points, the Dow futures are down 51, and the NASDAQ futures are about 14 points below fair value.
We report dozens of economic indicators every month. But when it comes to the direction of the economy, there is no more highly watched indicator than the Monthly Employment Report. In just about 10 minutes, the Labor Department will report the September numbers. Some say that an unemployment rate that continues to linger over the 8 percent level will spell doom for President Obama’s re-election. Others say that some improvement is all he needs. Some say that the Labor Department will somehow artificially lower the number, while others know that it’s all George Bush’s fault anyway.
Whatever, expect that 113,000 new jobs came into being last month and the employment rate remained at 8.1 percent.
More unemployment is reportedly coming to Morgan Stanley. Accordingly to a Financial Times report, Morgan Stanley will cut bonuses and dump more employees. Heck, they’ve even gotten rid of Smith and Barney.
The stock of the day may be social media’s former darling Zynga. Zynga shares are about 22 percent lower pre-market after cutting their current quarter and full year outlook last night. Facebook shares are more than 2 percent lower in sympathy.
Overseas markets are in the green. At this point, adjusted for fair value, the S&P futures are higher by about 2½ points, the Dow futures are up almost 30, and the NASDAQ futures are 6½ points above fair value.
We have the first Presidential debate out of the way, and the stock market is no worse for wear this morning. However, there’s no shortage of things that could change as the rest of the week unfolds.
This morning, the Bank of England and the European Central Bank each held short term interest rates steady, as expected. IN just about 15 minutes, the ECB’s Mario Draghi will hold a press conference that will be closely followed for details regarding the ECBs bond buying program.
Also at 8:30, the Weekly Unemployment Claims report is expected to hold steady at the rather depressing level of 370,000, and getting in that line soon will be 9 percent of the workforce at Applied Materials. The computer chip supplier is cutting their workforce as demand for chips for desktop and laptop machines continues to decline.
The economic big Kahuna of the week, which is the monthly Jobs Report, comes to us tomorrow morning.
Asian stocks rose overnight. Europe is playing wait and see with the Draghi press conference that starts at 8:30. Our futures, perhaps in reaction to last night’s Presidential debate, are higher.
At this point, adjusted for fair value, the S&P futures are higher by about 5½ points, the Dow futures are up about 55, and the NASDAQ futures are almost 8 points above fair value.
The Federal Reserve’s extremely aggressive monetary policy has been characterized one the one hand as “saving us from depression” and on the other hand as “just pushing on a string.” However, it’s becoming pretty evident that the housing market is a big beneficiary of the nearly free money.
The American Bankers Association Reported this morning that mortgage applications rose more than 16 percent last week. There was a 4 percent rise in purchase mortgage apps, and a 20 percent rise in refinancing loans, as the average interest rate on a 30 year mortgage sank to just over 3½ percent.
At 10 o’clock, the ISM Report on the health of the non-manufacturing sectors of the economy is expected to hold pretty steady at the slightly expanding rate of 53.5.
Watch shares of Best Buy today. Word is that at least five private equity firms have called out “Bella, bring the books!” The PE firms are pouring over Best Buy financials to assess how much they might want to pony up to own the retailer. Wouldn’t want to pay too much, if what your buying is already called a “Best Buy,” you know.
Overseas markets are a mixed picture, but pending an unpleasant surprise in the ADP payroll report at 8:15, we should move a little higher at 9:30. At this point, adjusted for fair value, the S&P futures are higher by about 2 points, the Dow futures are up about 15, and the NASDAQ futures are about 8 points above fair value.
October 2, 2012
Stock prices started off higher yesterday, and then received a boost from a rather unexpected source. The ISM Manufacturing Index, which is a survey of over 300 manufacturing companies, rose to a reading of 51.5. Anything over 50 indicates expansion in manufacturing, and that’s the first time that survey has indicated expansion in the manufacturing sector since May. The forward-looking new orders component was also surprisingly strong, and the stock-price enthusiasm continues this morning.
Down under, there’s another mild surprise this morning. The Royal Bank of Australia cut interest rates a quarter point to 3¼ percent, in light of the global economic slowdown. That boosted Australian stocks about one percent.
September New Car Sales Reports are due today from Ford and General Motors. Expect a 1.3 percent increase for Ford and 2½ percent for GM.
There’s another report circulating in Europe this morning that Spain is just about ready to ask for a bailout from its European partners, and in the seemingly counter-intuitive world of stock trading, that has touched off a rally in European stocks. Spanish stocks are higher by about a percent and a half.
Our futures are almost exactly as positive as they were 24 hours ago.
At this point, adjusted for fair value, the S&P futures are higher by about 7 points, the Dow futures are up 53, and the NASDAQ futures are about 15½ points above fair value.
Our one step forward, one step back stock market looks to recover much of Friday’s back-step this morning as we continue to consolidate the summer’s gains.
There will certainly be gains for shareholders of Ceradyne this morning. Ceradyne makes ceramic for body and vehicle armor. 3M apparently sees a bullet-proof investment here and will buy Ceradyne for 35 bucks per share. That’s a 43 percent premium to Friday’s closing price.
Sometimes even bad news can be good, as long as it isn’t bad enough. European manufacturing contracted for the 14thstraight month in September, but the reading of 46.1 was better than August’s 45.1 and was better than expected.
At 12:30, Ben Bernanke will speak to the Economic Club of Indiana. The title of his speech is “Five Questions About the Federal Reserve and Monetary Policy.” The speech was shortened from ten questions due to a low rate of interest. No, not really.
Asian markets were a mixed picture overnight, but Europe is higher, as are our futures. At this point, adjusted for fair value, the S&P futures are higher by about 5½ points, the Dow futures are up 53, and the NASDAQ futures are about 13 points above fair value.
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