September 28, 2001It's the last day of the quarter, and it's been a three month stretch that we really could have done without. The Dow Jones and the S&P 500 have lost 17% of their value, the Nasdaq has lost almost one third. A looming question is how investors will react when their 401(k) statements arrive in a couple of weeks.
Yesterday afternoon at about two o'clock, we saw a big surge in volume and a nice rebound in stock prices that had been slip sliding away most of the day. A lot of the rally may have been caused by pension funds and other institutions buying stocks to rebalance their portfolios. But whatever the reason it was a welcome relief.
NEC and Sony out with big earnings warnings today, and statistics just released show that luxury hotel revenues , were down over 70% in the week following September 11.
There's not much debate anymore about whether or not we're in a recession, but just for the record, the final Gross Domestic Product number for the second quarter comes out in ten minutes.
Stock futures have been strong this morning. Adjusted for fair value, the S&P futures are up 9, Dow futures are up 35, but the Nasdaq futures are 15 points above fair value.
September 28, 2001No big earnings reports are expected today, but don't be surprised to hear more earnings warnings. Those warnings were the main culprit yesterday as we gave back about 2.5% on the Nasdaq and 1% on the Dow.
A big-time warning from Communications Equipment maker Sonus yesterday. It wasn't long ago that an article on a national business magazine questioned the business methods that Sonus was using to allegedly "puff-up" revenues. Well, yesterday Sonus admitted that they're looking to lose 5 to 7 cents per share this quarter, rather than making the expected 1 cent per share. Sonus stock lost almost 60, % of its value yesterday.
If you remember Baltimore Gas and Electric, which morphed into Constellation Energy, which became Orion Power, well you're paying way to much attention to the power industry. But in any event, Orion is now being bought by Reliant Resources at about a 40% premium.
European markets are doing well this morning. Adjusted for fair value, Our futures are mixed, but have been slipping during the past hour. Adjusted for fair value, the S&P futures are up 3 ½ , Dow futures are up 3, but the Nasdaq futures are 28 points below fair value.
September 26, 2001The market bent, but didn't break yesterday. At one point the Dow was down almost 100 points, but managed to close with a gain. In fact we've had two days in a row of across the board gains in the major indexes - that I believe is the first two day winning streak in almost two months.
Almost lost in all the other bad news of the last two weeks, we are heading into the heart of "earnings warning season", and if you thought we were in for some warnings before September 11, you ain't seen nothing yet. This morning, Textron, a conglomerate that specializes in helicopters - you would think maybe not a bad play in this environment - they will lose 25 cents this quarter and estimate a 60 cent loss next quarter, versus profits of 71 cents and a dollar five last year. Renaissance Cruise Lines is folding up shop altogether. Expect a steady stream of bad earnings news for the next three weeks.
Of course next week we have another Federal Reserve Open Market Committee meeting. The fed futures are pricing in an 84% probability of another half-per cent cut in short term rates.
European markets had some pretty good gains this morning, but they have started to slip in the past hour. Adjusted for fair value, S&P futures are up 4, Dow futures are up 8, and the Nasdaq futures are 10 points above fair value.
September 25, 2001Yesterday wasn't just a breath of fresh air in the American stock market, it was like the first warm day of spring. The question is, will we get more snow before it really warms up?
Ever since their blockbuster merger, AOL/Time Warner has held to estimates that their revenue would rise by 12 to 15% this year. Well, they've finally fessed up that things won't be so rosy, and are now est, imating 5 to 7% growth. They've also lowered their estimates for 2002. A lot of analysts had already lowered their own projections for the company, so the stock might not be hit badly, however, AOL/Time Warner is down over a buck in pre-market trading.
The Conference Board's Consumer Confidence number comes out at 10 o'clock this morning. They survey period does include some post-September 11th responses, so we may get at least a partial indication of current consumer sentiment.
As we look forward to 9:30 this morning, the futures are painting an interesting picture. After being substantially in the red early this morning, the futures have rallied very strongly since 5 o'clock. Adjusted for fair value, S&P futures are up 4, Dow futures are up 17, and the Nasdaq futures are 7 points above fair value.
September 24, 2001We're looking at something we haven't seen in what seems like about a month --- green arrows across the board in the futures.
Last week gave us the worst point loss ever in the Dow Jones Industrials, and the worst percentage loss in 61 years. Word is that insurance companies were dumping stocks to raise cash to meet cla, ims, foreign investors, hedge funds and institutional managers may have been selling. But it looks like the average American sat tight. Trim Tabs reports that last Monday and Tuesday 7.8 billion dollars left stock mutual funds, but two weeks earlier, August 28 and 29, 8 ½ billion flowed out.
At 10 o'clock this morning, we get the reading on leading economic indicators for August. That normally would be a pretty important number. Isn't it interesting how many things that were pretty important two weeks ago are now, well, pretty irrelevant.
Asia up overnight, Europe up this morning, and adjusted for fair value, S&P futures are up 33, Dow futures are up about 319 points, Nasdaq futures are 52 points above fair value.
September 21, 2001Well the speeches are in, and so far, the markets aren't impressed. President Bush's speech was unifying, Alan Greenspan's testimony was reassuring about the long-term prospects for the economy. But this morning, foreign markets have sold off sharply. The London Exchange was actually evacuated because of a bomb threat - not exactly the type of thing that instills confidence.
, How about some good news? Nike beat earnings estimates by 4 cents per share, and made favorable comments about next year's business. Later today Morgan Stanley Dean Witter will report earnings. The brokerage industry has been hit especially hard this week.
The futures have traded in a range between very bad and awful this morning. A couple of hours ago, the Dow futures were suggesting a 600 point decline. The futures have come off of those lows, but they are still very weak. Adjusted for fair value, S&P futures are down 30, Dow futures are down about 400 points, Nasdaq futures are 44 points below fair value.
September 20, 2001Another point of interest for individual investors...the market this week has shaken a lot of people, and a lot of people are thinking of selling stocks and funds based upon the daily news. American Airlines and United Airlines, two stocks that immediately come to mind as stocks that have been hurt. They are down 33 and 39% from their prices before the attacks. However, if you had bought United at the opening price on Monday, as of last night's close you would be ahead by 3%. If you had bough, t American, you would be up 25%.
Overseas markets have followed suit overnight, most down 1 to 2%. British Airways announced layoffs today, as the airline recession spreads overseas. Alan Greenspan speaks to the Senate Banking Committee today, and of course the President's address to Congress should have an impact on tomorrow's market.
As for today, the futures were weaker a couple of hours ago, but they're still not pretty this morning. Adjusted for fair value, S&P futures are down 21, Dow futures off about 200 points and Nasdaq futures are 27 points below fair value.
September 19, 2001We had a pretty good rally going until late in the day, when semiconductor and computer hardware stocks led us down to a disappointing, but not horrible closing level.
This morning, the news is more of the same. More layoffs, as Boeing will lay off 30,000 employees. Earnings warnings, as Eastman Kodak is saying that they'll miss their quarter. And corporate stock buybacks. Put together, corporations have announced their intention to buyback about 30 billion dollars worth of their own stock. Those buybacks wi, ll certainly help shore up stock prices. But just because a buyback is announced, doesn't mean it start immediately. More than that, a lot of announced buyback are never completed. So we're really in wait and see mode on those plans.
The Federal Reserve's Beige Book, a survey of economic conditions will be released at 2 this afternoon. So far this morning, the futures not giving us much direction. S&P, Dow and Nasdaq futures are all within a couple points of fair value.
September 18, 2001Heavy volume yesterday without big technical problems, and there was no panic selling. We lost about 7% in the first hour of trading, and basically went nowhere for the rest of the day as our market adjusted to levels overseas markets.
A couple of lessons from yesterday's trading: retail investors did NOT bail out of their stocks yesterday. Retail action was reported to be positive by many brokers. Secondly, if at the market open, you bought some of the stocks that went way up yesterday, you lost money on the day. Raytheon was up 27% on the day, but closed 11% down from its opening price. , L-3 communications was up 38% on the day, but down 5% from the open. Same story for Lockheed Martin, General Dynamics and others. The lesson? For every buyer there is a seller, and if you are trying to buy stocks based upon already public information, the price you pay reflects that information. If you want to profit from the future growth of a business, you have to be invested BEFORE the news breaks, not after.
There's a big fair value adjustment when you look at the futures this morning, and unfortunately, the open looks even weaker than the nominal futures indicate. Adjusted for fair value S&P futures are down 13, Dow futures down 123 and the Nasdaq futures are 18 points below fair value.
September 17, 2001This will no doubt be one of the most interesting days in stock market history. There is no doubt that net-net, the terrorist attack of last Tuesday and the terrorist threat going forward are not good for efficiency, productivity, confidence - in short not good for economic progress. However, that doesn't mean that capitalism will crumble or that we are unable to fight back.
Some stock, prices will surely be hurt today, and some sectors may not recover for a long time. Airlines, insurance, travel and entertainment related issues will go down. Buying may lift oil stocks, companies that make security systems and devices, as well as computer system consultants, as many companies review their need for secure back-up systems.
Individual investors, especially if they invest through mutual funds should remember that if they place an order to buy or sell, the day's closing price is the price you get. So by selling - or buying - early in the day does not lock in the price you'll get.
Dozens of companies have announced stock buyback programs, as rules against certain types of buybacks have been lifted. There is a lot of talk about a "patriot rally" as investors may buy stocks in blatant defiance of the terrorist attacks. Just a minute ago the Federal Reserve cut interest rates by 50 basis points.
We have no equities futures market this morning. The Globex futures will open at 9:30. Overseas, Tokyo declined 5%. But in Europe, most markets, which had declined in early trading, started to rally about 6:45 this morning. At this hour, m, ost major European markets are up. Germany is actually up 1 ½ percent.
September 14, 2001Once again today, there will be no trading in domestic stocks. Tomorrow, system testing will begin at the New York Stock Exchange, and if all goes well, stock trading will resume in New York at 9:30 Monday morning.
The bond market did trade yesterday, and trading was brisk and orderly. No panic, no overreaction. Japanese stocks closed up 4%, and European markets are down between 2 and 4% at this hour.
Cisco Systems will buy back 3 billion dollars worth of its own stock. Expect to hear more buyback announcements, especially if stocks decline next week, as companies will look to support the market.
Predicting day to day movements in stock prices in this environment is, of course, impossible. However, there are some things you can expect. Recession in the U.S. is now very likely. The words "budget" and "surplus" will probably not show up in the same sen, tence very often in the future.
However, interest rates will be coming down, and coming down a lot. However, so is a massive rebuilding effort and some significant military action, both of which are usually good news for stock prices.
September 13, 2001There will be no trading in U.S. equities today. The markets will reopen either tomorrow, or perhaps more likely on Monday. The bond market will trade. The Chicago Merc will open in a few minutes, the open has been delayed due to very tight security.
The stabilization that started yesterday continues. Tokyo was flat overnight, European markets are generally positive at this hour.
A bunch of U.S. companies, including Cisco Systems, General Electric, Wells Fargo, Sprint PCS, have announced that they are contributing millions and millions of dollars to the relief effort, ten million alone from GE. There is a growing feeling that given the time we now have to reflect on the situation, when the markets open, investors may well feel that the best way that they can contribute - the way they can help a return to confidence --- is to stand firm with their investment positions. Not only is it good investment policy to not sell out of fear, it ma, y now be regarded as good patriotism as well. Don't be surprised if we get another cut in interest rates in very short order as well.
September 12, 2001Obviously, after yesterday, we are in uncharted waters. We now have a crisis in confidence on a number of fronts. However, it will not necessarily cause a crisis in the financial markets. That depends on what our political leaders do now. The banking system remains open. The Fed is providing all the cash that is needed. We will have at least this two-day break in securities trading, yesterday and today, for everyone to absorb the long-term impact of these events. So, when trading resumes it is more likely to be based on information rather than emotion.
Yesterday European markets dropped between 5 and 10%. Japan was down over 6% overnight. So far today, European markets have by and large stabilized. Historically, next day stock prices after previous war and terrorist situations are weak. However, three months down the road, the value of financial assets are typically higher. Of course that will depend on what our political leaders do next.
So, what should investors do? Hopefully, all investors have a sound financial plan in place. Tha, t means, of course, that the money you need for the next six months is in cash equivalents already, and the next three to five years of cash need is secured. If that next six months of liquidity is not there, you may want to provide for it. However, dumping all your financial assets out of panic is seldom a good strategy, and I doubt that it's a good idea right now.
September 11, 2001We started the day in a big hole yesterday and only partially dug our way out. The S&P 500 did gain almost 7 points, but declining stocks outnumbered advancers almost 2 to 1 on the New York Stock Exchange.
This morning, news from Pfizer. The big pharmaceutical maker reaffirmed their profit guidance for the rest of this year and next. The next three weeks will be filled with preannouncements, as we are entering what's known as "earnings warning season" for the third quarter. The more pessimistic those reports, the bumpier ride we'll have going into October.
Three Federal Reserve officials spoke yesterday about the economy. Unfortunately, when you look at all they had to say, it's pretty clear that no one has a firm handle on the timing of an economic turnaround. The next Federal Reserve Open Market Committee mee, ting is October 2.
The futures have improved in the past hour, and we're looking to rally at 9:30. Adjusted for fair value, S&P futures are up 9, Dow futures are up 75 and Nasdaq futures are 21 points above fair value.
September 10, 2001The employment report last Friday morning was a blockbuster, or maybe we should call it a stock-buster. The unemployment rate rose to 4.9%, far higher than expected. If that rate continues to rise at anywhere near the same speed, the fear is that consumer spending will weaken, and consumer spending has been the sole bright spot in this economy during that past year and a half.
Taking their cue from our market, Japan lost 3% overnight, and most European markets are off 2 to 3 percent.
There aren't a lot of big economic reports on the calendar until late in the week, and only a handful of earnings reports on the way. A lot of Federal Reserve Bank Presidents will be speaking throughout the week, but right now the Fed fund futures are pricing in a 100% probability of another interest rate cut in October, and a 50-50 chance of a second cut before year end.
The futures are have been dropping like a stone since 4:30 this morning. Adjusted for fair value, S&P futures are down 17, Dow futures down 146 and Nas, daq futures are down 22 points. Look out below at 9:30.
September 7, 2001We really needed some good news from Intel's mid quarter report last night, and we got - well - calling it good news would be a stretch, but Intel says that revenue for the quarter will be within the very large range of guidance they had previously provided, although it will be in the lower part of the range.
Yesterday was a mixed bag of news. Microsoft won't be broken up, but Motorola warned about earnings again, as they have every quarter for the past year, and the market was in no mood for it. TRW will be restructuring their automotive businesses and cutting their dividend in half. TRW off about 16% in the after hours trading yesterday.
Our direction for this morning's market will probably be established in less than 10 minutes. A drop of 40,000 non-farm jobs is expected to be announced, along with an unemployment rate of 4.7%. It sure wouldn't hurt to have one or both of those numbers come in better than expected. Watch the average national wage number too. It's expected to go up 3 tenths of a percent.
The futures are mixed at this hour. Adjusted for fair value, S&P and Dow futures are down a couple points or so, and the Nasdaq futures are 9 poin, ts above fair value on the Intel news.
September 6, 2001News just released from Walmart. Walmart same store sales up 7.2%, Sam's Club up 6.1%, that's better than expected. Last night Microsoft and Caterpillar both said that they'll meet earnings estimates this quarter. Okay, now the rest of the news....... Mariott says that business travel is lousy, with no turnaround in sight. Their August revenue was 7 to 10 % below last year. Overseas the London market is at a 34 month low, France at a 2 year low.
After the market closes today Intel will give its guidance for the remainder of the current quarter. Three weeks ago, Cisco gave us a pretty tepid mid-quarter update, and the market took off. So, it could be a case that any good news will be great news, but most analysts are not expecting a lot of good news from Intel tonight.
The futures are not promising at this hour. Adjusted for fair value, S&P futures are down about 8, Dow futures are down 43 and the Nasdaq futures are 18 points below fair value.
September 5, 2001The end could be in sight for the manufacturing slowdown, or so it seemed at 10 o'clock yesterday. The National Association of Purchasing Manager's Inde, x , came in stronger than expected. The overall number still reflected a contraction in manufacturing, but several pieces of the index were positive, including the new orders component. The stock market took off on the news, possibly fueled by some traders covering short positions. About 2:30 in the afternoon things reversed course, and while the Dow still closed up it couldn't quite get back to 10,000 and the Nasdaq took a 2% whack.
That negative momentum was picked up overseas. Most overseas markets are down between 1 and 2 percent. A lot of weakness in tech and telecom stocks in Europe. The big number for today will be the revised 2nd quarter U.S. productivity results. Expect a revised productivity increase of 2%. That announcement coming in about 10 minutes.
The futures started to slide about 4:30 this morning. Adjusted for fair value, S&P futures are down about 2 ½ , Dow futures are down 31 and the Nasdaq futures are 3 points below fair value.
September 4, 2001When does 2 plus 3 make 1? When you take the second largest and third largest PC makers in the world and put them together, they become the biggest. Hewlett-Packard is buyi, ng Compaq Computer for 25 billion in stock. You know, everyone's been waiting for a few big companies to come out and say that "things are getting better." Sometimes it's better to watch what they DO rather than what they SAY. When companies expect things to pick up, they may well go out and "pick up" market share by buying other businesses at bargain prices.
Not only is Hewlett buying Compaq, two other big deals this morning. Devon Energy buying Anderson, a Canadian company at a 51% premium, and Santa FE International is buying Global Marine at a 17% premium.
Later today, we get August Car Sales numbers, and the National association of Purchasing Managers Index. The Chicago Purchasing Managers number was strong on Friday, if that carries over to the National number, it should give stocks a boost. The futures have weakened a lot in the past few hours, but they still point toward a higher market open at 9:30. Adjusted for fair value, S&P futures up 3, Dow futures up 41 and the Nasdaq futures are 9 points above fair value.
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For an explanation of "fair value" please click here.