WJR September 2010 Reports
September 30, 2010
Here’s an idea – the next time you have a really big project to finish at work and you’re at the deadline – don’t finish it, just tell your boss that you really need to go on a 5 week vacation so that you can try to convince him to not fire you. The new fiscal year for these United States starts tomorrow and we’re supposed to have a budget in place. It would also be nice to know what next year’s tax rates would look like. However, Congress adjourned yesterday with those jobs undone and they won’t be back until after the November election because, after all, that stuff isn’t all that important and they really needed the time off.
At 8:30 this morning, the weekly jobless claims report is expected to give us more of the same – 459,000 new claims for the seemingly endless unemployment benefits. We’ll also get the third and final reading on 2ndquarter Gross Domestic Product. The second estimate lowered GDP from 2.4% to 1.6%. That 1.6 number is not expected to move.
One other number could influence traders today, and that’s the Chicago PMI at 9:45. Expect that barometer of business activity in the Midwest to drop just a bit to 56 from the August number of 56.7.
Japan was 2 percent lower overnight, major European markets are lower, but our futures are not pointing anywhere.
At this point, adjusted for fair value, the S&P, Dow and NASDAQ futures are all within a point or two of fair value.
We’re very near the end of the third quarter. Isn’t that when they draw the winner of the 50/50 drawing at the Catholic league football games? Hold on to your tickets, everybody.
Anyway, if a company is going to fess up to a quarterly operational “oops,” now’s the time. And right on cue, there appears to be a “Wi” bit of trouble brewing at Nintendo. Sales are reportedly soft, the yen is relatively strong, and the 3D version of the DS hardware will not be on sale until after the all-important Holiday season. Put it all together, and Nintendo is warning that the rest of 2010 will not be so rosy.
The yen, by the way, was at another high overnight at 83.66 yen to the dollar.
Yesterday in their analyst meeting, Hewlett Packard raised their outlook for 2011, even though they have yet to settle on a new CEO to replace Mark Hurd.
In case you’re looking for a job as an executive vice-president, it looks like BP will be needing bunches of them. BP will split its upstream operations into 3 divisions (exploration, development and production) and create a “safety” division to keep an eye on everybody.
Overseas markets are mixed, although Europe has perked up a bit since 8 o’clock. At this point, adjusted for fair value, the S&P futures are up a fraction, the Dow futures are up 12, but the NASDAQ futures are about 2 points below fair value.
Two economic reports are on the way this morning and each will draw traders’ attention. At 9 o’clock the Case-Shiller home price index is expected to report that existing home sale prices held steady in July from the June figures. The Index measures sales in 20 major metropolitan markets and will be watched for signs that the 2½ year slump in housing prices that apparently stabilized over the past few months will start to improve.
At 10 o’clock, the Conference Board’s September Consumer Confidence Index is expected to read 52.3, which is a little worse than the August reading of 53.5.
Walgreens is expected to report earnings today flat with last quarter at 44 cents per share.
Hewlett-Packard will hold an analyst meeting today in their continuing attempt to be seen without Hurd. Specifically, I mean without their former oracle, Mark Hurd.
Rating agencies may be throwing their weight around Europe this week. Standard and Poor’s may be ready to downgrade Irish debt and Moody’s is reportedly ready to downgrade Spain.
Asiawas lower overnight. Europe is mixed and we’re mildly positive in front of Case-Shiller at 9 o’clock. At this point, adjusted for fair value, the S&P futures are up about 2 points, the Dow futures are up 18, and the NASDAQ futures are about 6½ points above fair value.
It feels a little like the 90’s all over again. There’s not a great deal of economic news on the way today, but it looks like a return to Merger Monday Mania.
Walmart announced the biggest deal of the morning as they look to what many call the “final economic frontier.” They’re getting a foothold in 13 African Countries by buying South Africa’s Massmart for four and a quarter billion dollars.
Elsewhere, Southwest Airlines is buying AirTran for 3.4 billion (if you include the debt and the leases.) That’s nearly a 70% premium to Friday’s closing price. Unilever is buying Alberto Culver for 3.7 billion dollars. That’s about a 20% premium.
We’ll get earnings news from Paychex, Zale and Jabil Circuit a little later on.
Asian markets rose nicely overnight, following our big rally Friday. Europe is generally higher, but just barely.
Our futures perked up a little on all the merger news, but as we head toward the start of the trading day, there’s just not a lot of direction. At this point, adjusted for fair value, the S&P futures are up a point and the Dow futures are up 8, although the NASDAQ futures are about a point below fair value.
You may not have a job, but evidently, “you gotta have the right shoes!” Nike reported earnings last night that beat the $1.01 estimate by 13 cents. Nike shares rose over 5 percent after-hours.
The warning of the morning comes from Advanced Micro Devices. AMD warned that sales would be just a touch lower in the 2ndQuarter from the first, and will likely slip even further in the third quarter. AMD shares dropped about one percent last night, but have rallied in the pre-market this morning.
Back in April of the year, both the Durable Goods report and the New Home Sales Report hit their best levels since the Great Repression began in 2007. We’ll see how the August number for Durables shakes out at 8:30. Expect a one percent decrease, down from July’s three-tenths of a percent increase. At 10 o’clock, the new home sales report should hit an annualized rate of 290,000 units, that would be higher than July’s 276,000 and would follow yesterday’s surprisingly strong existing home sales report.
Overseas markets are mixed, but absent a horrible Durable Goods report at 8:30, we’ll head higher at 9:30.
At this point, adjusted for fair value, the S&P 500 futures are higher by 7 points, the Dow futures are up 71, and the NASDAQ futures are about 16 points above fair value.
Let’s start with the good news, especially if your hold shares of McDonalds. Big Mac is raising is dividend by 11 percent, to a quarterly payout of 61 cents. Okay, good news over – let’s get to the rest.
Blockbuster is finally filing for Chapter 11 bankruptcy protection. A deal has been reached to give senior secured bondholders equity in the company. Existing shareholders and unsecured debt-holders get bupkes. If you’re not familiar with the term “bupkes,” think in terms of “zero,” “nothin’” and “see ya’ later.”
Most Asian markets were closed overnight for a seasonal Holiday, but Europe is open and wishing it were on Holiday. The Markit Composite Purchasing Mangers Index, which measures business activity on Europe, declined to 53.8 from 56.2. That’s not indicative of recession, but it’s not heading in the right direction, especially with some European governments promising new austerity measures. European markets are about one percent lower on the news.
Weekly Jobless claims are expected to come in at 450,000 (again) at 8:30. Then, at 10 o’clock, the August Existing Home Sales Report is expected to come in just over the 4 million unit annualized rate, up from the July number of 3.83 million.
As we head toward 9:30, we could use a little good news on the Jobless Claims. At this point, adjusted for fair value, the S&P 500 futures are down almost 8½ points, the Dow futures are down about 65 points, and the NASDAQ futures are about 11 points below fair value.
The Fed’s Open Market Committee, which appeared to be a full step away from additional quantitative easing, moved at least a half-step closer at 2:15 yesterday afternoon. At this point, it certainly looks that absent any significant economic strengthening, the Fed will provide more “stimulus” at their next meeting. Interestingly, their next meeting is a two day deal that will start on election day and will conclude the day after.
The implied probability of additional Fed action sent the dollar down and gold prices through the ever-rising roof yesterday. This morning, gold is quoted at $1,294 per ounce and could pierce the $1,300 level any time now.
Another member of the gradually shrinking Obama economic brain-trust is going back to the academy from whence he came. Larry Summers will head back to Harvard by the end of the year.
General Mills reported 70 cents of quarterly operating profit. That was 8 cents better than expected. Darden Restaurants reported 80 cents versus the expected 77 cents. Abode Systems beat the 49 cent estimate by a nickel. However the outlook is ugly and Adobe shares had a rough time in after-hours trading. The downbeat earnings report of the morning was delivered by the New York Times, with costs going up and revenue heading south.
Also heading south are stock prices in Europe. Asia was more of a mixed picture overnight. We should head a little lower at 9:30. At this point, adjusted for fair value, S&P 500 futures just moved a bit to the plus side, the Dow futures are down 11, and the NASDAQ futures are about 6 points below fair value.
It’s Fed decision day. Today is the seventh meeting of the year for the Federal Reserve Open Market Committee (including one unscheduled meeting back in May.) As is customary, the Fed’s policy decision regarding short term interest rates will be announced at 2:15 this afternoon. No one is expecting any change in the targeted interest rate. Any comments regarding “quantitative easing” that is, for instance, the Federal Reserve direct purchases on bonds, is the wild card.
If this Fed meeting day is like many others, expect the stock market to float in a moderate range all day and arrive a 2:15 nearly unchanged.
At 8:30, the August Housing Starts report is expected to improve just a hair from July. Expect an annualized rate of 550,000 new starts.
There are a few bits of good news this morning. Biotech firm Vivus reports good test result from its anti-obesity drug, FactSet Research is out with better than expected earnings, and a 2 billion dollar Irish bond auction was fully subscribed this morning, although at an elevated interest rate.
Overseas markets are generally higher.
Our futures have been rising during the past couple of hours, and although the unadjusted futures are positive, after you adjust for fair value, you understand that the futures are pointing very slightly lower. At this point, adjusted for fair value, S&P 500 futures are lower by less than 2 points, the Dow futures are down 12, and the NASDAQ futures are about a point and a half below fair value.
It’s the last full week of the third quarter, so we’re getting into the earnings-warning season. Not that we’ve seen a lot earnings falling short lately, but if companies are really starting to see business slow down, we should start seeing it reflected in earnings pretty soon.
On the earnings front this morning, home builder Lennar is out with a pleasant surprise. Lennar earned 14 cents during the quarter gone by which is almost triple the average analyst estimate. Lennar stock is trending about 5 percent higher pre-market. We’ll get results from Discover Financial a little later on.
Shares of BP should open a bit higher on word that the Deepwater Horizon well has been permanently sealed.
IBM is the latest big tech company putting cash to work, paying 1.7 billion dollars this morning for a company named Netezza.
There’s a Fed meeting tomorrow and President Obama is holding a made-for-cable town hall meeting mid day today, which could whip the market around a bit.
A number of overseas markets did not trade overnight, including Japan. However, the trend in the active European markets is slightly higher. We should start the day nicely higher as well.
At this point, adjusted for fair value, S&P 500 futures are higher by about 7½ points, the Dow futures are up 39, and the NASDAQ futures are 8 points above fair value.
It looks from here like we’ll finish with another weekly gain for stock prices, after some good earnings news last night and more merger news this morning.
Last night, Oracle beat the 37 cent earnings estimate by a nickel. Research in Motion, the Blackberry-maker, earned $1.46 last quarter, which beat estimates by a dime. However, RIMM indicated that in the future, they wouldn’t be giving us updated subscriber data. That may take some bloom of the stock price rose as everyone wonders how many Blackberry users might be turning to Androids and iphones in the future.
Johnson & Johnson will reportedly pay a 58% premium to buy the 82% of Dutch biopharmaceutical firm Crucell that it doesn’t already own.
At 8:30, the CPI report will try to convince us that consumer prices rose only three-tenths of a percent last month. Then, just before ten, the University of Michigan’s Preliminary Consumer Sentiment Index for September is expected to improve to a reading of 70, which would be about a point higher than last month.
Most markets overseas are just mixed, but on the main a little bit higher overnight. Our futures are way lower than their highs of the morning, but they’re still indicating higher prices at 9:30. At this point, adjusted for fair value, S&P 500 futures are higher by 5 points, the Dow futures are up 38, and the NASDAQ futures are about 10 points above fair value.
It’s Thursday. So, traders’ attention will again be fixed on the 8:30 Report on Weekly Jobless Claims. The last two weekly reports have been rather pleasant surprises. However, this week the consensus estimate is a slight rise in first time claims to 455,000, from last week’s 451,000.
Also at 8:30, we’ll get word on just how much Producer Prices, that is prices paid at the wholesale level, increased in August. Expect a three-tenths of a percent rise overall, but only one-tenth of a percent excluding food and energy.
FedEx reported earnings that were pretty much in line with expectations and with the higher estimates that the company released just a few weeks ago. FedEx estimated that the next quarter would be a little soft. But overall for the year, they raised estimated profit number just a bit. Perhaps part of those increased earnings will results from an expense reduction, as FedEx announced that they will close 100 plants and shed 1,700 workers.
There are some little green arrows overseas, but most markets are lower, notably China, which lost about 2 percent.
At this point, adjusted for fair value, S&P 500 futures are lower by a little more than 4 points, the Dow futures are down 34, and the NASDAQ futures are almost 5 points below fair value.
We’re at the “slow news” point of the quarter. There’s not a lot of earnings news, and the economic reports due today on Import Prices and Industrial Capacity and Utilization are not exactly what you would call big market movers.
Yet, in the past 24 hours, we’ve seen some quietly profound events, and they’re at least at the margin, a little unsettling. Start with the State of Pennsylvania “advancing” the town of Harrisburg 4½ million dollars to prevent a debt default.
There’s been quite a surge in investor appetite are municipal bonds, as the conventional wisdom has held that tax rates will certainly be going higher. And gosh, what could go wrong? A reasonable question might be – How many more Harrisburgs are out there, and how close are they to default? Assuming that there are more than we’d like to see, you have to wonder who will bail THEM out.
Overnight, the Japanese Central Bank got busy in the currency market for the first time in six years in order to cut the value of the surging yen. While that kind of intervention has proven pretty fruitless long-term, it gave Japanese stocks a lift, with the Nikkei rising well over 2 percent.
On the famous other hand, the Chinese Government has allowed the yuan to rise in value again, JUST in time for a two day U.S. Congressional hearing on trade policy. Chinese stocks, in response, are lower.
European markets are just slightly lower, and that’s where we’re looking to head at 9:30 as well.
At this point, adjusted for fair value, S&P 500 futures are lower by about 3½ points, the Dow futures are down 24, and the NASDAQ futures are about 4½ points below fair value.
There’s some not-so-wonderful news out of Germany this morning. The Center for European Economic Research surveyed business sentiment in Germany, and the index, which stood at 14 last month and was expected to drop to a reading of 9, actually fell to a negative 4.3. Worries about the ongoing sovereign debt problems in Europe and the sustainability of the U.S. recovery got the blame.
At 8:30, we’ll find out about August Retail Sales. They are expected to have risen three-tenths of a percent, which would be just a bit weaker than the July results.
Cracker Barrel reported $1.14 per share of quarterly profit, which was two cents better than expected. Best Buy reported 60 cents of profit this morning. That was way above the 44 cent estimate, even though sales were a touch lower than expected. Best Buy raised their full year earnings estimate to $3.62, from the old guess of $3.36. Best Buy stock is bid almost 10% higher pre-market.
Gold spiked over the 1,250 dollar per ounce level this morning. Gold is up over 13 percent this year. Silver, by the way is up over 18 percent.
China was a bit higher overnight, Japan a bit lower, as is most or Europe.
Our futures, which have been lower most of the morning, recovered a bit on the Best Buy news at 8 o’clock. But we’re still looking at a slightly lower open. At this point, adjusted for fair value, S&P 500 futures are lower by about 2½ points, the Dow futures are down 14, and the NASDAQ futures are about 7½ points below fair value.
It’s always nice to start a Monday morning with some good news from overseas. Let’s start in China, where August Industrial Production was up about 14 percent year-over-year, which is up from 13 percent in July. Retail sales in China rose 18.4 percent, which was also an improvement from July. Perhaps even more importantly, inflation rose only 3½ percent. That calms fears that the Chinese Government will tap on the economic brakes once again.
News from Europe is also good this morning. Financial sector stocks have fallen 15 percent over the past five months, in part out of fear about what new rules international regulators might impose. Evidently, the new rules will still allow 14 times leverage for the banks, with reserve capital requirements only at 7 percent, and even that level of financial security won’t be fully phased in for another 9 years. In response, big U.S. banks are indicated about one percent higher pre-market.
Hewlett-Packard’s spending spree continues this morning, buying a cyber security firm Arcsight for 1.5 billion dollars. At about the same price tag, Hertz is finally sealing the deal for Dollar Thrifty. Genzyme is going to get 925 million dollars from LabCorp for its genetic testing unit.
Overseas markets are higher by, on average, about one percent.
At this point, adjusted for fair value, S&P 500 futures are up 10 points, the Dow futures are up 87, and the NASDAQ futures are about 15 points above fair value.
The only economic report on the docket today is a bit of a yawner. At 10 o’clock, we’ll get the July Wholesale Inventories Report. Expect an increase of four-tenths of a percent.
With that as the supposed highlight of the day, it looks like most folks will be paying attention to President Obama’s 11 o’clock news conference on the economy, even though this will be the third or fourth time we’ve heard this speech this week. But, then again, it’s a slow week.
In Europe, shares of Deutsche Bank are lower. They announced a plan to issue more shares in a bid to raise more cash. On the famous other hand, Nokia shares are higher. Nokia announced the appointment of a Microsoft executive as their new CEO and President.
Australian stocks were a little lower overnight. Asia was higher, but Europe has turned lower. Our futures are off their highs of the morning, but are still pointing toward higher prices at 9:30.
At this point, adjusted for fair value, S&P 500 futures are up about 3 points, the Dow futures are up 19, and the NASDAQ futures are a little more than 6 points above fair value.
The Bank of England followed the script this morning, holding short-term interest rates steady at one-half of one percent. They also made no changes in their bond-buying program.
The last two significant domestic economic reports of the week will be released at 8:30. The weekly jobless claims are expected to hold pretty steady at last week’s level of 472,000.
McDonald’s just announced their August same store sales, and they’re pretty good. Domestic same store sales were up 4.6 percent, which was a little better than the consensus estimate. Worldwide sales were up 4.9 percent, with the fastest growth coming in Asia, Africa, the Middle East, Britain and Russia.
Trading volume will likely be on the light side today, due to the Jewish New Year. But, if trading were to start now, prices would be higher.
Overseas markets are moderately higher. Our futures haven’t moved much at all throughout the morning. At this point, adjusted for fair value, S&P 500 futures are up almost 4 points, the Dow futures are up 30, and the NASDAQ futures are about 6 points above fair value.
Yesterday’s downdraft in the market was sparked by a fresh wave of concerns about European sovereign debt and bank stability.
This morning, our futures were once again pointed south until just about two hours ago. They turned positive on word of a successful Portuguese debt offering and are pointing nicely higher with just over an hour to go before then open.
The stock of the morning is no doubt tiny Zymogenetics. Bristol Myers has offered to pay $9.75 per share for Zymogenetics. The stock closed at $5.30 per share last night, so look for it to rise about 84% this morning. Zymogenetics has developed drugs that control bleeding during surgery, but Bristol is reportedly looking for its help in developing hepatitis C drugs. Zymogenetics’ revenue is only about $140 million dollars. The Bristol Myers offer totals over $700 million.
The Fed will release its quarterly Beige Book this afternoon. That’s the quarterly survey of regional economic activity that may give us some clues as to the strength of the rumored recovery. That release is scheduled for 2 o’clock, and then we’ll get the monthly report on Consumer Credit at 3. Expect a contraction of $3.5 billion as consumers continue to pull in their horns.
Asian markets fell modestly overnight, but Europe is a bit higher.
At this point, adjusted for fair value, S&P 500 futures are up 4½ points, the Dow futures are up 41, but the NASDAQ futures are more than 9 points above fair value.
A short week of trading will begin with a little Labor Day hangover this morning after a sharp three-day rally last week. Perhaps by the end of the week we’ll know whether there are some real legs to the buying spurt, or if last week was nothing more than a short-covering rally.
Overnight, the Bank of Japan held interest rates steady, said that the economy is improving, but left the door open to additional stimulus in the future.
Australia also held rates steady and said that the global economic outlook is “uncertain.” Hopefully the Aussies will get back to us when their “certain” about the future.
In Germany, we have a disappointing report on the manufacturing sector this morning. Manufacturing orders were off 2.2 percent in July. A small increase had been expected.
The suddenly visible President Obama is out on the spending money trail again, after announcing 50 billion dollars of additional infrastructure spending yesterday. Today, or at least soon, he’s expected to announce a proposal to allow businesses to write off all investments in plant and equipment in 2011.
Goldman Sachs is out with an upgrade for Schlumberger, a downgrade for Goodrich and lower price target for Baker Hughes.
Chinese stocks rose overnight, but most other major overseas markets are lower. Our futures started the morning on the downside and have been on the weak side ever since.
At this point, adjusted for fair value, S&P 500 futures are down almost 7 points, the Dow futures are down 53, but the NASDAQ futures are almost 11 points below fair value.
September 3, 2010
It’s the First Friday of the month – and that, of course, means that the financial world will revolve around the Labor Department’s Unemployment Report at 8:30 this morning. The consensus estimate is that the economy dropped another 90,000 non-farm jobs in August. However individual analyst estimates range anywhere from a 160,000 drop to a jobs INcrease of 75,000 jobs. Once again, the retirement of temporary government census jobs is getting the blame. The overall Unemployment Rate is expected to rise to 9.6 percent.
A couple of points of intrigue here – the White House has scheduled a speech at 10 o’clock – possibly to discuss either really good jobs news (or really bad.) Also, the late rally we saw in stocks yesterday may be indicative of a little short covering as the shorts try to protect themselves from a positive surprise in the number.
There must have been a lot of tax preparers eating donuts last quarter. Late yesterday, H&R Block and Krispy Kreme both turned in better than expected results for the past three months. Krispy Kreme earned 8 cents per share, which doubled estimates. Block lost 36 cents per share, which was a nickel better than expected.
Moderately positive numbers in most overseas markets overnight. We’re hovering right around the flat-line until the 8:30 Jobs Report.
At this point, adjusted for fair value, S&P 500 futures are down a half-point, the Dow futures are down 11, but the NASDAQ futures are just about even with fair value.
We’ll be hearing from the major retailers this morning about their August traffic, and so far, so good.
Costco led the parade with August same store sales up about 7 percent. That was better than expected. Also reporting better-than-expected sales were Macy’s, up 4.3 percent, and Limited, with sales up 10 percent versus the expected 7.3 percent.
Target was just a touch lower than expected, missing the estimated two percent increase by two-tenths of one percent. BJ’s Wholesale is also out with a disappointing report.
Shares of Burger King are set to sizzle a bit this morning. Burger King shareholders are being offered $24 per share by Investment company 3G. That’s about a 27 percent premium to yesterday’s close.
The European Central Bank, as expected, held short term interest rates unchanged at one percent this morning.
The July Factory Orders Report is due at 10 o’clock. Expect an increase there of four-tenths of one percent.
Our futures took a little turn higher about an hour ago, although the weekly Jobless Claims Report at 8:30 will likely determine our direction at 9:30. Most Asian markets rose overnight. European markets are essentially flat. At this point, adjusted for fair value, S&P 500 futures are up 1½, the Dow futures are up only 5 points, and the NASDAQ futures are 2 points above fair value.
September 1, 2010
It’s one of those blah-blah-blah mornings. By now, you’ve no doubt heard that August was the worst August we’ve seen in the stock market in 9 years. And how about the statistic that September has been the worst single month for stock returns over the past 20 years. And now, of course, even Tony Robbins has discovered that predicting financial disaster gets you lots of attention, which can eventually help sell books. Blah, blah, blah.
Let’s review some stats that might be a bit more relevant. This morning, the outplacement firm Challenger, Gray and Christmas released the results of their monthly survey of layoff announcements. Turns out that fewer jobs were cut in August than any month in the past ten years. The 34,000 reported layoff announcements were 65% lower than August 2009.
Mortgage applications were up 2.7 percent last month. Both purchase and refi apps were higher. The average interest rate of 4.43% was the lowest since the Mortgage Bankers Association survey has been around.
Heinz reported earnings that were two cents better than the 73 cent estimate.
On the famous flip-side, August Car Sales Reports will be coming in all day long. It’s expected to have been the slowest August for sales in 18 years.
Chinese stocks slipped a bit, but most other markets overseas are nicely higher. Not much of a fair value adjustment this morning, with S&P 500 futures are up almost 11 points, the Dow futures are up 78, and the NASDAQ futures are about 23 points above fair value.
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