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WJR September 2013 Reports


September 30, 2013

It’s the last day of the month, and of the quarter – and maybe of the Government of the United States. But, although September and the third quarter are unlikely to come back, we’ll likely be stuck with this Government for a while.

Stocks futures are sharply lower this morning as the hour of shutdown approaches. Although some sort of agreement is likely later this week, we’ll probably see some degree of Government disruption at midnight tonight as those we sent to Washington argue over how to spend someone else’s money. The Senate doesn’t convene until 2 o’clock this afternoon, presumably so that everyone gets a chance to finish a full 18 hole round this morning.

At 9:45 this morning, the Chicago PMI for September is expected to rise a bit to 54 from the August reading of 53. Anything over 50 indicates expansion of manufacturing activity in the U.S. Overnight, the PMI in China rose just a tenth of a point to 50.2. While that reflects slight expansion in Chinese manufacturing, it was a full point weaker than expected.

Shares of Panera Bread is lower this morning on a broker downgrade. The same broker upgraded Chipotle to overweight, no pun intended, I hope.

Japan and India were lower overnight, but the rest of Asia was a bit higher. Europe is seeing more red than green. We’ll start the morning in a significant hole as we wait for Washington to get its act together. At this point, adjusted for fair value, the S&P futures are lower by about 13 points, the Dow futures are down 118, and the NASDAQ futures are about 24 points below fair value.

September 27, 2013

The threat of a Government Shutdown, which in some ways sounds like a good idea, continues to rattle the markets around the world. We all know that stock prices are fundamentally a function of earnings and interest rates, so it’s easy to dismiss the shenanigans in Washington as a temporary phenomenon. However, it certainly would be nice to do without all the hysteria and grandstanding.

Speaking of hysteria, JC Penney shares continue to be the bouncing ball of the market. Shares dropped dramatically yesterday morning on a downgrade, only to bounce back on comments from the company that all was well. Last night, JC Penney’s controller resigned, and they announced a new offering of 84 million shares to be priced at $9.65 per share. Not exactly that type of move you make if “all is THAT well.” Accordingly, the stock is down about 7 percent pre-market to $9.67 per share.

The famous other hand belongs to Nike this morning. Nike announced 86 cents of operating profit last quarter. That was 8 cents better than expected on revenue that was 38% higher than a year ago.

The first reading on Consumer Sentiment comes from the University of Michigan at 9:55. Expect a pick-up a bit from the August reading of 76.8.

India and Japan were lower overnight, but the rest of Asia was higher. Most major European markets are lower. At this point, adjusted for fair value, the S&P futures are lower by about 7 points, the Dow futures are down 39, and the NASDAQ futures are about 11½ points below fair value.

September 26, 2013

Stock prices retreated for the fifth day in a row yesterday. That’s the longest daily losing streak so far this year, although in percentage terms it hasn’t been all that dramatic.

We’ll save the drama for shares of JC Penney this morning. Citigroup sooth-sayers now say that Penney stock might actually become just that. Citi lowered its target price to 7 bucks per share and set the floor on JC Penney at just one dollar per share. That would be the liquidation value. Although Penney is a ways away from that, traders are taking the news seriously, as Penney shares are indicated more than 10 percent lower pre-market at just over 9 bucks per share.

Bed, Bath and Beyond shares are more than 5 percent higher this morning, after a rosy earnings report last night.

At 8:30, the Government will publish the final verdict on third quarter Gross Domestic Product. Expect that they’ll lift the preliminary number from 2.5% to 2.6 percent. Weekly Jobless Claims, August pending Home Sales and the Kansas City Fed survey come later.

Japan was up one percent overnight, China down 2 percent, and although most of Europe is lower, our futures are pointing up. At this point, adjusted for fair value, the S&P futures are higher by almost 3 points, the Dow futures are up 32, and the NASDAQ futures are about 12 points above fair value.

September 25, 2013

Traders continued to back away from stocks yesterday as they look toward a possible government shutdown next week.  It’s still more likely that Congress will find a way to kick the proverbial can down the road once again, rather than actually doing something about the budget and the national debt. However, we do have a Senator standing up all last night in Senate session, reading nursery rhymes and whatnot to the country. Hard to believe that the public has such a low opinion of the folks in Washington. 

At 8:30 the August Durable Goods number is expected to have increased about one percent. That would be a lot better than July’s negative 7.4%, with was caused by a big falloff in aircraft orders.

Mortgage application rose 5½ percent last week as the average interest rate on the 30 year mortgage dropped to 4.62 percent. At 10 o’clock, the August New Home Sales are expected to have increased to an annualized level of 430,000. Bed Bath & Beyond will report quarterly results after 4 o’clock.

Most of the overseas markets that are trading are trading lower.

But once again this morning, we’re seeing very little movement in our futures. At this point, adjusted for fair value, the S&P futures are higher by nearly a point, the Dow futures are up 25, and the NASDAQ futures are a about 2½ points above fair value.

September 24, 2013

Just five trading days left in the quarter. And, of course, five trading days left until a possible government shutdown. Between that threat and a seemingly unending series of speeches from Federal Reserve officials, traders continue to send stock prices a bit lower.

If you sense some increase in your home’s market value, some confirmation may be available at 9 o’clock. The Case-Shiller National Home Price Index will be released. Overall, it’s expected to show about a12.4% increase in home prices year-over-year. Of course, real estate values are always a local story, so your mileage may vary. 

Speaking of single-family housing, home builder Lennar reported quarterly profits of 54 cents per share this morning. That was 9 cents better than expected, and 14 cents higher than a year ago, on strength in demand for single family housing.

Applied Materials will merge with Tokyo Electron on a stock-for-stock deal. AMAT shareholders will own a little more than two-thirds of the combined company. And, Fairfax Financial has offered 9 bucks per share to buy Blackberry. Fairfax already owns a bunch of Blackberry shares bought at much higher prices, and financing for the 4.7 billion dollar offer may not yet be in place, so don’t count your chickens on that one.

Our futures are indicating that we’ll get off to a flying stop this morning. Generally, slightly lower prices appear to be in the offing. At this point, adjusted for fair value, the S&P futures are down about 3 points, but the Dow futures are up 5½, and the NASDAQ futures are a little less than 2 points above fair value.

September 23, 2013

It’s been 80 years since hedge funds have been allowed to advertise to the general public. But as of today, print, broadcast and Internet advertising is fair game for the hedgies. Evidently, Government regulators believe that the general public has gotten so savvy that they’ve never gotten into an expensive or unsuitable investment because of what they heard on the radio, saw on TV or read in print or on the internet. Either that, or they have concluded that if you’re rich enough to qualify to get into a hedge fund, you should be responsible for yourself. Either way, it’s great news for the ad-sellers, especially with high-net-worth users.

The Federal Reserve officials are out on the speaking circuit today. A little Fed speak on Friday sent stock prices down a long way. And, of course, it was Black Friday for Blackberry. The cell-phone maker is cutting 4,500 jobs, basically giving up on the consumer market and possibly looking for someone that wants to buy its technology. Perhaps a museum would be interested. Or a hedge fund.

A new Microsoft Sur>

Overseas markets are mostly lower, although China rose a percent and a half. Our futures were nicely higher most of the morning, but have been headed south ever since.  At this point, adjusted for fair value, the S&P futures are down by 3½ points, the Dow futures are higher by 18, probably pumped up by prospects for the three new stocks added to the Index today, and the NASDAQ futures are almost 4 points below fair value.

September 20, 2013

It’s been an interesting month, to say the least. But now that Ben Bernanke has settled our monetary policy, Vladimir Putin has determined our Syrian policy and Larry Summers has, well, eliminated Larry Summers as something we should be concerned about, it looks like clear sailing for the stock market. At least until next week, when we start considering the debt limit, the budget deficit, Obamacare and the next big crisis we don’t see coming just yet.

Today, no fewer than 4 senior Fed officials will be out on the speaking circuit. Perhaps the most interesting insight will come from Kansas City Fed President Esther George, who was the strongest dissenter in this week’s Fed policy decision.

Darden Restaurants is out with a fairly unappetizing earnings report. Quarterly profit of only 53 cents per share fell 17 cents short of estimates. Darden announced a new cost-cutting effort and traders are cutting their losses this morning, as Darden shares are off about 5½ percent. 

Goodyear has reaffirmed full year guidance and reinstituted its dividend.

The Indian Central Bank raised its benchmark interest rate overnight from 7¼ to 7½ percent under a new Central Bank head.

Overseas markets are mixed. Our futures were nicely higher most of the morning, but have taken a bit of a dip during the past half hour.  At this point, adjusted for fair value, the S&P futures are up a fraction, the Dow futures are up 14, and the NASDAQ futures are about 5 points above fair value.

September 19, 2013

The big Fed monetary policy statement came at 2 o’clock yesterday. Just about all the so-called “experts” said that the Fed would start pulling back on its stimulus program. Two lessons to be learned here – firstly, nobody can predict the future and secondly, those who HAVE the inside insight aren’t talking. And nobody else is worth listening to.

In any event, the Fed said that the economy is still too weak to stand on its own, so the Government will continue to buy bonds from the Government, stock prices will continue to go up for now, and if you’re counting on an actual return on your money market fund or your CDs, stay in good health, because you may have to live a long time.

Helping more people live a long time is drug-store chain Rite Aid. They announced a surprise quarterly profit this morning and raised full-year guidance to 22 cents from 15 cents. Rite-Aid shares are higher by 13 percent pre-market. Agilent shares are higher by 10 percent on word that the company will split into two separate companies. Oracle shares are off slightly on a weak quarterly forecast.

Overseas stocks are on the rise on the heels of the Fed announcement yesterday.

Our futures are pointing higher once again, although they are well off their highs of the morning. At this point, adjusted for fair value, the S&P futures are up nearly 4½ points, the Dow futures are up 30, and the NASDAQ futures are about 7 points above fair value.

September 18, 2013

Some people who won’t watch professional basketball until the last two minutes of the game. Same thing goes for the stock market today. No matter what happens before 2 o’clock really won’t much matter.

At 2 o’clock, we’ll get the Federal Reserve’s decision on the future of monetary stimulus. In the old days, they use to announce the decision on short term interest rates. However, short term rates aren’t going anywhere for the next year or more. The Fed has been artificially suppressing long-term rates by buying Treasury Bonds and mortgage backed bonds at the rate of 85 billion dollars per month. Everyone expects that today they will announce a reduction of 5 to 15 billion per month in that purchase program of Treasuries. Any cutback in the purchase of mortgage bonds could lead to an unwelcomed slowdown in the housing market.

FedEx announced better-than-expected revenue and profit this morning. FedEx shares are almost 3 percent higher pre-market. Last night,  Adobe Systems reported a disappointing quarter for profits, but cloud subscriptions were going well, and Abode stock is higher by about 5% pre-market.

A number of markets overseas are closed today, but the markets that are open are generally a little higher. At this point, our futures are looking higher by about as much as they were 24 hours ago. Adjusted for fair value, the S&P futures are up 2 points, the Dow futures are up 27, and the NASDAQ futures are about 10 points above fair value.

September 17, 2013

We’ve officially entered the last two weeks of the third quarter. Traders will be on the lookout for companies that might want to take this opportunity to pre-announce sales or earnings shortfalls. Although profits have been decelerating, they held up pretty well against estimates in the second quarter. 

At 8:30, we’ll find out how your purchasing power is holding up, at least according to Government calculations. The August Consumer Price Index is expected to have increased only two-tenths of a percent, and only one-tenth of a percent if you ignore food and energy costs.

We’ll see if we can extend the end-of-Summers rally to a second day. Of course, tomorrow’s news from the Federal Reserve will be the tipping point of the week. It’s widely expected that the Fed will start slowing the rate of monetary steroids it’s pumping into the system, perhaps cutting their bond buying spree from 85 billion to 70 billion per month.

JP Morgan is reportedly close to agreeing to an 800 million dollar fine and actually admitting wrongdoing in the “London Whale” affair.

A bunch of overseas markets are closed today. But most of those that are open are a little lower. China is off more than 2 percent. We’re looking a bit better than that. At this point, adjusted for fair value, the S&P futures are up almost a point, the Dow futures are up 31, and the NASDAQ futures are about 13 points above fair value.

September 16, 2013

Traders are cheering the news that Larry Summers has withdrawn his name from consideration as the next Chairman of the Federal Reserve. Summers possible nomination, which may have been the culmination of a political deal made long ago, >

So, the presumptive nominee status now falls to Janet Yellen. Yellen is generally regarded as dovish on interest rates and the thought is that, if given the power, she will continue monetary policy in a very Bernanke-like manner. No matter, stock futures are surging and the Dow Industrials and S&P 500 should open the morning at all-time highs.

The August Industrial Production and Capacity Utilization numbers come out just 15 minutes before the market opens this morning. But make no mistake – this week it’s all about interest rates and the Federal Reserve policy. We’ll know much more about both by Wednesday afternoon.  This morning, the rate on the 10 year Treasury is down to 2.82%.

Stocks were slightly lower in China overnight, but just about everybody else of any consequence overseas are higher. Our futures have been deep in the green all morning, and really haven’t moved much. At this point, adjusted for fair value, the S&P futures are higher by more than 19 points, Dow futures are up 185, and the NASDAQ futures are about 32 points above fair value.

September 13, 2013
Yesterday’s very strong unemployment report was taken with a very liberal grain of salt. Computer issues at the state level reportedly skewed the new claims number lower, so we’ll have to wait until next Thursday to get a good indication of just where that Job Market might be headed.

Hopefully, the Labor Department can give us a more reliable number for August Producer Prices at 8:30. Expect an increase of just a tenth of a percent. Retail Sales and Business Inventory Reports are also due, along with the University of Michigan’s first look at September Consumer Sentiment, which is expected to be down a tenth from August’s level of 82.1.

Facebook’s target price was raised at two banks this morning, while Apple had its target lowered at another.

And if you want to feel better about today, just remember that 5 years ago this weekend, Lehman Brothers was about to fail, bought on by huge overleverage born of an ill-advised Government housing policy and lack of basic financial judgment.  That triggered a giant financial crisis, the likes of which we will hopefully not, but probably will, see again.

It’s one of those mornings when the futures can be easily misread. Although they look only modestly higher on their >

September 12, 2013

The Dow Jones Industrial Average chalked up its third triple-digit advance in a row yesterday, after a pretty quiet start. The S&P 500 Index, which is, of course, a somewhat better gauge of the overall stock market, has now risen seven sessions in a row.

Not rising this morning are the shares of a couple of clothing retailers. Yesterday, Men’s Wearhouse reported adjusted earnings of $1.01 per share. That was 13 cents short of estimates. Moreover, they lowered full year guidance by 30 cents and traders have lowered the price of the stock by more than 14 percent pre-market.

Lululemon may no longer have pants that you can see through, but analysts did not see what they wanted to see in the profit picture. Last quarter’s 39 cents beat the 35 cent estimate, but full-year guidance was lowered to $1.97 at best, which was at least 2 cents lower than expected. Lululemon shares are looking about 8 percent lower this morning.  

Weekly Jobless claims at 8:30 are expected to rise a bit to 330,000.

Overseas markets are mixed, but our futures, which had been pretty flat most of the morning, took a little jump higher within the past hour. Adjusted for fair value, the S&P futures are now flat, Dow futures are up 12, and the NASDAQ futures are 3 points above fair value.

September 11, 2013

Of course, we all remember where we were 12 years ago today. And while we pause to remember the events of that day, the current day should be pretty quiet as far as market-moving economic news is concerned. The July Wholesale Inventories number comes at 10 o’clock, and that’s about it.

By the way, 12 years ago, the Standard and Poor’s 500 Index stood at 1,092. This morning, even after a couple of dramatic market meltdowns in the interim, we’ll start out around 1,680 on the S&P – more than 50 percent higher.

We found out last week that Verizon will buy up Vodaphone’s interest in Verizon Wireless, motivated in part by currently low interest rates. This morning, it’s reported that investor demand for Verizon bonds that will be issued to raise the cash is extremely strong. That bond offering is expected to be the largest ever – perhaps as high as 49 billion dollars.

Men’s Wearhouse will release earnings today. It will be the first since the June ouster of its CEO George Zimmer. It should be interesting – I guarantee it.

Overseas markets are narrowly mixed. Our futures floated around the flat line for most of the morning, but have taken a slight turn for the worse during the past hour. Right now, adjusted for fair value, the S&P futures are down about 2 points, Dow futures are down 12, and the NASDAQ futures are about 13 points below fair value.

September 10, 2013

Improving economic reports from around the world and the prospect of a non-military way out of our stop-and-go-and-stop Syrian policy propelled the stock market to its best day in about 8 weeks yesterday. Looking at the futures this morning, the party doesn’t appear to be over just yet.

More economic support this morning comes out of China. August Industrial Production in China rose 10.4%, and Retail Sales rose 13.4 percent. Both of those results were better than expected and Chinese stocks rose about a percent and a half overnight, after a very strong day yesterday. 

Bank of America will be cutting 2,100 jobs in its mortgage business, as rising rates, which are likely to rise even more, are having a predictable impact on mortgage applications.

McDonald’s operating results in the U.S. were disappointing, at just a two-tenths of a percent increase. That was far lower than the 1.1 percent expected. Worldwide sales, however, were up 1.9 percent. That was far better than expected, and McDonald’s shares are on the rise pre-market.

Apple’s supposedly big iphone event comes at 1 o’clock. Overseas we have green arrows across the board. Right now, adjusted for fair value, the S&P futures are higher by 9½ points, Dow futures are up 74, and the NASDAQ futures are about 16 points above fair value.

September 9, 2013

It’s been a pretty quiet morning for news that might move stock prices. Corporate earnings reports have slowed to a trickle. But that doesn’t necessarily mean that we’ll have a quiet week ahead.

One big merger was just announced. Molex is to be acquired by Koch Industries for $38.50 per share. Molex closed Friday at $29.34.

The prospects of military action against Syria, whether with Congressional approval or not, will keep things interesting. The President will give the nation a prime-time talking to, but it will come tomorrow night, as the President knows that no matter where the public stands on Syria, they don’t want Monday night football interrupted.

And even though the next federal Reserve Open Market Committee meeting won’t take place until next week, chatter about a possible change in economic policy will have us on edge.

There’s a report on July Consumer Credit coming at 3 o’clock, but that’s it for economic reports today.

Chinese stocks rose more than 3 percent overnight, Japan up 2 percent. Europe is more of a mixed picture, but our futures have been higher all morning long. Right now, adjusted for fair value, the S&P futures are higher by almost 4 points, Dow futures are up 29, and the NASDAQ futures are almost 12 points above fair value.

September 5, 2013

Yesterday’s car sales numbers were an absolute blowout. Through a quirk of the calendar, this year’s August auto sales report included the Labor Day weekend. But even with that artificial boost, sales volume was much better than expected, and helped the stock market to a very strong performance.

For the rest of the week, the focus turns to jobs. The ADP Employment report is due in about one minute. It’s expected to reveal creation of 177,000 new private sector jobs in August. That would be down from July’s 200,000. Of course, tomorrow, we’ll see if the Labor Department confirms that level of new job creation. 

The Bank of England and the European Central Bank both held interest rate policy steady this morning as they wait for our Fed to lead the way.

And of course, the Senate will now take up the question of whether or not this country will slap the Syrian Government on the wrist. Expect that any votes authorizing a strike will not be good news for the market.

Chinese stocks were a bit lower overnight, but most other markets overseas are higher. We are so far pointing just slightly higher. Adjusted for fair value, the S&P futures are higher by a little less than 2 points, Dow futures are down 3, but the NASDAQ futures are about 7 points above fair value.

September 4, 2013

We had a pretty good rally working yesterday until some Republican leaders voiced support for President Obama’s plan to strike Syria. That ignited oil prices and chilled out stock prices which settled out only slightly higher.

But, today is another day, and August automobile sales reports will be rolling out as this day unfolds. Expect about a 13 percent sales increase from a year ago. Then at 2 o’clock this afternoon, the Federal Reserve will release its latest survey of regional economic conditions. Known as the “Beige Book” traders will be searching for any big increase in economic strength that might give the Fed an excuse to ease off on its monetary stimulus program. As counter-intuitive as it may seem, signs of economic weakness may give stock prices a boost.

Mortgage applications rose last week for the first week in four, as the average rate on the 30 year fixed dropped a bit to 4.73 percent.

Asian markets were mixed overnight, but Europe is losing ground at this hour. We are apparently in wait-and-see mode, although our futures have been slightly weaker all morning long.

Adjusted for fair value, the S&P futures are down a fraction of a point, Dow futures are down 14, but the NASDAQ futures are a little more than a point above fair value.

September 3, 2013

We’ll start the last month of the quarter with a short week of trading. And given that the prospect of promised action against Syria has now morphed from a military response into a political football, it looks as if traders will look to recover some of last week’s losses.

The star stock of that recovery will likely be Nokia. They will be selling their handset business to Microsoft for 7.2 billion dollars and traders approve, as Nokia shares are higher by almost 45 percent pre-market.  Microsoft is lower by about 4½ percent.

CBS and Time Warner Cable have settled their dispute over carriage charges, as expected, just in time for the start of regular season professional football.

And Verizon will pay 130 billion dollars in cash and stock to buy Vodaphone’s stake in Verizon Wireless. It will now be interesting to see if AT&T makes a play for a more cash rich, slimmed down Vodaphone.

The August ISM Manufacturing Index is expected to ease off to 54 from the July reading of 55.4. We’ll find out at 10 o’clock. Overnight the Australian Central Bank held rates steady. Asia markets were mostly higher. Europe is a little lower. Our futures have been higher all morning long.

Adjusted for fair value, the S&P futures are up by 13 points, Dow futures are up about 83, and the NASDAQ futures are about 20 points above fair value.

WJR October 2013 Reports
WJR August 2013 Reports

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