Stock Market closes up for the year
By Rick Paler
The trading year ended with little fanfare as many traders were on vacation and there was no major corporate news released. The economic data released this week did not impact the market and market volume was low.
In corporate news no companies reported earnings. In retail, MasterCard International reported that holiday sales seemed to increase in the final weeks of the holiday shopping season. MasterCard reported an 8.1% rise in spending from last year. Analyst had estimated that holiday spending would increase only 4.5% over last year’s strong numbers. This should support the retail sector going into next year.
Wal-Mart Stores (WMT) announced that they saw an increase in store traffic in the final week of shopping. The company now expects their December same-store sale to come in towards the middle of their prior reduced forecast of 1% - 3% sales growth.
Amazon.com (AZMN) reported that they had the busiest season ever. The company reported that it had set a one day sales record of 2.8 million units ordered.
Pfizer (PFE) was in the news again this week as the FDA approved Lyrical. Lyrica is the first FDA approved treatment for the depilating forms of pain caused by nerve damage resulting from diabetes or shingles. The Wall Street Journal also reported that sales of the arthritis pain reliever Celebrex fell 56%, after a study indicated a possible link to heart problems. Some are now questioning the study, since the study was using twice the recommended dose and another recent study released indicated that there was no link to heart problems.
Economic news this week was light. Following last weeks better than expected consumer sentiment report the Conference Board reported that consumer confidence surged to 102.3 in December, well above economist estimates of 94.0. The reading indicates that consumers are more optimistic about the economy as oil prices drop, job growth increases and the stock market posted a gain for the year. The positive news is a plus for the stock market going into 2005.
The Chicago PMI fell to 61.2 below the estimates of 65.2, but still well into the range of an expanding economy. Any number greater than 50 indicates an expanding economy while any number less than 50 indicates a contracting economy.
Bond trading was also light due to the holiday and no major news releases. Bond yield closed lower across the board compares to last month. The 5 year Treasury notes yield closed at 3.60% versus last months 3.69%. The 10 year note closed at 4.21% down from 4.35%. While the 30 year Treasury bond closed the month at 4.82% versus Novembers 5.00%.
Over the next few weeks both institutional portfolio managers and individual investors will continue to evaluate their existing portfolio holdings making important changes in their composition and allocations as they look for what will be 2005’s hot sectors and losers.
The all important fourth quarter earnings season will begin shortly and the current consensus is that earnings for the S&P 500 will grow by 15%. I would not be surprised if the final number is north of 15%. As for 2005 it is my belief that it will continue to be a stock pickers market were active professional management will outpace the indexes.
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Friday, December 31, 2004
Friday, December 24, 2004
Weekly Market Review 12-24-2004
Vioxx, Celebrex and now Aleve linked to heart problems
By Rick Paler
Overall this week’s market was nothing to write home about. As expected market action was very light due to the shortened holiday week. Big Pharma continued to take it on the chin this week, as another pain reliever was linked to heart attacks and strokes. There was little in the way of corporate news or earnings releases this week. Economic news for the week was light and uneventful.
In corporate news Pfizer (PFE) announced that it will halt the advertising of Celebrex, its blockbuster arthritis drug, after an ongoing study indicated the drug, a COX-2 Inhibitor was linked to an increase in heart problems in patients that took very high doses. But unlike Merck’s (MRK) Vioxx, Pfizer said that they would not pull the drug from the market. Additionally, this week a study was released that showed that Bayer AG‘s (BAY) over the counter pain reliever Aleve was linked to heart problems. At the same time, the same study indicated that Celebrex did not increase the likelihood of heart attacks or stroke and had the same results as the placebo.
Fannie Mae (FNM) reported this week that the CEO and CFO were forced to resign after major accounting problems were revealed. This will cause the company to restate earnings by as much a $9 billion. The new CEO Daniel Mudd and CFO Robert Levin immediately announced that the company had fired KPMG as the company’s independent auditor.
IAC/InterActive Corp (IACI) announced that the company would spin off Expedia.com. The travel related unit includes Expedia.com, Hotels.com and TripAdvisor. The company said it would maintain Ticketmaster, LendingTree, Evite and Match.com.
Insurance company PartnerRe Ltd. (PRE) has announced an accelerated share repurchase plan of 2 million shares. The share will be repurchased from Deutsche Bank AG (DB) on December 30.
Cell phone chip maker Qualcomm (QCOM) raised its first quarter guidance to $0.26 to $0.28 per share from a prior $0.24 to $0.26 per share. The company cited strong growth in networks using the company’s CDMA technology.
Cognizant Technology Solutions Corp. (CTSH) announced that it will be added to the NASDAQ-100 Index starting December 29, 2004. The IT service company’s President and CEO Lakshmi Narayanan said “We are the only IT Services firm on the list, and we are the first and only offshore firm to be included in the NASDAQ-100.”
In economic news, the final GDP was revised upwards to 4.0% from 3.9% and above what economist had estimated. The final University of Michigan Consumer Sentiment report for December came in above estimates, with a reading of 97.1 from the original reading of 95.7. The continuing positive economic data shows that the economy continues to improve and should continue its expansion well into 2005.
The slow week combined with economic data that did not overly surprise allowed bond rates to move very little. The 5 year Treasury note was unchanged from the prior week closing at 3.56%. While both the 10 year Treasury note and 30 year bond yields were fractionally higher, closing at 4.20% and 4.83% respectively.
Next week will be another very quite week with no earnings reports or major economic data being released. One point of interest is the fact that on a historical basis the final four days of trading combined with the first two of the New Year have averaged a return of 1.5% since 1950.
By Rick Paler
Overall this week’s market was nothing to write home about. As expected market action was very light due to the shortened holiday week. Big Pharma continued to take it on the chin this week, as another pain reliever was linked to heart attacks and strokes. There was little in the way of corporate news or earnings releases this week. Economic news for the week was light and uneventful.
In corporate news Pfizer (PFE) announced that it will halt the advertising of Celebrex, its blockbuster arthritis drug, after an ongoing study indicated the drug, a COX-2 Inhibitor was linked to an increase in heart problems in patients that took very high doses. But unlike Merck’s (MRK) Vioxx, Pfizer said that they would not pull the drug from the market. Additionally, this week a study was released that showed that Bayer AG‘s (BAY) over the counter pain reliever Aleve was linked to heart problems. At the same time, the same study indicated that Celebrex did not increase the likelihood of heart attacks or stroke and had the same results as the placebo.
Fannie Mae (FNM) reported this week that the CEO and CFO were forced to resign after major accounting problems were revealed. This will cause the company to restate earnings by as much a $9 billion. The new CEO Daniel Mudd and CFO Robert Levin immediately announced that the company had fired KPMG as the company’s independent auditor.
IAC/InterActive Corp (IACI) announced that the company would spin off Expedia.com. The travel related unit includes Expedia.com, Hotels.com and TripAdvisor. The company said it would maintain Ticketmaster, LendingTree, Evite and Match.com.
Insurance company PartnerRe Ltd. (PRE) has announced an accelerated share repurchase plan of 2 million shares. The share will be repurchased from Deutsche Bank AG (DB) on December 30.
Cell phone chip maker Qualcomm (QCOM) raised its first quarter guidance to $0.26 to $0.28 per share from a prior $0.24 to $0.26 per share. The company cited strong growth in networks using the company’s CDMA technology.
Cognizant Technology Solutions Corp. (CTSH) announced that it will be added to the NASDAQ-100 Index starting December 29, 2004. The IT service company’s President and CEO Lakshmi Narayanan said “We are the only IT Services firm on the list, and we are the first and only offshore firm to be included in the NASDAQ-100.”
In economic news, the final GDP was revised upwards to 4.0% from 3.9% and above what economist had estimated. The final University of Michigan Consumer Sentiment report for December came in above estimates, with a reading of 97.1 from the original reading of 95.7. The continuing positive economic data shows that the economy continues to improve and should continue its expansion well into 2005.
The slow week combined with economic data that did not overly surprise allowed bond rates to move very little. The 5 year Treasury note was unchanged from the prior week closing at 3.56%. While both the 10 year Treasury note and 30 year bond yields were fractionally higher, closing at 4.20% and 4.83% respectively.
Next week will be another very quite week with no earnings reports or major economic data being released. One point of interest is the fact that on a historical basis the final four days of trading combined with the first two of the New Year have averaged a return of 1.5% since 1950.
Friday, December 17, 2004
Weekly Market Report 12-17-2004
Interest rates, mergers and Pfizer dominate market
By Rick Paler
This week we saw the Federal Reserve raise interest rates as I had projected. Corporate mergers continue to be announced, which is a positive for the market. The biggest news of the week, although negative was Pfizer. Economic data was favorable and continues to show an expanding economy.
On Tuesday the FOMC had their meeting and as I had expected they continued with their policy of interest rate hikes to fend off inflation. The Federal Reserve raised interest rates another 25 basis points bringing the Federal Funds rate to 2.25%. The closely watched policy statement said “Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity.” This was the fifth increase since June of this year. Going into next year it is my expectation that the Federal Reserve will continue with removing its policy of accommodation at a measured pace. The next FOMC meeting is in February and based on the current economic data I anticipate another 25 basis point increase in the Fed funds rate.
Mergers seem to be the in thing to do. After last weeks announcement that Johnson & Johnson (JNJ) would be purchasing Guidant (GDT), Sprint (FON) announced that they have agreed to acquire Nextel Communications (NXTL). The $35 billion dollar deal would make Sprint the third largest wireless carrier behind Cingular Wireless and Verizon Wireless (VZ). Additionally a Vodafone (VOD) spokesperson denying rumors, said they were not planning to make a bid for Sprint.
It was reported this week that Symantec Corp. (SYMC) has been in negotiations for the last month to purchase Veritas Software (VRTS) for more than $13 billion. Shareholders of Veritas would receive 1.1242 shares of Symantec in the all-stock deal.
After a heated battle that began over a year ago Oracle (ORCL) signed an agreement to purchase PeopleSoft (PSFT) for $10.3 billion or $26.50 per share. The deal topped what they had called their final bid of $24 per share. The deal should close early next year. Additionally Oracle announced that their second quarter net income surged 32% to $815 million or $0.16 per share, well ahead of Wall Streets estimates of $0.13 per share. The company issuing third quarter guidance said it expects earning per share of $0.14 - $0.15 per share. Analysts are projecting $0.14 per share.
I view the recent increase in merger activity as a positive for the market and just the beginning of what might be an on slot of consolidation. After cutbacks in corporate spending, increases in productivity and slow hiring, during a period of expanding earnings corporations are flush with cash. Companies can do several things with the large amount of cash they are sitting on. They can use it to improve their operations infrastructure, retire long term debt, increase the dividends paid out to share holders, buy back their company shares or go shopping for acquisitions.
We have already seen corporations increasing their dividends and share buy back programs. It is my belief that many corporations are also looking for acquisition targets that would improve their market place share and provide overall cost savings.
The big corporate news this week was the announcement that Pfizer’s (PFE) arthritis drug Celebrex had been linked to increased heart risks when taken in very large doses. The study was based on patients taking between 400mg and 800mg of the drug. Most patients are taking only 100mg to 400mg and in very rare instances are given the amount used in the study. The study does put into question the entire class of Cox-2 inhibitors that are manufactured by several drug companies. Merck (MRK) had recently pulled their Cox-2 inhibitor Vioxx from the market.
Wal-Mart Stores (WMT) continues to disappoint as the company maintained their sales forecast for December of only 1% to 3% growth. The company said that their food sales remain strong but their general merchandise was not as strong. Wal-Mart recently lowered prices on many holiday gift items in an attempt to spur sales after the company started of the holiday sales season poorly.
Best Buy (BBY) reported that their net income increased 21% to $148 million or $0.45 per share which was ahead of analysts estimated by a penny. The company also announced their forth quarter guidance of $1.56 to $1.66 per share. Analysts are expecting earnings of $1.62 per share.
In economic news, retail sales for November were better than expected. The report said that retail sales for November increased 0.1% while economist had estimated a drop of 0.1%. The October number was also revised upwards from the original report of a 0.2% increase to a 0.8% increase.
This week both the Empire Manufacturing Index and the Philadelphia Fed’s Business Activity Index for December showed strong gains, coming in well above what economist had estimated. The strong numbers show that the economy is strong and continues to expand. Based on the overall all strong economic data reported for the fourth quarter I would expect the fourth quarter GDP number to come in around the 4.0% range which could provide additional stimulus for the market going into 2005.
In bond market news traders reacted after the Federal Reserve increased the Fed Funds rate by pushing bond yields higher on the short end of the yield curve, while the long end was down fractionally. This is because the shorter maturities bonds react quicker to interest rate changes. The 5 year Treasury note closed yielding 3.56% and the 10 year note was also yielding more at the close of the week, closing at 4.17%. The 30 year bond closed at 4.80% down from last week’s close of 4.81%.
Next week should be another slow week since many traders are leaving early for the holidays. There are no earnings announcements scheduled for the week and a few economic reports. Some of the economic reports due to be released are the final third quarter GDP, and Consumer Confidence report.
In closing, I would like to wish you and your family a wonderful holiday and prosperous New Year.
By Rick Paler
This week we saw the Federal Reserve raise interest rates as I had projected. Corporate mergers continue to be announced, which is a positive for the market. The biggest news of the week, although negative was Pfizer. Economic data was favorable and continues to show an expanding economy.
On Tuesday the FOMC had their meeting and as I had expected they continued with their policy of interest rate hikes to fend off inflation. The Federal Reserve raised interest rates another 25 basis points bringing the Federal Funds rate to 2.25%. The closely watched policy statement said “Committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity.” This was the fifth increase since June of this year. Going into next year it is my expectation that the Federal Reserve will continue with removing its policy of accommodation at a measured pace. The next FOMC meeting is in February and based on the current economic data I anticipate another 25 basis point increase in the Fed funds rate.
Mergers seem to be the in thing to do. After last weeks announcement that Johnson & Johnson (JNJ) would be purchasing Guidant (GDT), Sprint (FON) announced that they have agreed to acquire Nextel Communications (NXTL). The $35 billion dollar deal would make Sprint the third largest wireless carrier behind Cingular Wireless and Verizon Wireless (VZ). Additionally a Vodafone (VOD) spokesperson denying rumors, said they were not planning to make a bid for Sprint.
It was reported this week that Symantec Corp. (SYMC) has been in negotiations for the last month to purchase Veritas Software (VRTS) for more than $13 billion. Shareholders of Veritas would receive 1.1242 shares of Symantec in the all-stock deal.
After a heated battle that began over a year ago Oracle (ORCL) signed an agreement to purchase PeopleSoft (PSFT) for $10.3 billion or $26.50 per share. The deal topped what they had called their final bid of $24 per share. The deal should close early next year. Additionally Oracle announced that their second quarter net income surged 32% to $815 million or $0.16 per share, well ahead of Wall Streets estimates of $0.13 per share. The company issuing third quarter guidance said it expects earning per share of $0.14 - $0.15 per share. Analysts are projecting $0.14 per share.
I view the recent increase in merger activity as a positive for the market and just the beginning of what might be an on slot of consolidation. After cutbacks in corporate spending, increases in productivity and slow hiring, during a period of expanding earnings corporations are flush with cash. Companies can do several things with the large amount of cash they are sitting on. They can use it to improve their operations infrastructure, retire long term debt, increase the dividends paid out to share holders, buy back their company shares or go shopping for acquisitions.
We have already seen corporations increasing their dividends and share buy back programs. It is my belief that many corporations are also looking for acquisition targets that would improve their market place share and provide overall cost savings.
The big corporate news this week was the announcement that Pfizer’s (PFE) arthritis drug Celebrex had been linked to increased heart risks when taken in very large doses. The study was based on patients taking between 400mg and 800mg of the drug. Most patients are taking only 100mg to 400mg and in very rare instances are given the amount used in the study. The study does put into question the entire class of Cox-2 inhibitors that are manufactured by several drug companies. Merck (MRK) had recently pulled their Cox-2 inhibitor Vioxx from the market.
Wal-Mart Stores (WMT) continues to disappoint as the company maintained their sales forecast for December of only 1% to 3% growth. The company said that their food sales remain strong but their general merchandise was not as strong. Wal-Mart recently lowered prices on many holiday gift items in an attempt to spur sales after the company started of the holiday sales season poorly.
Best Buy (BBY) reported that their net income increased 21% to $148 million or $0.45 per share which was ahead of analysts estimated by a penny. The company also announced their forth quarter guidance of $1.56 to $1.66 per share. Analysts are expecting earnings of $1.62 per share.
In economic news, retail sales for November were better than expected. The report said that retail sales for November increased 0.1% while economist had estimated a drop of 0.1%. The October number was also revised upwards from the original report of a 0.2% increase to a 0.8% increase.
This week both the Empire Manufacturing Index and the Philadelphia Fed’s Business Activity Index for December showed strong gains, coming in well above what economist had estimated. The strong numbers show that the economy is strong and continues to expand. Based on the overall all strong economic data reported for the fourth quarter I would expect the fourth quarter GDP number to come in around the 4.0% range which could provide additional stimulus for the market going into 2005.
In bond market news traders reacted after the Federal Reserve increased the Fed Funds rate by pushing bond yields higher on the short end of the yield curve, while the long end was down fractionally. This is because the shorter maturities bonds react quicker to interest rate changes. The 5 year Treasury note closed yielding 3.56% and the 10 year note was also yielding more at the close of the week, closing at 4.17%. The 30 year bond closed at 4.80% down from last week’s close of 4.81%.
Next week should be another slow week since many traders are leaving early for the holidays. There are no earnings announcements scheduled for the week and a few economic reports. Some of the economic reports due to be released are the final third quarter GDP, and Consumer Confidence report.
In closing, I would like to wish you and your family a wonderful holiday and prosperous New Year.
Friday, December 10, 2004
Weekly Market Report 12-10-2004
IBM sells its PC division
By Rick Paler
Not much happened this week as Wall Street prepares for the end of the year and 2005. This week Johnson and Johnson announced the largest purchase in the company’s history and IBM sold its PC to a Chinese based company. Oil continued its decline from record highs and the PPI number was higher than economist estimated.
It was a quite week in regards to corporate news with the only major news coming from Johnson & Johnson and IBM. It was revealed this week that Johnson & Johnson (JNJ) was in advanced talks with Guidant Corp. (GDT) to purchase the company. The board of directors of each company will be meeting over the weekend to work out the final approval of the deal and it is expected to fetch $75.00 per share for shareholders of Guidant. The purchase of Guidant would help Johnson & Johnson in the fast growing market of defibrillators, pacemakers and should help their coronary stent business. The deal would be the largest in the 118 year history of Johnson & Johnson.
As I had written about last week International Business Machines (IBM) announced that they were selling their PC division to China’s largest PC marker Lenovo Group (LNVGY) for $1.75 billion. IBM would still maintain an 18.9% stake in Lenovo. Once the deal is completed it would make Lenovo the third largest PC maker behind Dell (DELL) and Hewlett-Packard (HPQ). Lenovo said that they would move their headquarters from China to New York City. The move allows IBM to further enhance its higher margin businesses.
Proctor & Gamble (PG) confirmed that it was comfortable with analyst earnings estimates for the company’s second quarter of $0.71 to $0.72 per share and 2004 earnings of between $2.25 and $2.35 per share. The company also reaffirmed its long term sales growth target of 4% to 6%. Chairman, President and CEO A.G. Lafley said “We’re confident we have the strategies, brands, innovation pipeline and new market opportunities to sustain our strong growth.” Proctor & Gamble has 16 brands that have sales of a billion dollars and another 10 that have sales over one-half billion in sales.
Another consumer product company was in the news this week. Colgate-Palmolive (CL) announced that they would cut their work force by 12% or approximately 4,440 employees. The move is expected to save the company $250 million to $300 million after taxes annually by the fourth year. The company also reaffirmed its fourth quarter 2004 and full year 2005 guidance.
In economic news oil continued its decline from all time highs above $50.00 per barrel a short time ago, by closing the week lower at $40.70. This despite word from OPEC that it would cut production by 1 million barrels a day. Some energy analysts are suggesting that oil prices could drop lower in coming weeks.
Final Non-farm productivity for the third quarter came in below economist estimates of 2.0%. The released number showed that productivity grew at 1.8%. Productivity gains have been strong in past months. This has allowed companies to raise wages and limit hiring while not having to raise prices.
A large than anticipated rise in the November Producers Price Index, which measures inflation, had traders concerned. But after reviewing the core rate which excludes energy and food, trader’s fears of run away inflation were subdued. The PPI for November rose 0.5% after October’s sharp rise. Economist had expected an increase of just 0.1%. Year over year the PPI is up 5.0%, which is the largest increase in 15 years.
Next week, the Federal Open Market Committee will be meeting on Tuesday and after the release of this week PPI numbers the Federal Reserve will more than likely continue their policy of raising interest rates. I would anticipate the Federal Reserve to raise the Fed Funds rate another 25 basis points bringing the rate to 2.25% from this the low earlier this year of 1.0%.
Bond yields were oddly lower this week even with the streets anticipation that rates will be raised next week. The 5 year Treasury note closed at 3.51% and the 10 year note closed yielding 4.13%. The 30 year bonds yield was also lower closing at 4.81%.
Next week Wall Street will be watching the FOMC meeting on Tuesday. Additional economic news due to be released next week are Retail Sales which could effect retail stocks and the Consumer Price Index or CPI. Companies that are releasing earnings are; Oracle (ORCL), Bed Bath & Beyond (BBBY), Best Buy (BBY), Biomet (BMET), FedEx (FDX), and Nike (NKE)
By Rick Paler
Not much happened this week as Wall Street prepares for the end of the year and 2005. This week Johnson and Johnson announced the largest purchase in the company’s history and IBM sold its PC to a Chinese based company. Oil continued its decline from record highs and the PPI number was higher than economist estimated.
It was a quite week in regards to corporate news with the only major news coming from Johnson & Johnson and IBM. It was revealed this week that Johnson & Johnson (JNJ) was in advanced talks with Guidant Corp. (GDT) to purchase the company. The board of directors of each company will be meeting over the weekend to work out the final approval of the deal and it is expected to fetch $75.00 per share for shareholders of Guidant. The purchase of Guidant would help Johnson & Johnson in the fast growing market of defibrillators, pacemakers and should help their coronary stent business. The deal would be the largest in the 118 year history of Johnson & Johnson.
As I had written about last week International Business Machines (IBM) announced that they were selling their PC division to China’s largest PC marker Lenovo Group (LNVGY) for $1.75 billion. IBM would still maintain an 18.9% stake in Lenovo. Once the deal is completed it would make Lenovo the third largest PC maker behind Dell (DELL) and Hewlett-Packard (HPQ). Lenovo said that they would move their headquarters from China to New York City. The move allows IBM to further enhance its higher margin businesses.
Proctor & Gamble (PG) confirmed that it was comfortable with analyst earnings estimates for the company’s second quarter of $0.71 to $0.72 per share and 2004 earnings of between $2.25 and $2.35 per share. The company also reaffirmed its long term sales growth target of 4% to 6%. Chairman, President and CEO A.G. Lafley said “We’re confident we have the strategies, brands, innovation pipeline and new market opportunities to sustain our strong growth.” Proctor & Gamble has 16 brands that have sales of a billion dollars and another 10 that have sales over one-half billion in sales.
Another consumer product company was in the news this week. Colgate-Palmolive (CL) announced that they would cut their work force by 12% or approximately 4,440 employees. The move is expected to save the company $250 million to $300 million after taxes annually by the fourth year. The company also reaffirmed its fourth quarter 2004 and full year 2005 guidance.
In economic news oil continued its decline from all time highs above $50.00 per barrel a short time ago, by closing the week lower at $40.70. This despite word from OPEC that it would cut production by 1 million barrels a day. Some energy analysts are suggesting that oil prices could drop lower in coming weeks.
Final Non-farm productivity for the third quarter came in below economist estimates of 2.0%. The released number showed that productivity grew at 1.8%. Productivity gains have been strong in past months. This has allowed companies to raise wages and limit hiring while not having to raise prices.
A large than anticipated rise in the November Producers Price Index, which measures inflation, had traders concerned. But after reviewing the core rate which excludes energy and food, trader’s fears of run away inflation were subdued. The PPI for November rose 0.5% after October’s sharp rise. Economist had expected an increase of just 0.1%. Year over year the PPI is up 5.0%, which is the largest increase in 15 years.
Next week, the Federal Open Market Committee will be meeting on Tuesday and after the release of this week PPI numbers the Federal Reserve will more than likely continue their policy of raising interest rates. I would anticipate the Federal Reserve to raise the Fed Funds rate another 25 basis points bringing the rate to 2.25% from this the low earlier this year of 1.0%.
Bond yields were oddly lower this week even with the streets anticipation that rates will be raised next week. The 5 year Treasury note closed at 3.51% and the 10 year note closed yielding 4.13%. The 30 year bonds yield was also lower closing at 4.81%.
Next week Wall Street will be watching the FOMC meeting on Tuesday. Additional economic news due to be released next week are Retail Sales which could effect retail stocks and the Consumer Price Index or CPI. Companies that are releasing earnings are; Oracle (ORCL), Bed Bath & Beyond (BBBY), Best Buy (BBY), Biomet (BMET), FedEx (FDX), and Nike (NKE)
Friday, December 03, 2004
Weekly Market Report 12-03-2004
Major Retailers Disappoint
By Rick Paler
The much anticipated holiday retail season has kicked off. The season which began on the Friday after Thanksgiving is vastly watched by Wall Street. This is due to the fact that strength in sales over the holiday weekend might give indications on how profitable the overall holiday season will be to retail stores. Many retail stores depend on the holiday season, and a poor sales season can make the difference between posting a profit or loss for the year.
Analysts are expecting a very strong holiday sales season. According to ShopperTrak retail sales jumped 10.8% on the Friday after Thanksgiving versus last year. Visa USA also reported that their credit card holders increased charging by over 14%, while debit card usage increased 20.3%. This gave traders a reason to celebrate, since the initial figures confirmed that the holiday sales season was off to a fast start. On Monday the numbers were in and were being interrupted by the analysts.
The seemingly strong start on Friday was interrupted on Monday when several major retailers reported disappointing sales. The largest disappointment came from the likes of Wal-Mart Stores (WMT) when they announced that November same-store sales would rise just 0.7%.
A sharp drop in the price of crude oil helped to cancel out negative sales announcement and rallied the market to post positive gains for the week. Oil started the week over $50.00 per barrel and by weeks end had dropped 13% to $42.54 per barrel. Some energy analysts are now stating that oil prices could drop further. Cheaper energy cost translates to lower production cost for corporations thereby improving their bottom line. It helps consumers also, since they have more money to spend on other items rather than energy and gasoline bills.
Overall news this week was light. Corporate news was focused on the retail sector; technology stocks received a boost from Intel (INTC) and IBM (IBM), while economic news was mixed.
Shares of Wal-Mart Stores (WMT) were hit hard on Monday, when they reported that their November same-store sales would rise just 0.7%. Wall Street had expected sales growth between 2% to 4%. Sales at Wal-Mart stores increased a miserable 0.3% and Sam’s Club sales increased 2.5%. In response to the slower sales officials at the company said that it would cut prices on popular Christmas items and heavily advertise the cuts to lure shoppers back. The company also said that it estimates December same-store sales to increase only 1% - 3%.
The TJX Companies (TJX) announced that November same store sales were up 2%, while overall sales at the company were up over 10%. President and CEO, Edmond English “we will be flowing fresh gift assortments to our off-price stores at great values right up until the Christmas holiday, a strategy that we believe will serve us well again this year.”
American Eagle Outfitters Inc. (AEOS) projected their November same-store sales to increase 22.7%. This tops analyst estimates of only 17% sales growth. Citing their strong November results the company forecast earnings of $1.08 to $1.10 per share for the fourth quarter. Wall Street had expected earning for the fourth quarter of $1.05 per share.
The NASDAQ market hit multi-year highs as the index hit the highest level since July 2001. Fueling the advance this week was Intel (INTC). The company released a very upbeat midyear update. Citing strong demand for the company’s microprocessors the company upped their fourth quarter guidance sharply. The company now expects revenues of $9.3 billion to $9.5 billion. Analysts had expected fourth quarter revenues of $8.8 billion. A spokesman also said that gross margins should be in the upper half of their prior guidance and that they expected their inventories to decline by several hundred million dollars.
International Business Machines (IBM) the maker of the first personal computer back in 1981 is putting their PC division up for sale according to the New York Times. According to the report the company is in negotiations with China’s largest PC maker Lenovo Group Ltd. (LNVGY) and another unnamed company. The division is expected to sell for between $1 billion and $2 billion.
This week the National Association of Securities Dealers (NASD) fined 29 brokerage firms. The fines were similar to the ones leaved against Morgan Stanley (MWD) earlier this year. The companies involved were supposed to keep the records of their brokers updated through the filing of Form U4 and U5. The U4 form reports any regulatory actions against the broker, customer complaints, settlements, and criminal charges and convictions. Form U5 reports when a broker is no longer employed by the company. Merrill Lynch (MER) and American Express Financial Advisors (AXP) were two of the companies fined. In addition to the fine, Merrill Lynch and Wachovia Corp. (WB) were prohibited from registering new brokers for five days.
Economic news this week was mixed. The Non-farm payrolls and Consumer Confidence disappointed, when both missed prior estimates. Non-farm payrolls for November came in well below what economist had expected. Economist had expected payrolls to climb by 200,000 and only 112,000 new jobs were created. The slow growth in jobs could lead to moderation in the economic growth.
Consumer Confidence also came in below estimates. The Index reading fell to 90.5 versus the consensus of 96.0. Lower consumer confidence could curtail holiday spending.
The Personal Income and Consumption data was strong for October and the GDP numbers for the third quarter were revised upwards. The revised GDP came in at 3.9% up from the prior 3.7%. Economists now estimate that the fourth quarter GDP growth will come in at 4.0%, which bodes well for the economy and stocks.
Bond yields continue to rise in anticipation of the Federal Reserve raising interest rates at their next meeting and the continued weakness in the dollar. Yields were higher for the week and for the month of November. The 5 year Treasury note closed yielding 3.59% versus last months 3.32%. The 10 yr Treasury note ended the week at 4.25% up from 4.07% the month before. The 30 year Treasury bond closed at 4.92% compared to 4.82% a month ago. A continued rise in interest rates could pressure stocks in coming months.
Since one way of valuing stocks is to compare the earnings yield of stocks to the yield on bonds.
Next week Wall Street will continue to watch retail sales, energy prices and the dollar. Overall, given the current market conditions I believe that the market is fairly valued at these current levels. Given that, I believe that December has the potential to post positive gains for the month. A positive return for the month of December could keep the spark alive in this rally going into next year.
By Rick Paler
The much anticipated holiday retail season has kicked off. The season which began on the Friday after Thanksgiving is vastly watched by Wall Street. This is due to the fact that strength in sales over the holiday weekend might give indications on how profitable the overall holiday season will be to retail stores. Many retail stores depend on the holiday season, and a poor sales season can make the difference between posting a profit or loss for the year.
Analysts are expecting a very strong holiday sales season. According to ShopperTrak retail sales jumped 10.8% on the Friday after Thanksgiving versus last year. Visa USA also reported that their credit card holders increased charging by over 14%, while debit card usage increased 20.3%. This gave traders a reason to celebrate, since the initial figures confirmed that the holiday sales season was off to a fast start. On Monday the numbers were in and were being interrupted by the analysts.
The seemingly strong start on Friday was interrupted on Monday when several major retailers reported disappointing sales. The largest disappointment came from the likes of Wal-Mart Stores (WMT) when they announced that November same-store sales would rise just 0.7%.
A sharp drop in the price of crude oil helped to cancel out negative sales announcement and rallied the market to post positive gains for the week. Oil started the week over $50.00 per barrel and by weeks end had dropped 13% to $42.54 per barrel. Some energy analysts are now stating that oil prices could drop further. Cheaper energy cost translates to lower production cost for corporations thereby improving their bottom line. It helps consumers also, since they have more money to spend on other items rather than energy and gasoline bills.
Overall news this week was light. Corporate news was focused on the retail sector; technology stocks received a boost from Intel (INTC) and IBM (IBM), while economic news was mixed.
Shares of Wal-Mart Stores (WMT) were hit hard on Monday, when they reported that their November same-store sales would rise just 0.7%. Wall Street had expected sales growth between 2% to 4%. Sales at Wal-Mart stores increased a miserable 0.3% and Sam’s Club sales increased 2.5%. In response to the slower sales officials at the company said that it would cut prices on popular Christmas items and heavily advertise the cuts to lure shoppers back. The company also said that it estimates December same-store sales to increase only 1% - 3%.
The TJX Companies (TJX) announced that November same store sales were up 2%, while overall sales at the company were up over 10%. President and CEO, Edmond English “we will be flowing fresh gift assortments to our off-price stores at great values right up until the Christmas holiday, a strategy that we believe will serve us well again this year.”
American Eagle Outfitters Inc. (AEOS) projected their November same-store sales to increase 22.7%. This tops analyst estimates of only 17% sales growth. Citing their strong November results the company forecast earnings of $1.08 to $1.10 per share for the fourth quarter. Wall Street had expected earning for the fourth quarter of $1.05 per share.
The NASDAQ market hit multi-year highs as the index hit the highest level since July 2001. Fueling the advance this week was Intel (INTC). The company released a very upbeat midyear update. Citing strong demand for the company’s microprocessors the company upped their fourth quarter guidance sharply. The company now expects revenues of $9.3 billion to $9.5 billion. Analysts had expected fourth quarter revenues of $8.8 billion. A spokesman also said that gross margins should be in the upper half of their prior guidance and that they expected their inventories to decline by several hundred million dollars.
International Business Machines (IBM) the maker of the first personal computer back in 1981 is putting their PC division up for sale according to the New York Times. According to the report the company is in negotiations with China’s largest PC maker Lenovo Group Ltd. (LNVGY) and another unnamed company. The division is expected to sell for between $1 billion and $2 billion.
This week the National Association of Securities Dealers (NASD) fined 29 brokerage firms. The fines were similar to the ones leaved against Morgan Stanley (MWD) earlier this year. The companies involved were supposed to keep the records of their brokers updated through the filing of Form U4 and U5. The U4 form reports any regulatory actions against the broker, customer complaints, settlements, and criminal charges and convictions. Form U5 reports when a broker is no longer employed by the company. Merrill Lynch (MER) and American Express Financial Advisors (AXP) were two of the companies fined. In addition to the fine, Merrill Lynch and Wachovia Corp. (WB) were prohibited from registering new brokers for five days.
Economic news this week was mixed. The Non-farm payrolls and Consumer Confidence disappointed, when both missed prior estimates. Non-farm payrolls for November came in well below what economist had expected. Economist had expected payrolls to climb by 200,000 and only 112,000 new jobs were created. The slow growth in jobs could lead to moderation in the economic growth.
Consumer Confidence also came in below estimates. The Index reading fell to 90.5 versus the consensus of 96.0. Lower consumer confidence could curtail holiday spending.
The Personal Income and Consumption data was strong for October and the GDP numbers for the third quarter were revised upwards. The revised GDP came in at 3.9% up from the prior 3.7%. Economists now estimate that the fourth quarter GDP growth will come in at 4.0%, which bodes well for the economy and stocks.
Bond yields continue to rise in anticipation of the Federal Reserve raising interest rates at their next meeting and the continued weakness in the dollar. Yields were higher for the week and for the month of November. The 5 year Treasury note closed yielding 3.59% versus last months 3.32%. The 10 yr Treasury note ended the week at 4.25% up from 4.07% the month before. The 30 year Treasury bond closed at 4.92% compared to 4.82% a month ago. A continued rise in interest rates could pressure stocks in coming months.
Since one way of valuing stocks is to compare the earnings yield of stocks to the yield on bonds.
Next week Wall Street will continue to watch retail sales, energy prices and the dollar. Overall, given the current market conditions I believe that the market is fairly valued at these current levels. Given that, I believe that December has the potential to post positive gains for the month. A positive return for the month of December could keep the spark alive in this rally going into next year.
Friday, November 26, 2004
Weekly Market Report 11-26-2004
Thanksgiving Day causing slow trading week
By Rick Paler
It was a very slow week due to the Thanksgiving Day holiday. Many traders took extended vacations and both economic and corporate news was light. The Bond market was also slow, with it closing early on Wednesday and Friday and being closed along with the stock market on Thursday. The market ended higher for the week on expectations that Black Friday, the day after Thanksgiving, which kicks off the holiday sales season would be stronger than last year.
In corporate news, this week Deere & Co. (DE) earnings surged, exceeding analyst estimates by $0.44 per share. The company cited favorable market conditions when they reported earnings of $1.41 per share or $356.7 million. Analysts had expected earnings of only $0.97 per share. Sales and revenues grew 32% to 5.207 billion for the quarter. The company expects continuing sales and profit growth in 2005.
H.J. Heinz (HNZ) reported earnings of $0.56 per share below the streets estimates of $0.59 per share. Sales at the company rose 5.2% to $2.2 billion. The company said that for the next quarter it expects to earn $0.46 per share, above last years $0.37 per share for the same period. The company also released their 2005 guidance stating that it expected to earn $1.65 to $1.75 per share.
Mylan Laboratories (MYL) said that it was rejecting Carl Icahn’s bid to buy the company and called his bid a “self-serving publicity device.” Mr. Icahn, Mylans largest share holder has been against the company acquiring King Pharmaceuticals (KG), which is under SEC investigation.
Campbell Soup (CPB) exceeded Wall Street estimated, when they reported that the company had earning $230 million or $0.56 per share for their third quarter. The company cited strong U.S. sales and reconfirmed their 2005 earnings guidance of 5% to 7% growth.
In economic news, the dollar continues its slide against the Euro and Yen. The dollar now is near an all time low against the Euro and is at a four year low against the Yen. The low dollar will help U.S exports making U.S. goods cheaper overseas, but hurt European and Japanese imports to the U.S., making foreign goods more expensive.
The final University of Michigan consumer sentiment for November came in at 92.8 down from the preliminary reading of 95.5 and below economist estimates of 96.0. The lower number reflects consumers’ reactions to higher energy prices and job growth.
The Five and Ten year Treasury notes both had higher yields at the close of the week, while the Thirty year Bond remained unchanged. The 5 year Note closed yielding 3.62% and the 10 year Notes yield was up to 4.23%. The 30 year Bond closed the week yielding 4.88%.
Next week the market will continue to watch the U.S dollar and will anxiously await the sales results from Black Friday. Company’s reporting poor weekend sales will be punished by traders. Companies releasing earnings next week are; Chico’s FAS (CHS), Dollar General (DG), Neiman Marcus Group, Inc. (NMGA), and Pall Corp. (PLL).
By Rick Paler
It was a very slow week due to the Thanksgiving Day holiday. Many traders took extended vacations and both economic and corporate news was light. The Bond market was also slow, with it closing early on Wednesday and Friday and being closed along with the stock market on Thursday. The market ended higher for the week on expectations that Black Friday, the day after Thanksgiving, which kicks off the holiday sales season would be stronger than last year.
In corporate news, this week Deere & Co. (DE) earnings surged, exceeding analyst estimates by $0.44 per share. The company cited favorable market conditions when they reported earnings of $1.41 per share or $356.7 million. Analysts had expected earnings of only $0.97 per share. Sales and revenues grew 32% to 5.207 billion for the quarter. The company expects continuing sales and profit growth in 2005.
H.J. Heinz (HNZ) reported earnings of $0.56 per share below the streets estimates of $0.59 per share. Sales at the company rose 5.2% to $2.2 billion. The company said that for the next quarter it expects to earn $0.46 per share, above last years $0.37 per share for the same period. The company also released their 2005 guidance stating that it expected to earn $1.65 to $1.75 per share.
Mylan Laboratories (MYL) said that it was rejecting Carl Icahn’s bid to buy the company and called his bid a “self-serving publicity device.” Mr. Icahn, Mylans largest share holder has been against the company acquiring King Pharmaceuticals (KG), which is under SEC investigation.
Campbell Soup (CPB) exceeded Wall Street estimated, when they reported that the company had earning $230 million or $0.56 per share for their third quarter. The company cited strong U.S. sales and reconfirmed their 2005 earnings guidance of 5% to 7% growth.
In economic news, the dollar continues its slide against the Euro and Yen. The dollar now is near an all time low against the Euro and is at a four year low against the Yen. The low dollar will help U.S exports making U.S. goods cheaper overseas, but hurt European and Japanese imports to the U.S., making foreign goods more expensive.
The final University of Michigan consumer sentiment for November came in at 92.8 down from the preliminary reading of 95.5 and below economist estimates of 96.0. The lower number reflects consumers’ reactions to higher energy prices and job growth.
The Five and Ten year Treasury notes both had higher yields at the close of the week, while the Thirty year Bond remained unchanged. The 5 year Note closed yielding 3.62% and the 10 year Notes yield was up to 4.23%. The 30 year Bond closed the week yielding 4.88%.
Next week the market will continue to watch the U.S dollar and will anxiously await the sales results from Black Friday. Company’s reporting poor weekend sales will be punished by traders. Companies releasing earnings next week are; Chico’s FAS (CHS), Dollar General (DG), Neiman Marcus Group, Inc. (NMGA), and Pall Corp. (PLL).
Friday, November 19, 2004
Weekly Market Report 11-19-2004
Greenspan warns and markets fall
By Rick Paler
This week started off well but ended lower for the week, on comments made by Federal Reserve Chairman Alan Greenspan. Earnings continue to come in strong as the third quarter earnings season comes to a close. This week three Dow components exceeded their earnings targets Wal-Mart, Home Depot and Disney. Economic news was good but provided a reason for the bears to sell.
Alan Greenspan during a meeting in Frankfurt Germany warned that the current trade and budget deficits could cause foreign investors to seek higher interest rates elsewhere and continued weakening of the dollar as investors diversify into other currencies. His comments that investors need to hedge against higher interest rates cause a large sell off in the market and pushed bond yields higher for the week. Many traders now think it is certain that the Federal Reserve will raise interest rates again in December.
Retailer made most of the corporate headlines this week, as many of the heavy hitters released their earnings results giving a window into what Wall Street expects to be a good holiday sales season.
Home Depot (HD) reported terrific results for the quarter when the company reported this week that they have achieved record earnings and sales. The company reported that earnings for the quarter ending October 31 was up 20% to $0.60 per share and that sales were up 13% to $18.86 billion. "The strength of our core retail business, coupled with our growing services and professional supply businesses, is delivering solid returns," Chairman, President and Chief Executive Robert L. Nardelli said on Tuesday. The company also announced that it expects earning per share growth of 19% to 20% for the fiscal year or $2.24 to $2.26 per share. Wall Street had estimated earnings of $2.22 per share for 2005.
Wal-Mart Store (WMT) notched up another record quarter for earnings and sales, as their third quarter net rose 13% and sales increased 9.7%. The world’s largest retailer reported net earnings of $2.29 billion or $0.54 per share. This was up from $0.46 per share a year earlier. Sales rose to $68.52 billion, but fell short of the streets estimates of $69.22 billion. The company also announced that it expects to earn $0.73 to $0.75 per share for the fourth quarter.
Kmart (KMRT) which recently emerged from bankruptcy, surprised analysts when it was announced that the company will acquire Sears (S) for $11 billion. The new company will be called Sears Holdings Corporation and will become the third largest retailer behind Wal-Mart and Target. Shareholders of Sears have the option of receiving $50.00 per share or 0.5 shares of the new company. Kmart shareholders will receive one share of the new company. The acquisition is expected to be completed by March 2005.
PETsMART (PETM) reaffirmed their full year guidance of $1.19 to $1.20 per share after releasing their third quarter results. The company reported earnings in line with estimates of $0.24 per share or $35.9 million, which was a 21% increase over the previous period. Sales rose 13% to $826.8 million.
TJX Companies (TJX) reported net income of $0.41 per share or $201 million, which was a 14% increase over the prior year. Sales for the retailer increased 13% for the third quarter to $3.8 billion. Edmond English President and CEO said “We are pleased with our third quarter performance.”
Walt Disney Co. (DIS) citing strength from its troubled television networks announced earnings that beat analysts’ estimates by a penny. Earnings for the entertainment company came in at $0.19 per share. Revenues missed estimates coming in at $7.54 billion. The company reaffirmed its previous guidance of double digit earnings growth through 2007.
Google (GOOG) the high flying internet search company announced this week that its current revenue growth rate can not be maintained due to increased competition. This announcement was made, as million of shares held by insiders will become available to sell in the open market.
In economic news, economists were surprised when the October PPI numbers were released showing that wholesale prices increased more than expected. The PPI come in at 1.7%, when economist had estimated an increase of only 0.6%. This led to fears of inflation that were quickly blamed on the 6.8% increase in energy prices.
After the surge in the PPI numbers, economists were nervous when the CPI numbers were released. The CPI for October came in higher than expected at 0.6%, but the core rate which excludes food and energy was up a modest 0.2% putting fears of run away inflation to bed.
Bonds sold off after the release of both the PPI and CPI numbers, combined with Mr. Greenspan’s comments. Traders now anticipate the Federal Reserve will raise interest rates another 25 basis points in December to bring the Fed Funds Rate up to 2.25%. The Federal Reserve has already indicated that they will raise interest rate to a more neutral stance, since the economy seems to be self sustaining at this point. Bond yields were higher across the yield curve for the most part. The 5 year Treasury note closed higher yielding 3.56%. The 10 year note closed the week yielding 4.20% and the 30 year bond yield was slightly lower from the previous week closing at 4.88%.Next week the bears will continue to look for reasons to take profits in view of the markets recent run up. Corporate earnings will be released by Campbell Soup (CPB), Toys R Us (TOY), H.J. Heinz (HNZ), Deere & Co. (DE), Hormel Foods (HRL) and Patterson Dental (PDCO).
By Rick Paler
This week started off well but ended lower for the week, on comments made by Federal Reserve Chairman Alan Greenspan. Earnings continue to come in strong as the third quarter earnings season comes to a close. This week three Dow components exceeded their earnings targets Wal-Mart, Home Depot and Disney. Economic news was good but provided a reason for the bears to sell.
Alan Greenspan during a meeting in Frankfurt Germany warned that the current trade and budget deficits could cause foreign investors to seek higher interest rates elsewhere and continued weakening of the dollar as investors diversify into other currencies. His comments that investors need to hedge against higher interest rates cause a large sell off in the market and pushed bond yields higher for the week. Many traders now think it is certain that the Federal Reserve will raise interest rates again in December.
Retailer made most of the corporate headlines this week, as many of the heavy hitters released their earnings results giving a window into what Wall Street expects to be a good holiday sales season.
Home Depot (HD) reported terrific results for the quarter when the company reported this week that they have achieved record earnings and sales. The company reported that earnings for the quarter ending October 31 was up 20% to $0.60 per share and that sales were up 13% to $18.86 billion. "The strength of our core retail business, coupled with our growing services and professional supply businesses, is delivering solid returns," Chairman, President and Chief Executive Robert L. Nardelli said on Tuesday. The company also announced that it expects earning per share growth of 19% to 20% for the fiscal year or $2.24 to $2.26 per share. Wall Street had estimated earnings of $2.22 per share for 2005.
Wal-Mart Store (WMT) notched up another record quarter for earnings and sales, as their third quarter net rose 13% and sales increased 9.7%. The world’s largest retailer reported net earnings of $2.29 billion or $0.54 per share. This was up from $0.46 per share a year earlier. Sales rose to $68.52 billion, but fell short of the streets estimates of $69.22 billion. The company also announced that it expects to earn $0.73 to $0.75 per share for the fourth quarter.
Kmart (KMRT) which recently emerged from bankruptcy, surprised analysts when it was announced that the company will acquire Sears (S) for $11 billion. The new company will be called Sears Holdings Corporation and will become the third largest retailer behind Wal-Mart and Target. Shareholders of Sears have the option of receiving $50.00 per share or 0.5 shares of the new company. Kmart shareholders will receive one share of the new company. The acquisition is expected to be completed by March 2005.
PETsMART (PETM) reaffirmed their full year guidance of $1.19 to $1.20 per share after releasing their third quarter results. The company reported earnings in line with estimates of $0.24 per share or $35.9 million, which was a 21% increase over the previous period. Sales rose 13% to $826.8 million.
TJX Companies (TJX) reported net income of $0.41 per share or $201 million, which was a 14% increase over the prior year. Sales for the retailer increased 13% for the third quarter to $3.8 billion. Edmond English President and CEO said “We are pleased with our third quarter performance.”
Walt Disney Co. (DIS) citing strength from its troubled television networks announced earnings that beat analysts’ estimates by a penny. Earnings for the entertainment company came in at $0.19 per share. Revenues missed estimates coming in at $7.54 billion. The company reaffirmed its previous guidance of double digit earnings growth through 2007.
Google (GOOG) the high flying internet search company announced this week that its current revenue growth rate can not be maintained due to increased competition. This announcement was made, as million of shares held by insiders will become available to sell in the open market.
In economic news, economists were surprised when the October PPI numbers were released showing that wholesale prices increased more than expected. The PPI come in at 1.7%, when economist had estimated an increase of only 0.6%. This led to fears of inflation that were quickly blamed on the 6.8% increase in energy prices.
After the surge in the PPI numbers, economists were nervous when the CPI numbers were released. The CPI for October came in higher than expected at 0.6%, but the core rate which excludes food and energy was up a modest 0.2% putting fears of run away inflation to bed.
Bonds sold off after the release of both the PPI and CPI numbers, combined with Mr. Greenspan’s comments. Traders now anticipate the Federal Reserve will raise interest rates another 25 basis points in December to bring the Fed Funds Rate up to 2.25%. The Federal Reserve has already indicated that they will raise interest rate to a more neutral stance, since the economy seems to be self sustaining at this point. Bond yields were higher across the yield curve for the most part. The 5 year Treasury note closed higher yielding 3.56%. The 10 year note closed the week yielding 4.20% and the 30 year bond yield was slightly lower from the previous week closing at 4.88%.Next week the bears will continue to look for reasons to take profits in view of the markets recent run up. Corporate earnings will be released by Campbell Soup (CPB), Toys R Us (TOY), H.J. Heinz (HNZ), Deere & Co. (DE), Hormel Foods (HRL) and Patterson Dental (PDCO).
Friday, November 12, 2004
Weekly Market Report 11-12-2004
Bulls stampede into the market
By Rick Paler
This week the bulls were out in force again pushing the market to a new three year high. Since the election the market has been on a tear the Dow Jones Industrial has risen over 5% and the S&P 500 has risen 4.7%. Historically the market does perform well during the period of November through January. Wall Street calls this the Santa Clause Rally and this year it looks like it might have come a little early. This was due to the pent up demand as investors sat on the sidelines fearing another 2000 election debacle or a terrorist attack similar to the one Spain experience prior to their election. There are some on Wall Street that say are now in what looks like the beginning of a secular bull market rally.
Overall corporate earnings have been growing at a blistering pace. Economic conditions have been positive and the economy has been growing. So it did not come as a surprise when the Federal Reserve announced that they were going to raise the target Fed Funds rate by ¼ of one percent. This brought the Fed Funds rate from 1.75% to 2.0%. The market had anticipated the rate hike and therefore did not react when the announcement was made. This weeks Fed action marked the fourth time this year that the Federal Reserve raised interest rate in an attempt to keep inflation at bay. Since that market anticipated the rate hike the all important policy statement was closely watched to provide incite into the health of the economy and possible future actions by the Fed. The Federal Open Market Committee statement indicated that output is expanding while inflation continues to remain tame. It looks as if the soft patch in the economy has ended, since the FOMC said that the economy “regained some vigor.”
As the third quarter earnings season come to a close, the street will be focusing on corporate guidance for the forth quarter. Currently the negative-to-positive ratio is 2.2, which is in line with the historical ratio, but above last quarters 1.8. Analysts are expecting another strong quarter for earnings growth. Earnings for the S&P 500 for the forth quarter are expected to grow by 15.3%.
Merck (MRK) continues to be in the news unfortunately it has all been unpleasant. This week the company disclosed that it had been subpoenaed by the Justice Department regarding its handling of Vioxx. The company pulled the drug several weeks ago, after it was linked to possible deaths. The SEC has also launched an informal investigation into the company.
Pfizer (PFE) announced this week the company was under investigation by New York and Connecticut attorney generals office. This investigation is focusing on whether the company marketed drugs for uses not approved by the FDA.
Cisco Systems (CSCO) reported earning that matched the streets estimates of $0.21 per share. But the maker of switched and routers disappointed the street, when their revenues came in at $5.97 billion. The street had expected revenues of $6.20 billion. The company also disappointed with future sales guidance, which was well below what analyst had expected. The company also reveled that they were increasing their stock repurchase program by $10 billion.
PeopleSoft (PSFT) was in the news when the company’s board of directors rejected Oracle’s (ORCL) bid to purchase the company. Oracle had previously said that their current bid of $24.00 per share was their last and final offer.
Dell’s (DELL) earnings grew by 27%, as the company’s earnings came in at $0.33 per share matching estimates. The company said that it sees strong world wide demand and expects to hit its sales goal of $60 billion by 2006 a full year ahead of schedule.
The big economic news for the week was the FOMC raising interest rate for the fourth time since June of this year. In the committees policy statement it appears that the Federal Reserve is willing to continue to raise interest rates “keyed to incoming data.” Currently, Fed Funds futures now give an 80% chance that the Federal Reserve will raise interest rates again in December. At this point the economy appears to be self sustaining and the FOMC can begin to remove its extremely accommodative stance.
The preliminary University of Michigan consumer sentiment for November rose to 95.5 from the prior months 91.7 topping economist estimates of 93.1. The positive result might be from the stronger than expected October payrolls report.
Oil continues to decline in price losing another $2.00 per barrel. Some analysts are now thinking oil prices could continue to decline into the $40.00 per barrel rage. This would have a positive effect on the economy. This is because higher energy prices can lead to inflation, low consumer sentiment, hurt corporate earnings and slow down economic growth.
In bond news Treasury yields were lower across the yield curve. The 5 year note closed yielding 3.50%. The 10 year notes yield was 4.17% and the 30 year bonds yield closed at 4.89%.
Companies releasing earnings this week are; Lowe’s Companies (LOW), Ross Stores (ROST), Home Depot (HD), The TJX Companies (TJX), Wal-Mart Stores (WMT), PetsMart (PETM), Gap Inc. (GPS), and Walt Disney (DIS).
By Rick Paler
This week the bulls were out in force again pushing the market to a new three year high. Since the election the market has been on a tear the Dow Jones Industrial has risen over 5% and the S&P 500 has risen 4.7%. Historically the market does perform well during the period of November through January. Wall Street calls this the Santa Clause Rally and this year it looks like it might have come a little early. This was due to the pent up demand as investors sat on the sidelines fearing another 2000 election debacle or a terrorist attack similar to the one Spain experience prior to their election. There are some on Wall Street that say are now in what looks like the beginning of a secular bull market rally.
Overall corporate earnings have been growing at a blistering pace. Economic conditions have been positive and the economy has been growing. So it did not come as a surprise when the Federal Reserve announced that they were going to raise the target Fed Funds rate by ¼ of one percent. This brought the Fed Funds rate from 1.75% to 2.0%. The market had anticipated the rate hike and therefore did not react when the announcement was made. This weeks Fed action marked the fourth time this year that the Federal Reserve raised interest rate in an attempt to keep inflation at bay. Since that market anticipated the rate hike the all important policy statement was closely watched to provide incite into the health of the economy and possible future actions by the Fed. The Federal Open Market Committee statement indicated that output is expanding while inflation continues to remain tame. It looks as if the soft patch in the economy has ended, since the FOMC said that the economy “regained some vigor.”
As the third quarter earnings season come to a close, the street will be focusing on corporate guidance for the forth quarter. Currently the negative-to-positive ratio is 2.2, which is in line with the historical ratio, but above last quarters 1.8. Analysts are expecting another strong quarter for earnings growth. Earnings for the S&P 500 for the forth quarter are expected to grow by 15.3%.
Merck (MRK) continues to be in the news unfortunately it has all been unpleasant. This week the company disclosed that it had been subpoenaed by the Justice Department regarding its handling of Vioxx. The company pulled the drug several weeks ago, after it was linked to possible deaths. The SEC has also launched an informal investigation into the company.
Pfizer (PFE) announced this week the company was under investigation by New York and Connecticut attorney generals office. This investigation is focusing on whether the company marketed drugs for uses not approved by the FDA.
Cisco Systems (CSCO) reported earning that matched the streets estimates of $0.21 per share. But the maker of switched and routers disappointed the street, when their revenues came in at $5.97 billion. The street had expected revenues of $6.20 billion. The company also disappointed with future sales guidance, which was well below what analyst had expected. The company also reveled that they were increasing their stock repurchase program by $10 billion.
PeopleSoft (PSFT) was in the news when the company’s board of directors rejected Oracle’s (ORCL) bid to purchase the company. Oracle had previously said that their current bid of $24.00 per share was their last and final offer.
Dell’s (DELL) earnings grew by 27%, as the company’s earnings came in at $0.33 per share matching estimates. The company said that it sees strong world wide demand and expects to hit its sales goal of $60 billion by 2006 a full year ahead of schedule.
The big economic news for the week was the FOMC raising interest rate for the fourth time since June of this year. In the committees policy statement it appears that the Federal Reserve is willing to continue to raise interest rates “keyed to incoming data.” Currently, Fed Funds futures now give an 80% chance that the Federal Reserve will raise interest rates again in December. At this point the economy appears to be self sustaining and the FOMC can begin to remove its extremely accommodative stance.
The preliminary University of Michigan consumer sentiment for November rose to 95.5 from the prior months 91.7 topping economist estimates of 93.1. The positive result might be from the stronger than expected October payrolls report.
Oil continues to decline in price losing another $2.00 per barrel. Some analysts are now thinking oil prices could continue to decline into the $40.00 per barrel rage. This would have a positive effect on the economy. This is because higher energy prices can lead to inflation, low consumer sentiment, hurt corporate earnings and slow down economic growth.
In bond news Treasury yields were lower across the yield curve. The 5 year note closed yielding 3.50%. The 10 year notes yield was 4.17% and the 30 year bonds yield closed at 4.89%.
Companies releasing earnings this week are; Lowe’s Companies (LOW), Ross Stores (ROST), Home Depot (HD), The TJX Companies (TJX), Wal-Mart Stores (WMT), PetsMart (PETM), Gap Inc. (GPS), and Walt Disney (DIS).
Friday, November 05, 2004
Weekly Market Review 11-05-2004
Stocks rally on Bush win
By Rick Paler
The market posted excellent results this week due to a flood of positive news. Companies continued to report expanding earnings for the third quarter, oil prices eased, economic reports were positive and the election was over. The largest factor for the rally though was that President Bush had won and no terrorist event occurred.
On Election Day, early reports from exit polls indicated that Senator Kerry would win the election. This caused the market to begin a steep sell off. Within minutes the Dow Jones Industrial index had fallen over 100 points and the S&P 500 index fell 10 points. The next morning the results proved otherwise. Traders realized that President Bush had won the election and the market opened up 160 points and the S&P 500 opened 16 points higher.
The reason behind this rally is Wall Streets prospective that a Republican administration would be more pro-business. Multiplying this was that fact that the Republicans would control both the Senate and House of Representatives and that the Presidents tax cuts and specifically the dividend tax cut would stay in effect were seen as pluses. For the week just about all industry groups joined the rally with the energy, defense and health care sectors leading the way.
In corporate news, the third quarter is coming to a close and earnings for the quarter are expanding nicely. Currently it appears that the S&P 500 will post earnings growth of 16% for the quarter. Additionally corporate earnings guidance for the fourth quarter also appears to be strong.
Merck’s (MRK) bad news just seems to be getting worse. Questions now have surfaced as to when the company knew of the risks associated with Vioxx. Vioxx was pulled from the market due to cardiac risks associated with taking the drug. The Wall Street Journal reported that management might have known about potential issues with the drug as early as March of 2000. This could give the company even greater exposure to lawsuits.
Pfizer (PFE) shares also have come under pressure when it was announced that its arthritis drug Celebrex, which is similar to Merck’s Vioxx, might have contributed to 14 deaths in Canada. Dr. Maria Valois, director of marketed pharmaceuticals at Health Canada said that they were awaiting more information from the company and that they had set November 18th as the deadline for receiving the information. At this point Dr. Valois said “It’s still premature to conclude what intervention is required in this case.”
Retail stocks had a good week when Wal-Mart (WMT) indicated that its same-store sales for October rose 2.8% and that it saw its third quarter earnings coming in at the high end of the company’s guidance of $0.52 - $0.54 per share.
Discount retailer TJX Companies (TJX) reported that their same-store sales for October rose 7% exceeding the company’s own guidance of 4% - 5% and blowing away analyst estimates of only 4.2% sales growth. The company also sees its third quarter earnings to be inline with its prior guidance of $0.39 - $0.42 per share.
Qualcomm (QCOM) shares were under pressure when the company announced that their earnings for the quarter were $0.29 per share, matching street estimates. The company then warned about its future. The company lowered its first quarter 2005 outlook citing higher operating cost. They now expect to earnings of $0.24 - $0.26 per share. Analyst had expected earning of $0.31 per share for the first quarter.
Wachovia Corporation (WB) finalized its deal to acquire SouthTrust (SOTR). The merger took place effective November 1st and shareholders of SouthTrust received 0.89 shares of Wachovia common stock.
Estée Lauder Companies (EL) posted strong results as they saw profits rise 23% and raised their dividend 10 cents. The company posted earnings of $0.41 per share exceeding Wall Streets estimates of only $0.37 per share.
Economic new this week was very positive, showing that the economy continues to be strong despite higher energy cost. This biggest new for the week was the release of the much anticipated employment numbers. On Friday the report was released showing that a very impressive 337,000 jobs were created in October. Additionally the prior two months data was revised upwards by 113,000 new jobs. Economist had expected a rise of only 175,000 new jobs for October. Unemployment rose less than expected coming up only 0.03% to 5.46%. Economist had estimated that unemployment for October would rise to 5.5%.
The bond market sold off pushing yields higher for the week. This was due to the very strong economic data combined with traders moving from the pre-election flight to the safety of bonds back into the stock market. The economy at this point seems self secificiant and can maintain its growth without the Federal Reserves policy of accodimations. By the close of the week bond traders anticipated a 100% chance that the Federal Reserve would raise interest rates at their meeting next week by ¼ of a percent. The bond market is now also giving it an 80% chance that the Federal Reserve will also take action to raise rates in December. The 5 year Treasury closed yielding 3.46% and the 10 year notes yield was up to 4.17%. The 30 year Treasury bond closed yielding 4.89%.
Next week all of Wall Street will be watching the Federal Reserve when they meet on Tuesday to see if they in fact raise interest rates for the forth time this year. Companies releasing earnings next week are as follows; Abercrombie & Fitch (ANF), Cisco (CSCO), Starbucks (SBUX), Pixar Animation Studios (PIXR), Kohl’s (KSS), Tiffany & Co. (TIF) and Dell Inc. (DELL).
By Rick Paler
The market posted excellent results this week due to a flood of positive news. Companies continued to report expanding earnings for the third quarter, oil prices eased, economic reports were positive and the election was over. The largest factor for the rally though was that President Bush had won and no terrorist event occurred.
On Election Day, early reports from exit polls indicated that Senator Kerry would win the election. This caused the market to begin a steep sell off. Within minutes the Dow Jones Industrial index had fallen over 100 points and the S&P 500 index fell 10 points. The next morning the results proved otherwise. Traders realized that President Bush had won the election and the market opened up 160 points and the S&P 500 opened 16 points higher.
The reason behind this rally is Wall Streets prospective that a Republican administration would be more pro-business. Multiplying this was that fact that the Republicans would control both the Senate and House of Representatives and that the Presidents tax cuts and specifically the dividend tax cut would stay in effect were seen as pluses. For the week just about all industry groups joined the rally with the energy, defense and health care sectors leading the way.
In corporate news, the third quarter is coming to a close and earnings for the quarter are expanding nicely. Currently it appears that the S&P 500 will post earnings growth of 16% for the quarter. Additionally corporate earnings guidance for the fourth quarter also appears to be strong.
Merck’s (MRK) bad news just seems to be getting worse. Questions now have surfaced as to when the company knew of the risks associated with Vioxx. Vioxx was pulled from the market due to cardiac risks associated with taking the drug. The Wall Street Journal reported that management might have known about potential issues with the drug as early as March of 2000. This could give the company even greater exposure to lawsuits.
Pfizer (PFE) shares also have come under pressure when it was announced that its arthritis drug Celebrex, which is similar to Merck’s Vioxx, might have contributed to 14 deaths in Canada. Dr. Maria Valois, director of marketed pharmaceuticals at Health Canada said that they were awaiting more information from the company and that they had set November 18th as the deadline for receiving the information. At this point Dr. Valois said “It’s still premature to conclude what intervention is required in this case.”
Retail stocks had a good week when Wal-Mart (WMT) indicated that its same-store sales for October rose 2.8% and that it saw its third quarter earnings coming in at the high end of the company’s guidance of $0.52 - $0.54 per share.
Discount retailer TJX Companies (TJX) reported that their same-store sales for October rose 7% exceeding the company’s own guidance of 4% - 5% and blowing away analyst estimates of only 4.2% sales growth. The company also sees its third quarter earnings to be inline with its prior guidance of $0.39 - $0.42 per share.
Qualcomm (QCOM) shares were under pressure when the company announced that their earnings for the quarter were $0.29 per share, matching street estimates. The company then warned about its future. The company lowered its first quarter 2005 outlook citing higher operating cost. They now expect to earnings of $0.24 - $0.26 per share. Analyst had expected earning of $0.31 per share for the first quarter.
Wachovia Corporation (WB) finalized its deal to acquire SouthTrust (SOTR). The merger took place effective November 1st and shareholders of SouthTrust received 0.89 shares of Wachovia common stock.
Estée Lauder Companies (EL) posted strong results as they saw profits rise 23% and raised their dividend 10 cents. The company posted earnings of $0.41 per share exceeding Wall Streets estimates of only $0.37 per share.
Economic new this week was very positive, showing that the economy continues to be strong despite higher energy cost. This biggest new for the week was the release of the much anticipated employment numbers. On Friday the report was released showing that a very impressive 337,000 jobs were created in October. Additionally the prior two months data was revised upwards by 113,000 new jobs. Economist had expected a rise of only 175,000 new jobs for October. Unemployment rose less than expected coming up only 0.03% to 5.46%. Economist had estimated that unemployment for October would rise to 5.5%.
The bond market sold off pushing yields higher for the week. This was due to the very strong economic data combined with traders moving from the pre-election flight to the safety of bonds back into the stock market. The economy at this point seems self secificiant and can maintain its growth without the Federal Reserves policy of accodimations. By the close of the week bond traders anticipated a 100% chance that the Federal Reserve would raise interest rates at their meeting next week by ¼ of a percent. The bond market is now also giving it an 80% chance that the Federal Reserve will also take action to raise rates in December. The 5 year Treasury closed yielding 3.46% and the 10 year notes yield was up to 4.17%. The 30 year Treasury bond closed yielding 4.89%.
Next week all of Wall Street will be watching the Federal Reserve when they meet on Tuesday to see if they in fact raise interest rates for the forth time this year. Companies releasing earnings next week are as follows; Abercrombie & Fitch (ANF), Cisco (CSCO), Starbucks (SBUX), Pixar Animation Studios (PIXR), Kohl’s (KSS), Tiffany & Co. (TIF) and Dell Inc. (DELL).
Friday, October 29, 2004
Weekly Market Review 10-29-2004
New Osama bin Laden tape released
By Rick Paler
The market ended this week with a nice rally pushing all the major indices higher for the week. This week earnings continued to roll out with a majority of the companies reporting to the up side of estimates. Economic reports continued to be strong, while oil prices saw some relief and China announced that they would raise their interest rates.
Unfortunately, late Friday after the markets closed, a new Osama bin Laden terror tape was released. The al-Qaeda terrorist leader released a tape to the Aljazeera network threatening 9-11 style terrorist strikes against the United States. This was done in an attempt to affect the outcome of the presidential election. It was the first tape of the murderer released in the past three years.
For months now, the market has been stuck in a very tight trading range, while corporate profits have been surging and the economy has been growing. One of the factors causing the stalemate between the markets bulls and bears is the uncertainty of the presidential election and the fear of a terrorist attack in the United States.
Wall Street will be on edge next week, since one of the factors affecting the markets performance has now become more front and center. Spain experienced terror attacks in that country just days before the election. The attacks affected the outcome of the Spanish election and al-Qaeda learned from that experience that they might be able to affect our election process here in the United States. Because of Osama bin Ladens’ tape, Monday’s opening will be closely watched since traders will have had the entire weekend to digest the news.
In corporate news over half of the S&P 500 companies have reported their earnings results and 62% of those companies have exceeded their earnings estimates. Wall Street now expects earnings growth for the S&P 500 to come in at 15.2%. This is well above the historical number of 7%, but below the blistering pace of 20% plus that the last several quarters produced.
Dow component DuPont (DD) reported third quarter earnings that rocketed 92% to $0.25 per share, which was a penny above analysts’ estimates. The company cited strong demand in the Asia Pacific area. Additionally the company reiterated its full year earnings guidance of $2.25 to $2.35 per share.
Northrop Grumman Corp.’s (NOC) third quarter results were boosted by strong government sales. The company’s net income increased 51% to $278 million or $0.76 per share, while sale increased 11% to $7.41 billion. The company also raised their full year earnings guidance to $2.95 to $3.00 per share.
ConocoPhillips (COP) helped by higher oil prices, posted third quarter earnings that blew away estimates. The company reported that third quarter earnings came in at $2.87 per share versus the estimate of only $2.56 per share.
Chubb Inc. (CB) posted net income that was up 40% in the third quarter. The company reported net income of $364 million or $1.88 per share up from $1.37 per share a year ago. John Finnegan who is Chairman, President and CEO of the company stated that “Chubb had a terrific third quarter despite the severe hurricane season.”
Japanese film and document solution company Fuji Photo Film (FUJIY) reported that their fist half of the year profits increased 28% due to increased sales of the company’s fax and copier machines.
In economic news, economist became concerned with the announcement that China hiked their interest rates to cool off their red hot economy. The fear is that a slowdown in China’s economy could slow the global economy.
A huge increase in the Chicago Purchasing Managers’ Index stunned the market this week, when it was announced that the index had jumped to 68.5 in October from a level of 61.9 for September. Economist had expected a decline from Septembers’ levels to 59.0. This was the highest level since 1988. Additionally, new orders hit their highest level in two decades jumping to 79.4 and production surged to its highest reading since 1950, coming in at 79.7. The Chicago PMI is a forward-looking indicator that measures manufacturing activity for the Midwest.
The advance Gross National Product number was released this week showing that the economy is still growing quite well. The advance GPD came in at 3.7%, which was above the historical trend but below what some analyst had predicted.
The National Association of Realtors announced that existing home sales for September increased 3.1% to 6.75 million unit annual rate above economist expectation of 6.51 million. While the supply of unsold homes fell to 4.4 months. It seems that the hot real estate market continues to motor on.
The interest rate yield curve continues to flatten out as short term rates have risen quicker than long term rates. Bond yields were slightly higher this week with the 5 year Treasury notes yield rising to 3.27% from 3.24% last week. The 10 year note and the 30 year Treasury bond both had higher yields when the market closed for the week. The 5 year note closed at 4.02% and the 30 year bond closed yielding 4.78%.
Next week, the presidential election and the possibility of an attack by al-Queda will dominate the markets. Both have the ability to move the markets and traders will be taking a wait and see stance until the election results are completed.
Companies of interest reporting earnings next week are the following; HCC Insurance Holdings (HCC), Priceline.com (PCLN), SAP AG (SAP), Clorox (CLX), PG&E Corp. (PCG), Qualcomm (QCOM) Estée Lauder Companies (EL), and Berkshire Hathaway (BRKA / BRKB)
By Rick Paler
The market ended this week with a nice rally pushing all the major indices higher for the week. This week earnings continued to roll out with a majority of the companies reporting to the up side of estimates. Economic reports continued to be strong, while oil prices saw some relief and China announced that they would raise their interest rates.
Unfortunately, late Friday after the markets closed, a new Osama bin Laden terror tape was released. The al-Qaeda terrorist leader released a tape to the Aljazeera network threatening 9-11 style terrorist strikes against the United States. This was done in an attempt to affect the outcome of the presidential election. It was the first tape of the murderer released in the past three years.
For months now, the market has been stuck in a very tight trading range, while corporate profits have been surging and the economy has been growing. One of the factors causing the stalemate between the markets bulls and bears is the uncertainty of the presidential election and the fear of a terrorist attack in the United States.
Wall Street will be on edge next week, since one of the factors affecting the markets performance has now become more front and center. Spain experienced terror attacks in that country just days before the election. The attacks affected the outcome of the Spanish election and al-Qaeda learned from that experience that they might be able to affect our election process here in the United States. Because of Osama bin Ladens’ tape, Monday’s opening will be closely watched since traders will have had the entire weekend to digest the news.
In corporate news over half of the S&P 500 companies have reported their earnings results and 62% of those companies have exceeded their earnings estimates. Wall Street now expects earnings growth for the S&P 500 to come in at 15.2%. This is well above the historical number of 7%, but below the blistering pace of 20% plus that the last several quarters produced.
Dow component DuPont (DD) reported third quarter earnings that rocketed 92% to $0.25 per share, which was a penny above analysts’ estimates. The company cited strong demand in the Asia Pacific area. Additionally the company reiterated its full year earnings guidance of $2.25 to $2.35 per share.
Northrop Grumman Corp.’s (NOC) third quarter results were boosted by strong government sales. The company’s net income increased 51% to $278 million or $0.76 per share, while sale increased 11% to $7.41 billion. The company also raised their full year earnings guidance to $2.95 to $3.00 per share.
ConocoPhillips (COP) helped by higher oil prices, posted third quarter earnings that blew away estimates. The company reported that third quarter earnings came in at $2.87 per share versus the estimate of only $2.56 per share.
Chubb Inc. (CB) posted net income that was up 40% in the third quarter. The company reported net income of $364 million or $1.88 per share up from $1.37 per share a year ago. John Finnegan who is Chairman, President and CEO of the company stated that “Chubb had a terrific third quarter despite the severe hurricane season.”
Japanese film and document solution company Fuji Photo Film (FUJIY) reported that their fist half of the year profits increased 28% due to increased sales of the company’s fax and copier machines.
In economic news, economist became concerned with the announcement that China hiked their interest rates to cool off their red hot economy. The fear is that a slowdown in China’s economy could slow the global economy.
A huge increase in the Chicago Purchasing Managers’ Index stunned the market this week, when it was announced that the index had jumped to 68.5 in October from a level of 61.9 for September. Economist had expected a decline from Septembers’ levels to 59.0. This was the highest level since 1988. Additionally, new orders hit their highest level in two decades jumping to 79.4 and production surged to its highest reading since 1950, coming in at 79.7. The Chicago PMI is a forward-looking indicator that measures manufacturing activity for the Midwest.
The advance Gross National Product number was released this week showing that the economy is still growing quite well. The advance GPD came in at 3.7%, which was above the historical trend but below what some analyst had predicted.
The National Association of Realtors announced that existing home sales for September increased 3.1% to 6.75 million unit annual rate above economist expectation of 6.51 million. While the supply of unsold homes fell to 4.4 months. It seems that the hot real estate market continues to motor on.
The interest rate yield curve continues to flatten out as short term rates have risen quicker than long term rates. Bond yields were slightly higher this week with the 5 year Treasury notes yield rising to 3.27% from 3.24% last week. The 10 year note and the 30 year Treasury bond both had higher yields when the market closed for the week. The 5 year note closed at 4.02% and the 30 year bond closed yielding 4.78%.
Next week, the presidential election and the possibility of an attack by al-Queda will dominate the markets. Both have the ability to move the markets and traders will be taking a wait and see stance until the election results are completed.
Companies of interest reporting earnings next week are the following; HCC Insurance Holdings (HCC), Priceline.com (PCLN), SAP AG (SAP), Clorox (CLX), PG&E Corp. (PCG), Qualcomm (QCOM) Estée Lauder Companies (EL), and Berkshire Hathaway (BRKA / BRKB)
Friday, October 22, 2004
Weekly Market Review 10-22-2004
Eliot Spitzer causes market to slide
By Rick Paler
New York Attorney General Eliot Spitzer shook the market this week when he announced that he was widening his investigations into insurance industry practices and was now including the reinsurance business. Additionally, Mr. Spitzer announced that he would begin investigating the music industry; subpoenas have been issued to Universal Music, Sony BMG Music, EMI Group and Warner Music. Reports also circulated that there might be additional investigations into pension accounting, derivatives and managed care. This led investor to recall the corporate accounting and mutual fund scandals that hurt the stock market. This combined with the uncertainty of the outcome of the presidential election and oil prices hitting another record high caused trader to take money of the table.
Corporate earnings reports were mixed this week, along with the recent economic reports. For the week the big winner was the energy sector, while the loser was the insurance sector.
This week some big names reported earnings that did not meet analyst estimates. Some of the companies coming up shy of their earnings estimates this week were; J.P. Morgan Chase (JPM), Whirlpool (WHR), 3M (MMM), Wells Fargo (WFC), Countrywide Financial (CFC), Delta (DAL), Merck (MRK), Sears (S), and United Postal Service (UPS).
On the positive side of the third quarter earnings season, a majority of companies continue to meet or exceed their earnings estimates. The big surprise of the week was when Google (GOOG) reported earnings that blew away Wall Streets estimates. The internet search company reported earnings and revenues that doubled over the year ago period. Earnings came in at $0.19 per share or $52 million and revenues at $805.9 million. This sent the companies shares up more than 15% on Friday.
Fortune Brands (FO) reported earnings that surged 55%. The company reported earnings of $1.20 per share, above the Streets estimate of $1.18 per share. The company predicts earnings growth for 2004 to be in the double digits and is comfortable with earnings growth of 20% or more. The company said it has been “another excellent year.”
Genuine Parts Co. (GPC) reported earnings growth of 11%, when they announced income of $97.9 million, or $0.56 per share which was in line with analyst estimates. Chairman Larry Price said “We are pleased with this trend.”
ITT Industries (ITT) surpassed Wall Streets earnings estimates when they reported earnings of $1.16 per share, which was up over 20% from the year-ago period. Revenues for the company were up more than 21% to $1.67 billion. The company also said that it was confident it will achieve earnings at the top end of their forecast range of $4.45 - $4.50 per share.
Kinder Morgan Inc.’s (KMI) third quarter earnings surged 17% to $0.90 per share, analyst had expected earnings of only $0.88 per share. The company also raised its dividend 41% to $0.5625 cents per share from the prior $0.40 cents per share. The company said that they expect to beat its prior full-year earnings target of $3.71 per share.
Leggett & Platt Inc.’s (LEG) third quarter earnings grew by 58% as sales rose 16% to $1.34 billion. The company met earnings estimates when they reported earnings of $0.41 per share. The company said that they are aiming for 15% average earnings per share growth and 10%-15% sales growth each year. The company also raised their full year guidance to $1.35-$1.45 per share.
Coca-Cola Inc. (KO) reported net income of $0.39 per share down from $0.50 per share for the same period a year ago. World-wide case volume rose only 1%. CEO Neville Isdell said “Our performance has fallen short of the goals we have set for ourselves.”
McDonalds (MCD) reported third quarter earnings of $0.61 per share which was inline with their recently raised estimates. Sales rose 9% to $4.9 billion as the company continues to revamp their stores and menu.
Pfizer’s (PFE) earnings rose 15% to $0.55 per share topping estimates by Wall Street. Sale came in at $12.8 billion missing estimates of $13.2 billion. The company reaffirmed their full-year guidance of $2.12-$2.14 per share.
Microsoft (MSFT) beat earnings estimates of $0.30 per share, when they reported earnings of $0.32 per share. Sale grew 12% to $9.2 billion due to strong PC demand, but analysts were caught of guard when the company also reported that their deferred revenue fell more than expected. Analyst had expected deferred revenue to decline $250 million yet the company reported a $395 million decline.
Economic news for the week was mixed. The Philadelphia Fed’s Index of Business Activity blew away economist estimates. The index which measures economic activity in the Philadelphia area rose to 28.5, economists had expected a reading of only 18.0 and the prior month was only 13.4. A number greater than 1 indicates an expanding economy.
The Consumer Price Index, which measures inflation, increased 0.2% in September matching economist estimates, but the core rate that excludes food and energy increased more than expected. Year-over-year the CPI is up 2.5%.
Housing starts in September fell 6.0% to 1.898 million units below the estimate of 1.950 million units, yet building permits increased 1.8% to 2.005 million units versus the estimate of only 1.950 million.
Oil continues to rise with no end in site. Oil futures toped $55.00 per barrel this week hitting a new record high. The Department of Energy reported a smaller than expected rise in oil inventories. This led traders to fear low supply levels as winter nears. Higher oil prices continue to be a drag on the world wide economy and push the core rate of inflation higher.
The 5 year Treasury note closed yielding 3.24% and the 10 year note closed yielding 3.97%. The 30 year bond yield fell to 4.74% for the week.
As I have stated many times before, I believe that market will continue to trade within a narrow range as traders take a wait and see stance. The reason for this is the close presidential election with rumors of post election lawsuits, new investigations by Eliot Spitzer, oil supplies and the fear of terrorism.
Corporate earnings are running well ahead of the normal earnings growth rate for the S&P500 of 7%. This combined with lower stock prices have pushed PE ratios to more reasonable levels. This should be seen as a positive for the market long term.
Next week it will be all about earnings and the Third Quarter GDP, which will be reported on Friday. Companies of interest reporting earnings next week are; DuPont (DD), Procter & Gamble (PG), ExxonMobil (XOM), Plum Creek Timber (PCL), AFLAC Inc. (AFL), Arthur J Gallagher & Co (AJG), Chubb Corp. (CB), Anheuser-Bush (BUD), Northrop Grumman (NOC), Rayonier (RYN), and Fuji Photo Film (FUJIY).
By Rick Paler
New York Attorney General Eliot Spitzer shook the market this week when he announced that he was widening his investigations into insurance industry practices and was now including the reinsurance business. Additionally, Mr. Spitzer announced that he would begin investigating the music industry; subpoenas have been issued to Universal Music, Sony BMG Music, EMI Group and Warner Music. Reports also circulated that there might be additional investigations into pension accounting, derivatives and managed care. This led investor to recall the corporate accounting and mutual fund scandals that hurt the stock market. This combined with the uncertainty of the outcome of the presidential election and oil prices hitting another record high caused trader to take money of the table.
Corporate earnings reports were mixed this week, along with the recent economic reports. For the week the big winner was the energy sector, while the loser was the insurance sector.
This week some big names reported earnings that did not meet analyst estimates. Some of the companies coming up shy of their earnings estimates this week were; J.P. Morgan Chase (JPM), Whirlpool (WHR), 3M (MMM), Wells Fargo (WFC), Countrywide Financial (CFC), Delta (DAL), Merck (MRK), Sears (S), and United Postal Service (UPS).
On the positive side of the third quarter earnings season, a majority of companies continue to meet or exceed their earnings estimates. The big surprise of the week was when Google (GOOG) reported earnings that blew away Wall Streets estimates. The internet search company reported earnings and revenues that doubled over the year ago period. Earnings came in at $0.19 per share or $52 million and revenues at $805.9 million. This sent the companies shares up more than 15% on Friday.
Fortune Brands (FO) reported earnings that surged 55%. The company reported earnings of $1.20 per share, above the Streets estimate of $1.18 per share. The company predicts earnings growth for 2004 to be in the double digits and is comfortable with earnings growth of 20% or more. The company said it has been “another excellent year.”
Genuine Parts Co. (GPC) reported earnings growth of 11%, when they announced income of $97.9 million, or $0.56 per share which was in line with analyst estimates. Chairman Larry Price said “We are pleased with this trend.”
ITT Industries (ITT) surpassed Wall Streets earnings estimates when they reported earnings of $1.16 per share, which was up over 20% from the year-ago period. Revenues for the company were up more than 21% to $1.67 billion. The company also said that it was confident it will achieve earnings at the top end of their forecast range of $4.45 - $4.50 per share.
Kinder Morgan Inc.’s (KMI) third quarter earnings surged 17% to $0.90 per share, analyst had expected earnings of only $0.88 per share. The company also raised its dividend 41% to $0.5625 cents per share from the prior $0.40 cents per share. The company said that they expect to beat its prior full-year earnings target of $3.71 per share.
Leggett & Platt Inc.’s (LEG) third quarter earnings grew by 58% as sales rose 16% to $1.34 billion. The company met earnings estimates when they reported earnings of $0.41 per share. The company said that they are aiming for 15% average earnings per share growth and 10%-15% sales growth each year. The company also raised their full year guidance to $1.35-$1.45 per share.
Coca-Cola Inc. (KO) reported net income of $0.39 per share down from $0.50 per share for the same period a year ago. World-wide case volume rose only 1%. CEO Neville Isdell said “Our performance has fallen short of the goals we have set for ourselves.”
McDonalds (MCD) reported third quarter earnings of $0.61 per share which was inline with their recently raised estimates. Sales rose 9% to $4.9 billion as the company continues to revamp their stores and menu.
Pfizer’s (PFE) earnings rose 15% to $0.55 per share topping estimates by Wall Street. Sale came in at $12.8 billion missing estimates of $13.2 billion. The company reaffirmed their full-year guidance of $2.12-$2.14 per share.
Microsoft (MSFT) beat earnings estimates of $0.30 per share, when they reported earnings of $0.32 per share. Sale grew 12% to $9.2 billion due to strong PC demand, but analysts were caught of guard when the company also reported that their deferred revenue fell more than expected. Analyst had expected deferred revenue to decline $250 million yet the company reported a $395 million decline.
Economic news for the week was mixed. The Philadelphia Fed’s Index of Business Activity blew away economist estimates. The index which measures economic activity in the Philadelphia area rose to 28.5, economists had expected a reading of only 18.0 and the prior month was only 13.4. A number greater than 1 indicates an expanding economy.
The Consumer Price Index, which measures inflation, increased 0.2% in September matching economist estimates, but the core rate that excludes food and energy increased more than expected. Year-over-year the CPI is up 2.5%.
Housing starts in September fell 6.0% to 1.898 million units below the estimate of 1.950 million units, yet building permits increased 1.8% to 2.005 million units versus the estimate of only 1.950 million.
Oil continues to rise with no end in site. Oil futures toped $55.00 per barrel this week hitting a new record high. The Department of Energy reported a smaller than expected rise in oil inventories. This led traders to fear low supply levels as winter nears. Higher oil prices continue to be a drag on the world wide economy and push the core rate of inflation higher.
The 5 year Treasury note closed yielding 3.24% and the 10 year note closed yielding 3.97%. The 30 year bond yield fell to 4.74% for the week.
As I have stated many times before, I believe that market will continue to trade within a narrow range as traders take a wait and see stance. The reason for this is the close presidential election with rumors of post election lawsuits, new investigations by Eliot Spitzer, oil supplies and the fear of terrorism.
Corporate earnings are running well ahead of the normal earnings growth rate for the S&P500 of 7%. This combined with lower stock prices have pushed PE ratios to more reasonable levels. This should be seen as a positive for the market long term.
Next week it will be all about earnings and the Third Quarter GDP, which will be reported on Friday. Companies of interest reporting earnings next week are; DuPont (DD), Procter & Gamble (PG), ExxonMobil (XOM), Plum Creek Timber (PCL), AFLAC Inc. (AFL), Arthur J Gallagher & Co (AJG), Chubb Corp. (CB), Anheuser-Bush (BUD), Northrop Grumman (NOC), Rayonier (RYN), and Fuji Photo Film (FUJIY).
Friday, October 08, 2004
Weekly Market Review 10-08-2004
Third Quarter Earnings Season Begins
By Rick Paler
This week officially kicked off the third quarter earnings season when on Thursday ALCOA Inc (AA) released their earnings. The company announced that they had earned $0.34 per share, which was inline with Wall Streets estimates. Traders were disappointed with the number, since the company failed to capitalize on higher demand and prices for metal.
All eyes will be focused on earnings for the next few weeks as market moving companies release their earnings for the quarter. Some traders are uneasy about the number of negative earnings preannouncements over the last few weeks. Wall Street expects the overall third quarter earnings growth for the S&P 500 to be between 14% to 16% year-over-year. While the number is below the last four quarters growth rate of over 20%, it would still be a very healthy number. There has not been five consecutive quarters with 20% growth for over 40 years and the average historical growth rate of earnings for the S&P 500 is only 7%.
In corporate news, the health care sector continued to get hammered. Last week Merck (MRK) announced the withdrawal of their arthritis drug Vioxx and the bad news continued to roll in this week. Pfizer (PFE) shares were pressured, when it was announced that an upcoming article in The New England Journal of Medicine will state that drug companies need to prove that their arthritis drugs, such as Pfizer’s Celebrex do not pose the same risk as Merck’s Vioxx. Pfizer’s medical director Dr. Gail Cawkwell said that the drugs are safe and that “there is no evidence” of increased risks of heart problems associated with Celebrex.
Chiron (CHIR) shares were sharply lower when it was announced that British health authorities suspended the company’s manufacturing license for three months. The action was taken after it was revealed that the company’s flu vaccine FluVirin had been contaminated. This caused the company to withdrawal their prior earnings guidance.
General Electric (GE) reported earnings that matched Wall Streets estimates. The company announced that their net income for the third quarter was $0.38 per share. CEO Jeffery Immelt said that “The economy we see continues to be very strong” and that “We also remain confident that we will achieve 10% to 15% earnings-per-share growth in 2005. The company also adjusted their full year earnings guidance upward to $1.57 to $1.60 per share for 2004.
Krispy Kreme (KKD) announced that the SEC has begun a formal investigation into the company’s repurchases of some franchises.
American International Group Inc. (AIG) also announced that the SEC is looking into bringing charges against the company related to press releases that allegedly violated federal securities laws.
American Eagle Outfitters, Inc. (AEOS) raised their third quarter guidance to $0.67 to $0.69 per share as September same-store-sales increased 22.7%.
In economic news this week, oil prices continue to climb to record highs. This week alone, oil jumped 8% in price to $53.31 per barrel. Traders continue to worry about supplies; as weaker than expected oil inventories in the U.S. were announced, peace talks in Nigeria broke down, Gulf Coast refineries continue to be impacted from the hurricanes, Yukos (YUKOY) battles the Russian government, Norway workers might go on strike, OPEC is near its producing capacity, and a colder winter might further drain supplies. This caused the stock market to decline for the week, since higher oil prices have the potential to slow the economy and hurt corporate profits.
The Labor Department reported this week that September Nonfarm payrolls rose by 96,000 versus the 148,000 increase in jobs that economist had expected. Some analyst blamed the shortfall on the hurricanes that hit Florida.
On the positive side Philadelphia Federal Reserve President Anthony Santomero said he sees the Gross Domestic Product growth through 2005 to be 3.5% to 4.0% and anticipates continued growth in the labor markets. He also stated that he expects inflation to be kept in check.
In bond news the 5 year Treasury note closed yielding 3.38%. The 10 year note closed with a yield at 4.13% and the 30 year bond closed at 4.90%.
Next week, we will be flooded with earnings. Potentially market moving reports will come from; Johnson & Johnson (JNJ), Yahoo Inc. (YHOO), Citigroup (C), Nokia (NOK), Stryker (SYK), Genuine Parts (GPC), Intel (INTC), Bank of America (BAC), and General Motors (GM). As a reminder the bond markets will be closed on Monday for Columbus Day.
By Rick Paler
This week officially kicked off the third quarter earnings season when on Thursday ALCOA Inc (AA) released their earnings. The company announced that they had earned $0.34 per share, which was inline with Wall Streets estimates. Traders were disappointed with the number, since the company failed to capitalize on higher demand and prices for metal.
All eyes will be focused on earnings for the next few weeks as market moving companies release their earnings for the quarter. Some traders are uneasy about the number of negative earnings preannouncements over the last few weeks. Wall Street expects the overall third quarter earnings growth for the S&P 500 to be between 14% to 16% year-over-year. While the number is below the last four quarters growth rate of over 20%, it would still be a very healthy number. There has not been five consecutive quarters with 20% growth for over 40 years and the average historical growth rate of earnings for the S&P 500 is only 7%.
In corporate news, the health care sector continued to get hammered. Last week Merck (MRK) announced the withdrawal of their arthritis drug Vioxx and the bad news continued to roll in this week. Pfizer (PFE) shares were pressured, when it was announced that an upcoming article in The New England Journal of Medicine will state that drug companies need to prove that their arthritis drugs, such as Pfizer’s Celebrex do not pose the same risk as Merck’s Vioxx. Pfizer’s medical director Dr. Gail Cawkwell said that the drugs are safe and that “there is no evidence” of increased risks of heart problems associated with Celebrex.
Chiron (CHIR) shares were sharply lower when it was announced that British health authorities suspended the company’s manufacturing license for three months. The action was taken after it was revealed that the company’s flu vaccine FluVirin had been contaminated. This caused the company to withdrawal their prior earnings guidance.
General Electric (GE) reported earnings that matched Wall Streets estimates. The company announced that their net income for the third quarter was $0.38 per share. CEO Jeffery Immelt said that “The economy we see continues to be very strong” and that “We also remain confident that we will achieve 10% to 15% earnings-per-share growth in 2005. The company also adjusted their full year earnings guidance upward to $1.57 to $1.60 per share for 2004.
Krispy Kreme (KKD) announced that the SEC has begun a formal investigation into the company’s repurchases of some franchises.
American International Group Inc. (AIG) also announced that the SEC is looking into bringing charges against the company related to press releases that allegedly violated federal securities laws.
American Eagle Outfitters, Inc. (AEOS) raised their third quarter guidance to $0.67 to $0.69 per share as September same-store-sales increased 22.7%.
In economic news this week, oil prices continue to climb to record highs. This week alone, oil jumped 8% in price to $53.31 per barrel. Traders continue to worry about supplies; as weaker than expected oil inventories in the U.S. were announced, peace talks in Nigeria broke down, Gulf Coast refineries continue to be impacted from the hurricanes, Yukos (YUKOY) battles the Russian government, Norway workers might go on strike, OPEC is near its producing capacity, and a colder winter might further drain supplies. This caused the stock market to decline for the week, since higher oil prices have the potential to slow the economy and hurt corporate profits.
The Labor Department reported this week that September Nonfarm payrolls rose by 96,000 versus the 148,000 increase in jobs that economist had expected. Some analyst blamed the shortfall on the hurricanes that hit Florida.
On the positive side Philadelphia Federal Reserve President Anthony Santomero said he sees the Gross Domestic Product growth through 2005 to be 3.5% to 4.0% and anticipates continued growth in the labor markets. He also stated that he expects inflation to be kept in check.
In bond news the 5 year Treasury note closed yielding 3.38%. The 10 year note closed with a yield at 4.13% and the 30 year bond closed at 4.90%.
Next week, we will be flooded with earnings. Potentially market moving reports will come from; Johnson & Johnson (JNJ), Yahoo Inc. (YHOO), Citigroup (C), Nokia (NOK), Stryker (SYK), Genuine Parts (GPC), Intel (INTC), Bank of America (BAC), and General Motors (GM). As a reminder the bond markets will be closed on Monday for Columbus Day.
Friday, October 01, 2004
Weekly Market Review 10-01-2004
Third Quarter Ends
By Rick Paler
On Thursday last week, the third quarter officially ended and Friday started the fourth quarter. It was a very positive sign for the market that the week ended on an up note. Looking back the market actually performed quite well. The market was able to post positive results for the quarter despite record energy prices; terrorist attacks, the war in Iraq and the uncertainty of the out come of the presidential election. This should provide additional traction going into the fourth quarter as earnings continue to improve and the world wide economy, including the United States continues to expand.
Next week, we begin the third quarter earnings season with Alcoa (AA) reporting their results on Thursday. I estimate that overall quarter versus quarter earnings growth for the S&P 500 to be in the 14% range. This is not as high as the prior quarters 20% plus growth, but still very respectable. The historical average earnings growth for the S&P 500 is only 7%.
Last week in corporate news Merck (MRK) made headlines. The company announced that their blockbuster drug Vioxx would be pulled from the market, after a study confirmed that the drug led to an increase of heart attack and or strokes. The drug was responsible for approximately $3 billion in sales a year. In the announcement the company lowered their earnings guidance by $0.50 - $0.60 per share for 2004. Wall Street analysts expect this to impact 2005 earnings also, since the drug was not scheduled to go off patent until 2006. Shares fell 24% on the news.
ConocoPhillips (COP) as expected announced that they would acquire a 7.6% stake in Lukoil (LUKOY) for $2 billion dollars. The purchase represents the sale of the Russian governments remaining stake in the company. This gives the company access to the Russia’s vast oil reserves and potential access to Iraq’s yet developed oil fields. Wall Street expects Conoco to raise their stake in the company to 20% over time.
PeopleSoft (PSFT) announced that they fired Craig Conway as President and CEO, citing that the board of directors had lost their confidence that he could lead the company. Replacing Mr. Conway will be Dave Duffield, PeopleSoft’s founder and Chairman.
PETsMART’s (PETM) board of directors approved a new stock repurchase program replacing the existing $35 million per year program. The new plan allows for the purchase of $150 million of the company’s common stock. CEO Philip Francis stated “This move demonstrates our confidence in the fundamental strength of our business model, our strategy, and our people, and we’re confident about the future.”
Walt Disney Co. (DIS) former board members Roy Disney and Stanley Gold announced that they support the boards move to retain an independent search firm to select a new CEO. Embattled CEO Michael Eisner will be stepping down in 2006 when his contract expires.
PepsiCo (PEP) reported third quarter earnings of $0.66 per share beating estimates by $0.01. Revenues grew 6% to $7.3 billion. The company cited strong international demand and said that it expects demand to be strong heading into the fourth quarter.
Coca-Kola (KO) said that it may take two years to regain the growth and performance associated with the brand. The company will establish a new marketing campaign to spur the growth. The company had earlier warned that they would not meet earnings expectations for the quarter.
In economic news crude oil prices reached a record high before moving back below the magic $50.00 per barrel price for the week. Fears continue about supply, as violence in Nigeria intensifies, causing Royal Dutch (RD) to pull its workers from the country.
Economic reports for the week were generally upbeat. The final second quarter GDP was revised upward more than economist had expected. The report showed that the economy grew by 3.3%, while economist had expected 3.0% and the preliminary number was 2.8%.
Consumer spending which accounts for two-thirds of the economy came in better than expected. The Personal Consumption Expenditures Index increased 2.1% year over year. While the University of Michigan Consumer Sentiment Index for September came in at 94.2, which was below analyst estimates as energy prices dampened consumers outlook.
The ISM Purchasing Managers’ Manufacturing Index came in above economist expectations at 58.5. The number confirmed that labor as well as production continues to expand.
The Treasury market had higher yields across the yield curve from the prior week. The 5 year Treasury note closed yielding 3.42%. Bond traders also moved the yields on the 10 year note and 30 year bond higher for the week. The 10 year note closed at 4.18% and the 30 year bond closed yielding 4.94%. The yield curve continues to flatten out, as short term yields respond quicker to the Federal Reserves increase in the Fed Funds rate a few weeks ago.
Next week marks the kick-off of the third quarter earnings season and trades will be watching closely at companies posting result. In economic news, retail same store sales will be released and the important September employment numbers will finish up the week.
Companies releasing earnings next week are; Yum! Brands (YUM), Genentech (DNA), Monsanto Company (MON), ALCOA Inc. (AA), Costco Wholesale (COST), and General Electric (GE).
By Rick Paler
On Thursday last week, the third quarter officially ended and Friday started the fourth quarter. It was a very positive sign for the market that the week ended on an up note. Looking back the market actually performed quite well. The market was able to post positive results for the quarter despite record energy prices; terrorist attacks, the war in Iraq and the uncertainty of the out come of the presidential election. This should provide additional traction going into the fourth quarter as earnings continue to improve and the world wide economy, including the United States continues to expand.
Next week, we begin the third quarter earnings season with Alcoa (AA) reporting their results on Thursday. I estimate that overall quarter versus quarter earnings growth for the S&P 500 to be in the 14% range. This is not as high as the prior quarters 20% plus growth, but still very respectable. The historical average earnings growth for the S&P 500 is only 7%.
Last week in corporate news Merck (MRK) made headlines. The company announced that their blockbuster drug Vioxx would be pulled from the market, after a study confirmed that the drug led to an increase of heart attack and or strokes. The drug was responsible for approximately $3 billion in sales a year. In the announcement the company lowered their earnings guidance by $0.50 - $0.60 per share for 2004. Wall Street analysts expect this to impact 2005 earnings also, since the drug was not scheduled to go off patent until 2006. Shares fell 24% on the news.
ConocoPhillips (COP) as expected announced that they would acquire a 7.6% stake in Lukoil (LUKOY) for $2 billion dollars. The purchase represents the sale of the Russian governments remaining stake in the company. This gives the company access to the Russia’s vast oil reserves and potential access to Iraq’s yet developed oil fields. Wall Street expects Conoco to raise their stake in the company to 20% over time.
PeopleSoft (PSFT) announced that they fired Craig Conway as President and CEO, citing that the board of directors had lost their confidence that he could lead the company. Replacing Mr. Conway will be Dave Duffield, PeopleSoft’s founder and Chairman.
PETsMART’s (PETM) board of directors approved a new stock repurchase program replacing the existing $35 million per year program. The new plan allows for the purchase of $150 million of the company’s common stock. CEO Philip Francis stated “This move demonstrates our confidence in the fundamental strength of our business model, our strategy, and our people, and we’re confident about the future.”
Walt Disney Co. (DIS) former board members Roy Disney and Stanley Gold announced that they support the boards move to retain an independent search firm to select a new CEO. Embattled CEO Michael Eisner will be stepping down in 2006 when his contract expires.
PepsiCo (PEP) reported third quarter earnings of $0.66 per share beating estimates by $0.01. Revenues grew 6% to $7.3 billion. The company cited strong international demand and said that it expects demand to be strong heading into the fourth quarter.
Coca-Kola (KO) said that it may take two years to regain the growth and performance associated with the brand. The company will establish a new marketing campaign to spur the growth. The company had earlier warned that they would not meet earnings expectations for the quarter.
In economic news crude oil prices reached a record high before moving back below the magic $50.00 per barrel price for the week. Fears continue about supply, as violence in Nigeria intensifies, causing Royal Dutch (RD) to pull its workers from the country.
Economic reports for the week were generally upbeat. The final second quarter GDP was revised upward more than economist had expected. The report showed that the economy grew by 3.3%, while economist had expected 3.0% and the preliminary number was 2.8%.
Consumer spending which accounts for two-thirds of the economy came in better than expected. The Personal Consumption Expenditures Index increased 2.1% year over year. While the University of Michigan Consumer Sentiment Index for September came in at 94.2, which was below analyst estimates as energy prices dampened consumers outlook.
The ISM Purchasing Managers’ Manufacturing Index came in above economist expectations at 58.5. The number confirmed that labor as well as production continues to expand.
The Treasury market had higher yields across the yield curve from the prior week. The 5 year Treasury note closed yielding 3.42%. Bond traders also moved the yields on the 10 year note and 30 year bond higher for the week. The 10 year note closed at 4.18% and the 30 year bond closed yielding 4.94%. The yield curve continues to flatten out, as short term yields respond quicker to the Federal Reserves increase in the Fed Funds rate a few weeks ago.
Next week marks the kick-off of the third quarter earnings season and trades will be watching closely at companies posting result. In economic news, retail same store sales will be released and the important September employment numbers will finish up the week.
Companies releasing earnings next week are; Yum! Brands (YUM), Genentech (DNA), Monsanto Company (MON), ALCOA Inc. (AA), Costco Wholesale (COST), and General Electric (GE).
Friday, September 24, 2004
Weekly Market Review 09-24-2004
Market ends lower for the week
By Rick Paler
Last week the markets decided to a breather and ended lower as traders took profits amidst a string of earnings warnings. Crude oil prices not help matters, but compounded fears that higher prices would affect the economy. Economic news for the week was mixed and bond traders flattened out the yield curve.
The string of recent earnings warnings continued last week with several companies lowering their earnings guidance for the upcoming quarter. This week it was CarMax (KMX), Colgate-Palmolive (CL), Ethan Allen (ETH), The New York Times (NYT), PMC Sierra (PMCS), RF Micro Devices (RFMD), UT Starcom (UTSI) and Wendy’s (WEN), Colgate-Palmolive (CL) said that their earnings for the second half of the year would be far below analyst estimates. The company cited marketing expenses and higher material cost. The company now expects third and fourth quarter earnings to be $0.57 - $0.59 per share. Wendy’s (WEN) shares fell when the company slashed their full year earnings guidance. The company announced that their full year earnings expectations would be $2.25 - $2.30 per share. Analyst had expected the company to earn $2.32 - $2.37 per share.
Although over the last two weeks we have had a string of earnings warnings, earnings for the quarter are expected to come in at a growth rate of 14.3% for the S&P 500. Additionally the negative –to-positive ratio is currently at 1.9. Both of these are better than their historical averages of 7% and 2.0 respectively.
Crude oil prices continue to climb and last Thursday hit a new high at $49.00 per barrel. Supply concerns continue as world wide demand increases due to the global economic recovery. Also pressuring prices higher are the string of hurricanes in the Gulf Coast. The hurricanes have caused many refineries to close down. Not helping prices are continuing problems at Yukos (YUKOY), Russia’s largest oil exporter continues to battle the Russian government over taxes. The company announced this week that they had suspended exports of oil to China and Lithuania. The company also continues to warn of bankruptcy.
In corporate new last week AutoZone (AZO) announced net income of only $2.83 per share. This included a $0.12 per share gain from warranty negotiations, missing Wall Streets estimates of $2.56. Sales for the period only grew by 0.3% and same store sales declines 3%.
American International Group, Inc. (AIG) announced that AIG and its subsidiary company AIG Financial Products Corp. (AIGFP) were informed that the SEC is considering bringing action against the companies for alleged violations of federal securities laws.
General Electric (GE) issued a statement following the SEC Order that found that proxy statements and Form 10-k “failed to fully describe the substantial benefits that Welch would receive as part of the agreement”. The company statement said that GE cooperated fully with the SEC’s informal investigation into former COE Jack Welch’s Employment and Post-Retirement Consulting Agreement. The agreement allowed Mr. Welch to use GE aircraft, offices, apartments and financial services for life.
ConocoPhillips (COP) approved a 16% increase in the company’s dividend rate. The new quarterly dividend rate will be $0.50 per share. In separate news, Vagit Alekperov CEO of OAO Lukoil Holdings (LKOH.RS) said that company has not discussed the possibility of selling a stake to Conoco. Reports had been circulating that Conoco plans to win the privatization auction with a 7.6% stake in Lukoil and plans to increase the stake to 20%.
Walt Disney Co.’s (DIS) board of directors reaffirmed their support for embattled CEO Michael Eisner. A shareholders group led by Roy Disney wants Mr. Eisner to resign before next years annual shareholders meeting. Mr. Eisner recently announced that he would resign at the end of his current contract that expires in 2006.
General Mills (GIS) posted earnings of $0.55 per share, which was below analyst estimates of $0.60 per share. The company cited higher commodity prices but reaffirmed their full year earnings guidance.
In economic news, the highlight for the week was the FOMC meeting. As expected the Federal Reserve moved interest rates higher. It was the third time the Federal Reserve raised interest rates this year as they attempt to head off inflation as the economy continues to recover. The closely watch minutes on the meeting stated that the slowdown in the economy was temporary and that their long term view was that the economy would continue to expand. In their statement they said “The Committee believes that policy accommodation can be removed at a pace that is likely to be measured.” The Federal Funds rate now stands at 1.75% up from 1.50%.
Housing starts for August were up 0.6% to an annual rate of 2.0 million units versus the estimate by economist of 1.93 million units. Building permits missed expectations in August coming in at 1.952 million units. The expectation was for 1.985 million units.
The Leading Index, an index that measures economic activity in the future fell 0.3% in August below economist estimates of a 0.2% drop. This was the third consecutive drop, which suggests economic growth is slowing.
Bond traders have flattened out the yield curve as short term interest rates rise quicker than long term rates. It may also be an indication that traders feel the economy is slowing down. The 5 year note closed at 3.31%. The 10 year Treasury note closed lower on the week yielding 4.02%, while the 30 year bond also closed lower for the week yielding 4.79%.
Next week, I would expect the markets to continue to trade within the narrow rage that has established over the last few months. This is due to traders waiting for the third quarter earnings season, the uncertainty of the presidential election and the threat of a terrorist attack in the United States before the election.
Companies releasing earnings next week include the following: Walgreen (WAG), PepsiCo (PEP), Constellation Brands, Inc. (STZ).
By Rick Paler
Last week the markets decided to a breather and ended lower as traders took profits amidst a string of earnings warnings. Crude oil prices not help matters, but compounded fears that higher prices would affect the economy. Economic news for the week was mixed and bond traders flattened out the yield curve.
The string of recent earnings warnings continued last week with several companies lowering their earnings guidance for the upcoming quarter. This week it was CarMax (KMX), Colgate-Palmolive (CL), Ethan Allen (ETH), The New York Times (NYT), PMC Sierra (PMCS), RF Micro Devices (RFMD), UT Starcom (UTSI) and Wendy’s (WEN), Colgate-Palmolive (CL) said that their earnings for the second half of the year would be far below analyst estimates. The company cited marketing expenses and higher material cost. The company now expects third and fourth quarter earnings to be $0.57 - $0.59 per share. Wendy’s (WEN) shares fell when the company slashed their full year earnings guidance. The company announced that their full year earnings expectations would be $2.25 - $2.30 per share. Analyst had expected the company to earn $2.32 - $2.37 per share.
Although over the last two weeks we have had a string of earnings warnings, earnings for the quarter are expected to come in at a growth rate of 14.3% for the S&P 500. Additionally the negative –to-positive ratio is currently at 1.9. Both of these are better than their historical averages of 7% and 2.0 respectively.
Crude oil prices continue to climb and last Thursday hit a new high at $49.00 per barrel. Supply concerns continue as world wide demand increases due to the global economic recovery. Also pressuring prices higher are the string of hurricanes in the Gulf Coast. The hurricanes have caused many refineries to close down. Not helping prices are continuing problems at Yukos (YUKOY), Russia’s largest oil exporter continues to battle the Russian government over taxes. The company announced this week that they had suspended exports of oil to China and Lithuania. The company also continues to warn of bankruptcy.
In corporate new last week AutoZone (AZO) announced net income of only $2.83 per share. This included a $0.12 per share gain from warranty negotiations, missing Wall Streets estimates of $2.56. Sales for the period only grew by 0.3% and same store sales declines 3%.
American International Group, Inc. (AIG) announced that AIG and its subsidiary company AIG Financial Products Corp. (AIGFP) were informed that the SEC is considering bringing action against the companies for alleged violations of federal securities laws.
General Electric (GE) issued a statement following the SEC Order that found that proxy statements and Form 10-k “failed to fully describe the substantial benefits that Welch would receive as part of the agreement”. The company statement said that GE cooperated fully with the SEC’s informal investigation into former COE Jack Welch’s Employment and Post-Retirement Consulting Agreement. The agreement allowed Mr. Welch to use GE aircraft, offices, apartments and financial services for life.
ConocoPhillips (COP) approved a 16% increase in the company’s dividend rate. The new quarterly dividend rate will be $0.50 per share. In separate news, Vagit Alekperov CEO of OAO Lukoil Holdings (LKOH.RS) said that company has not discussed the possibility of selling a stake to Conoco. Reports had been circulating that Conoco plans to win the privatization auction with a 7.6% stake in Lukoil and plans to increase the stake to 20%.
Walt Disney Co.’s (DIS) board of directors reaffirmed their support for embattled CEO Michael Eisner. A shareholders group led by Roy Disney wants Mr. Eisner to resign before next years annual shareholders meeting. Mr. Eisner recently announced that he would resign at the end of his current contract that expires in 2006.
General Mills (GIS) posted earnings of $0.55 per share, which was below analyst estimates of $0.60 per share. The company cited higher commodity prices but reaffirmed their full year earnings guidance.
In economic news, the highlight for the week was the FOMC meeting. As expected the Federal Reserve moved interest rates higher. It was the third time the Federal Reserve raised interest rates this year as they attempt to head off inflation as the economy continues to recover. The closely watch minutes on the meeting stated that the slowdown in the economy was temporary and that their long term view was that the economy would continue to expand. In their statement they said “The Committee believes that policy accommodation can be removed at a pace that is likely to be measured.” The Federal Funds rate now stands at 1.75% up from 1.50%.
Housing starts for August were up 0.6% to an annual rate of 2.0 million units versus the estimate by economist of 1.93 million units. Building permits missed expectations in August coming in at 1.952 million units. The expectation was for 1.985 million units.
The Leading Index, an index that measures economic activity in the future fell 0.3% in August below economist estimates of a 0.2% drop. This was the third consecutive drop, which suggests economic growth is slowing.
Bond traders have flattened out the yield curve as short term interest rates rise quicker than long term rates. It may also be an indication that traders feel the economy is slowing down. The 5 year note closed at 3.31%. The 10 year Treasury note closed lower on the week yielding 4.02%, while the 30 year bond also closed lower for the week yielding 4.79%.
Next week, I would expect the markets to continue to trade within the narrow rage that has established over the last few months. This is due to traders waiting for the third quarter earnings season, the uncertainty of the presidential election and the threat of a terrorist attack in the United States before the election.
Companies releasing earnings next week include the following: Walgreen (WAG), PepsiCo (PEP), Constellation Brands, Inc. (STZ).
Friday, September 17, 2004
Weekly Market Review 09-17-2004
The S&P500 post gains for the sixth straight week
By Rick Paler
This week the S&P 500 posted a modest gain for the week. It was the sixth consecutive weekly gain. Trading volume remained low, which indicates the gains might not be long lasted. Typically a market gain with heavy volume indicates that the rally can be sustained.
During the week oil prices continued to rise and economic data was mixed. Several companies warned about their earning this week. While bond traders wait for next weeks Federal Open Market Committee meeting next week.
This week oil prices rose as hurricane Ivan hit the Gulf Coast, causing oil facilities in the area shut down. Yukos Oil (YUKOY) the largest exporter of oil in Russia revealed that it was close to bankruptcy and would stop exporting oil to China. Oil ended up 6.5% to $45.59 a barrel for the week.
In economic news several reports were released this week showing that the economy, which had began to slow down is still growing strongly. The weakest report of the week was the Philadelphia Fed Business Activity Index for September came in at 13.4, below economist expectations of 25.0. The index measures economic activity and any number above zero reflects economic growth.
This came on the back of a very strong Empire Manufacturing Index. The index surged in September to 28.3 from 13.2 the prior month. The reading blew away economists expectations of 20.0 for the New York area.
A favorable CPI report for August showed that both the total and core-CPI numbers came in low at 0.1%. Since inflation is under control, the Federal Reserve should be able to raise interest rates at a measured pace. What is not being spoken about is the Federal Reserves deceleration in the money supply. This indicates that the Federal Reserve’s monetary policy is tighter than at first glance. Next week the Federal Open Market Committee meets on Tuesday. It is my expectation that they will raise interest rates another 25 basis points bringing the Fed Funds Rate to 1.75%. I expect the Federal Reserve to raise rates slowly until interest rates are at a more neutral stance at 3.75%.
In cooperate news this week several companies warned that their third quarter earnings would not meet analyst expectations. Companies issuing warnings this week were Coca-Cola (KO), Cardinal Health (CAH) Office Depot (ODP) and Nortel Networks (NT).
Coca-Cola (KO) issued earnings guidance for the third quarter that disappointed the Street. The company issued guidance of $0.46 - $0.48 per share, below previous estimates of $0.54 per share. The company cited rain and cooler weather in Europe and volume trends in the United States. CEO Neville Isdell said “They are symptoms of problems that demand strong corrective actions and initiatives that will put this company firmly on its proper growth course. That is my unmistakable and immediate objective”.
Cardinal Health (CAH) said that they made a request to the SEC for an extension in filing its Form 10-k for 2004. The company said they would have to restate earnings for 2001 – 2003 and the first quarter of 2004. The company also announced that their net income for the first quarter 2005 would fall 25% and 10% - 15% for the first half of 2005.
Walt Disney Company’s (DIS) Michael Eisner, the embattled CEO, last week said that he would be stepping down from his position in 2006 when his current contract expires. Shareholders led by Roy Disney and Stanley Gold were able to get Mr. Eisner to step down as Chairman earlier this year. They are now demanding the Mr. Eisner be removed as CEO by the company’s 2005 annual meeting.
Patterson Companies (PDCO) the dental, pet veterinarian and rehabilitation supply company announced a 2-for-1 stock split and authorized the repurchase of 3 million shares or 6 million shares post split.
Delta Airlines (DAL) may be going the way of US Airways (UAIRQ). US Airways recently declared bankruptcy and now Delta Airlines auditor Deloitte & Touche LLP expressed doubt about the company’s ability to continue as a going concern.
Qualcomm (QCOM) was under pressure, when the company announced that they are reviewing how the company accounts for royalty payments. They also announced that they see earnings coming in at $0.28 - $0.30 per share. Wall Street analyst had expected earnings of $0.29 per share.
Bond trading was light this week in front of next weeks FOMC meeting. The 5 year Treasury note closed at 3.32%. The 10 year note and the 30 year bond closed at 4.11% and 4.90% respectively.
The market should continue its slight rally into the election as long as the polls show that President George W. Bush has a sizable lead over Senator John Kerry. This is because the market does not like uncertainty, not because the market likes one over the other. With President Bush, the market knows his policies, whereas with Senator Kerry it is an unknown.
The third quarter earnings season is right around the corner. I expect the strong earnings trend to continue. Earnings growth for the S&P 500 will not be in the mid 20% range like the last few quarters. I expect earnings growth for the S&P 500 to be close to 15%. The long term average earnings growth is 7%. Currently, the negative-to-positive preannouncement ratio is running at 1.7, which is below the historical level of 2.0.
Next week all eyes will be on the FOMC which will meet Tuesday to discuss raising interest rates. Companies releasing earnings are the following: Nike (NKE), General Mills (GIS), AutoZone (AZO), Goldman Sachs (GS), Bed Bath & Beyond (BBY) and FedEx (FDX).
By Rick Paler
This week the S&P 500 posted a modest gain for the week. It was the sixth consecutive weekly gain. Trading volume remained low, which indicates the gains might not be long lasted. Typically a market gain with heavy volume indicates that the rally can be sustained.
During the week oil prices continued to rise and economic data was mixed. Several companies warned about their earning this week. While bond traders wait for next weeks Federal Open Market Committee meeting next week.
This week oil prices rose as hurricane Ivan hit the Gulf Coast, causing oil facilities in the area shut down. Yukos Oil (YUKOY) the largest exporter of oil in Russia revealed that it was close to bankruptcy and would stop exporting oil to China. Oil ended up 6.5% to $45.59 a barrel for the week.
In economic news several reports were released this week showing that the economy, which had began to slow down is still growing strongly. The weakest report of the week was the Philadelphia Fed Business Activity Index for September came in at 13.4, below economist expectations of 25.0. The index measures economic activity and any number above zero reflects economic growth.
This came on the back of a very strong Empire Manufacturing Index. The index surged in September to 28.3 from 13.2 the prior month. The reading blew away economists expectations of 20.0 for the New York area.
A favorable CPI report for August showed that both the total and core-CPI numbers came in low at 0.1%. Since inflation is under control, the Federal Reserve should be able to raise interest rates at a measured pace. What is not being spoken about is the Federal Reserves deceleration in the money supply. This indicates that the Federal Reserve’s monetary policy is tighter than at first glance. Next week the Federal Open Market Committee meets on Tuesday. It is my expectation that they will raise interest rates another 25 basis points bringing the Fed Funds Rate to 1.75%. I expect the Federal Reserve to raise rates slowly until interest rates are at a more neutral stance at 3.75%.
In cooperate news this week several companies warned that their third quarter earnings would not meet analyst expectations. Companies issuing warnings this week were Coca-Cola (KO), Cardinal Health (CAH) Office Depot (ODP) and Nortel Networks (NT).
Coca-Cola (KO) issued earnings guidance for the third quarter that disappointed the Street. The company issued guidance of $0.46 - $0.48 per share, below previous estimates of $0.54 per share. The company cited rain and cooler weather in Europe and volume trends in the United States. CEO Neville Isdell said “They are symptoms of problems that demand strong corrective actions and initiatives that will put this company firmly on its proper growth course. That is my unmistakable and immediate objective”.
Cardinal Health (CAH) said that they made a request to the SEC for an extension in filing its Form 10-k for 2004. The company said they would have to restate earnings for 2001 – 2003 and the first quarter of 2004. The company also announced that their net income for the first quarter 2005 would fall 25% and 10% - 15% for the first half of 2005.
Walt Disney Company’s (DIS) Michael Eisner, the embattled CEO, last week said that he would be stepping down from his position in 2006 when his current contract expires. Shareholders led by Roy Disney and Stanley Gold were able to get Mr. Eisner to step down as Chairman earlier this year. They are now demanding the Mr. Eisner be removed as CEO by the company’s 2005 annual meeting.
Patterson Companies (PDCO) the dental, pet veterinarian and rehabilitation supply company announced a 2-for-1 stock split and authorized the repurchase of 3 million shares or 6 million shares post split.
Delta Airlines (DAL) may be going the way of US Airways (UAIRQ). US Airways recently declared bankruptcy and now Delta Airlines auditor Deloitte & Touche LLP expressed doubt about the company’s ability to continue as a going concern.
Qualcomm (QCOM) was under pressure, when the company announced that they are reviewing how the company accounts for royalty payments. They also announced that they see earnings coming in at $0.28 - $0.30 per share. Wall Street analyst had expected earnings of $0.29 per share.
Bond trading was light this week in front of next weeks FOMC meeting. The 5 year Treasury note closed at 3.32%. The 10 year note and the 30 year bond closed at 4.11% and 4.90% respectively.
The market should continue its slight rally into the election as long as the polls show that President George W. Bush has a sizable lead over Senator John Kerry. This is because the market does not like uncertainty, not because the market likes one over the other. With President Bush, the market knows his policies, whereas with Senator Kerry it is an unknown.
The third quarter earnings season is right around the corner. I expect the strong earnings trend to continue. Earnings growth for the S&P 500 will not be in the mid 20% range like the last few quarters. I expect earnings growth for the S&P 500 to be close to 15%. The long term average earnings growth is 7%. Currently, the negative-to-positive preannouncement ratio is running at 1.7, which is below the historical level of 2.0.
Next week all eyes will be on the FOMC which will meet Tuesday to discuss raising interest rates. Companies releasing earnings are the following: Nike (NKE), General Mills (GIS), AutoZone (AZO), Goldman Sachs (GS), Bed Bath & Beyond (BBY) and FedEx (FDX).
Friday, August 20, 2004
Weekly Market Review 08-20-2004
The Crude Reality
By Rick Paler
I am now starting to sound like a broken record, but once again Wall Streets focus remains fixated on oil. This week oil hit another record high when it reached $49.40 on Friday before dropping back to close at $47.86. Supply concerns continue to linger as violence increased in Iraq. Shiite militants related to Muqtada al-Sadr attacked a pipeline lending some traders to question the stability of Iraq’s output. The Department of Energy also announced a larger than expected decline in gasoline inventories.
Higher oil prices will continue to be a drag on the market going forward. Higher crude prices act as a tax on the world wide economy, thereby slowing down economic growth. Currently, it is my belief that the market has already priced in $50.00 per barrel oil prices. Although continued violence in the middle-east, increasing world wide demand, and the possibility of terrorism have the ability to push prices even higher.
Overall the market was able to pull off a stealth rally ending the week higher on low volume. Earnings reports were mixed this week. While Google began trading and economic data was mixed.
Overall earning this quarter continues to be very strong as the second quarter earnings season slows down. Home Depot (HD) the world’s largest home improvement retailer posted earnings of $0.70 per share topping estimated of $0.64per share. Sales surged 11% to $20 billion. The company cited strong average ticket growth in every selling category. The company also increased their fiscal year guidance saying they expect earnings to grow 14% - 17% up from 10% - 14%.
Estee Lauder (EL) reported that their fourth-quarter net income surged 34% and sales rose 15% to $1.4 billion on strong international sales. The company posted earnings of $0.31 per share missing analyst estimates of $0.32 per share. The company announced that they project to earn $1.88 - $1.93 per share for fiscal 2005 which would match Wall Streets estimates of $1.91 per share.
Hormel Foods Corp (HRL) reported that their fiscal third quarter earnings were $0.32 per share a penny below expectations. Sales jumped 15% to $1.16 billion from last years $1.01 billion. The company lowered guidance for the full year. The company cited higher grain prices. The company now is expected to earn $1.46 - $1.52 per share, from the prior street estimate of $1.62 per share.
PETsMart (PETM) net income for the second quarter rose 21% to $0.23 per share which matched analyst estimates. Sales rose to $806 million or 11%. The company credited strong demand for its higher margin services. The company also reaffirmed its full year earnings guidance of $1.18 per share up from $0.95 per share a year ago.
Google (GOOG) the internet search company began trading this week. The much anticipated IPO had numerous analysts questioning the company’s decision to bypass Wall Street by offering shares through a Dutch auction format. After problems with the offering, the company priced the shares at $85.00, which was below their initial price target of $108 - $135 per share. At the close of trading on Friday the company’s shares ended at $108.31.
In general corporate news ITT Industries Inc. (ITT) announced that it had received a $24.9 million dollar contract from the U.S Navy. The company will provide engineering software support for the tactical aircraft-warfare program.
Symantec Corp. (SYMC) announced the release of its latest line of consumer and home office internet security solutions. The leader of information security and makers of Norton AntiVirus, Norton Personal Firewall and Norton Internet Security said that the new versions for 2005 are designed to address the newest and most rampant online threats. Matthew Moynahan, Vice President of Consumer Products and Solutions said “Symantec’s new security products provide powerful, proactive defense to aggressively handle today’s most common and highly developed Internet threats, all with easy-to-use automated convenience for optimal computing in a connected world”.
Coca-Cola (KO) announce that basketball star LeBron James has worked with the company to produce a new POWERade drink. The new drink will be called FLAVA23 and have a unique “sourberry” flavor and burgundy color. The company stated that James was directly involved with every aspect of the creation of FLAVA23. In conjunction with the new drink POWERade commissioned DC Comics to produce a new comic titled “King James” that will feature LeBron James superhero-caliber basketball skills. The comic will be available for free with three purchases for the new drink.
Economic news this week was mixed. The closely watched CPI report for July came in at -.01% with the core rate at just 0.1%, both were below economist expectations and indicate that higher oil prices have not had an effect on inflation to date. The Philadelphia Fed’s Business Activity Index for August came in below estimates at 28.5. Economist had expected a decline to 30.0 from 36.1 for July. This came on the back of a very disappointing Empire Manufacturing Index earlier in the week. Each index measures business growth activities in their region.
It was a slow week in the Treasury market this week with yields lower across the yield curve for the week. The 5 year Treasury note closed yielding 3.40%. The 10 year note closed at 4.23% and the 30 year Treasury bond closed yielding 5.02%
This week should be a slow week with little volume as many traders try to get in a vacation before the school year begins. Analyst will continue to watch oil prices for market direction. If the U.S. military and the Iraq government can eliminate Shiite cleric Muqtada al-Sadr we could see a market rally.
Stocks to watch this week include the following companies: H.J. Heinz (HNZ), Williams-Sonoma (WSM), Chico’s FAS (CHS), and Patterson Companies Inc. (PDCO)
By Rick Paler
I am now starting to sound like a broken record, but once again Wall Streets focus remains fixated on oil. This week oil hit another record high when it reached $49.40 on Friday before dropping back to close at $47.86. Supply concerns continue to linger as violence increased in Iraq. Shiite militants related to Muqtada al-Sadr attacked a pipeline lending some traders to question the stability of Iraq’s output. The Department of Energy also announced a larger than expected decline in gasoline inventories.
Higher oil prices will continue to be a drag on the market going forward. Higher crude prices act as a tax on the world wide economy, thereby slowing down economic growth. Currently, it is my belief that the market has already priced in $50.00 per barrel oil prices. Although continued violence in the middle-east, increasing world wide demand, and the possibility of terrorism have the ability to push prices even higher.
Overall the market was able to pull off a stealth rally ending the week higher on low volume. Earnings reports were mixed this week. While Google began trading and economic data was mixed.
Overall earning this quarter continues to be very strong as the second quarter earnings season slows down. Home Depot (HD) the world’s largest home improvement retailer posted earnings of $0.70 per share topping estimated of $0.64per share. Sales surged 11% to $20 billion. The company cited strong average ticket growth in every selling category. The company also increased their fiscal year guidance saying they expect earnings to grow 14% - 17% up from 10% - 14%.
Estee Lauder (EL) reported that their fourth-quarter net income surged 34% and sales rose 15% to $1.4 billion on strong international sales. The company posted earnings of $0.31 per share missing analyst estimates of $0.32 per share. The company announced that they project to earn $1.88 - $1.93 per share for fiscal 2005 which would match Wall Streets estimates of $1.91 per share.
Hormel Foods Corp (HRL) reported that their fiscal third quarter earnings were $0.32 per share a penny below expectations. Sales jumped 15% to $1.16 billion from last years $1.01 billion. The company lowered guidance for the full year. The company cited higher grain prices. The company now is expected to earn $1.46 - $1.52 per share, from the prior street estimate of $1.62 per share.
PETsMart (PETM) net income for the second quarter rose 21% to $0.23 per share which matched analyst estimates. Sales rose to $806 million or 11%. The company credited strong demand for its higher margin services. The company also reaffirmed its full year earnings guidance of $1.18 per share up from $0.95 per share a year ago.
Google (GOOG) the internet search company began trading this week. The much anticipated IPO had numerous analysts questioning the company’s decision to bypass Wall Street by offering shares through a Dutch auction format. After problems with the offering, the company priced the shares at $85.00, which was below their initial price target of $108 - $135 per share. At the close of trading on Friday the company’s shares ended at $108.31.
In general corporate news ITT Industries Inc. (ITT) announced that it had received a $24.9 million dollar contract from the U.S Navy. The company will provide engineering software support for the tactical aircraft-warfare program.
Symantec Corp. (SYMC) announced the release of its latest line of consumer and home office internet security solutions. The leader of information security and makers of Norton AntiVirus, Norton Personal Firewall and Norton Internet Security said that the new versions for 2005 are designed to address the newest and most rampant online threats. Matthew Moynahan, Vice President of Consumer Products and Solutions said “Symantec’s new security products provide powerful, proactive defense to aggressively handle today’s most common and highly developed Internet threats, all with easy-to-use automated convenience for optimal computing in a connected world”.
Coca-Cola (KO) announce that basketball star LeBron James has worked with the company to produce a new POWERade drink. The new drink will be called FLAVA23 and have a unique “sourberry” flavor and burgundy color. The company stated that James was directly involved with every aspect of the creation of FLAVA23. In conjunction with the new drink POWERade commissioned DC Comics to produce a new comic titled “King James” that will feature LeBron James superhero-caliber basketball skills. The comic will be available for free with three purchases for the new drink.
Economic news this week was mixed. The closely watched CPI report for July came in at -.01% with the core rate at just 0.1%, both were below economist expectations and indicate that higher oil prices have not had an effect on inflation to date. The Philadelphia Fed’s Business Activity Index for August came in below estimates at 28.5. Economist had expected a decline to 30.0 from 36.1 for July. This came on the back of a very disappointing Empire Manufacturing Index earlier in the week. Each index measures business growth activities in their region.
It was a slow week in the Treasury market this week with yields lower across the yield curve for the week. The 5 year Treasury note closed yielding 3.40%. The 10 year note closed at 4.23% and the 30 year Treasury bond closed yielding 5.02%
This week should be a slow week with little volume as many traders try to get in a vacation before the school year begins. Analyst will continue to watch oil prices for market direction. If the U.S. military and the Iraq government can eliminate Shiite cleric Muqtada al-Sadr we could see a market rally.
Stocks to watch this week include the following companies: H.J. Heinz (HNZ), Williams-Sonoma (WSM), Chico’s FAS (CHS), and Patterson Companies Inc. (PDCO)
Friday, August 13, 2004
Market Wrap Up 8-13-2004
Oil Prices Hit Record Highs
By Rick Paler
Oil prices hit record highs this week of $46.65 per barrel. Traders continue to focus on supply concerns and some analysts are now predicting oil prices to reach $50.00 per barrel. Continued problems at Yukos (YUKOY) Russia’s largest oil exporter hurt oil prices, when the company announced that they are running out of money and may be forced to cut production. The company also announced that they received default notice on a $1.6 billion bank loan. The company is currently in a tax dispute with the Russian government. Also contributing to higher oil prices is the threat of terrorism and the recall vote in Venezuela. On the positive side Saudi Arabia said that they have 1.3 million barrels in spare capacity that could be used immediately to increase world wide supplies. Continued high oil prices have the ability to increase inflation and slow the world wide economy.
This week we also had a flood of economic data that was mixed and disappointing earnings announcements in the technology sector. This caused mixed results in the market for the week.
In corporate new a majority of companies continue to post strong earnings result. Cisco Systems (CSCO) announced earnings of $0.21 per share ahead of Wall Streets estimates of $0.20 per share. Sales climbed 26% to $5.9 billion. The company did disappoint, when they also announced that they saw rising inventories and said that future sales might not meet analyst estimates.
Hewlett-Packard (HPQ) disappointed when they released their earnings ahead of schedule and posted earnings of only $0.24 per share, the street had expected earnings of $0.31 per share. The company also lowered guidance to $0.35 - $0.39 per share for their fiscal fourth quarter from the prior $0.43 per share.
ITT Industries Inc. (ITT) announced that they completed their purchase of Eastman Kodak’s (EK) remote sensing systems business for $275 million in cash. The company expects the purchase to improve its space payload and service product offerings to its commercial, scientific and U.S. Military customers.
Church & Dwight (CHD) reported net income of $0.45 per share and sales jumped 33% to $340.8 million. The company said they had taken a charge for the purchase of the remaining stake in Armel LLC. The company also announced a 3-for1 stock split effective September 1.
Walt Disney Company (DIS) reported a 21% increase in net income per share when they announced earnings of $0.29 per share, topping the Streets estimates of $0.27 per share. Sales growth came in up 17% compared with a year ago. The company cited strong attendance at its theme parks and sales of DVD’s.
Marsh & McLennan (MMC) was in the news when it was announced that the nation’s largest insurance broker was being sued by United Policyholders, a not-for-profit organization. The suit claims that the company poorly disclosed commissions from insures.
Wal-Mart Stores (WMT) reported strong earnings of $0.62 per share, a penny above analyst estimates. Sales increased 11% to $69.7 billion but missed estimates of $70.7 billion. The company also raised their guidance for third quarter sales to 3% - 5% from the previous estimate of 2% - 4%.
In economic news, The Federal Reserve increased interest rates, the PPI and trade deficit surprised economist, while the weekly jobless claims and Consumer Sentiment came in below expectations.
As expected the Federal Reserve raised interest rates this week to 1.5%. In their statement they said that higher oil prices had slowed economic growth and hindered the improving job market. They also said that “the Committee believes that policy accommodation can be removed at a pace that is likely to be measured”.
The core Producer Price Index rose only 0.1% for July versus 0.2% for the fist half of they year and estimates of a 0.3% rise. Many Street analysts say that this indicates that higher oil prices have not reached consumers yet.
The biggest surprise to economist was the trade deficit. Economist had expected the deficit to rise to $47 billion, but the deficit rocketed to a record high of $55.8 billion. Treasury Secretary Snow said that the deficit indicates that the world wide economy is slowing.
Weekly Jobless claim came in below estimates at falling 4,000 to 333,000 versus the estimate of 340,000 new claims. A number below 400,000 indicates an improving job market.
The preliminary University of Michigan Consumer Sentiment report fell to 94.0 in August from 96.7 in July, which was below estimates of a rise to 97.2. This suggests that consumers are aware of the slow down in the economy and fear higher oil prices.
In bond trading the 5 year Treasury note closed the week higher yielding 3.41%, while the 10 year note and 30 year bond also closed the week yielding 4.22% and 5.01% respectively.
Next week the Summer Olympics and the possibility of terrorism will be on everyone’s minds. Companies of interest announcing earnings next week are the following; Kmart (KMRT), Home Depot (HD), Estee Lauder Companies (EL), TJX Companies (TJX), Nestle S.A (NSRGY) Gap Inc (GPS), and PETsMart (PETM)
By Rick Paler
Oil prices hit record highs this week of $46.65 per barrel. Traders continue to focus on supply concerns and some analysts are now predicting oil prices to reach $50.00 per barrel. Continued problems at Yukos (YUKOY) Russia’s largest oil exporter hurt oil prices, when the company announced that they are running out of money and may be forced to cut production. The company also announced that they received default notice on a $1.6 billion bank loan. The company is currently in a tax dispute with the Russian government. Also contributing to higher oil prices is the threat of terrorism and the recall vote in Venezuela. On the positive side Saudi Arabia said that they have 1.3 million barrels in spare capacity that could be used immediately to increase world wide supplies. Continued high oil prices have the ability to increase inflation and slow the world wide economy.
This week we also had a flood of economic data that was mixed and disappointing earnings announcements in the technology sector. This caused mixed results in the market for the week.
In corporate new a majority of companies continue to post strong earnings result. Cisco Systems (CSCO) announced earnings of $0.21 per share ahead of Wall Streets estimates of $0.20 per share. Sales climbed 26% to $5.9 billion. The company did disappoint, when they also announced that they saw rising inventories and said that future sales might not meet analyst estimates.
Hewlett-Packard (HPQ) disappointed when they released their earnings ahead of schedule and posted earnings of only $0.24 per share, the street had expected earnings of $0.31 per share. The company also lowered guidance to $0.35 - $0.39 per share for their fiscal fourth quarter from the prior $0.43 per share.
ITT Industries Inc. (ITT) announced that they completed their purchase of Eastman Kodak’s (EK) remote sensing systems business for $275 million in cash. The company expects the purchase to improve its space payload and service product offerings to its commercial, scientific and U.S. Military customers.
Church & Dwight (CHD) reported net income of $0.45 per share and sales jumped 33% to $340.8 million. The company said they had taken a charge for the purchase of the remaining stake in Armel LLC. The company also announced a 3-for1 stock split effective September 1.
Walt Disney Company (DIS) reported a 21% increase in net income per share when they announced earnings of $0.29 per share, topping the Streets estimates of $0.27 per share. Sales growth came in up 17% compared with a year ago. The company cited strong attendance at its theme parks and sales of DVD’s.
Marsh & McLennan (MMC) was in the news when it was announced that the nation’s largest insurance broker was being sued by United Policyholders, a not-for-profit organization. The suit claims that the company poorly disclosed commissions from insures.
Wal-Mart Stores (WMT) reported strong earnings of $0.62 per share, a penny above analyst estimates. Sales increased 11% to $69.7 billion but missed estimates of $70.7 billion. The company also raised their guidance for third quarter sales to 3% - 5% from the previous estimate of 2% - 4%.
In economic news, The Federal Reserve increased interest rates, the PPI and trade deficit surprised economist, while the weekly jobless claims and Consumer Sentiment came in below expectations.
As expected the Federal Reserve raised interest rates this week to 1.5%. In their statement they said that higher oil prices had slowed economic growth and hindered the improving job market. They also said that “the Committee believes that policy accommodation can be removed at a pace that is likely to be measured”.
The core Producer Price Index rose only 0.1% for July versus 0.2% for the fist half of they year and estimates of a 0.3% rise. Many Street analysts say that this indicates that higher oil prices have not reached consumers yet.
The biggest surprise to economist was the trade deficit. Economist had expected the deficit to rise to $47 billion, but the deficit rocketed to a record high of $55.8 billion. Treasury Secretary Snow said that the deficit indicates that the world wide economy is slowing.
Weekly Jobless claim came in below estimates at falling 4,000 to 333,000 versus the estimate of 340,000 new claims. A number below 400,000 indicates an improving job market.
The preliminary University of Michigan Consumer Sentiment report fell to 94.0 in August from 96.7 in July, which was below estimates of a rise to 97.2. This suggests that consumers are aware of the slow down in the economy and fear higher oil prices.
In bond trading the 5 year Treasury note closed the week higher yielding 3.41%, while the 10 year note and 30 year bond also closed the week yielding 4.22% and 5.01% respectively.
Next week the Summer Olympics and the possibility of terrorism will be on everyone’s minds. Companies of interest announcing earnings next week are the following; Kmart (KMRT), Home Depot (HD), Estee Lauder Companies (EL), TJX Companies (TJX), Nestle S.A (NSRGY) Gap Inc (GPS), and PETsMart (PETM)
Friday, August 06, 2004
Weekly Market Review 08-06-2004
Terrorism, Oil Prices and Jobs Report Send Markets Lower
By Rick Paler
The stock market continued to decline this week on higher oil prices and a poor Non-Farm Payrolls Report. This caused the DOW, S&P 500 and Nasdaq to close the week at new lows for the year. Oil again this week hit record highs as traders pushed the price of crude on supply fears and terrorism concerns.
Terrorism was in the news again when a car bomb exploded just outside of Athens Greece leading to fears of a terrorist attract during the Olympic games that begins at the end of next week. The department of Homeland Security also announced that financial institutions in the United State are key targets for Al Queda. This led to a raising of the terror alert to high in New York, Washington D.C. and New Jersey. Additional targets were identified in San Francisco, but the terror threat for San Francisco and the rest of the nation remained unchanged at Elevated.
OPEC President Purnomo Yusgiantoro raised concerns with traders when he announced that Saudi Arabia’s planned product increase could not go through as early as planed. Traders were also shocked when Russia’s Justice Ministry said that Russian oil giant Yukos (YUKOY) would not be allowed to use frozen funds to pay for their day-to-day operations reversing their previous statements. Yukos has been in a battle with the government over paying past taxes.
Non-farm Payrolls disappointed Wall Street when it was announced that an mere 32, 000 jobs were created in July when economist had expected job growth in July on 243, 000 new job. This was the slowest job growth in eight months. This came on the back of last months disappointing numbers.
The week was not all bad news though. Earnings continue to surprise on the upside for the second quarter. 82% of the S&P 500 companies have now released their earnings for the second quarter. Of the companies that have reports to date, 69% of the companies have beat analyst earnings expectations with only 14% missing their earnings target. Overall earnings for the S&P 500 are now running at a 28% growth rate over a year ago.
In economic news the Non-Farm Payrolls Report disappointed, but the unemployment rate and weakly jobless claims came in better then expected. The unemployment rate came in at 5.5%, when economist had expected the rate of unemployment to stay unchanged at 5.6%. Weekly initial jobless claims fell unexpectedly to 336,000 from the estimated 340,000. Next week all eyes will be on the FOMC meeting on Tuesday to see if the Federal Reserve will again take action to raise interest rates.
In corporate news this week, Fifth Third Bancorp (FITB) announced that it had entered into an agreement to purchase First National Bankshares of Florida (FLB). Under the terms of the agreement First National Bankshares of Florida will be acquired for approximately $1.6 billion or $25.00 per share.
Proctor & Gamble (PG) announced earnings that exceeded the Streets estimates of $0.48 per share. The company earned $0.50 per share and sales climbed 19% to $13 billion. The company also announced that it expected their earnings to continue to growth at a double digit pace for 2005.
Tenet Healthcare continues to struggle. The company announced that they lost $0.06 per share versus the consensus of a $0.01 per share loss. Compounding their problems, the company announced that they received a subpoena from the U.S. Attorney’s Office and their CFO will resign.
Bond yield fell across the yield curve as traders flocked to bonds. The 5 year Treasury note closed at 3.37%. The 10 years yield closed lower at 4.21% and the 30 year bond fell to 5.03%.
Next week companies releasing earnings that are of interest include the following; Church & Dwight Co., Inc. (CHD), Cisco Systems (CSCO), UBS (UBS), Walt Disney (DIS), Target Corporation (TGT) Dell (DELL) and Wal-Mart Stores (WMT).
By Rick Paler
The stock market continued to decline this week on higher oil prices and a poor Non-Farm Payrolls Report. This caused the DOW, S&P 500 and Nasdaq to close the week at new lows for the year. Oil again this week hit record highs as traders pushed the price of crude on supply fears and terrorism concerns.
Terrorism was in the news again when a car bomb exploded just outside of Athens Greece leading to fears of a terrorist attract during the Olympic games that begins at the end of next week. The department of Homeland Security also announced that financial institutions in the United State are key targets for Al Queda. This led to a raising of the terror alert to high in New York, Washington D.C. and New Jersey. Additional targets were identified in San Francisco, but the terror threat for San Francisco and the rest of the nation remained unchanged at Elevated.
OPEC President Purnomo Yusgiantoro raised concerns with traders when he announced that Saudi Arabia’s planned product increase could not go through as early as planed. Traders were also shocked when Russia’s Justice Ministry said that Russian oil giant Yukos (YUKOY) would not be allowed to use frozen funds to pay for their day-to-day operations reversing their previous statements. Yukos has been in a battle with the government over paying past taxes.
Non-farm Payrolls disappointed Wall Street when it was announced that an mere 32, 000 jobs were created in July when economist had expected job growth in July on 243, 000 new job. This was the slowest job growth in eight months. This came on the back of last months disappointing numbers.
The week was not all bad news though. Earnings continue to surprise on the upside for the second quarter. 82% of the S&P 500 companies have now released their earnings for the second quarter. Of the companies that have reports to date, 69% of the companies have beat analyst earnings expectations with only 14% missing their earnings target. Overall earnings for the S&P 500 are now running at a 28% growth rate over a year ago.
In economic news the Non-Farm Payrolls Report disappointed, but the unemployment rate and weakly jobless claims came in better then expected. The unemployment rate came in at 5.5%, when economist had expected the rate of unemployment to stay unchanged at 5.6%. Weekly initial jobless claims fell unexpectedly to 336,000 from the estimated 340,000. Next week all eyes will be on the FOMC meeting on Tuesday to see if the Federal Reserve will again take action to raise interest rates.
In corporate news this week, Fifth Third Bancorp (FITB) announced that it had entered into an agreement to purchase First National Bankshares of Florida (FLB). Under the terms of the agreement First National Bankshares of Florida will be acquired for approximately $1.6 billion or $25.00 per share.
Proctor & Gamble (PG) announced earnings that exceeded the Streets estimates of $0.48 per share. The company earned $0.50 per share and sales climbed 19% to $13 billion. The company also announced that it expected their earnings to continue to growth at a double digit pace for 2005.
Tenet Healthcare continues to struggle. The company announced that they lost $0.06 per share versus the consensus of a $0.01 per share loss. Compounding their problems, the company announced that they received a subpoena from the U.S. Attorney’s Office and their CFO will resign.
Bond yield fell across the yield curve as traders flocked to bonds. The 5 year Treasury note closed at 3.37%. The 10 years yield closed lower at 4.21% and the 30 year bond fell to 5.03%.
Next week companies releasing earnings that are of interest include the following; Church & Dwight Co., Inc. (CHD), Cisco Systems (CSCO), UBS (UBS), Walt Disney (DIS), Target Corporation (TGT) Dell (DELL) and Wal-Mart Stores (WMT).
Friday, July 16, 2004
Weekly Market Review 07-16-2004
Market flirts with moving averages
By Rick Paler
The market closed lower for the third week in a row, as the major indices flirted with their 50 day and 200 day moving averages. Traders are looking at the moving averages to determine if the markets are heading lower. If the market breaks through its moving average on the down side, some traders will interpit this as a bearish sign.
Intel (INTC) helped drive the market lower after offering a disappointing second quarter report. The company announced second quarter earnings of $0.27 per share matching Wall Streets estimates. The company warned that its gross margins peaked for the cycle and lowered its gross margin forecast for the year from 62% to 60%. The company also announced that their inventory level had risen to a 10 year high.
Qualcomm (QCOM) announced a 2-for-1 stock split and said that they would be increasing their dividend to $0.07 per share from $0.05.
PepsiCo (PEP) second quarter earnings increased 12% over last year posting $0.61 per share matching analyst estimates. But some questioned the numbers posted by the company’s Frito-Lay unit. The popularity of the high protein low carb diets had effected the unit’s growth.
Pfizer (PFE) was in the news after the Chinese government overturned its local patent for Viagra. The company’s CEO Henry McKinnell said that the decision could affect the company’s desire to invest further in China. The company also announced this week that they were trimming their 2004 full year sales forecast to $52.5 - $53.0 billion from $54.0 billion.
Johnson & Johnson (JNJ) reported earnings of $0.82 per share topping the Streets estimates of $0.79 per share. Sales jumped 11% to $11.5 billion. The company also announced that they were raising their full-year profit guidance to $3.03 per share from $3.00.
In economic news, reports indicated that inflation might be slowing and the economy continues to expand. The closely watched Producer Price Index for June unexpectedly fell and the core Consumer Price Index, which excludes food and energy rose only 0.1%. Economist had expected an increase of 0.2%. The index, which measures inflation, indicates that the Federal Reserve might not have to raise interest rates in August.
The Philadelphia Fed’s Business Activity Index came in much higher than expected. The index which measures manufacturing came in at 36.1; economist had expected a reading of only 25.0.
Not all of the reports were rosy, the June Retail Sales, Industrial Production, Capacity Utilization and Consumer Confidence all missed their estimates.
In fixed income news the 5 year Treasury note closed yielding 3.67% up from last weeks 3.62%. The 10 year note yielded 4.48% and the 30 year bond yield ended at 5.21%.
Next week companies that will be releasing earnings are Plum Creek Timber (PCL), US Bancorp (USB), Leggett & Platt (LEG), SouthTrust Corp. (SOTR), Cerner Corp. (CERN), Colgate-Palmolive (CL), Symantec (SYMC), Synovus Financial Corp. (SNV), Pfizer (PFE), Sherwin-Williams (SHW), Bright Horizons Family Solutions (BFAM), Coca-Cola (KO) and Fortune Brands (FO).
By Rick Paler
The market closed lower for the third week in a row, as the major indices flirted with their 50 day and 200 day moving averages. Traders are looking at the moving averages to determine if the markets are heading lower. If the market breaks through its moving average on the down side, some traders will interpit this as a bearish sign.
Intel (INTC) helped drive the market lower after offering a disappointing second quarter report. The company announced second quarter earnings of $0.27 per share matching Wall Streets estimates. The company warned that its gross margins peaked for the cycle and lowered its gross margin forecast for the year from 62% to 60%. The company also announced that their inventory level had risen to a 10 year high.
Qualcomm (QCOM) announced a 2-for-1 stock split and said that they would be increasing their dividend to $0.07 per share from $0.05.
PepsiCo (PEP) second quarter earnings increased 12% over last year posting $0.61 per share matching analyst estimates. But some questioned the numbers posted by the company’s Frito-Lay unit. The popularity of the high protein low carb diets had effected the unit’s growth.
Pfizer (PFE) was in the news after the Chinese government overturned its local patent for Viagra. The company’s CEO Henry McKinnell said that the decision could affect the company’s desire to invest further in China. The company also announced this week that they were trimming their 2004 full year sales forecast to $52.5 - $53.0 billion from $54.0 billion.
Johnson & Johnson (JNJ) reported earnings of $0.82 per share topping the Streets estimates of $0.79 per share. Sales jumped 11% to $11.5 billion. The company also announced that they were raising their full-year profit guidance to $3.03 per share from $3.00.
In economic news, reports indicated that inflation might be slowing and the economy continues to expand. The closely watched Producer Price Index for June unexpectedly fell and the core Consumer Price Index, which excludes food and energy rose only 0.1%. Economist had expected an increase of 0.2%. The index, which measures inflation, indicates that the Federal Reserve might not have to raise interest rates in August.
The Philadelphia Fed’s Business Activity Index came in much higher than expected. The index which measures manufacturing came in at 36.1; economist had expected a reading of only 25.0.
Not all of the reports were rosy, the June Retail Sales, Industrial Production, Capacity Utilization and Consumer Confidence all missed their estimates.
In fixed income news the 5 year Treasury note closed yielding 3.67% up from last weeks 3.62%. The 10 year note yielded 4.48% and the 30 year bond yield ended at 5.21%.
Next week companies that will be releasing earnings are Plum Creek Timber (PCL), US Bancorp (USB), Leggett & Platt (LEG), SouthTrust Corp. (SOTR), Cerner Corp. (CERN), Colgate-Palmolive (CL), Symantec (SYMC), Synovus Financial Corp. (SNV), Pfizer (PFE), Sherwin-Williams (SHW), Bright Horizons Family Solutions (BFAM), Coca-Cola (KO) and Fortune Brands (FO).
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