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)
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Friday, August 20, 2004
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).
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