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)
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Friday, October 29, 2004
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).
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