MORNING COFFEE

Headlines

Ben Bernanke was awarded Time Magazines Person of the Year Award

EU ends 10yr Microsoft antitrust battle without fining the company. Microsoft agreed to provide European Windows users with greater choices of web browsers.

Banks get more time on new capital rules. Banks around the globe could get ten years to transition to the new capital rules that take effect in 2012. the Basel Committee on Banking Supervision is expected to issue new proposals to toughen financial regulations, which had raised concerns about banks scrambling to raise capital quickly. The new rules will likely take a broader view on the definition of liquid assets and core capital, while the minimum capital threshold will likely be raised to help buffer against future losses.

Bernanke downplays inflation. High U.S. unemployment and unused manufacturing capacity suggest that there's still plenty of slack in the economy and that inflation will remain low, Fed Chairman Ben Bernanke told a lawmaker in a written statement Tuesday. "I continue to expect slack resources, together with the stability of inflation expectations, to contribute to the maintenance of low inflation in the period ahead." Most economists expect the Fed to keep rates unchanged which will be announced today at 2:15pm.

Geithner said banks are stronger. U.S. Treasury Secretary Geithner said Tuesday that confidence in the financial system is coming back and that private capital will start replacing the government's investment in banks. The government expects to get checks totalling more than $185B in repaid TARP, after Wells Fargo (WFC) said Monday it will repay $25B in bailout money.

Today’s Market

· Futures at 7:00: Dow +0.4% to 10438. S&P +0.5% to 1109.50. Nasdaq+0.6%.

Treasurys showing modest gains ahead of FOMC rate decision.
Crude +0.8% to $71.26. Gold +1% to $1,134.
Euro +0.2% vs. dollar. Yen flat. Pound +0.5%.

· Asia: Nikkei +0.9% to 10177. Hang Seng -0.9% to 21612. Shanghai -0.6% to 3255. BSE +0.2% to 16913.

· Europe at midday: FTSE +0.5% to 5312. CAC +0.8% to 3865. DAX+1.2% to 5881.

Market Wrap-Up

February 6, 2008

DOW 12200.10 -65.03 (-0.53%) S&P 500 1326.45 -10.19 (-0.77%)
NASDQ 2278.75 -30.82 (-1.35%) 10 Year Bond 3.614% +0.027

The Market opened higher this morning on news that Walt Disney (DIS) $31.50 +1.43 (4.76%) posted better than expected earnings. Time Warner (TWX) $15.71 +0.31 (+2.01%) also had a nice report today

Future exchange companies CME Group (CME) $485.25 -103.55 (-17.59%) and NYMex (NMX) $87.88 -18.78 (-17.61%) both got killed today after it was reported that U.S. Dept. of Justice is calling for an end for futures exchanges being able to own or control clearing functions.

BHP Billiton's (BHP) $66.10 -3.38 (-3.16%) offer to acquire Rio Tinto (RTP) $409.37 -12.13 (-2.88%) for $147.4 billion was rejected today. The company said that the offer did not reflect the value of the company and its prospects for expansion.

Today’s downturn in the market can be attributed to Philadelphia Fed President Plosser. Mr. Plosser expressed concerns about inflation and said that the Fed's credibility is weakening. The market had positive returns up until his comment.

The energy sector also got hit today (-1.58%) on the Department of Energy report showing that crude stockpiles rose 7.05 million barrels. Economist has been looking for only a 2.6 million barrel increase. This also caused the price of crude to drop today.

After hours today, Cisco Systems (CSCO) $23.08 -0.18 (-0.77%) reported earnings in line with estimates. The company reported earnings of $0.38 per share. Revenues rose 17.0% year-over-year to $9.8 billion, which also met estimates. The shares are under pressure in after hours trading.

I would expect more volatility in the market tomorrow.

Market Wrap-Up

January 31, 2008

DOW 12650.36 +207.53 (+1.64%) S&P 500 12650.36 +22.74 (+0.18%)
NASDQ 2389.86 +40.86 (+1.71%) 10 Year Bond 3.639% -0.094

The market opened up lower today after the Labor Department said jobless claims for the week ended Jan. 26 jumped to 375,000 from 306,000. Economists had expected 320,000 new claims. Although it is only one week’s worth of data it is something to be watched to see if a trend develops.

In other economic news the Chicago PMI, a survey of regional manufacturing came in weaker than expected at 51.5. Economist has been looking for a reading of 52.0. It was also a decline from December’s reading of 56.4.

MasterCard (MA) $207.00 +18.00 (+9.52%) had a nice gain today after the company reported better than expected earnings. MasterCard's earnings came in at $0.89, beating Wall Streets estimate of $0.72. The company’s revenue increased 27.8% year over year.

MBIA (MBI ) $15.50 +1.54 (+11.03%) reported larger than expected losses. The bond insurance company had an operating loss of $3.38 per share in the fourth quarter. The company’s CEO said that the 80% decline in the share price was unjustified and that the company will exceed all AAA rating requirements.

Bristol-Myers Squibb (BMY) $23.02 -0.24 (-1.03%) missed its earnings expectations and issued lower guidance today, while Procter & Gamble (PG) $65.42 +0.33 (+0.51%) topped their earnings estimates.

Leading sectors today were Financials and Retailers which is expected after the recent Fed cuts. The question remains will they continue to recover from their recent slides.

Market Wrap-Up

January 30, 2008

DOW 12442.83 -37.47 (-0.30%) S&P500 1355.81 -6.49 (-0.48%)
NASDQ 2349.00 -9.06 (-0.39%) 10 yr Bond 3.733% +0.075

The stock market opened lower on a weaker than expected GDP report. Fourth quarter GDP came in at 0.6%, when economist has been looking for the economy to grow 1.2%. However, the economy did manage to stay out of recession territory, but not by much.

Altria (MO) $76.50 +0.38 (+0.50%) announced earnings that beat estimates by $0.03 and announced the spin-off of Phillip Morris effective March 28.

Yahoo! (YHOO) $19.05 -1.76 (-8.46%) reported earnings that beat Wall Street estimates, but the street was disappointed with the company’s guidance going forward.

Shares of bond insurers MBIA (MBI) $13.96 -2.02 (-12.64%) and AMBAC Financial (ABK) $10.85 -2.08 (-16.09%) were hit hard today after CNBC reported that Bill Ackman, an activist investor, wrote the NY State Insurance Commissioner stating that the insurers situation is much worse than previously stated.

Additionally, CNBC ran a story stating that a rating agency was going to lower its rating on one of the insurers. Fitch also lowered its rating on FGIC Corporation and its subsidiaries.

The most important news of the day had to be the Federal Reserve lowering rates again. This time they lowered rates 50 basis points to 3.00%. In their statement they did note the slowdown in growth and hinted that they would be open to more rate cuts to keep the economy growing.

The market was higher on the Fed cut today, but lost its steam as traders digested the news about the bond insurance companies. The thought is the problems with the insurers could translate into more billion dollar write downs in the financial sector.

Overall, the rate cut today is very positive for the economy and stocks. With the miserable rates on Treasuries the thought is money will now flow back into the stock market looking for values.

Market Wrap-Up

January 29, 2008

DOW 12480.30 +96.41 (+0.77%) S&P500 1362.30 +8.33 (+0.61%)
NASDQ 2358.06 +8.15 (+0.35%) 10 yr Bond 3.658% +0.072

A nice durable goods report lifted stocks higher today at the open. December durable goods rose 5.2%, when economists were looking for only a 1.6% rise. Today’s strong report leads to the question is the US economy really heading for a recession?

Shares of JPMorgan Chase (JPM) $47.45 +1.88 (4.13%) traded higher on news that rumors that the bank was facing a big derivative loss are not true.

Conference Board today said January consumer confidence slipped to 87.9 from Decembers 90.6. Today reading actually top economist estimates which were 87.0

This market continues to punish any company not hitting expectations. Shares of VMware (VMW) $54.87 -28.13 (-33.89%) got killed after the company top earnings estimates on slightly lower revenue than expected. The company also gave 2008 guidance below analyst estimates.

Wal-Mart (WMT) $49.01 +0.30 (+0.62%) announced their own economic stimulus package today. The company said it will be reducing prices from 10% - 30% on thousands of items and they will be offering no interest for 18 months on purchases of $250.00 dollars or more.

The Wall Street Journal report today that the FBI has opened criminal inquiries on 14 companies in its subprime mortgage probe. This is something that should be watched since the government will want to make an example out of some CEO and other executives to make home owners feel better.

The market rallied today in anticipation of the FOMC lowering interest rates tomorrow another 50 basis points. Helping this feeling was the terrible new home numbers. The strong durable goods numbers should have had a negative affect on the market, but traders decided to interrupt it as good news that the economy was indeed still growing and not in a recession.

Tomorrow everything will be based on what the Fed does. I believe that if the Fed does not do anything or only cuts rates by only 25 basis points the market will sell off. But if the Fed cuts 50, I would expect the market to do little or rise slightly, since I believe that market has already priced in a 50 basis point cut in the Fed Funds Rate.

Market Wrap-Up

January 23, 2008

DOW 12,270.17 +298.98 (+2.50%) S&P 500 1,338.60 +28.10 (+2.14%)
NASDQ 2,316.41 +24.14 (+1.05%) 10 year Bond 3.426% -0.058

Stock opened today sharply lower continuing the sell-off from yesterday. Apple (AAPL) $139.07 -16.57 (-10.65%) didn’t help. The company had a good earnings report beating estimates by $0.14. But the street had expected larger iPhone and iPod sales and traders were not happy with their forward guidance. I believe that the stock got unfairly punished. Just a few weeks ago shares of Apple traded at near $200.00 per share.

Also contributing to the continued sell off was the ECB President, who made it clear that their main focus was inflation. The street interpreted this as an indication that they would not follow the Feds lead and lower interest rates.

Motorola (MOT) $10.01 -2.31 (-18.75%) also toped analyst estimates, but got killed when they gave an outlook below what the street was looking for.

SLM Corp. (SLM) $18.69 -0.33 (-1.74%) or Sallie Mae, posted earning today well below estimates. The company posted a loss of -$0.36 per share. Wall Street was looking for $0.55 per share. Additionally, the SEC is now looking into stock sales by directors and executives. The shares are now down more than 71% from their 52 week high.

Somewhat ignored today was the fact that Pfizer (PFE) $22.86 +0.63 (+2.83%) posted better than expected earnings and gave guidance better than the street had expected.

The market though managed to fight its way into positive territory by the end of the day led by the financial sector. Sparking the rally was a report that New York regulators and banks met to discuss a plan for raising new capital for bond insurers.

The market has feared that bond insurers, like MBIA (MBI) $16.61 +4.08 (+32.56%) and AMBAC (ABK) $13.70 +5.73 (+71.98%), might get downgraded at Moody's or Standard & Poor's. This has been a major factor behind recent decline in the stock market. Since a downgrade or possible bankruptcy of these companies would mean more write-downs in the financial sector.

The rally today was a good thing for the market and we will have to see if it last or if it was just a dead cat bounce. Only time will tell.

Companies reporting tomorrow are: AT&T (T), Baxter (BAX), Ford Motor (F), Kimberly-Clark (KMB), Lockheed Martin (LMT), Northrop Grumman (NOC), and Potash (POT),

Market Wrap Up

January 22, 2008

DOW 11,971.19 -128.11 S&P500 1310.50 -14.69 NASDQ 2292.27 -47.75
10yr Bond 3.48 -0.15

The stock market was closed on Monday for Martin Luther King Jr. Day. But while our markets were closed, global markets worldwide sold off. Hong Kong, Shanghai and India plunged more than 10% in the last two sessions.

Stocks started to fall right from the open even as the Federal Reserve cut interest rates 75 basis points. In their comment they stated “While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate." I had been calling for more aggressive rate cuts for some time and this is good news. The cut did help pull the market up from its lows. If the Fed had not cut rates we could have seen a much larger decline.

This was the first emergency rate cut since 2001 and a surprise, since the Fed is scheduled to meet at the end on the month. What’s interesting is that despite the rate cut, the market is pricing in another rate cut at the end of the month of another 50 to 75 basis points. The Fed funds rate now stands at 3.5%.

So what is causing the declines in the market? Fears of a recession. The problem is we have been aware that the economy is slowing for some time, which has led to the market coming off its record highs. Additionally, we will not know if we are in a recession for some time. To determining if we are in a recession we need to look backwards. A recession is defined as two consecutive quarters in which real GDP adjusted for inflation declines and we have not seem this yet. It also takes about twelve months for a rate cut to be felt in the economy.

A little history about the market and recessions reveals that the stock market has historically fallen going into a recession, but stabilizes during the recession. The market than rallies sharply as the economy pick up steam and comes out of the recession.

What should investors do? Investors need to only look back at the 1987 market crash and the market downturn after 911 to realize that if you held your investments you were better off than selling them. In fact, despite the October cash in 1987 the market still posted a positive gain for the year. My point is don’t try to time the market, you will lose. As a long term investors stick to your investment plan and be ready to scoop up the worlds best companies at discounted prices once the market stabilizes.

Market Wrap-Up

January 18, 2008

DOW 12,099.30 -59.91 (-0.49%) S&P 500 1,325.19 -8.06 (-0.60%)
NASDQ 2,340.02 -6.88 (-0.29%) 10 year Bond 3.648% +0.008

A strange thing occurred this morning, the stock market opened higher. There were three causes to the higher opening today. First, President Bush was expected to unveil his stimulus package for the slowing economy. Then General Electric (GE) $34.31 +1.10 (+3.31%) reported a better than expected earnings report and gave nice guidance for 2008. Also, IBM (IBM) $103.40 +2.30 (+2.27%) hiked their 2008 earnings forecast well above analyst expectation and had a nice report.

Sprint Nextel (S) $8.70 -2.87 (-24.81%) shares got hammered today after the company announced that it expects continued pressure on subscriber trends and profitably in 2008. The company will cut 4,000 jobs and close 125 stores.

In economic news, December leading indicators fell 0.2%, this follows November's 0.4% decline. Economists had expected only a 0.1% drop. The January preliminary University of Michigan Confidence came in at 80.5, which was higher than economist had predicted.

President Bush unveiled his stimulus plan to keep the US economy from falling into a recession. The $145 billion dollar plan calls for tax relief and other incentives including tax rebates of as much as $800 for individuals and $1600 for couples.

This week it appears that we have began to see the next shoe fall off from the sub-prime credit mess. Although the credit card companies are seeing an increase in defaults, remember American Express (APX) $43.61 +0.94 (+2.20%) and CapitalOne’s (COF) $39.68 -1.38 (-3.36%) announcements last week? The next shoe to fall appears to be the bond insurance companies.

AMBAC Financial (ABK) $6.20 -0.04 (-0.64%) shares have fallen $16.00 dollars or 72% since Monday. The company had a 52 week high of $96.10. First after stating that they would not cut their dividend they did. Also the company announced that they would seek $1 billion in capital to shore up its finances. Then they announced they would not seek additional capital. The company is also due to report their earnings next Tuesday.

MBIA (MBI) $8.55 -0.67 (-7.27%) announced its Aaa credit rating was placed under review for a possible downgrade at Moody's Investors Services yesterday. MBIA had a 52 week high of $72.02.

The street also had rumors that bankruptcy of a bond insurance company could occur. AMBAC and MBIA were downgraded to Hold from Buy at Citibank and Neutral from Buy at Bank of America. I am sure that their clients are happy, what happened to good old sell recommendations?

Monday the market will be closed in observance of Martin Luther King Jr. Day.

Next a flood of S&P 500 companies will be reporting their earnings, 85 in total. Companies to watch for are: AMBAC Financial (ABK) Bank of America (BAC), Johnson & Johnson (JNJ), DuPont (DD), Apple (AAPL), Pfizer (PFE), AT&T (T), Amgen (AMGN), Microsoft (MSFT) and Caterpillar (CAT).

Market Wrap-Up

January 17, 2007

DOW 12,159.21 -306.95 (-2.46%) S&P 500 1,333.25 -39.95 (-2.91%)
NASDQ -2,346.90 -47.69 (-1.99%) 10 yr Bond 3.64% -0.072

What can I say other than thank god my office is not on the top floor of a skyscraper. The market again was pummeled my fears of recession and the credit problems spiraling out of control.

Merrill Lynch (MER) $49.45 -5.64 (-10.24%) reported huge losses, even more than the street expected. Mother Merrill lost $10.3 billion in the fourth quarter, or $12.57 per share, well short of the streets expected loss of $4.93. The loss was largely due to a $11.5 billion write-down.

In economic news today, December housing starts dropped a larger than expected 14.2% and housing permits also fell, no big surprise there. Jobless claims for the week came in at a better than expected 301,000. Economist had expected 335,000 new claims.

Federal Reserve Chairman Ben Bernanke testified before the House Budget Committee today. While testifying he said that any fiscal stimulus plan should be implemented quickly and last for 12 months. He noted if the plan comes too late it might do more harm than good. Additionally, he said the economic outlook has worsened, and that downside risks to growth are now more pronounced. Is he saying recession? He also said subprime losses could amount to "several multiples" of $100 billion, but would not top $500 billion. This is the same guy who last year said that the subprime problem was contained and would not affect the capital markets. Funny thing is that once he opened his mouth the market started to sell off.

AMBAC (ABK) $6.24 -6.43 (-51.89%) continued to get hammered today after yesterdays announcement of a dividend cut and the need to raise $1 billion in capital.

Look for the market to continue its sell off tomorrow, since many traders will not want to hold on to positions going into the weekend.

Companies reporting earnings tomorrow are: General Electric (GE), Johnson Controls (JCI) and Schlumberger (SLB)

Market Wrap-Up

January 16, 2008

DOW 12,466.16 -34.95 (-0.28%) S&P 500 1,373.20 -7.75 (-0.56%) NASDQ 2,394.59 -23.00 (-0.95%) 10yr Bond 3.7120% +0.0110

The stock markets opened up mixed today. It appeared that the markets would open lower after Intel (INTC) $19.88 -2.81 (-12.38%) reported earnings that missed Wall Street estimates and gave first quarter guidance below expectations.

But the market was helped by news that JPMorgan Chase (JPM) $41.43 +2.26 (+5.77%) had a smaller than expected write-down of only $1.3 billion. The bank did miss their earnings estimates by six cents. Also news that Oracle (ORCL) $21.92 +0.61 (+2.85%) was acquiring BEA Systems (BEAS) $18.64 +2.88 (+18.49%) for $8.5 billion helped boost the market.

Wells Fargo (WFC) $27.37 +0.88 (+3.32%) reported earnings today that were inline with estimates.

In economic news today the December CPI jumped more that expected rising 0.3%. Economist had expected a rise of 0.2%. The Core CPI which excludes food and energy rose 0.2% inline with estimates.

AMBAC Financial (ABK) $12.97 -8.17 (-38.65%) shares got crushed today when the company announced that raising $1 billion and cutting its dividend 67% to shore up its finances. Just three weeks ago the company said that it would not cut its dividend. The stock is now down over 84% from its 52 week high.

Wall Street will be watching Merrill Lynch (MER) tomorrow since they a due to report earnings and the street is anticipating large write offs. Other companies reporting earnings are: BB&T Corp (BBT), Comerica (CMA), Intl Game Tech (IGT), and Norvartis (NVS)

On the economic side housing starts and building permits will be released.

I would expect more volatility in the market until we get a clearer picture of how the credit mess is affecting the major banks and the overall economy.

Market Wrap-Up

January 11, 2008

DOW 12,606.30 -246.79 (-1.92%) 1,401.02 -19.31 (-1.36%) NASQD 2,439.94
-48.58 (-1.95%) 10 yr Bond 3.81% -0.077

Today the markets traded lower on continued credit and recession concerns.

There was a lot of news today in the financial sector. American Express (AXP) $44.00 -4.92 (-10.06%) got killed today after announcing that it was raising its reserves to cover bad debt as customer defaults increase.

After yesterdays announcement that Bank of America (BAC) $38.50 -0.80 (-2.04%) and Countrywide Financial (CFC) $6.33 -1.42 (-18.32%) both traded lower. As some Wall Street analyst questioned the reasoning and details of the deal. Thinking BofA was trying to catch a falling knife. Others were disappointed in the $4 billion dollar price thinking Countrywide could have gone for more.

Shares of MBIA (MBI) $16.59 +2.48 (+17.58%) traded higher today after it was disclosed that Third Avenue Management took a 10.98% stake in the company.

Merrill Lynch (MER) $54.69 +2.66 (+5.11%) shares traded higher today even though it was reported that the company will announce a $15 billion dollar loss. Driving the shares higher was news that the company is in negotiations to raise another $4 billion to shore up its finances.

CNBC reported today that Citigroup (C) $28.56 +0.45 (+1.60%) is seeking an infusion of cash from various sources of approximately $15 billion.

Additionally it was reported that Washington Mutual (WM) $14.69 +0.53 (+3.74%) was in preliminary talks to merge with JPMorgan Chase (JPM) $40.86 -0.47 (-1.14%).

Shares of Tiffany & Co (TIF) $35.80 -4.52 (-11.21%) declined after the company reduced its 2007 forecast.

Gold hit a record high today trading for the first time at $900 a once before fall back to $897.60 +4.10 (+0.46%).

Fears on Wall Street continued today that a slowdown in consumer spending will push the US economy into a recession. Philadelphia Fed President Paulson echoed this by saying that the Fed's biggest worry is weakness in consumer spending and Treasury Secretary Henry Paulson said "time is of the essence" in developing a stimulus package.

Next week we will see a flood of earnings releases in the financial sector some of the companies due to report are: M&T Bank (MTB), Citigroup (C), State Street Bank (STT), US Bancorp (USB), JPMorgan Chase (JPM), Northern Trust (NTRS), Wells Fargo (WFC), Bank of New York (BK), BB&T Corp (BBT), Comerica (CMA), Huntington Bank (HBAN), Merrill Lynch (MER), PNC Bank (PNC), TD Ameritrade (AMTD), and Washington Mutual (WM).

Other companies reporting are Genentech (DMA), Intel (INTC), IBM (IBM) and Schlumberger (SLB).

With all the financials reporting and concerns about more write offs I would expect the market to continue with its recent volatility.

Market Wrap-Up

January 10, 2008

DOW 12,853.09 +177.78 (+0.92%) S&P 500 1,420.33 +11.20 (+0.79%) NASDQ 2,488.52 +13.97 (+0.56%) 10yr Bond 3.887% +0.096

The market opened lower today driving the declines were December same-store sales which came in weaker than expected. Although Wal-Mart (WMT) $48.40 +1.50 (+3.20%) had a nice report.

CapitalOne (COF) $42.92 -0.43 (-0.99%) shares traded lower after the company lowered their outlook citing loan delinquencies. This made many traders question whether the credit card companies were the next sector to get hit by the fallout from housing.

American Express (AXP) $48.92 -0.16 (-0.33%) said the company will raise its reserves for loan losses by $440 million. The announcement also said that cardmember spending last month dropped well below levels for the previous two months of the quarter.

In a speech today Federal Reserve Chairman Bernanke said that additional policy easing may well be necessary, and that the Fed is willing to take "substantive additional action" if needed. The market now is expecting a 90% chance that the Fed will lower interest rates by 50 basis points at their next meeting. I have been calling for this for weeks.

The market rallied on the Bernanke news, but soon gave up those gains. It didn’t push back into positive territory until news came out that Bank of America (BAC) $39.30 +0.56 (+1.45%) was in advanced talks to acquire troubled Countrywide Financial (CFC) $7.75 +2.63 (51.37%).

The financial and telecom sectors were today’s top performing sectors up 2.3% and 1.7% respectively.

I am expecting more chopping trading to occur tomorrow as traders close out the week.

Market Wrap-Up

January 7, 2008

DOW 12,827.49 +27.31 (+0.21%) S&P 500 1,416.18 +4.55 (+0.32%) NASDQ 2,499.46 -5.19 (-0.21%) 10yr Bond 3.8390% -0.0150

The stock market opened today high and fluctuated between gains and losses during trading before ending the session in a mixed fashion.

McDonalds (MCD) $58.03 +0.98 (+1.72%) traded higher on new that the company would be adding it high-end coffee bars to it 14,000 restaurants.

International Business Machines (IBM) $100.05 -1.08 (-1.07%), Sun Microsystems (JAVA) $16.11 -0.20 (1.23%), Dell (DELL) $21.26 -0.83 (-3.76%) and EMC (EMC) $16.04 -0.95 (-5.59%) shares all traded lower after a UBS analyst downgraded the companies.

In a speech today U.S. Treasury Secretary Henry Paulson said that the markets should not be surprised if financial intuitions announce more write-downs going forward and the overhang of unsold homes will be a prolonged drag on growth. Additionally, Atlanta Fed President Lockhart said the Fed needs to balance concerns about inflation with "serious" concerns about growth.

It was reported today in the Daily Telegraph the Merrill Lynch believes that the US economy is already in recession.

As expected the defensive sectors outperformed and the worst performing sector was energy.

Tomorrow we will see the release of Pending Home Sales for November. Economists are looking for a decline of 0.8%. I would not be surprised if that number comes in much lower.

Earnings releases to watch for are: Constellation Brands (STZ), Family Dollar (FDO), KB Home (KBH), and Apollo Group (APOL)

Market Wrap-Up

January 4, 2008

DOW 12,800.18 -256.54 (-1.96%) S&P 500 1,411.63 -35.53 (-2.46%) NASDQ 2,504.65 -98.03 (-3.77%) 10yr Bond 3.854% -0.047

The market opened sharply lower today after the release of a weaker than expected employment data report. The Department of Labor reported that only 18,000 new non-farm payrolls were created. Economist had expected 70,000. Unemployment also edged higher than expected to 5.0%.

The December ISM Services, a national non-manufacturing survey came in slightly above expectations with a reading of 53.9. A reading above 50 indicates growth. This was good news since the ISM Index, which measures manufacturing came in earlier this week at dismal 47.7 indicating contraction in the economy. A ready of 47 has occurred during the last two recessions.

Shares of Bed Bath & Beyond (BBBY) $26.19 -1.21 (-4.42%) got killed today after the company announced earnings that met expectations. What scared the traders was the company’s guidance going forward.

Some of last years biggest winners continue to be under pressure Apple (APPL) $180.05 -14.88 (-7.63%), Research In Motion (RIMM) $103.35 -9.47 (8.39%), Intel (INTC) 22.67 -2.00 (-8.11%).

Consumer discretionary and the financial sectors again were the worst performing sectors.

Traders now believe there is a 68% chance that the Federal Reserve will lower interest rates 50 basis point at their next meeting on January 30.

I would expect that the recent volatility seen will continue for some time. The good new is that the volatility will lead to true buying opportunities for long term investors.

Market Wrap-Up

January 3, 2008

DOW 13,056.72 +12.76 (+0.10%) S&P 500 1,447.16 0.00 (0.00%) NASDQ 2,602.68 -6.95 (-0.27%) 10yr 3.901%

The market opened on a positive note after the ADP Employment report came in better than economist had expected. Economist had expected an increase in private employment of 33k. The actual figure came in at 40k for December.

The weekly jobless claim came in better than expected coming in at 336k. Factory orders also came in stronger than expected with a reading of a 1.5% increase for November. Traders saw these reports as positives for the economy, indicating that the sub-prime debacle has not filtered it way into the general economy yet.

Crude inventories for the week of December 28^th fell by 4056K barrels. Analysts expected inventories to decline by a smaller 2250K.

Walgreen (WAG) $35.06 -2.28 (-6.11%) and CVS Caremark (CVS) $36.77 -2.58 (6.56%) shares fell after both companies announced disappointing sales numbers. Walgreen reported same store sales grew 2.6% and CVS same store sales grew 1.8% the street wanted more. A weak cold and flu season appears to have impacted sales traffic. The drug retail sector was today’s worst performing group off a -6.3%.

General Motors (GM) $23.92 -0.49 (-2.01%) reported December auto sales dropped 5% and Ford (F) $6.45 -0.15 (-2.27%) reported a sales drop of 9%. Toyota’s (TM) $106.90 +0.44 (+0.41) sales dropped 1.7% but passed Ford for the number two spot for total US sales.

Today best performing sector was the fertilizer & agriculture chemicals group (+8.3%)

Tomorrow we will see the release of the following economic data.

Non-farm Payrolls
Unemployment Rate
ISM Services

Texas Industries will also be reporting their earnings

Market Wrap-Up

January 2, 2008

Dow 13,043.96 -220.86 -1.67 S&P500 1,447.16 -21.20 -1.44% NASDQ 2,609.63 -42.65 -1.61%

Ugly that’s their only way I can describe it. Stocks started off the New Year by opening up lower and never saw the day of light.

Sending stocks lower was the ISM Index. Economist had expected the report to come in at 50.5, but it fell short coming in at 47.7. Remember that any number less than 50 indicates a contraction in manufacturing within the economy. Readings below 47 have occurred in the last two recessions.

Qualcomm (QCOM) $38.39 -0.96 (-2.44%) shares fell after a federal judge ruled that the company had infringed on three Broadcom (BRCM) $26.32 +0.18 (0.69%) patents.

Oil hit the $100 dollar mark today before closing at $99.45 up 3.6%. The rise was due to geopolitical concerns.

Merrill Lynch (MER) $52.76 -0.92 (-1.71) was also rumored to be announcing layoffs tomorrow and that it will be taking an additional $10 billion in write downs.

Today’s release of the FOMC minutes did little to encourage the market. The Fed to acknowledge that consumer spending is slowing and that stabilizing the credit markets could require “substantial further easing of policy." But they also said there is a chance that reversing the recent rate cuts could occur if the markets stabilized. These amateurs are running around like chickens with their heads cut off. The Fed is unable to see what is really occurring in the real world.

The financial sector (-2.5%) was again the worst performing sector. National City (NCC) $15.59 -0.87 (-5.29%) shares got hammered after the company cut its dividend 49% to preserve capital.

The best performing sectors today were gold, and energy.

Economic reports to be released tomorrow are:

ADP Employment
Initial Claims
Factory Orders

Companies reporting earnings of interest are:

Monsanto (MON)
Bed Bath & Beyond (BBBY)

Market Wrap-Up

December 28, 2007

Dow 13,365.87 +6.26 +0.05% NASDAQ 2,674.46 -2.33 -0.09% S&P500 1,478.49 +2.12 +0.14% 10yr Bond(%) 4.09% -0.10

The market opened strong today after overreacting to yesterday’s news that Pakistan's former Prime Minister Benazir Bhutto was assassinated.

Warren Buffet’s Berkshire Hathaway (BRKB) $4685.00 +112.00 (2.45%) made news today. The company announced it was starting a bond insurance company. Shares of MBIA (MBI) $18.74 -3.53 (-15.85%) and Ambac (ABK) $25.12 -4.02 (13.80%) fell on the news, since Berkshire stands to take business away from these companies. Berkshire also announced it is buying a reinsurance unit from ING.

Also helping stocks was the release of the Chicago PMI which came in better than economist had expected.

Stock then started to retreat when the Dept of Commerce reported that new home sale fell 9% to 647k, economist had expected new home sales to come in at 714k. New home sales are now down 53% from their all time high reached in July 2005.

Retailer Macy’s (M) $25.48 +0.44 (1.76%) announced that it was closing nine underperforming stores sending the shares higher on the news.

Not surprisingly the worst performing sectors for the day were the homebuilders (-3.2%) and the thrifts & Mortgages (-3.0%)

Next week should be a quite one with only a few companies reporting earnings. Companies reporting of interest are Monsanto (MON), Bed Bath & Beyond (BBBY), and Texas Industries Inc. (TXI)

Economic reports of importance out next week are: the December ISM Index, the minutes from the most recent FOMC meeting and the December Employment report.

Weekly Market Report 07-15-2005

S&P 500 Index reaches a four year high

By Rick Paler


The market had a great performance this week. The S&P 500 saw a seven day rally and closed at a four year high. The Dow Jones Industrial Index closed at a four month high and the NASDQ closed at its best levels this year.

Several factors have contributed to the positive returns. Economic conditions are good, inflation continues to be a non-issue, corporate earnings remain strong and a flat bond yield curve combined with low interest rates have made stocks more attractive.

Second quarter earnings season is now in full bloom. To date the second quarter appears as if it will not disappoint. Wall Street analysts are estimating that the year-over-year earnings growth for the S&P 500 will now come in at 7.5%. But based about my experience I believe that the 7.5% growth estimate is a little low. The trend is that the street has been underestimating earnings growth. I would not be surprised if the S&P 500 post earnings growth more towards 9% or more. In the next few weeks earnings reports from key bellwether stocks will give better incite. This might just be the beginning of a strong bull rally.

This week Apple Computer (AAPL) reported that their second quarter revenues grew to $3.52 billion up 75%. Earnings beat the streets estimates of only $0.31 per share, coming in at $0.37 per share. Strong sales if iPod’s and PC’s continue at the company.

General Electric (GE) reported that earnings came in at $0.44 per share matching estimates. All of the company’s eleven units showed double-digit growth. The company also raised their full year guidance to a $1.80 - $1.83 range.

UnitedHealth Group (UNH) posted earnings of $0.61 per share up 36% from the year-ago period beating analysts’ estimates. Revenues grew 28% to $11.11 billion. The company also gave future guidance stating that they expected next quarter’s earnings to come in at $0.63 per share and full year earnings of $2.46 per share. The company also stated “We expect to continue to drive substantive gains in 2006, with earnings per share up at least 15%, excluding any contributions from the recently announced merger with PacifiCare.”

BB&T Corp (BBT) reported that their second quarter net fell 3.3% on an accounting adjustment. Earnings per share at the bank holding company came in at $0.70 per share. Excluding the adjustment earnings were $0.75 per share, which matched the streets estimate.

PepsiCo (PEP) reported a strong quarter with earnings easily beating analyst’s estimates of $0.67 per share. The drink and snack company earned $0.70 per share. They also gave full year guidance of $2.56 to $2.59 per share.

In economic news, several reports were released and each report indicated that the economy continues to be strong. The May trade deficit, unexpectedly fell to $55.3 billion. This was due to lower energy prices and strong U.S. exports.

Both the June CPI and PPI a key measurement of inflation came in better than expected. The reports indicated that inflation is well under control. Additionally the June industrial production hit record levels and the July New York Empire Manufacturing Index rose to the best levels this year. The University of Michigan Consumer Confidence hit the highest level since December 2004 coming in at 96.5

The bond yield cure continues to be flat, difference between the 5 year Treasury note and 30 year Treasury bond is less than one half of one percent.. This week the 5 year Treasury note closed yielding 3.96%. The 10 year noted yielded 4.17% and the closing yield on the 30 year bond was 4.41%.

Next week traders will be fixated on earnings and hurricanes. The hurricane season appears as though it will be worse than expected. If this is true it has the potential to hurt the oil sector and help the building sector.

Next week, companies releasing earnings that will be of interest are 3M Company (MMM), Bank of America (BAC), Citigroup (C), Amgen (AMGN), Ford Motor Company (F), Intel (INTC), Johnson & Johnson (JNJ), Motorola (MOT), US Bancorp (USB), Wachovia (WB), Well Fargo (WFC), Yahoo Inc. (YHOO), eBay (EBAY), Pfizer (PFE), Qualcomm (QCOM), Autoliv (ALV), D.R. Horton (DHI), Google (GOOG), Microsoft (MSFT), Nokia (NOK), Coca-Cola (KO), and Fortune Brands (FO).

Weekly Market Report 07-08-2005

Terror attack has no effect on market

By Rick Paler


Another terrible tragedy occurred this week. Radical Islamic terrorist set off multiple bombs in London, but unlike the bombings that occurred in Spain the market really had no reaction and rebounded quickly to post small gains for the week.

This week officially kicked off the second quarter earnings season. Wall Street analysts are estimating that the S&P 500 will post year-over-year earnings gains of 7.5%. While this number is not the double digit growth we have become accustom too, it is a good number and closer to the historical norm.

Up to bat first was Alcoa (AA). The aluminum manufacture reported that their second quarter revenues increased 7.5% to $6.76 billion and had earnings of $0.46 per share. The street had estimated revenues of only $6.71 billion, but had earnings at $0.47 per share. The company cited energy cost and raw material prices as factors in their results.

Retail sales reports were released this week and reports overall were good. Abercrombie & Fitch (ANF) and American Eagle Outfitters (AEOS) continued their domination of the competition. Both companies posted huge numbers. Abercrombie posted same-store sales gains of 38% and American Eagle had gains of 28%.

TJX Companies (TJX) reported that same-store sales rose 3%. The results were below their own internal forecast causing the retailer to reduce their second quarter earnings guidance.

West Marine, Inc. (WMAR) the boating retailer reported that their same-store sales decreased 3.5% from the previous period. CEO Peter Harris said “As one would expect, continuing poor weather in April and May on both coast dampened second quarter sales, especially when compared to the great spring weather we enjoyed last year.” Many boats remained in storage for most of the quarter due to the weather.

Home Depot (HD) will be market testing gas and convenience stores located in their parking lots. Similar concepts have been implemented at Costco and Safeway stores. The concept is that the convenience stores located on the property will help drive traffic into the main store and capture purchases that might have gone elsewhere.

It was reported this week that the European Commission is scrutinizing the merger of Procter & Gamble with Gillette Co. (G). This development could delay the deal.

In economic news oil prices fell after the attacks in London, after hitting new record highs earlier in the week. The thought is that the attacks may slow economic growth and discourage travel causing demand for oil to decrease. The price fell despite continued supply concerns.

The Labor Department reported that June nonfarm payrolls increased by 146,000, which was below economist estimates of a 200,000 increase in jobs. The unemployment rate fell to 5.0% from 5.1%. This is the lowest level since September 2001. As a note economist view 5.0% unemployment within an economy as full employment.

The 5 year Treasury note closed the week yielding 3.87%. The 10 year note ended at 4.09% and the 30 year bond closed the week yielding 4.34%.

Next week will be all about earnings. Traders will be eyeing several companies’ earnings reports to give them direction. Overall I believe that corporate earnings will show nice growth, but if a few major companies disappoint the disappointments will have the ability to drive the market lower.

Companies of interest reporting earnings next week are the following: Genentech, Inc. (DNA), PepsiCo (PEP), Apple Computers (AAPL), BB&T Corp (BBT), UnitedHealth Group Inc. (UNH), and General Electric (GE).

Weekly Market Report 06-24-2005

Record energy prices weigh on market

By Rick Paler


Oil prices hit record levels this week causing traders to take profits after a four week run-up in stock prices. Additional fears of a world wide economic slowdown did not help. Earnings reports were on the light side and mergers mania continued.

Oil prices continued their climb this week hitting a record high, closing on Friday at $59.84 per barrel. Concerns about refining capacity for the summer driving season, reports of Nigerian oil workers being held hostage and a possible strike in Norway drove prices higher.

Wall Street also is concerned that a world-wide economic slowdown might be starting. Since recent data both in the United States and other countries indicates some weakness. Analysts are keeping a watchful eye on second quarter earnings reports. The street now expects the second quarter to show a 7% growth year-over-year for the S&P 500 compared with 21% earnings growth in the fourth quarter and 13% growth in the first quarter this year.

Bed Bath & Beyond (BBBY) had a nice earnings report. The retailer reported that their first quarter profit rose 21% and same store sales jumped 4.4%. Earnings came in at $98.9 million or $0.33 per share, a penny ahead of estimates. Sales rose 13% to $1.24 billion.

FedEx (FDX) disappointed the street when they posted earnings of $1.46 per share when analyst had been looking for $1.48 per share. Revenues also missed estimates. The company reported revenues of $7.72 billion. The company also gave future guidance below that the street was looking for citing higher energy cost as the cause.

General Electric (GE) reaffirmed their second quarter guidance of $0.43 to $0.45 per share and a full year outlook of $1.78 to $1.83 per share. The company also announced that they would reduce the number of operating units from eleven to six in an effort to reduce cost.

Guidant (GDT) shares fell on news that the company informed physicians to stop using certain cardiac defibrillators that it manufactures. This announcement might affect the company’s purchase by Johnson & Johnson (JNJ).

Housing continues to be hot. Lennar (LEN) posted earnings of $1.55 surpassing Wall Streets estimates of $1.31 per share. Revenues also exceeded estimates coming in at $2.93 billion. The homebuilder now sees full year earnings of $7.15 to $7.80 per share, citing their $7.3 billion order backlog.

China’s state-run energy company CNOOC (CEO) put in a bid for Unocal (UCL) offing $18.5 billion or $67 per share. The offer surpassed Chevron’s (CVX) bid of $16.4 billion for the company.

In economic news May durable good orders were up 5.5%. Additionally existing and new home sales data came in strong.

In bond news, the 5 year Treasury note closed at 3.68%. The 10 year note ended yielding 3.91 and the 30 year bond closed with a 4.21% yield.

Next week traders will be watching oil prices and second quarter earnings warnings to give the market direction. Companies releasing earning are the following companies; Nike (NKE), Paychex (PAYX), Walgreen (WAG), and Oracle (ORCL).

Weekly Market Report 06-17-2005

Markets have good week

By Rick Paler


It was a good week for the stock market with all the major indices posting gains for the week. Corporate news and earnings releases of any significance were none existent. Economic news this week helped to support stock prices.

Volume remained light and should stay that way for some time as traders and investors focus more on their summer vacations than the market. Despite the low volume, sediment remains positive for the market. This is due to the speculation that the Federal Reserve has inflation under control.

In corporate news this week, Adobe Systems (ADBE) posted nice numbers. The maker of the popular acrobat software which makes PDF files reported earnings of $0.29 per share which was a penny above estimates. Revenues surged 21% to $496 million. Giving guidance the company expects earnings of between $0.25 and $0.27 per share for quarter three.

KB Homes (KBH) reported a 36% rise in revenues and a 72% jump in earnings. The home builder reported earnings of $2.06 per share on revenues of $2.1 billion. Wall Streets estimates had been for the company to earn only $1.78 per share. Giving guidance the home builder stated that their backlog increased 52% and that they now expect their full year earnings to come in at $9.00 per share.

Pfizer Inc. (PFE) announced that it would acquire Vicuron Pharmaceuticals (MICU) for $1.9 billion or $29.10 per share. Shares of Vicuron soared on the news.

Both Target (TGT) and Wal-Mart (WMT) reported their same store sales estimates for June. Target said that they see sales coming in at the high end of their prior range of 4% to 6%. Wal-Mart said they see sales growth for June coming in at 2% to 4%.

In economic news traders watched closely for the release of the May PPI and CPI numbers. The May Producers Price Index reported a drop of 0.6% and the core rate was up just 0.1%. The Consumer Price Index was also bullish for the market. The CPI for May fell 0.1% economist had expected a 0.1% rise. The core rate which excludes food and energy rose only 0.1% versus the estimate of a 0.2% rise. This signaled that the Federal Reserve does have inflation under control and might be at the end of their policy of raising interest rates. Traders will be watching the next FOMC meeting very closely to see if the Federal Reserve changes its language in its policy statement.

Next week expect traders to react quickly to earnings warnings. We are now in the period where companies will warn if they are not going to be able to meet their earnings estimates. Companies that announce warnings have the ability to move those sectors of the market.

Companies releasing earnings next week are the following; FastSet Research Systems (FDS), Lennar Corporation (LEN), Bed Bath & Beyond (BBBY) and FedEx (FDX).

Weekly Market Report 06-10-2005

Alan Greenspan sees housing bubble

By Rick Paler


It was another slow week for the market. No market moving earnings reports were released and traders looked at both Texas Instruments and Intel’s mid-quarter reports for guidance in the technology sector. Alan Greenspan was in the spotlight giving his insight into the economy, home prices and interest rates, which caused the market to take notice.

It was a very light week for the market new wise. The main story of the week was the release of Texas Instruments and Intel’s mid-quarter reports. First came Texas Instruments (TXN) on Tuesday. The company raised their profit guidance citing rising demand for its microchips. The company now expects to earn $0.27 per share to $0.30 per share. Prior guidance had been $0.25 to $0.29 per share. Revenue projections were also raised to the $3.12 billion to $3.24 billion range.

Then Intel (INTC) also raised their outlook. The chip company now sees revenues coming in at $9.1 billion to $9.3 billion and gross margins of 57%. Analyst had expected revenues to come in at $9.0 billion.

In general news IBM (IBM) shares fell on news that Apple Computer (AAPL) plans to switch to Intel (INTC) chips to power their Macintosh PC’s. The switch could offer the company more flexibility and a likely price savings that could be passed on to consumers.

Troubled General Motors (GM) announced that the company would cut 25,000 jobs in the next three years in an effort to reduce cost. Additionally the company is talking to UAW officials in an effort to reduce their health care cost.

E*Trade (ET) renewed its effort to purchase Ameritrade (AMTD) this week by upping its bid for the company. The new offer stands at $2.0 billion and a 49.5% stake in the new company. The offer might cause problems for Ameritrade’s offer to buy TD Waterhouse from Toronto-Dominion Bank (TD).

Washington Mutual (WM) announced that they will purchase Providian Financial (PVN) for $6.45 billion in cash and stock.

ITT Industries Inc. (ITT) announced that they have “increased confidence” their earnings will come in at the high range of their $1.28 to $1.32 per share guidance. The company cited growth in their water, wastewater and defense business units.

In Economic news, Alan Greenspan had all eyes watching him as he appeared twice this week. Overall he said that “the US economy seems to be on a reasonably firm footing, and underlying inflations remains contained.” He also said that the flat yield curve “is clearly without recent precedent” during a period when the Federal Reserve is raising short term interest rates. Addressing the possibility of a housing bubble Mr. Greenspan said that he does not see a nationwide bubble in housing prices. Adding to that he did state that he does see “signs of froth in some local markets where home prices seem to have risen to unsustainable levels.” He had given similar statements prior to the end of the technology bubble.

Bond yield rose slightly across the yield curve this week as traders digested Mr. Greenspan’s comments and look to the next FOMC meeting that will occur at the end of this month. The 5 year Treasury closed yielding 3.83%, the 10 year ended at 4.04% and the 30 year bond closed yielding 4.32%.

Earnings due to be released next week are from the following companies: Best Buy Co. (BBY), Adobe Systems (ADBE), Goldman Sachs (GS), KB Homes (KBH), and Circuit City Stores (CC). Trades will also anticipate the release of both the PPI and CPI numbers for signs of inflation.

Weekly Market Report 06-03-2005

Economic data highlights week

By Rick Paler


This week was shortened by the Memorial Day Holiday on Monday and the rest of the week was non-eventful. The highlights of the week were retail same-store sales reports, interest rates, and economic data.

May same-store sales were released this week and Wal-Mart (WMT) missed their target once again. The behemoth retailer reported that their same-store May sales grew by 2.5% which was below the streets estimate of 2.7%. Looking ahead the company said that they see June sales coming in at 2% to 4% growth.

Competitor Target (TGT) continued to outpace its rival Wal-Mart by posting a 5.1% increase in same-store sales for May. Wall Street analyst had expected growth of only 4.8%.

In the hot teen clothing market both Abercrombie & Fitch Co. (ANF) and American Eagle Outfitters Inc. (ASEOS) posted excellent numbers. Abercrombie’s May same-store sales rocketed 29% blowing away analyst estimates of 13.9% growth. Total sales at the company grew 43% to $159 million from $111.5 million. At American Eagle, May same-store sales jumped 17.1% and total sales increased 25.8% to $140.9 million. American Eagle also reiterated their guidance, stating that they expect to earn $0.32 to $0.33 per share compared to $0.22 a year ago.

In general corporate news merger mania continues. This week Ameritrade Holding Corp. (AMTD) and Toronto Dominion Bank Financial Group (TD) confirmed that they are in discussions about the sale of discount broker TD Waterhouse to Ameritrade. Share of both firms were higher on the news.

Sun Microsystems (SUNW) announced that the company will purchase Storage Technology (STK) for $4.1 billion in cash or $37.00 per share.

L-3 Communications Holdings (LLL) reported that they will buy Titan Corp (TTN) for $2.7 billion or $23.10 per share. The deal included the assumption of $680 million in debt and is contingent on the settlement of class-action suits.

Biogen Idec (BIIB) shares were lower after a fourth case of a deadly rare brain disease was reported in a patient taking the multiple sclerosis drug Tysabri.

In economic news real estate continues to be red hot. Existing home sales in April increased more than expected to 7.18 million units. Economists were looking for 6.89 million units.

Reports continue to show that manufacturing continues to slow. The May Chicago PMI dropped to 54.1 its lowest level since June 2003. Economist had estimated a number of 62.0. This was the second month indicating declines in manufacturing in the Chicago region.

The May ISM index also missed economist estimates of 52.1, coming in at 51.4. Both reports do show that the economy is still growing but not as quickly as before. Any number greater than 50 indicates a growing economy, while a number below 50 indicates the opposite.

The biggest news of the week was comments made by Dallas Federal Reserve President Richard Fisher. In a television interview he said that the Federal Reserve is in the “8th inning” of its cycle of interest rate hikes. The next FOMC meeting is scheduled on June 30 and the street expects the Fed to raise interest rates another .25 basis points. This would bring the Fed Funds rate to 3.25%. Wall Street interrupted the his comments to mean the Federal Reserve might hold off on continuing is policy of “measured” interest rate hikes after the meeting.

The bond market rallied on the news causing rates to drop across the yield curve for the week. The 5 year Treasury yield ended at 3.72%. The 10 year note closed at 3.97% and the 30 year Treasury bond closed the week yielding 4.27%.

Companies reporting earnings next week that are of interest are the following. CMGI (CMGI), Sears Holdings Co (SHLD), and H&R Block (HRB).