Wednesday, April 30, 2008

FED announcement disappoints investors

Stocks really wanted to go up today & tried hard, but after digesting the FED's rate cut & what they had to say, sold off. Dow had been flirting with 13K & S&P 500 topped 1400, both important ceilings, but they could not keep the gains. In the last hour, Dow sold off about 175 to 12820. For the day, the averages ended slightly underwater although the internals were a little better with advancers a little ahead of decliners. For what it's worth, volume of 1.44B was slightly higher than in the recent past. The month turned out to be good. Dow was up more than 500 after a lousy start in Q1.

Markets were debating whether this is the end of rate cuts for awhile. Maybe. With low rates & more signs of inflation becoming a bigger problem, they can be expected to proceed cautiously on new rate cuts. "Rates on hold" is a new buzz phrase which seemed to be the thinking driving down stocks in the last hour of trading. For what it's worth, oil fell 2.17 to 113.46. But that remains high enough to drive gas prices up many more notches at the pump.

Starbucks (SBUX) was essentially even on down profits. I don't drink coffee but it's such a well known brand, hard to ignore it. CNBC had an excellent interview with Dr. Eric Schmidt CEO of Google (GOOG) sending the stock up 15.82. Check it out!

Stocks up before FED meeting

Stocks advanced before the FED meeting this PM. Dow was up 84 (helped by GM and P&G), advancers ahead of decliners 3-2 & NAZ was up 13. The Commerce Dept reported the US economy grew at a meager 0.6% rate in Q1 as housing & credit problems slowed consumers & businesses. This pace matched Q4 of 2007. While not defined as a recession, the economy continues to be stuck in a rut with modest growth. After yesterday's sharp fall, oil rose 60¢ to 116.23.

GM (GM) lost over $3B in Q1 on weak US sales. Excluding one-times charges, EPS was 62¢ beating analysts forecasts sending the stock up 1.93. Procter & Gamble (PG) reported excellent earnings from cost controls & price increases, the stock rose 2.10. Time Warner (TWX) reported lower earnings & decided to spin off its cable business. The stock dropped 11¢. Let's see what the FED meeting brings.

Tuesday, April 29, 2008

Stocks slip ahead of FED meeting

Stocks were down a little ahead of tomorrow's FED meeting. Dow was down 40, decliners ahead of advancers 3-2 while NAZ eaked out a gain of 2 as volume continues at a low 1.2B level. Merck (MRK) hurt the Dow, pulling back 4.30 after its new cholesterol drug was rejected by the FDA. Commodities which had been strong, pulled back today partially on recent strength in the dollar. Oil led the decline in commodities, down 3.12 to 115.63 after knocking on the 120 door just yesterday. Commodity declines help ease inflationary concerns.

Consumer confidence slipped again in Apr. The Conference Board said their Consumer Confidence index fell to 62.3 from 65.9 in the prior month (in line with expectations). This is another sign of a deteriorating economy. The FED meeting should give markets a sense of direction.

More housing troubles

Sorry to report more ugly news. Masco (MAS), a member of the S&P Dividend Aristocrat list (paying higher divs year over year for around 40 years in their case), announced the housing slump is hitting them harder than formerly indicated. They are projecting EPS will fall to 50-65¢ down from from .85-1.15 in their former guidance, street forecasts had been looking for 1.03. This news sent the stock to the low 18's, down 8% at another new multi year low. Obviously their div is at risk.

Stocks continue mixed

Stocks continue mixed afraid to make a major move ahead of the FED's meeting. Dow is down 52, decliners over advancers 3-2 & NAZ down 9. Gloomy economic news has not been able to attract sellers in a big way. Foreclosures for homes more than doubled in Q1 compared with the prior year. The trend continues negative as the number is 23% ahead of the prior qtr. Home prices dropped 12.7% in Feb, the fast rate recorded. It's no secret, the housing slump is dragging on & promises to be with us for months.

Some company reports were better. MasterCard (MA) had a great qtr with profits more than doubling, stock up 22.53. Foreign business, up 30%, showed the greatest gains, although US business was also strong, up 9%, helped when I used my card. BP (BP), Europe's 2nd biggest oil producer reported profits were up 63% from higher oil prices. BP gained 3.07 & Royal Dutch Shell (RDS-B), Europe's biggest oil producer, also reported substantially higher earnings sending its stock up 3.77. Meanwhile Countrywide (CFC) reported another whopper loss which may result in Bank of America (BAC) reducing the price it's paying for the company, although CFC is down only fractionally today.

Monday, April 28, 2008

Markets little changed ahead of FED meeting

Markets were little changed ahead of the FED meeting but the averages closed near the lows for the day. Dow dropped 60 in the last ½ hour & S&P closed near its lows in a range of only 8½ points. The internals were stronger with advancers leading decliners 3-2. Volume continues at 1.2B, near the lowest levels for the year. Morgan Stanley recommended selling big banks although Bank of America (BAC), on the right, was down only 12¢. There is a lot of mention that the purchases of Wrigley (WWY) & Ford (F) didn't stimulate more buying. The big picture story remains the same, everybody is watching for the 25 point rate cut & especially interested in what the FED says.

Oil had traded near 120, it closed at 118.75, up 23¢. Until the FED acts there may be more sideways trading.

Stocks slightly up, again

Without clear signals & awaiting the FED's meetings on Tues-Wed, markets were only slightly up. Dow & NAZ were barely up while internals were better, advancers were 40% ahead of decliners. The FED is widely expected to cut their rate another 25 basis points but the wording on their follow-up statement will probably have more significance for the markets. Oil is nearing 120 once again while gas reaches another record, 3.60. Kirk Kirkorian is offering 8.50 for another 20M shares of Ford (F), up 73¢ to 8.43. Mars (love their candy) is offering $23B to buy Wrigley (WWY), up 14.50, with help from Berkshire Hathaway, Warren Buffet's company. Many times these offers for large blocks of stocks at premiums help boost the markets, not so today.

Stocks may be held back by an interview Warren Buffet had on CNBC where he said the recession may be more serious & longer lasting than some are predicting. Among other things, he's also worried that higher food & gas prices are pinching hard on consumers.

Friday, April 25, 2008

Stocks up a little

After one of those wobbly days, stocks generally finished up. Dow was up 43, advancers ahead of decliners 3-2 but NAZ was down 6 not helped by MSFT down 2 after its earnings announcement. Even with mostly sideways movement during the week, the modest rally in the last couple of days gave the Dow about 100 point gain for the week. Volume continues light at under 1.2B, one of the lightest days of the year. The Alerian Master Limited Partnership Index has been performing well recently, up 10 in the last couple of weeks.

Oil finished at 118.24 up 2.40 on worries about supplies, a common worry in recent days. Consumer confidence fell for the 5th month in a row, to the lowest level in 26 years. The last time it was this low, there was stagflation to worry about in 1982. Next week, the earnings season will begin winding down. So far, the markets have handled them well.

Microsoft & higher oil sends markets lower

Tough news from Microsoft & a spike up in oil prices sent markets lower. Dow was down 57, decliners only slightly ahead of advancers & NAZ was down 27. Microsoft (MSFT), a Dow company, reported so-so earnings & guidance. Comparison requires extra analysis since Vista was first sold in Q1 of 2007, accounting for some the sales decline in Q1 of 2008. But it takes a little time for investors to absorb. The possible Yahoo acquisition is another ingredient making their future fuzzier than usual. MSFT is down 2.05. Meanwhile oil spiked up to around 119 on word that US naval ships fired at Iranian swift boats. Nigerian instability does not help matters.

On the good news front, tax rebates designed to help the economy will go out 4 days earlier than planned. The idea is more money spent will help the ailing economy. Unfortunately some of that will go just to pay for higher priced gas which reached another record yesterday. I'll close with a story about states feeling the economic recession (or whatever you want to call it) with bigger than expected budget deficits.

Thursday, April 24, 2008

Stocks rally on company news

Stocks rallied on better news from companies & earnings reports. Dow was up 86 (after being up 150 earlier), advancers ahead of decliners 3-2 & NAZ was 24. It didn't hurt that commodities pulled back highlighted by oil dropping 2 to 116. Overall a pretty good day but volume continues to drag along at 1.45B. Bloomberg News reported after an interview with the head of troubled AMBAC (ABK) that they were in great shape & expecting to maintain their AAA debt rating. Pretty good trick after losing billions in 6 months, sending the stock down over 90%. Merrill Lynch (MER) said they had ample cash to maintain the div. In addition, the favorable unemployment report this AM helped bring back buyers looking past dreary economic news.

Not all company news has been favorable. The Microsoft (MSFT) - Yahoo (YHOO) dispute drags on. Starbucks (SBUX) is at the lowest level in almost 5 years, maybe that's because I don't drink coffee. Aetna (ET) reported lower Q1 earnings, down 83¢. Sales beat expectations & EPS was up on lower earnings because of fewer shares. They also maintained guidance of $4 for the year. Let's see what tomorrow brings.

Stocks slump again

Jobless claims declined, normally a boost for stocks. But a another terrible housing report & cautious earnings comments sent stocks lower. Dow is down 31, decliners over advancers 2-1 & NAZ down 11. Tough day. The housing report is dismal. Sales of new homes are at a 17 year low. Factory orders for big-ticket goods fell for a 3rd straight month in Mar, the longest string of declines since the 2001 recession. The Commerce Dept said demand for durable goods dropped by 0.3% last month, worse-than-expected. The last time orders fell for three consecutive months was Feb-Apr, 2001, when the country was sliding into the last recession.

Stanley Works (SWK), a member of the S&P Dividend Aristocrat list & a favorite of mine as shown on the right widget, was down 2.50 on tough earnings. They squeezed out higher profits & EPS was up 5¢ on fewer shares, but SWK remains cautious for the rest of the year. They feel the depressed housing market & are going to have to squeeze costs harder to make their guidance range of 4.20-4.40 for EPS. MMM (MMM), a Dow company & another member of the S&P Div Aristoctat list, was down 2.51 on so-so earnings. They reported the same story, lower earnings but beating analyst expectations. Overseas business is solid helped by currency gains adding 7¢ to EPS. Now they have to hunker down for a difficult year. While Ford (F) had a good report, earnings for Starbux (SBUX) & Motorola (MOT) were not favorable sending their stocks lower.

Wednesday, April 23, 2008

Boeing send stocks higher

Boeing's (Dow stock) favorable earnings sent stocks higher despite other tough stories. Dow was up 43, but advancers just barely beat decliners while NAZ had a good day, up 28. While BA's news sent the stock up 3.53 accounting for chunk of the gain in the Dow, other news was mixed. Credit problems are starting to weigh on regional banks signaling losses will continue & probably grow. Speaking of credit problems, AMBAC (ABK) had another brutal day, down 60%+ to 3.46. About a year ago the stock traded at 96. This is one of the major credit agencies which had to come up with extra financing & beg to keep their AAA credit status (one of just a few companies in the US with that rating) 3 months ago. The Financial Times has a good review of their loss. They've lost $13 per share in the last ½ year, making the current AAA rating for them to be a joke. They should be downgraded soon as will their rivals. These are bond insurers. If the bond insurers are in trouble, it makes you wonder what value their insurance has! This kind of thinking can cause bond yields to rise due to less certainty about the future. Not good.

Amazon (AMZN) had a very good Q1, but.... They had been up 1.40 for the day but in after hours trading they're down 4.05. Too many companies when reporting even good figures have been following with a but.... Their earnings were 34¢ beating the street by 2¢, pretty good. Sales rose 37% worldwide over last year worldwide . But margins were weak & sales in the US only grew 31%, slower than in the rest of the world. Problems in the US economy continue. It's difficult to see them ending without some resolution to the credit mess that seems to be getting worse.

Stocks little changed

Current reporting is talking about stocks rising on lower oil prices. Unfortunately that was written about an hour ago, now they've slipped back to about break even. Averages & decline line are about even. Oil pulled back to "only" 117 on a gov report that inventories declined last week. This allows markets to pay more attention to earnings. Boeing (BA), a Dow stock, reported excellent earnings, up 38% sending the stock up 3.91. Their guidance also was encouraging with a record backlog of $346B. For those who wonder what value the weak dollar has, with the Euro at $1.60, they are clobbering Airbus in getting new business. Airbus has announced previously, their existence could be threatened. While this is probably the the largest value comparison, it is playing out with thousands of businesses exporting products.

Yahoo (YHOO) takeover drama thickens. Microsoft (MSFT) is getting nervous & may take a walk after Q1 earnings proved to be nothing special while the fight drags on. A little noticed story here because it is not local, the Royal Bank of Scotland needs a huge investment (measured in billions) after taking a whopper loss on bad loans. Can you spell sub-prime? This sub prime mess along other regular bad loans is global mess, affecting banks from to US to Europe to Asia. We don't know where this mess will take us but it does not look good.

Tuesday, April 22, 2008

Down market on higher oil prices & company earnings

Stocks pulled back today on worries about the high price of oil and a more careful look at company earnings. Dow was down 104, decliners over advancers 5-2 & NAZ down 31. This week starts with 2 down days after a great week last week. Oil came within in whisper of 120 but slipped back to settle at 119.37. Gas at the pump reached another record 3.51 yesterday, up 66¢ from last year. As I said this morning, I saw a lot of 3.60 prices as the base price at a number of stations in the last few days. Earnings reports are getting mediocre reviews if that. The scariest was DuPont (DD) talking about weakness in their US business, down 2.09. The trend seems to be that it's getting harder & harder to beat estimates & many of those have already been lowered.

Yahoo (YHOO) just reported earnings, beating estimates. They earned 10 or 11¢ (depending whether how a special gain is handled) compared to 9¢ estimate, but down from 37¢ last year. The stock is down a few pennies in after hours trading. This is the type of report that is more common & not being taken well. Their comments by phone will help answer questions.

Stocks down on earnings reports

3 Dow stock, McDonalds (MCD), DuPont (DD) & AT&T (T), reported earnings but investors are trying to evaluate the reports. Earnings were generally good, but...... They all talk about the slowdown in the US, not helpful for the markets. Dow is down 89, decliners over advancers 5-2 & NAZ is down 21. Yesterday wasn't too bad a day for the markets, but reality is hitting today. DuPont had the most interesting report. They beat analyst estimates but growth comes from overseas while US is down 5%. The good & bad was taken on balance as bad, down 2.23.

Home sales in Mar continue to fall. What's disturbing is analysts are talking about the housing recovery as being months away. Oil keeps marching upward, this time to 118. Even with tax rebate checks issued in the next couple of weeks, higher oil prices will hurt. In the last few days I noticed a lot of gas stations. Starting prices at the pumps were around 3.60 & that's going up.

Monday, April 21, 2008

Stocks fall

Stocks fell on lower earnings by Bank of America. Dow is down 60, decliners over advancers 2-1 & NAZ is down 6. BAC is down 68¢. Eli Lilly (LLY), a member of the S&P Dividend Aristocrat list, is down 1.58 on favorable earnings, but they missed analysts estimate. I'll be away for much of the day, so I want everybody to be good.

Pretrading stocks pull back

Pretrading stocks pulled back a little. Bank of America (BAT), a Dow stock, reported lower earnings in Q1, down 77% from last year. EPS was 23¢ far below 41¢ analysts estimate but the stock was little changed in pretrading. Merck (MRK), another Dow stock, reported good earnings, 89¢ (after a special gain) compared with analysts estimate of 86¢. Their stock was up 21¢ in pretrading & MRK reaffirmed it's 2008 EPS guidance for 3.28-3.38. Meanwhile supply problems for oil in the Middle East & Nigeria sent the price up to 117. This could be a wild day in trading, be prepared.

Sunday, April 20, 2008

Markets start week with strong rally

Asian markets started the week in a rally mode. Most markets were up around 2% following the strong markets on Fri in NY. For example, Tokyo is up 1.7% while Shanghai is up more than 4%. The goods news from Caterpillar (CAT) eased concerns about a slowing US economy & good news from Google (GOOG) gave a major boost to the tech sector. Banks shares were strong because of a feeling that Citigroup (C) news on Fri signalled that the credit crisis in the US was ending. We'll see.

Friday, April 18, 2008

Up, up & away!!

Last night we were treated to a local fireworks display which probably helped spark today's major rally in the stock markets. Dow is up 234, advancers ahead of decliners 4-1 & NAZ is up 63. That's a nice rally. For the week, Dow will have a 500 point gain assuming these levels hold. Without economic news, company releases provided the fire. Citigroup (C) lost only $5B in the last qtr, Caterpillar (CAT) had great earnings plus a nice forecast for 2008 & AT&T (T) reported they were cutting 4600 jobs. All are Dow stocks with nice gains today, although T was up only 22¢. Google (GOOG) led NAZ, up 91, following a positive earnings report last night. Next week there should be more economic news which may bring back reality to the markets.

Stocks ready for big day

Stocks are poised for a big rally day. Google (GOOG) earnings reported last night followed by Citigroup (C) & Caterpillar (CAT), both Dow companies, earnings today should bring higher prices. Dow is up 107 already in pretrading. Citigroup reported bigger write-offs resulting in a $5.1B loss for Q1 but less than the $10B in the prior quarter. The loss per share was 1.02, larger than the 95¢ analysts were expecting but stock is up 7% in the pretrading market. CAT reported earnings of 1.45 up 13% & forecasting earnings in 2008 will be up 5-15%. These reports should make for a very good day in stock markets.

Thursday, April 17, 2008

Stocks mixed (up) again

Stocks were mixed (up) again. The averages hardly changed & advancers equaled decliners, a very neutral day. After another 6B in writedowns, Merrill Lynch (MER) reported their 3rd straight quarterly loss. The loss was 2.19 per share vs 1.99 forecasted by analysts. Moodys said they might have to cut MER debt ratings. MER was up 1.82, most of the other big name financials were also up. I dunno! After hours, Google (GOOG) reported higher earnings for Q1, 4.12 vs 3.18 last year. The markets liked this report, sending the stock up 74 after hours (after declining 5 in regular trading). GOOG tweaked their online business (whatever that means) plus were aided by strong overseas growth. This should give NAZ & maybe the Dow a nice start tomorrow, although Asian markets are down a little as of this writing.

Gas prices keep going up, passing 3.40 to 3.42 on their march towards $4 at the pump. Doesn't sound good. Oil continues trading just under 115. Tomorrow we'll see if optimism on company reports will trump dreary economic news.

Wednesday, April 16, 2008

Dow surges on earnings reports

Dow surged today on great earnings reports from Dow stocks. JPMorgan (JPM), Coca Cola (KO) & Intel (INTC) reported earnings traders were happy to see, so they bid up stocks. Dow was up 255, advancers ahead of decliners 5-1 and NAZ was up 64. All this sounds good except for volume which was coming in at 1.36B at the close, still low. Old timers worry that continuing low volume is a bad sign. After the close IBM, another Dow stock, reported excellent earnings sending the stock up 3.50 after hours following a 3.30 gain during the day. IBM reported EPS for Q1 of 1.65 easily beating 1.45 analysts were estimating.

Meanwhile oil jumped to a record 115, but settled at 114.93. Gas at the pump is at a record 3.40. up 53¢ from last year. The economy weakened in the spring according to Janet Yellen, president of the Federal Reserve Bank of San Francisco. She said the economy "has all but stalled and could even contract over the first half of the year." It's good to keep in mind that times remain tough in the US.

I'll be in & out for the next couple of days, but I will try to continue with my comments.

Dow higher on earnings news

Dow rocketed ahead on favorable earnings news from 3 Dow companies. JPMorgan (JPM), Coca Cola (KO) & Intel (INTC) beat earnings estimates, sending the Dow up 192, advancers ahead of decliners 4-1 & NAZ up 53. JPM reported profits down 50% from last year's 1.34, but that beat analyst forecasts of 64¢ sending the stock up 1.86, near the price on Jan 1. KO reported excellent sales & earnings beating estimates, but the stock was only up 21¢. However, they mentioned North American sales were challenging (a code word for down a little) related to sales in the US. INTC reported earnings last night, beating expectations. Wells Fargo (WFC), a stock in Warren Buffet's portfolio, reported earnings fell 11% but beat analysts forecasts sending the shares up 1.46. Loan write offs were about 1½B, more than double last year's figure.

On the economic front, the Commerce Dept reported housing took another hit. Housing construction fell 12% to a 17 year low, building permits also fell in Mar. Oil continues higher, reaching a new record of 115. Maybe tomorrow the economic news will start to sink in.

Tuesday, April 15, 2008

Stocks up in an erratic day

Stocks were up in an erratic day. Dow was up 60, advancers ahead of decliners 3-2 & NAZ up 10. Volume continues to be light although some make excuses for it. Banks & REITs were mushy with a bias to the upside. After hours, Washington Mutual (WM) reported a 1.14B loss. The stock closed up 31¢ for the day & slipped slightly on this news. As bad as it sounds, the loss was only a little greater than had been forecasted. Intel (INTC), a Dow company, reported in-line results which brought out buyers. The stock had been up only modestly during the day, but after hours rose another 1.35.

Crude oil topped 114, but settled back to close at 113.79. Difficult to remember, but just a few months ago we were wondering about cracking 100. Now it has become the current base for oil. Prices at the pump are 3.39, with some CA stations getting over $4.

Stocks higher after tough news

Stocks were a little higher after generally tough news stories. Dow is up 27, advancers ahead of decliners 3-2 but NAZ is down 3. The Labor Dept reported inflation rose 1.1% last month (analysts had been expecting .4%), while the "core" number was a much more moderate .2%. For the last 12 months, inflation was up 6.9% & the core number was 2.7%. These numbers are high enough to be of interest to the FED when setting new interest rates. Foreclosures on homes in the US jumped 57% last month keeping housing in a severe recession. Oil is up again, surging near 114, another record & another kick in the head the economy would rather not have to deal with.

In company news, there were better reports. J&J (JNJ), a Dow stock, reported an excellent Q1 with profits up 40%. They are guiding for 4.40-4.45 EPS in 2008, a little ahead of their Jan guidance. Despite the good news, the stock is down 24¢. US Bancorp (USB), a member of the S&P Dividend Aristocrat list, reported earnings fell to 62¢ in Q1 from 63¢ last year, but beat analysts forecast of 61¢. They are setting aside more for loan losses but are in fairly good shape compared with ugly bank stories which have become so common.

Monday, April 14, 2008

Wachovia sinks markets

Wachovia's (WB) loss sent stocks modestly lower. Dow & NAZ pulled back a little, but decliners outnumbered advancers 3-2. Once again, volume was light coming in under 1.2B, lowest this year. Banks & related stocks (i.e. home building, REITs, etc.) took a beating from the Wachovia news. Fifth Third Bank (FITB) was down 1.84 to 19.02, lowest price in 10 years implying a yield of almost 9%. That yield includes a significant risk factor. The silver lining for WB is they are getting $7B financing from traditional sources as opposed to going overseas for foreign investment. On the bright side, MLPs had an up day. The Alerian MLP index was up 1.20 to 283, not bad. This was a day when boring pipelines with nice yields looked good. Last week, junk bonds rallied a little. Even today, they offer yields triple the 3½% available on Treasuries.

Goldman Sachs said Q1 earnings got off to an awful start. Fair assessment. Prepare for more ugly news.

Wachovia reports loss

Wachovia reported a big & unexpected loss but the markets are only slightly lower. Dow & NAZ are down a little while advancers about equal decliners. Wachovia (WB), down 10%, reported a loss of almost $.4B for Q1. Much the disappointment relates to last year's acquisition of a mortgage company, now they admit their timing was not good. To improve equity they are raising $7B & also cutting div 41%. Most banks are selling off on this news. Two other dividend banks I have followed, National City (NCC) & First Horizon (FHN), are at multi year lows, each down 6% today. FHN used to be on the S&P Dividend Aristocrat list. Both had good records for raising divs, but that's all history in today's world.

Commerce Dept reported Mar retail sales were sluggish after a down Feb. Mar was up only .2% vs a .4% decline in the prior month. That gain was largely due to higher prices for gas. Without gas, retail sales were only even. Oil is back over 111, higher prices will continue to be a drag for the US economy. The head of the World Bank urges action on dealing with higher food prices. Corn & rice, two of the most important grains for the planet, are at record levels. The fall of the gov in Haiti over the weekend followed deadly rioting over food prices. Higher food prices are hurting much of the world's population, this story may get worse going forward.

Market have a lot to think about, much of it's pretty ugly.

Friday, April 11, 2008

Stocks plunge on GE news

Stocks plunged on GE's disappointing Q1 earnings report. Since 2005, GE managed to report earnings within a penny of final results. This time, their 43¢ was far below the 50-53¢ guidance. Dow was down 256 (partially due to GE's 4.70 decline), decliners ahead of advancers 4-1 & NAZ down 61. Stocks closed at the lows, always a bad sign. For April, Dow is only up 63 & that's due to big gain on April 1. Another way to look at it, is those gains were an April Fool's joke.

Overlooked with the excitement about GE, the Michigan Surveys of Consumers reported its index of confidence fell to 63.2 in Apr, its lowest point in 26 years & down from 69.5 in March. Economists had expected the index to fall to 68.0. This puts the idea of recovery in the second half in greater doubt. As the head of the FED said, the economy is fighting headwinds.

GE sends stocks tumbling

GE's disappointing Q1 report sent stocks tumbling. Dow is down 144, decliners ahead of advancers 5-2 & NAZ down 31. GE, a Dow stock & volume leader, is down 11% on volume of 180MM shares already. GE reported what can only be described as disappointing earnings of 43¢. This is down a penny from last year & below the guidance area of 50-53¢ they had been using. GE is a bell-weather company with many divisions competing on a worldwide basis with their financial business being especially important.

"We had planned for a difficult environment," according to Jeff Immelt, CEO. He cited the near-collapse of Bear Stearns Cos. as a reason for the performance of GE's commercial business. He continued, "We had planned for an environment that was going to be challenging, but what I would say is kind of late in the quarter, particularly after the Bear Stearns event, we experienced an extraordinary disruption in our ability to complete asset sales and incurred marks of impairments and this was something that we clearly didn't see until the end of the quarter." More of CNBC's interview with Jeff Immelt. GE's announcement is an ominous sign for other earnings releases in coming weeks!

Thursday, April 10, 2008

Stocks gain on mixed retail sales

Stocks were up on mixed retail sales for Mar. Dow gained 54, advancers over decliners 2-1 & NAZ was up 29 (probably helped by traders betting on a higher purchase price for Yahoo (YHOO)). Volume continues light, just over 1.2B. Retailers were strong following favorable news by Walmart (WMT) & Costco (COST) while negative news by many other retailers was ignored. Retailers may have benefited by the extreme oversold condition for the group. Financials, especially banks, were weak again. The S&P 500 is heading for a down week.

Gas & diesel prices hit new records & oil remains over 110. The pump price for gas is 3.36, another record. Ben Bernanke, the FED Chairman, said regulators must move to prevent a future financial crisis from occurring while they battle this one threatening to plunge the country into recession. During the last 3 months, Dow has been range-bound between 12 & 12½K. More sideways action is in order.

Paulson says US economy has turned down

Sec Paulson said the US economy has turned down in a CNBC interview. More food for thought!

Markets mixed on slugghish retail sales

Markets were mixed from reports on sluggish retail sales. Dow was up 47, advancers slightly ahead of decliners & NAZ up 27. Retail sales for Mar were mixed at best, consumers were mostly looking for sales & buying basics. Walmart (WMT), a Dow stock, & Costco (COST) were among the best performers, reflecting this trend. Target (TGT) reported sames store sales in Mar down 4½% & sees Apr sales as so-so. Thomson Financial said 17 retailers missed sales expectations while only 6 merchants beat estimates. The tally is based on same-store sales or sales at stores opened at least a year & are considered a key indicator of a retailer's health. Labor Dept reported jobless claims dropped 53K last week taking it below the important figure, 400K. However, the 4 week average remains highest in last 2½ years.

Meanwhile, Yahoo (YHOO) has become a darling of companies sending it's shares up 58¢ & helping NAZ have a good day. Buyers are hoping for a better offer.

Wednesday, April 9, 2008

Stocks down again

A week ago yesterday the market had it's big gain day, up 400. Since then it has been slipping & sliding. Volume continues light, only slightly ahead of yesterday which was the slowest day of the year. Dow was down 59, decliners over advancers 2-1 and NAZ slipped 21. Financials, especially brokers, were weak on worries about more big write-offs. Merrill Lynch (MER) is looking at another 6½B in write-downs. Only these aren't related just to sub-prime loans. Instead they will include real-estate & other loans. This comes after $24B already written off. I still remember those commercials: "Merrill Lynch is bullish on America." I don't know! Oil prices reached a new record, above 112, closing at 110.87. It was just a couple of weeks ago it slipped under 100 bringing some relief. Crude oil stocks (inventory) were reported to have declined last week by 3.2MM barrels as opposed to an expected increase of 2.4MM. Gas prices at the pumps reached a record & poised to go higher.

There is supposed to be a ton of cash on the sidelines. One estimate yesterday said there was $7T (that's trillion) in money market accounts. Investors are waiting for more earnings reports. The first reports along with warnings are getting nervous ones to sell.

Here's an excellent summary on today's markets from from

``It will be a challenging quarter,'' Brian McMahon, chief investment officer at Thornburg Investment Management, which oversees $53 billion, said in a Bloomberg Television interview in New York. ``What we're seeing now is a ratcheting down in earnings expectations particularly for stocks that serve the retrenching American consumer. This quarter is going to be a splash of cold water in the face for certain consumer-facing stocks.''

Earnings Concern
Analysts have cut their projections for first-quarter earnings every week this year as evidence grows that more than $230 billion in global losses and asset writedowns at financial firms have pushed the economy into a recession. First-quarter profits at S&P 500 companies probably fell an average of 11.3 percent from a year earlier, according to estimates compiled by Bloomberg.

Earnings worries send stocks lower

Earnings worries are sending stocks lower again. Dow is down 77, decliners ahead of advancers better than 2-1 & NAZ is down 25. Worries about Q1 earnings are driving the selling. UPS (UPS) warned it could miss Q1 guidance because of fewer packages shipped along with higher fuel prices. The stock fell 2.35. The second half of Q1 showed contraction following the first 3 weeks which were strong, doesn't sound good. UPS talked about a weakening US economy causing shipment declines, their best markets should be in Asia (China & India) & Europe. FedEx (FDX) was down 2.67 in sympathy. Gas prices at the pump reached another record, 3.34, sending oil to 111, near last month's record. The price for gas should reach $4 at the pump by summer. Ugh! Boeing (BA), a Dow company, is up 4.42 even though they announced the 4th delay in shipment of their new plane, the 787. It's unclear what's causing buyers to flock to BA.

Most groups are down today. REITs & even MLPs which have pulled back from their highs near 290 just a couple of days ago. US economic problems impacting earnings can be expected to drive markets.

Tuesday, April 8, 2008

Earnings & FED sink stocks

Earnings news & the FED sank stocks today, but declines were not major. Dow was down 36, decliners over advancers 3-2 & NAZ down 16. Volume continues light at only 1.2B (lightest this year). Negative announcements by Alcoa (AA) & AMD (AMD) weighed on the markets raising fears of more ugly reports. FED minutes were released from the Mar meeting when they saw a contraction likely & worried about a severe & prolong recession. Their actions in Q1 were the most aggressive in a ¼ century.

Oil is trading near 109. Coal stocks rose today in anticipation of more price increases resulting from the cold winter in China. China is a very big user of coal. Below are 2 quotes from on coal & Washington Mutual (WM), down 1.34:

Coal producers gained on speculation a shortage of coal in China will lead to higher prices. China, the world's biggest producer and consumer of coal, may fall 300 million tons short of demand this year, Reuters reported, citing a study by the Chinese Department of Tariffs and Financial Regulation.
Peabody Energy Corp. (BTU:US), the largest producer, rose 5.1 percent to $59.92. Consol Energy Inc. (CNX:US), the third- biggest U.S. producer, climbed 4.9 percent to $78.21. Arch Coal Inc. (ACI:US), the second-biggest, gained 10 percent to $53.03.

Washington Mutual Inc. (WM:US) had the biggest loss in the Standard & Poor's 500 Index, sliding 10 percent to $11.81. The largest U.S. savings and loan lender said it may post a $1.1 billion loss in the first quarter and plans to cut its quarterly dividend to 1 cent from 15 cents. Separately, the bank was cut to ``underperform'' from ``market perform'' at Keefe, Bruyette, & Woods, Inc. after shares rallied yesterday.

Pending home sales down again

Pending sales of new homes fell in Feb to another low. More evidence that this is one tough market!

Earnings season begins

Earnings season begins on a down note. Dow is down 43, decliners ahead of advancers 2-1 & NAZ is down 10. Gloomy earnings news from Alcoa (AA) & AMD (AMD) got traders worrying about a tough Q1. Alcoa fell 61¢ at the open (but rallied to break even) on a negative earnings report from higher costs. AMD is cutting 10% of it's workforce after lowering guidance. The IMF issued a report with a very negative assessment on the global financial system. Credit problems & slow growth economies are putting a strain on financials. However, that won't stop TPG Capital from investing $7B in Washington Mutual (WM) the troubled S&L dealing with enormous mortgage loan problems, down 78¢ after yesterday's big run up.

Earnings reports should dominate news for the next few weeks & the markets are getting nervous about what to expect.

Monday, April 7, 2008

Little change today

After a strong start in the morning, stocks pulled back in the PM ending little changed. Volume continues low, under 1.3B (1½B is typical) as it has been for most of the last 2 weeks. Last week was an excellent week in the markets, even junk bond funds held onto strong gains after the big gainer day of Tues.

Today the markets got an early lift with word that Washington Mutual (WM) would get $5B new capital to help it thru the credit crises. WM rose 2.98, although nothing has been finalized yet. After the close, Alcoa (AA), a Dow stock, reported earnings of 44¢, 6¢ below forecasts (after an 8¢ negative adjustment for foreign exchange). In after hours, AA was up 61¢.

Oil is back up to 109, commodities in general remain quite strong which is an ominous sign for future inflation. Investors are still trying to figure if Microsoft (MSFT), a Dow company, & Yahoo (YHOO) are trying to combine. Here are interesting comments from TechTalk.

Acquisition news lifts stocks

Acquisitions are good news, raising stock prices. Dow is up 107, advancers ahead of decliners better than 2-1 while NAZ is up 17. The major news is Washington Mutual (WM), the troubled but largest S&L in the US will receive a $5B investment from TPG, sending the stock up 2.71. The investment is from Texas-based TPG a Fort Worth business formerly know as Texas Pacific Group which invests more than $30B. This is not a done deal although investors are treating it as such. In addition, Novartis, a Swiss pharmaceutical company, will spend $38B in a two-step bid for a majority stake in U.S. eye-care company Alcon (ACL) sending it's stock up $5.39. Acquisition news is always good for stocks, raising spirits of investors.

The future of bank dividends are discussed in an excellent article attached. Yields are high, partly because dividends are at risk. Two mentioned, Bank of America (BAC) & US Bancorp (USB), are members of the S&P Dividend Aristocrats group, stocks with track records of more than 25 years of year over year higher dividends. This article gives a pause for thought.

This PM, Alcoa (AA) will announce earnings, the first Dow stock to do so. As mentioned last week, analysts are forecasting lower earnings, but traders are generally more concerned about "beating" estimates.

Friday, April 4, 2008

Choppy but undecided

This was another choppy & undecided day. Markets ended little changed, although Dow had a range of about 150 points from top to bottom. For the week, Dow was up 400 on Tues then bumped along sideways for the last 3 days, holding onto its gain. Volume today was light at 1.2B (1½B is typical). Banks & REITs fell today, but junk bond funds rallied from depressed levels. The Alerian MLP index gained more than 3 to 286.69, a 20 point gain from its lows a couple of weeks ago. The job report showing 80K jobs were lost is helping convince many we are in a recession. Oil is back up to 106 which should bring even higher gas prices at the pumps (from record current levels). Here is a good report on the Housing Bust from USNews.

Next week, Alcoa (AA) will be the first Dow company reporting earnings. Analysts are forecasting a lower Q1 than last year:

Low 48¢
Avg 37¢
High 64¢

Last year 79¢

Let's see what kind of reception the numbers get in the markets.

Markets mixed (up) again

Stocks are still looking for direction. Dow is down a little with advancers slightly ahead of decliners & NAZ up a little. The economic news was negative. Employers cut jobs by 80K last month, not as bad as some feared but still a solid minus. The national unemployment rate rose from 4.8 to 5.1%, another indication that recession if not here is around the corner. These figures from the Labor Depart underscored the damage that a trio of crises, in housing, credit & financial sectors, has inflicted on companies, jobseekers and the economy as a whole. The unemployment rate was the highest in 2½ years (a period following destruction from hurricane Katrina). Gas prices reached a record $3.30. With oil over 100, prices are poised to go higher

Yesterday, San Francisco Federal Reserve President Janet Yellen warned that "economic prospects remain unusually uncertain" & continued that the FED must be ready to act in a timely manner to spur the economy to keep it out of a recession. Yellen said that the slowdown started in the Q4, when the economy "slowed to a crawl." The housing downturn is one of the major risks to the economy & it isn't likely to improve until next year at best. Gloomy thoughts!

Next week, Alcoa (AA), will be the first Dow company reporting earnings. This will give an early signal about Q1.

Thursday, April 3, 2008

Stocks eak out another gain

After stocks struggled in a choppy day, they eaked out another gain. Dow was up 20, advancers ahead of decliners 3-2 & both NAZ & S&P 500 inched up. Financials & real estate led gainers. MLPs continue to rebound from their recent lows. The index is 282.90 up 17 from it's recent low (but still down 60 from the highs of last year). Once again, volume was "light" indicating a lack of conviction by buyers. The afternoon was a little higher, so Bernanke's testimony must have inspired a little confidence. These hearings are important as they will shape future legislation on security regulation (even if that's still a year away). Bernanke defended FED's actions during a brutal couple of days for the FED. Many on TV give him high marks although these actions may not affect the next ugly financial situation.

In the markets, rice hit a record anticipating higher demand (i.e primarily from lesser developed countries) while corn reached $6. Corn is the leading US export crop, strengthening in anticipation of higher worldwide demand for this product. But the US economy struggles. The jobs report reported earlier keeps pointing to the idea of recession. The number of unemployment applications is 407K, above 400K is considered a serious threshold (higher indicates a very weak economy). American Bankers Assoc said the number of Americans falling behind on debt rose 2.65% & is at the highest level since 1992. The US economy keeps struggling, while overseas markets, especially in eastern Asia, are doing well.

Markets are giving back recent gains

Markets are pulling back; Dow is down 42, decliners ahead of advancers 3-2 & NAZ declined 14. The Labor Dept reported jobless claims jumped 38K last week, an unexpectedly high number. Claims are at the highest level in 2½ years. Congress is getting more testimony from Bernanke, head of the FED, concerning the demise of Bear Stearns & the FED's role in keeping the markets quiet. Jamie Dimon, CEO of JP Morgan (JPM), a Dow stock, down 62¢, said they wouldn't have bought Bear Stearns without the FED's help. Not sure much new will be learned but this is a good chance for members of the committee to get national TV exposure.

Financials are leading the decline. Banks & REITs are lower although the MLP index is up 1.60. Research in Motion (RIMM), following yesterday's optimistic report about selling more Blackberrys, is up 6.60. Markets look like they will repeat prior weeks performance, selling off after a sharp gain. With the focus on testimony in Washington today, tough to see an up day.

Wednesday, April 2, 2008

Stocks search for direction

A day like yesterday is tough to follow, so stocks went searching for direction. To some this seems like a bear rally again. Recently there have been a number of big gainer days followed by disappointment. Tomorrow, Ben Bernanke, the FED Chairman, will testify about the Bear Stearns story. This is politics in an election year, so he will be on will be on defense all day.

Dow was down 45 & NAZ was essentially even while advancers beat decliners 3-2, a confusing day. OK, Dow was hurt by Merck dropping 1.22 following the recent problems with its Vytorin. Volume has been running mediocre a little under 1½B per day, another sign about lack of conviction. Bloomberg TV had a story about money market funds that now have 3½T (that's T as in trillion dollars). A lot of frightened money is willing to accept 2-3% interest, a rate that will continue to decline, rather than invest in the stock market.

In company news, Merrill Lynch (MER) announced it was cutting up to 10% of the non-broker staff, bleeding has not stopped. Research in Motion (RIMM) reported excellent earnings after hours, sending the stock up 4.84 in after hours trading. This should help NAZ tomorrow. Bigger picture, watch for headlines to drive markets especially on the downside.

Markets inch up

Markets are trying to work they way up. Dow is down a little but advancers beat decliers 2-1 & NAZ is up 12. Not too bad after yesterday. Chairman Bernanke, from the FED, said he doesn't expect a repeat of the Bear Stearns failure a couple of weeks ago. But he warned of a possible recession, they are trying to steady a shaky economy. Mortgage applications fell 28% during the week ending Mar 28 after a 41% decline in the prior week.

Best Buy (BBY), up 75¢, reported slightly lower profits which beat analysts forecasts. The markets are absorbing yesterday's gains pretty well, but economic news continues gloomy.

Tuesday, April 1, 2008

Stocks start Q2 with a surge

Stocks started Q2 with a surge, wiping out 40% of the decline from Q1. Not bad! Dow was up 393, advancers ahead of decliners 5-1 & NAZ up 47. Financials led the way, many up 5-10%. The markets were buying the idea that the financial crisis is over. The good news on the economic front was the Institute for Supply Management reported its March index of national manufacturing activity rose to a reading of 48.6 -- indicating a contraction, but a slower one than in Feb. This reading was better than forecasts by analysts helping bring out buyers. However, below 50 is considered bearish but "less bad" carried the day.

Back to economic news, automakers reported March auto sales were down. Let's see what tomorrow brings in the markets.

Construction spending falls again

Sorry, but dreary economic news which has been forgotten today. Construction spending fell again in Feb. Home building declined for a record 24 straight months. The Commerce Depart reported overall construction activity dropped 0.3% in Feb, reflecting weakness in home building & in nonresidential activity. Only government building projects showed a gain in February. The US economy remains weak.

New month, new quarter, new start

This quarter starts off with a big bang. Dow is up 220, advancers ahead of decliners 4-1 (although not as great as other big days) & NAZ is up 42. Today's another one of those days, to find winners just throw darts. Banks & financials are leading the rally but MLPs, REITs & even junk bond funds are joining this time.

Markets were moved by UBS (UBS), up 3.16, announcing it's seeking $15B in new capital while ignoring the $19B additional losses in mortgages expected in Q1 following $18B losses last year. Lehman (LEH), up 2.49, announced it's raising $4B by selling 3MM of new convertible preferred shares due to "investor interest." Deutsche Bank (DB), up 2.90, announced write-downs of $4B for bad sub prime loans. I don't know! Let's see how long this enthusiasm lasts.