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Daily State of the Markets |
Although the Dow finished in the green on Tuesday, the rest of the indices headed lower for a third straight session; something, we might add, that has only happened to the S&P 500 six times since March 9th of this year. And for those of you keeping score at home, there has only been one stretch of four straight down days in the last 7+ months. Yes fans, things have been THAT strong.
The essence of the problem at the present time has to do with the issue of confidence. In short, it seems that confidence is starting to sag on the topic of the economy improving in a meaningful way. There suddenly appears to be a lack of confidence that company earnings will grow “for real” in the coming quarters. There is little confidence that the jobs market will see any serious upswing anytime soon. And don’t look now, but we might be starting to see that brash confidence in the bull camp starting to wane after a gain of 62% in seven months.
The issue of confidence was highlighted appropriately on Tuesday by the Conference Board’s Consumer Confidence Index. The headline confidence index fell by 5.7 points in October to a reading of 47.7. This was not only the largest drop since February, but was also well below the consensus estimate of 53.2. The Present Situation component was a problem as it lost 2.3 points, bringing it to 20.7; its lowest level since February 1983. It appears that pessimism is growing about employment conditions as the job availability survey fell to its lowest level in over 26 years. Ouch.
But wait, there’s more. The Expectations Index dropped a big 8 points as all three of its components (Business Expectations, Job Expectations, and Income Expectations) fell back in October. The drop in both the present and future jobs and income surveys put a big dent in consumer spending plans as the report showed plans to buy a major appliance, a home, or a car all fell back toward their lows for the year. And in short, this does not at all bode well for spending this holiday season.
Getting back to the stock market, the recent increase in volatility along with concerns about the recovery trade as well as the worry over the “Dollar Carry Trade” appears to be causing the bulls to lose some confidence in their game plan. To be sure, the tape action has been pretty pathetic lately as the market turned tail and ran lower after the opening bell for a third straight day yesterday.
And while we’re fairly confident (although less so with each passing decline) that the dip buyers will return to do their thing before the year is out, they too might be losing some of their confidence as performance anxiety is less of a problem during a correction.
Turning to this morning, the Commerce Department reports that orders for Durable Goods in September rose by +1.0%, which was in line with expectations for an increase of +1.0%.When you strip out the volatile transportation numbers, orders ex-Transportation rose by +0.9% vs. consensus +0.7%. And finally, Nondefense capital goods excluding aircraft, a closely watched proxy for business spending, increased by 2% after falling -0.8% in August. Expectations were for an increase of +0.9%.
Running through the rest of the pre-game indicators, the foreign markets are mostly lower. Crude futures are moving down with the latest quote showing oil trading off by $0.65 to $78.90. On the interest rate front, we’ve got the yield on the 10-yr trading at 3.44%, while the yield on the 3-month T-Bill is currently at 0.06%. And finally, with about 45 minutes before the bell, stock futures in the U.S. are pointing to maybe a modestly lower open. The Dow futures are currently off by about 35 points; the S&P’s are down by about 4 points, while the NASDAQ looks to be about 4 points below fair value at the moment.
| Yesterday’s Earnings After The Bell | |||
Company |
Symbol |
EPS |
Reuters Estimate |
| Apollo Group | APOL | $1.06 | $1.04 |
| Boston Properties | BXP | $1.13 | $1.10 |
| Cephalon | CEPH | $1.62 | $1.41 |
| DeVRY | DV | $0.76 | $0.65 |
| DreamWorks Animation | DWA | $0.23 | $0.16 |
| E*Trade | ETFC | -$0.05 | -$0.06 |
| Fiserv | FISV | $0.92 | $0.92 |
| FMC Technologies | FTI | $0.73 | $0.63 |
| Harris Crop | HRS | $0.83 | $0.76 |
| Illumina | ILMN | $0.24 | $0.20 |
| McKesson | MCK | $1.07 | $1.01 |
| Massey Energy | MEE | $0.19 | $0.18 |
| Molex | MOLX | $0.18 | $0.15 |
| Norfolk Southern | NSC | $0.81 | $0.78 |
| Panera Bread | PNRA | $0.65 | $0.58 |
| RF Micro Devices | RFMD | $0.13 | $0.08 |
| Stericycle | SRCL | $0.55 | $0.53 |
| Visa | V | $0.74 | $0.72 |
| ValueClick | VCLK | $0.29 | $0.14 |
| Today’s Earnings Before The Bell | |||
Company |
Symbol |
EPS |
Reuters Estimate |
| Ashland | ASH | $0.96 | $0.90 |
| Coca-Cola Enterprises | CCE | $0.51 | $0.46 |
| ConocoPhillips | COP | $1.00 | $0.93 |
| CommVault Systems | CVLT | $0.17 | $0.15 |
| General Dynamics | GD | $1.48 | $1.40 |
| Goodyear Tire | GT | $0.45 | $0.40 |
| Hess Corporation | HESS | $1.05 | $0.54 |
| International Paper | IP | $0.37 | $0.24 |
| Jones Apparel | JNY | $0.46 | $0.27 |
| Level 3 | LVLT | -$0.10 | -$0.10 |
| Newell Rubbermaid | NWL | $0.38 | $0.35 |
| PepsiAmericas | PAS | $0.59 | $0.62 |
| Praxair | PX | $1.02 | $1.00 |
| Qwest | Q | $0.09 | $0.07 |
| Sealed Air | SEE | $0.38 | $0.33 |
| Silicon Labs | SLAB | $0.67 | $0.61 |
| Southern Company | SO | $0.99 | $0.98 |
| Unisys | UIS | $1.48 | $1.45 |
| WellPoint Health | WLP | $1.53 | $1.38 |
| Wyndham Worldwide | WYN | $0.58 | $0.56 |
Wall Street Research Summary
Upgrades:
Banco Bilbao Vizcaya (BBV) – BofA/Merrill Crane (CR) – BofA/Merrill BP (BP) – Barclays, Goldman National Fuel Gas (NFG) – Barclays SunTrust Banks (STI) – Citi AK Steel (AKS) – Citi Target (TGT) – Citi Waters (WAT) – Deutsche Bank Edwards Lifesciences (EW) – Goldman Texas Instruments (TXN) – Goldman DeVRY (DV) – Oppenheimer Wynn Resorts (WYN) – Oppenheimer Motorola (MOT) – RBC Capital Cabela’s (CAB) – Thomas Weisel LM Ericsson (ERIC) – UBS
IMS Health (RX) –BofA/Merrill Apollo Group (APOL) – BofA/Merrill, Morgan Stanley, RBC Capital Nuvasive (NUVA) – Goldman SanDisk (SNDK) – Goldman AK Steel (AKS) – KeyBanc US Steel (X) – KeyBanc ValueClick (VCLK) – Merriman Curhan Ford, Needham
Long positions in stocks mentioned: GS, MCK, VCLK, NFG
Regardless of the color on the screen, make every effort to enjoy the day and until next time, “may the bulls be with you!”
David D. Moenning
Founder TopStockPortfolios.com
For more “top stock” portfolios and research, visit TopStockPortfolios.com
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