Earnings, Politics Swing Markets

For the nest two weeks, market movements are likely to be a function of 2nd quarter earnings reports, though Tuesday may have been an exception.

Of the major reports flowing from corporate offices, the following:

• Forest Labs (FRX): Net income rose to $268.2 million, or 83 cents per share, in the fiscal first quarter ended June 30, from $200.6 million, or 62 cents per share, a year earlier. Analysts had expected 77 cents per share.


• Johnson & Johnson (JNJ): Net income, $3.1 billion, $1.05 a share, up from $2.8 billion, or 95 cents, earned in the second quarter last year. Analysts were calling for $1 a share.


• Merrill Lynch (MER): Net earnings rose to $2.14 billion, or $2.24 a diluted share, compared with $1.63 billion, or $1.63 a share, in the year-earlier period. Analysts sought 2.02 per share.


• Coca-Cola (KO): Profits, on a continuing operations basis, were $1.98 billion, or 85 cents a share, cleanly beating Wall Street's call of 82 cents a share.


• Wells Fargo & Company (WFC): Net revenue of $2.28 billion, or 67 cents per share for the 2nd quarter, compared with net income of $2.09 billion, or 61 cents per share, a year earlier. The numbers were in line with expectations of 0.67 per share.


• CSX Corporation (CSX): Reported earnings of $324 million, or 71 cents per share. Last year the company reported second quarter earnings of $390 million, or 83 cents per share which included a one-time 25 cent gain, so analysts were only looking for 64 cents and the company delivered handily.


• Intel Corporation (INTC): The company reported revenue of $8.7 billion and earnings per share of 22 cents in the second quarter including a tax item that boosted EPS by 3 cents. The resulting 19-cent-per-share profit figure was in line with analyst expectations.


• Yahoo, Inc. (YHOO): Net income for the second quarter fell to $161 million, or 11 cents per diluted share, from the year-earlier quarter's $164 million (0.11). Results were in line with lowered expectations of 11 cents per share.

Note that all of the companies listed above either beat or met expectations, but the overall market barely budged.

Dow 13,971.55 +20.57; NASDAQ 2,712.29 +14.96; S&P 500 1,549.37 -0.15; NYSE Composite 10,170.36 -17.82

Why? Could it be the price of crude oil, which hit a high of $75.35 earlier in the day before being hammered down to $74.02, a loss of 13 cents? Or the shifting political tides in Washington, which look to put Bush & Co. out of business in a matter of months? There's a storm brewing, and impeachment and military failure in the field (which has already occurred) are not likely to aid the mood on Wall Street.

Oil will slide to less than $60 per barrel if an end to the Iraq situation is found soon and it's looking more and more like that will be the case, but Wall Street isn't so sure, plus, the finality of the Bush administration may mean closer scrutiny of corporate governance and possibly even an SEC with real investigative and subpoena powers.

So, politics are moving the markets, even while corporate earnings are about as solid as one would like.

Decliners beat out advancing issues by an 11-9 margin and the gap narrowed again, with new highs checking in at 430 to 211 new lows.

On tap for tomorrow (company, ticker, expectations):

• CIT Group (CIT) 1.35


• eBay (EBAY) 0.32


• Gannett (GCI) 1.21


• Pfizer (PFE) 0.50


• Piper Jaffray (PJC) 0.74


• Southwest Airlines (LUV) 0.22


• United Technologies (UTX) 1.15

Gold and silver were both marginally lower. No surprise there.

The Dow Stands Alone

Another Monday meant another record close for the Dow Jones Industrials, but, while the blue chip index climbed closer to the 14,000 mark, all other major US equity indices were lower.

With earnings season going full tilt, investors took on a cautious tenor against the backdrop of spiraling energy prices and a general weariness caused alternately by the spectacular gains of recent days and the mid-summer doldrums.

Dow 13,950.98 +43.73; NASDAQ 2,697.33 -9.67; S&P 500 1,549.52 -2.98; NYSE Composite 10,188.18 -32.49

Volume was very light and all of the indices traded in extremely narrow ranges.

Declining issues beat advancers by a 2-1 margin. The gap between new highs and new lows continued to narrow, 478-193. This is indicative of a consolidating phase and sluggish overall trade. Expect to see some pullback unless corporate profits roll in very positively.

Reporting on Monday were Mattel (MAT), in line; Novellus (NVLS), beat estimates by .02; Sun Bancorp (SNBC), 0.22 vs. 0.17 EPS a year ago; and W.W. Grainger (GWW) beat estimates by .02, 1.19 per share.

A number of heavyweights are on tap for tomorrow, with expected EPS:

• CSX Corporation (CSX) 0.64


• Forest Laboratories (FRX) 0.77


• Intel Corporation (INTC) 0.19


• Johnson & Johnson (JNJ) 1.00


• Merrill Lynch (MER) 2.02


• Coca-Cola Company (KO) 0.82


• Wells Fargo & Company (WFC) 0.67


• Yahoo, Inc. (YHOO) 0.11

Of particular interest are Merrill Lynch, Yahoo and Coca-Cola. Merrill will be in focus because of its position in the financial services industry, which has done extremely well over the past 3 years. Coca-Cola is a top-performing blue chip which is expected to report strong numbers regarding sales in emerging markets. Yahoo has already warned investors that they will not meet their numbers. Investors are hoping that they don't miss too badly.

Oil rose another 22 cents to $74.15. Gold and silver were marginally lower.

Stocks Plow Ahead; Oil Out of Control

Well, you've made it through Friday, the 13th, unscathed. Well, at least you've made it this far. As I write, it's after 10:00 in London, so those superstitious Brits should be OK by now. The US stock markets had a pretty good day, even after a monstrous upwind on Thursday. All major indices managed gains again, though not nearly as large as yesterday's.

Dow 13,907.25 +45.52; NASDAQ 2,707.00 +5.27; S&P 500 1,552.50 +4.80; NYSE Composite 10,220.67 +22.98

This week's substantial gains occurred in the face of dismal retail reports, with consumer spending down 0.9% for June, with some spots of positive news. US equity investors should become more accustomed to stock gains against a backdrop of a weakening US economy, as the global nature of many companies affords them lesser dependence on the American market. With globalization, the US economy will continue to become more and more marginalized until it is nearly an afterthought for equity investors.

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Life for the ordinary American hasn't improved in 6+ years, and likely it will not fare better soon.

For Friday, advancing issues were beaten slightly by decliners, as the trade was spotty and volume moderate. Likewise, new highs weakened a little against new lows, 562-164, though the tone was still heavily weighted to the positive.

Oil continued its ridiculous price spiral, rising another $1.43 to $73.93. I'm sorry, but that's just plain absurd. The price of crude has absolutely no basis in reality. It is the most manipulated, monopolized, contrived price structure in the world. There are no shortages anywhere and new wells are being found and drilled every day. The oil pricing mechanism is plain and simply a get-rich-quick scheme for billionaires - like they need more.

As disgusting as that is, gold and silver were marginally lower. After such a great week in the markets, leave it to the oil freaks to throw a wet towel on the entire event. Bah.

Wall Street Surprise

Just a few days ago, earnings season looked like it was going to be an enormous flop, but after the best session on the Dow since October 2002, all is well again in the financial world.

The Dow Jones Industrials rocketed skyward by 283.86, shattering the old record of 13,676.32, set just over a month ago on June 4, by a mile and then some, more than 185 points better, in fact. The S&P also rose to a new all-time high while the NASDAQ closed at its best level since February 2001.

Dow 13,861.73 +283.86; NASDAQ 2,701.73 +49.94; S&P 500 1,547.70 +28.94; NYSE Composite 10,197.69

A single catalyst for the big move has yet to be unearthed, though the mainstream financial press is giving retailers - especially Wal-Mart which showed same-store sales up more than 2% in June - most of the credit. More to the point would be the considerably low interest rates which continue to persist at around 5% - an historically low level - feeding more money into stocks, mutual funds, hedge funds and ETFs.

US equities are currently awash in capital, with literally no end in sight. The credit expansion of the past 6 years has created an unimaginably robust bull market which has run longer than any in recent memory. Off the lows of October 2002, we are now well into this bull run's 58th month, and that's a long, long run.

The other major catalyst is the maturation of globalization. Companies are just now beginning to see the world as a whole, complete with outstanding opportunities in emerging markets and leveraging of entire economies. The world hasn't seen this kind of explosive growth - amid a somewhat stable environment - ever, and most of the global giant companies are listed on US indices.

On the day, advancing issued hammered decliners by nearly a 3-1 margin, while 577 new highs dwarfed 162 new lows.

Normally, any good market reporter would through a word of caution in on a day as spectacular as today, but the best this one can provide is a reminder that tomorrow is Friday the 13th. The boom continues, and there seems to be nothing in the way to slow it down.

The only price lower on the day was that of oil futures, which fell a paltry 6 cents to a still-ridiculous $72.50. Americans, hardy lot that we are, have adjusted to $3.00 per gallon gasoline, so even the mad oil barons are plotting new ways to make more money. Gold was up $6.20 to $668.30, while silver advanced 21 cents to $13.18, proving that even bad dogs have good days.

Retail Swoon, Oil Boom Slams Stocks

I've been saying this for months - that the price of oil in the futures markets is unsustainable and may be sowing the seeds of catastrophe for the markets and world economy - and today, finally, that thinking has come home to roost.

While the oil monopolists were boosting the price of light sweet crude another 62 cents - to close at $72.81 - stocks in New York were taking a beating. Adding to the malaise were inconsequential comments from Ben Bernanke, who is beginning to look more and more like a one-term paper tiger, earnings warnings from Home Depot (no surprise there) and Sears, and some more sobering news on the sub-prime front, all of which added up to a big, fat bummer for US investors.

Dow 13,501.70 -148.27; NASDAQ 2,639.16 -30.86; S&P 500 1,510.12 -21.73; NYSE Composite 9,953.57

Get ready for a dramatic turn-around for stocks, if today's trading was any indication. Of course, the markets themselves may have sent a powerful message with the losses, and it just may wake up some people as to the potential for long-term damage by oil prices in the sky. The remaining days of this week should be telling.

The damage was widespread, affecting all sectors and industries, though retailers were hardest hit. Declining issues led advancers by a 3-1 margin, while new highs eked out a win over new lows, 260-220. Once again, this stumbling could be just the silver lining of the dark cloud suddenly settling over Wall Street. It's a bit premature to make predictions, and tomorrow's follow-through (or lack of one) will be telling.

This kind of sharp move, however, is indicative of turning points, and there have been no lack of them lately, though the markets always seem to find a way to survive and move ahead. It's going to be a very bumpy earnings season.

Gold and silver made minor moves to the plus side.