Markets Rise Amid Big Corporate Drama

Congress drilled Tim Cook with Q’s Tuesday… and the poor Apple CEO didn’t know what was about to hit him

Dow: 15,388, +52 (+0.34%)        S&P 500: 1,669, +3 (+0.17%)

Maybe it’s the “Two-4-Tuesday” pastrami deal at the corner bodega (thanks, Omar) or maybe it’s just post-Monday enthusiasm.  Either way, investors pumped up stocks for the 19th straight Tuesday — The Dow jumped 53 points on a big day of corporate drama (we’re looking at you, Apple & JPMorgan).

#1. Fed Presidents Calm “End-Of-Stimulus” Fears

Relax… Remember when investors got all heated Monday that the central bank might be ending its stimulus policies early?  Well the Fed President from the St. Louis Branch, James Bullard, effectively told Wall Street to chug a huge chill pill (Businessweek).

Mr. Bullard… made 2 key points.  First, that the quantitative easing policy(in which the Fed buys long-term bonds monthly to keep interest rates low and encourage economic lending/growth) has been working — and second, that he’d support more stimulus given the slower-than-expected recovery.  Not too shabby.

Wednesday, Wednesday, Wednesday… Investors were aroused to hear the pro-stim news, but all eyes (and wallets) are now on the Fed Chairman Ben Bernanke’s speech Wednesday afternoon, when he also releases details from the Fed’s last meeting.  What’s the QE plan, Benji?

#2. Apple’s Testy Congressional Testimony

At MarketSnacks HQ… we’re jamming to the new Daft Punk album on our MacBooks, iPhones, and iPad minis.  But on Capitol Hill, (the government’s HQ) a flurry of bitter Senators celebrated Memorial Day a tad early by grilling… grilling Apple CEO Tim Cook that is. #SnapbacksandHorseshoes
 
Here’s the haps, Uncle Phil… For years, Apple has been the Money Mayweather heavyweight champ of avoiding the 35% US corporate tax rate and penetrating every loophole in the often-criticized complicated American tax code.  Estimates figure that Apple saved between six and seven billion dollars in 2011 by doing the international tax revenue Harlem Shake.
 
Guinness, corned beef and cabbage, potatoes… tax haven?  Two years ago, Apple recorded 64% of its global pretax income in Ireland, where only 4% of its employees and 1% of its customers were located (NYT).  Although Apple hasn’t broken any laws, politicians from both sides were upset with the questionable tax evasion practices, except for Rand Paul that is, who suggested “we should have brought in a giant mirror.” #QuotesTakenOutofContext #RandPaulforSeniorClassPresident 

#3. JPM CEO Jamie Dimon Keeps Job(s)

Mr. Dimon… you win.  The CEO of JPMorgan Chase Bank (JPM), the top-gun at the most powerful investment bank in the world, won a major vote Tuesday to retain his title of both CEO and Chairman of the Board of Directors.  He’s Yoda and the Emperor all at once.  At the annual shareholder meeting in Tampa FL, many votes were held but the question of whether to strip the CEO of his second title as Chairman was a doozy for Wall Street gossip…

Remember that $6 billion trading mistake?… Shareholders do.  When JPM lost all that money on a series of foolish trades last year shareholders were pissed.  Where’s the oversight?  The thought was that Mr. Dimon needed a powerful body to reign him and control his pursuit of profit.  Typically that’s the Board of Directors – oh shoot – Dimon is the Chairman of the board.  Many investors thought he should lose his dual role, but not enough…

67.8%… is the number of the day.  That’s the amount of shareholders who voted not to split the role of CEO/Chairman for Dimon.  Bottom line is Mr. Dimon is too important for the gargantuan bank, and taking away his chairman role could have caused Jamie to walk away altogether (Dealbreaker).  When your man’s made $60 billion of profits in the last 3 years for JPM, you give him a mulligan on that $6 billion slip.    

Wednesday:

• Chairman Bernanke’s eagerly anticipated speech (plus juicy details from the Fed’s last meeting)
• April Existing Home Sales

MarketSnacks Fact of the Day:  Home Depot has the most olympic medals held in a company by its employees.

 

The Best Damn Wall Street “Week in Review” Anywhere…

These markets just keep going up — and it feels amaaaaazing

Week of May 13th – May 17th:
Dow: 15,354 (+1.6% last week, +17.2% YTD)
S&P 500: 1,667 (+2.1% last week, +16.9% YTD)
 

Links Worth Snacking On:

• Chart of the Week – Being the Great Gatsby by the numbers
• Wall Street Oasis – The top 15 cities for venture capital
• Bloomberg – The 10 worst states for the unemployed
• Businessweek – Ben Franklin’s face-lift and the new $100 bill
• Motley Fool – Is it too late to buy Tesla’s hot stock?
• The Atlantic – How Venezuela’s economy created a toilet paper crisis
• Inc. – What Kim Kardashian’s marriage will teach you about being a better business leader
• MoneyBeat – The 1 year anniversary of the Facebook IPO

We can’t bring back American Idol (and we have no intention of doing so).  But we can tell you why stocks rose last week to more record highs as the 1st quarter earnings season slows down.
 

#1. Stock Winners…

Tesla is on an electric-powered roll after posting its 1st ever quarterly profit and then announcing a new stock offering because its shares have been popping.  Google stock reached $900 after flexing some new features to guffawing nerd bloggers at its I/O Conference.  And Sony even got some love from hedge funder Dan Loeb who bought up 6.5% of the company’s shares like they’re Super Mario tokens.

#2. …And Stock Losers

After struggling through a worse year than LiLo, retailer JCPenney announced earnings well below analysts’ already low expectations.  John Deere also released poor earnings, but they’re blaming the cold spring weather for why their backyard and agriculture machinery isn’t flying off lots.

#3. Consumer Confidence Is Back, Baby

Stocks rallied Friday to end the week on a cocktail-deserving note thanks to the bi-monthly Reuters/UMich Consumer Sentiment Survey.  Consumer confidence has jumped over the month of May so far, most likely thanks to the country’s improving employment situation.  April’s monthly employment report beat expectations 3 weeks ago (and people simply really like that).

#4. The Fed’s Stimulus Plans Might Not Be Forever

As econ reports keep showing mild improvements in the recovery (solid jobs data, increasing retail sales, earnings reports are punching expectations in the face, etc.), the Fed might not keep its foot on the stimulus pedal forever.  Although investors have been pumping up stocks under the impression that the central bank will maintain it’s quantitative easing policies until unemployment hits 6.5%, rumor spread this week that stimulus measures could end sooner than that.  Bummer.

#5. Europe’s Economy Keeps (Awkwardly) Contracting

If the mid 2000’s were the hair sprouting, voice deepening puberty of the Eurozone booming to economic highs, then it’s already shrinking of old age since the financial crisis.  Debt problems in Europe caused the euro currency zone to continue shrinking for a 6th straight quarter.  Will Captain America or Ironman go over to Europe and be the savior that they need?

What MarketSnacks Is Checking Out This Week:

• Monday – Treasury Auctions
• Tuesday – 1st Quarter Earnings Reports: Burberry, Saks, Vodafone…
• Wednesday – Minutes from the Fed‘s last meeting and Chairman Ben Bernanke speaks
• Thursday – Weekly Jobless Claims, April New Home Sales
• Friday – April Durable Goods Orders

MarketSnacks Fact of the Day:  With its IPO in 2010, Tesla Motors is technically America’s 2nd oldest publicly-listed/traded US car company (behind Ford) — Since General Motors went bankrupt in 2009, Tesla’s stock is 4 months older than GM’s (and Chrysler is a private company).

Stock Streak Runs Out Of Gas

“We got a groupon for a big bike. Redundant? Maybe.”

Dow: 15,083, -23 (-0.15%)        S&P 500: 1,627, -6 (-0.37%)

Hey, you can’t win ’em all.  Stocks turned south after 5 straight positive and record-setting finishes for major stock market indices.  Despite some solidearnings reports, the Dow slipped 23 points Thursday as investors’ enthusiasm waned.

#1. Groupon Deals Impressive Earnings 

“Just kidding, I was fired today”… In case you haven’t been MarketSnacking, those were the infamous words of Andrew Mason, former CEO and founder of Groupon (GRPN) in February when the he was let go.  Board and investors alike were happy with the online deal site when quarterly results beat expectations, sending shares up over 11% Thursday (Mashable).
 
We know… you haven’t bought a Groupon in years (“2 tickets to the Avatarmovie premiere for $10?  Sick.”).  So why are investors pleased?   Groupon is undergoing a facelift and the good lookin’ numbers are coming from smaller than expected revenue losses, stock buybacks, and cutting costs. 
 
None of those sound good?… So, let us explain, Mr. Burgandy. First, by reducing costs, Groupon increases the bottom line, net income. Second, stock buybacks increase the earnings per share ratio (net income/outstanding shares) which is the most important number investors look at.  “EPS” – what’s my share of the company’s profits?  That’s what it’s all about. 

#2. Tesla Hits 1st Quarterly Profit

Buzz-buzzzz… (that’s how electric cars sound, right?).  Sexy plug-in vehicle powerhouse Tesla (TSLA) jumped 24% Thursday on a hat-trick of a day: 1. They enjoyed their first ever quarterly profit after 10 years in the business; 2. Earnings topped analysts’ expectations; 3. And finally, they earned a ridiculously impressive top rating from Consumer Reports (Bloomberg).

The takeaway… is that it’s been a crazy year for the Cali-based firm.  Despite a controversial NY Times review of their star car (the “Model S”) hit the company hard this winter, Tesla’s revenues managed to leap from $30 million in the 1st quarter of last year to over $560 million in the 1st quarter of 2013.  That’s serious acceleration.

As a side note… today’s stock jump pushed Tesla’s market capitalization to $8 billion — passing Fiat’s market cap of $7.8 billion (by comparison, Toyota’s the world’s largest car co. with $200 bn market cap).  Since market capitalization is a measurement of value by multiplying the number of shares outstanding by the stock price, this is a pretty impressive feat.  And a nice little cherry on top.

Friday:

• Federal Reserve Chairman Ben Bernanke speaks at the Chicago Fed banking conference (tweet us @MarketSnacks if you’re scalping tix)

MarketSnacks Fact of the Day:  The NHL does not actually own the Stanley Cup — it uses the trophy by a special legal licensing agreement with the 2 trustees of the Cup (there have been 9 total since 1893) who serve terms until their death.

 

Bernanke Speech on Stimulus Sends Stocks Up

“Bearded Chairman Ben Bernanke tells it like it is”

Dow: 14,512, +56 (+0.39%)        S&P 500: 1,559, +10 (+0.67%)

Sorry, Cyprus.  You’ve had your 15 seconds.  Investors ignored the Euro debt crisis like it was another Kardashian sister, and turned their attention to the Federal Reserve.  Chairman Bernanke’s speech after the 2-day Fed meeting lifted the Dow 56 points Wednesday.

#1. Bernanke’s Post-Summit Speech Promises More Stimulus 

8 times a year… the Federal Open Market Committee (the top deciders of America’s central bank) meets to chit-chat monetary policy, interest rates, and weekend plans.  The most recent 2-day Fed meeting ended Wednesday and the important part for investors was Chairman Ben Bernanke’s customary concluding speech (WSJ).
 
Big Ben spoke from the heart… and made 2 things clear.  First, the Fed is keeping an eye on the developments in Cyprus.  And second, the Fed will continue its quantitative easing policy to continue to stimulate the economy.
 
Can I get a quick QE reminder, again?… No problem – under the Fed’s 3^rd round of quantitative easing, the central bank buys $85 billion in long-term bonds each month to keep interest rates low.  These lower borrowing rates encourage folks to take out loans, buy cool things, subsequently growing the economy.
 
The takeaway… was that the Bearded One is repeating his similar theme from that last Fed meeting in January.  The volatility in Europe isn’t going to change the fact that the Fed will keep stimulating the economy aggressively.  And investors like them some stimulus, sending markets up Wednesday.

#2. CAT sales drop in Asia

If Optimus Prime was born today… it would hatch in a Caterpillar (CAT) factory.  The world’s largest heavy machinery maker reported struggling sales in Asia today, sparking a 2% stock sell-off.  Since CAT is the biggest maker of construction and mining equipment, analysts closely watch its performance as a gauge of global economic growth and development.  Markets pretty much shrugged off the one bad apple though, as CAT was the only red stock in the Dow’s 30 components.

#3. FedEx Disappoints With Weak 2013 Outlook
 
“I’d like that delivered as slowly as possible”… FedEx Corporation (FDX) announced a that consumers are increasingly using their cheap shipping options, “the tortoise,” in order to save money, even though their packages will take longer to arrive.  Express and overnight shipping is where FDX makes big money, so this change of consumer behavior hurt the bottom line by 31% in their most recent quarter.  

Consumers are being watched… in 2013 like George Orwell’s 1984.  Analysts wonder whether increased payroll taxes from the Fiscal Cliff and the government spending cuts of sequestration are going to hurt spending.  This news shows a more cost-conscious consumer, and that’s not good from Wall Street’s perspective.  

If Fedex falls 7% on the news… the rest of the market notices.  FDX is a “bellwether” company that’s used to indicate the strength of the economy in general. The purple-orange FedEx has a bellwether body because it ships goods from all over the world.  A decrease in their outlook could potentially reflect a hit to global commerce, to many analysts.
 
Thursday:

• Some more fun housing data: FHFA Home Price Index & Existing Home Sales
• Right on time, every Thursday morning: Weekly Jobless Claims
• The 4th quarter earnings season continues: Nike, Lululemon, ConAgra…

MarketSnacks Fact of the Day:  Nike bought its legendary “swoosh” logo for only $35.  That’s it.

“Stocks Fall After Bernanke Speech Revives Fiscal Cliff Fears”

Bernanke’s warning to Congress was too serious for comfort

Dow: 12,789, -7 (-0.06%)        S&P 500: 1,388, +1 (+0.07%)

Like many a facial-hair endowed master before him (Gandalf, Dumbledore, Jack Sparrow, etc.), Federal Reserve Chairman Ben Bernanke has the power to move markets with mere expressions, twitches…and especially words.  Stocks rallied big yesterday on optimism Congress will compromise to deal with the looming Fiscal Cliff – but Bernanke’s comments today turned the hope back to worry, edging the Dow down 7 points.  While US housing data continue to electrify, Hewlett-Packard and Best Buy also made headlines for the wrong reasons.

Fed Chairman Bernanke discusses Fiscal Cliff concerns

Ben Bernanke did his best Any Given Sunday locker room speech today to encourage Congress to beat the fiscal cliff.  I can’t do it for you.  I’m too old.   The Fed chairman sent a message to congress that they better get it together and compromise on a plan to avoid the fiscal cliff because the Fed can’t do it alone.  Investors are impressed by the Fed’s actions to stimulate the economy, but the Fiscal Cliff is a major threat that cannot be counteracted by monetary policy alone (Central Banks do monetary policy).  Congress must act with fiscal policy (the spending and taxing of government) or the economy will suffer.  Bernanke: Fiscal Cliff = 9% unemployment again.  Investors feared the beard today.    

Housing Starts & Building Permits for October rise to record levels

Builders be busy.  In a shortened week chock full of housing data, American home news impressed again: Construction on new residential buildings (“Housing Starts”) rose 3.6% in October to reach an annual pace of 894,000 new units.  September’s data was revised hugely higher (a 15.1% surge) and the number of permits for future construction also rose.  Surprisingly, the Commerce Dep’t noted that Hurricane Sandy, despite her wrath, did not unleash a noticeable impact on the figures.  Fresh off of yesterday’s solid existing home sales news (levels not seen since May of ’06), the housing market continues to gain momentum (a construction growth rate similar to a little kid with a new Lego’s kit after drinking 2 sodas and a Capri Sun).

HP hits new low with $8.8 Billion write-off

Shockingly consistent with the printers they produce, Hewlett-Packard (HPQ) is struggling.  They brought in former eBay CEO Meg Whitman to turn things around and, well, that plan’s been slow going.  But today the PC maker-turned-printer & software maker-turned-PC maker (there’s an identity crisis at HP) took a real shot in the hard drive.  HP dropped 12% to a 10-year low after announcing that a software company they bought last year, Autonomy, was actually worth about 1/10th of what they paid.  The $10 BN acquisition was supposed to get the company away from hardware into software.  Instead HP announced today that some glossy and probably fraudulent accounting by Autonomy’s management made it look much more valuable than it was and they horribly overpaid.  The Bait-and-switch forced HP to write down a $8.8 BN loss to correct for the real value of the acquired asset.  HP also announced earnings today, which were completely wiped out by the $8.8 BN write-down and into the red.

Best Buy earnings poor, Krispy Kreme impresses

Best Buy (BBY) has been trying to turn over a new leaf as well – but slowing sales and heavy costs spent  to restructure the business hurt earnings.  The $10 million loss knocked the stock down 13%.  On the bright side, Krispy Kreme (KKD) leapt 23% after increased same-store sales strengthened earnings (the MarketSnacks team’s sweet tooth takes partial responsibility).

Tomorrow:

• Weekly Jobless Claims – a day early because no Thursday trading for Thanksgiving
• The final Reuters/University of Michigan Consumer Sentiment Poll for November – we assume most are mentally preparing themselves to be trampled on Black Friday
• Earnings: John Deere…

© 2012 MarketSnacks

 

“Stocks Rocket Up on The Fed’s QE3 Announcement”

“THE BIG 3” market movers took their talents to Wall Street this week

Dow: 13,540 (+1.55%)        S&P 500: 1,460 (+1.63%)

With QE3, a major German court decision and the iPhone 5, “THE BIG 3” (or Los Tres Grandes, for MarketSnacks fans south of the border) have officially arrived and Wall Street is Hot-Hot-Hot like South Beach.  Yesterday’s news that the German constitutional court confirmed the legality of the Eurozone bailout fund lifted stocks up early and excitement over Apple‘s newest wonder-phone propelled the stock to an all-time high of $683.29 this morning.  Then, with the 2-day Federal Reserve policy meeting concluding, Chairman Ben Bernanke’s highly-anticipated afternoon remarks about what the nation’s central bank plans to do to help spur economic growth pushed stocks really f**king northward.  All 3 major stock indices reached multi-year highs and the Dow added 207 points on the Fed’s fancy new stimulus moves.  Here’s how it all went down…

Federal Reserve announced 3rd round of “Quantitative Easing” after 2-day policy meeting

The Federal Reserve Bank announced today that it would purchase $40 billion of mortgage-backed securities every month to inject the economy with cash and stimulate economic growth.  Chairman Ben Bernanke will fire up the printing presses, tie rolls of $100s with rubber bands and walk out like Santa Claus carrying a sack of cash on his back.  This highly anticipated stimulus decision, or “QE3,” is the 3rd round of quantitative easing since the financial crisis, but, unlike QE1 and QE2, this one is for no pre-determined amount and will continue until the labor market improves substantially.  This is a clear message of the Fed’s stance to the economy: it will do whatever it can to reduce unemployment and isn’t as worried about the threat of inflation potentially caused by the injection of cash.  But why QE3? The Spark Notes version: bond buying lowers interest rates, increases investment, and the economy grows.

You’re not applying for a job at Spark Notes though, so here’s a bit more.  The Fed will buy “mortgage-backed securities,” which are bonds that make interest payments to the bondholder – and the money for these interest payments originates from the mortgage payments that your mom and dad pay on your house (that’s why the bonds are “mortgage backed“).  The influx of demand for bonds by the Fed will increase the prices and lower the yields (bond yields and prices move in the opposite direction).  Lower bond yields mean lower interest rates for the underlying mortgages, so the effect is that long-term interest rates, especially mortgage rates, will decrease.

How will this help the economy?  Two ways mainly: 1) lower yields (the amount of return on an investment) on long-term bonds will cause stocks to look more attractive as a relative investment ==> people will shift their money to the stock market and stock prices should rise.  2) Lower long-term interest rates means more loans ==> more people will be able to buy homes through mortgages and more businesses owners will take out loans to grow their businesses.  Home purchases and business loans are the major investments the economy needs right now to drive growth.  Also, people will feel richer when the values of their stock portfolio and home rises, which increases confidence and spending.  This is the ideal outcome, and Bernanke is praying the plan works.  Pray with him.

Tomorrow:

• A serious serving of consumer-related econ data: Reuters/University of Michigan Consumer Confidence Poll (Preliminary) for September, August Retail Sales, August Consumer Price Index, July Business Inventories…

© 2012 MarketSnacks

The Best Damn Wall Street “Week in Review” Anywhere – LABOR DAY EDITION…

 

MarketSnacks nation: Happy labor day. Get after the summer waves while you still can

It’s been quiet on Wall Street…almost too quiet.  Investors are busy today saying “bye-bye” to that Hamptons timeshare and getting one last annual use out of a “Six-Minute-Abs” DVD with the markets closed for Labor Day.  Although the Fed made some big splashes, stocks drifted down most of last week as trading activity dropped to yearly lows during the unofficial end of summer.

Since Monday the focus was on Wyoming, a fun-less state where horses outnumber cars.  Investors globally awaited the Fed Reserve Chairman Ben Bernanke’s state-of-the-economy speech on Friday morning to conclude the annual 2-day symposium of the world’s central bankers. Many Krugman-like economists are downright on their knees praying to the Lord for a hint of stimulus to juice up the economy. With 4 long trading days to wait Big Ben’s speech, investors were offered their pick at the econ buffet…

…but they weren’t interested.  Econ news was surprisingly positive but went mostly unnoticed.  For instance, take a closer look at Sugar Ray’s hit 90’s single ‘Every Morning’ and it’s clear he’s singing about the Case-Shiller Home Price Index – “Every quarter there’s a number hangin’ from the corner of my father’s 4 bedroom home.” – homeowners can feel a bit wealthier as average home prices rose for the 5th straight month.  And you know that feeling when your teacher admits she made a mistake and everyone gets 2 extra exam points?  Well the Commerce Dep’t upgraded the economy’s score in the 2nd quarter of this year from 1.5% GDP growth to 1.7% (it’s welcome news, but mom is still going to be pissed by the crappy grade).

Corporate news was mostly quiet except for the Apple-Samsung patent battle controlling headlines.  Like a bad-ass leather jacket-clad high school punk, Samsung got caught cheating on the final exam by a U.S. Federal Court – copying answers/original smartphone designs from class nerd Apple. Instead of detention, Samsung has to pay Apple $1 billion for stealing sexy designs from the iPhone, sending Apple shares to a record high & slamming Samsung down (we assume Apple CEO Tim cook will now scold the competitor to “be wary to eat the forbidden fruit from the tree iTree of knowledge”).  Now Apple is looking to tear down Samsung’s house by stripping the shelves of all smartphones guilty of the patent infringement.  Apple was hitting record high stock prices like they just tried on Michael Phelps’ full body speedo for the first time.  $665 bucks for Apple paper.

Meanwhile, a Billy-Madison-repeating-5th-grade level of enthusiasm for the Back-to-School “holiday” season helped retailers as Gap (sales up 6%) and Macy’s (net profit up 16%) reported surprisingly good earnings.  And Citigroup shelled out $590 million to angry shareholders for selling collateralized debt obligations (“CDOs”) based on faulty mortgages during the ’08 financial crisis.  That’s the biggest payout/fine for any Wall Street firm since the crisis.

The x-factors of the week?  Europe and goddam hurricanes, man.  The European debt crisis hasn’t shown its face most of August as US stocks rallied, but rising German unemployment and Spain’s decision to delay receiving another bailout smacked markets on Thursday.   As for commodities, Category 1-rated Isaac also came out of nowhere – Gas futures jumped, pumping up record gas prices for Labor Day weekend as oil refineries in the Gulf closed, cutting supply.  World leaders are asking oil rich countries to pump out more to ease the increasing price pressure but Saudi Arabian oil princes don’t like to be told what to do.

Friday finally came and Ben Bernanke interrupted the Federal Reserve’s central bank summit at a Jackson Hole, Wyoming resort, tore off his hiking boots and read some prepared remarks on plans for his baby, the U.S. economy.  Although he announced no new policies to stimulate the economy, he sure set the stage for a big announcement at the next policy meeting in September.  He built a case for the benefits of quantitative easing and played down the potential risks.  He also claimed responsibility for some major job growth over the past few years from the Fed’s low interest rate policies.  Easy credit has allowed business to take on debt and consumers to buy up home mortgages…and Bernanke wants more.  Investors can see it coming – the 3rd round of quantitative easing to reduce interest rates…”QE3″…and they’re already salivating.  Markets finished up big on Friday to send investors into the big Labor day weekend.

So on those positive notes, go enjoy a final grill sesh today in your white apron before next week’s hefty load of econ data (especially Friday’s major government employment report).

The Dow Jones Industrial Average finished down .51% for the week and is up 7.2% year to date.  The S&P 500 sank .32% this week and is up 11.9% in 2012

Links Worth Snacking On:

• Wall Street Oasis – For our college seniors, how to deal with bad interviewers (like when they forget your name)
• Financial Times – A little more color, a lot more pics and one great headline from Bernanke’s Jackson Hole summit
• Bloomberg – Holders of Soviet bonds want their money back from Russia…all $700 billion of it
• Reuters – The tech wars continue…Apple and Google CEOs in patent talks
• Google – Why Warren Buffett has so much money…and decided to stay in Nebraska
• CNBC – Enjoying a wheat beer this Labor Day?  How MillerCoors diversified its holdings with Blue Moon years back
• Mail Online – Damn the Burritos! Chipotle stealing pennies/making millions by rounding up your receipts
• Charts – Get your artistic eye on…which brand colors are the most successful for public companies

This Week:

• Monday – MARKETS CLOSED FOR LABOR DAY
• Tuesday – July Construction Spending, August Vehicle Sales, ISM Manufacturing Index
• Wednesday – 2nd Quarter Productivity
• Thursday – ADP August Jobs Report, Weekly Jobless Claims, European Central Bank policy meeting
• Friday – The Labor Department’s Major August Employment Report

© 2012 MarketSnacks

“Bernanke’s Words Help Stocks Finish 3rd Straight Positive Month”

The Fed Chairman comes down from the Rocky Mountains to give us “The Central Bank Gospel”

Dow: 13,091 (+0.69%)        S&P 500: 1,407 (+0.51%)

LIVE, from Jackson Hole, it’s FRIDAY NIGHT!  Federal Reserve Chairman Ben Bernanke’s eagerly anticipated speech from the economic symposium in Wyoming has been the primary focus anchoring the year’s slowest week and the bearded orator’s choice of words kept stocks up.  Wall Street offices were borderline empty as investors started the 3-day weekend early (many a trader took advantage of the unprecedented lack of lines in the financial district’s Chipotle and Chop’t locations).  Factory orders in July (for big items like bulldozers) rose the most in a year, while the Reuters/University of Michigan Final Consumer Sentiment Poll for August increased more than expected.  Unlike most Managing Directors, the blue chip-heavy Dow didn’t take the day off, jumping 90 points to finish August with its 3^rd straight monthly gain.

Fed Chairman Bernanke’s Jackson Hole speech opens the door for QE3

It went down like this: Ben Bernanke interrupted the Federal Reserve’s central bank summit at a Jackson Hole, Wyoming resort, tore off his hiking boots and read some prepared remarks on plans for his baby – the U.S. economy.  Bernanke began by expressing his concerns for the economy recovery, but all investors wanted to know is whether the Fed will intervene.  Although he described no new policies to stimulate the economy, he sure set the stage for a big announcement at the next policy meeting in September.  He built a case for the benefits and played down the risks of quantitative easing, a policy in which the Fed buys long-term bonds to lower long-term interest rates, which promotes economic growth by increasing lending amounts.  Investors smile and turn bullish on any signs of stimulus and can see it coming – like a potential 3^rd round of quantitative easing to reduce interest rates…”QE3″ – and they’re already salivating.

FB falls to new low, Sears booted from S&P 500

Mark Zuckerberg’s Labor Day weekend just got not as fun.  Facebook (FB) shares dropped over 5% today to reach a new low and the stock is now worth less than 1/2 of its $38 IPO price.  Bank of America Merril Lynch cut its forecasts of the stock’s future price down to $23 while BMO Capital Markets knocked their target price to $15 on expectations employees will sell their shares as they become eligible (these insiders are restricted from unloading all their FB stock immediately by regulations).  Sears (SHLD) will also be sporting a black eye on the beach this weekend – although one of the founding members of the S&P 500, an index composed of the 500 top publicly traded companies, it’s getting dropped from the benchmark stock index because the number of shares available for you and me to buy in the public stock market is only like half of the company’s total shares…the rest are being hoarded by the company which is a no-no for the S&P index.  Kind of embarrassing for the long time member to get booted from the club, but they broke the rules, it’s as simple as that.

Next Week:

• MARKETS CLOSED MONDAY FOR LABOR DAY – get after it this weekend
• The big monthly official government employment report – non-farm payrolls and unemployment rate for August…

© 2012 MarketSnacks

“Fresh Euro Fears Slam Stocks”

“The European debt crisis – it’s baaa-aaaaak“

Dow: 13,001 (-0.81%) S&P 500: 1,399 (-0.78%)

So you’re enjoying your last summer beach BBQ and suddenly that moocher guy you haven’t seen since college passes by…and then invites himself to a burger, tells an offensive joke, uses up your last squirts of sriracha and makes your girlfriend cry. That’s basically the scenario in the market today –the European debt crisis hasn’t shown its face this August, then unpleasant Eurozone developments pulled stocks down for the 3^rd day this quiet week. We had the 1st day of the central bank’s two-day meeting in Wyoming that concludes with Fed Chairman Ben Bernanke’s speech tomorrow, but US econ news wasn’t too exciting: the number of Americans filing for unemployment was unchanged while consumers’ personal spending rose big in July as economists expected. For those scandal-hungry MarketSnackers out there, we’ve got a Citibank $560 million lawsuit settlement from the ’08 financial crisis to satiate you…the Dow dropped 107 points.

Spain delays bailout decision, Euro confidence falls and German unemployment increases

The European debt crisis that smacked investors almost daily this spring has been quiet lately, but today bombarded US stocks. The main issue was Spanish Prime Minister Mariano Rajoy’s announcement that his government will delay the decision on whether to request another bailout until after meeting with the French president. Additionally, an economic-sentiment indicator that surveys financial confidence across the Eurozone dropped to its lowest level in almost 3 years. And just in case the situation across the pond wasn’t difficult enough, German unemployment increased for a 5^th straight month…and then Slovakia’s prime minister channeled his inner Vegas appetite and estimated publicly that the odds of the euro currency breaking are 50%. Investors aren’t fans of how European policy makers kick the debt-filled can down the road without solutions and continue to respond with frowns and stock selling.

Citigroup pays $590 Million to angry shareholders to settle financial crisis lawsuit

The 99%ers planning their second wave of Occupy Wall Street protests may be ticked off that no major executive is are behind bars for financial crisis misdoings, but another big bank paid out hundreds of millions to settle lawsuits today. Citigroup (C) was sued by a group of former C-Shareholders for concealing information from regulators and deceiving shareholders right when the financial crisis was getting hot ‘07/’08. Citibank was the biggest packager of collateralized debt obligations (“CDOs”), the investment securities that were packaged by investment banks and sold to investors. The value of these CDOs originated from the interest and principal loan payments of home mortgages…But theses assets were toxic (finance-speak for crap) and Citi knew it. The housing market was crashing and Citi knew that waves of mortgages would soon default and the value of CDOs would fall. The problem? Citi had billions worth of CDOs that it couldn’t sell.

And so begins the corporate mischief. Instead of reporting its enormous holdings of toxic CDOs on its balance sheet as the law commands, Citi allegedly hid them from financial statements through some crafty (and illegal) accounting methods…but the world was bound to find out. Once it did, the market punished Citi and stockholders watched their shares drop in value from $500 in ’07 to a mere $29 today. The market dumped Citi like it was the 7th Season of the Jersey Shore (sorry Snooki, enjoy raising your kid). Citi’s massive holdings of CDOs were crashing in value and Citi was losing billions of dollars…and the rest is history (government bailout, quick return to profitability – and that’s how Occupy Wall Street protests are born). The stockholders who sued Citi were furious that they were hoodwinked by the misleading bank, so finally Citi paid them $590 million to settle the case today in the biggest settlement/fine associated with the financial crisis to date. The truth is that $590 million is chump change to the huge bank (Citi actually has a reserve of about ~$1 billion for just this purpose, legal settlements), so the stock dropped a mere .9% today.

Tomorrow:

• The speech you’ve all been waiting for – Ben Bernanke’s annual symposium address, straight from Wyoming
• Reuters/University of Michigan Final Consumer Sentiment poll for August
• More exciting econ news from rest of the world: Canada’s 2nd quarter GDP, German Retail Sales and Eurozone Unemployment…
• The online radio Pandora (P) we enjoy while writing your daily MarketSnack jumped 14% after its earnings report that the firm broke even in the 2^nd quarter when analysts expected a loss – will investors still love it tomorrow?

© 2012 MarketSnacks

“Hurricane Pushes Up Energy Costs As Stocks Finish Lower”

Bad weather is already driving up oil prices (and George Clooney ain’t happy)

Dow: 13,103 (-0.17%)         S&P 500: 1,409 (-0.08%)

Hurricane Isaac has already delayed the Republican National Convention, ruined many a late-summer bachelor party fishing trip and completely taken over control of The Weather Channel (kudos on some magnificent storm journalism, by the way).  On the flip side, the meteorological wonder made energy stocks the big movers of the day.  Stocks remained mostly flat again as investors look forward to Federal Reserve Chairman Ben Bernanke’s policy announcement from Wyoming on Friday.  Two major econ reports on housing and consumer sentiment cancelled each other out and the Dow ultimately finished down 22 points.

Hurricane Isaac shuts down oil refineries, pumps up record gas prices for Labor Day

Condolences to our Cadillac Escalade-driving MarketSnacks readers – Gas prices are bound to hit record highs for Labor Day weekend as Hurricane Isaac is causing off-shore oil rigs and Gulf Coast oil refineries to shut down (not to mention an oil refinery in Venezuela actually exploded last week which sadly killed 48 people).  The sudden cut in oil supply is coming just as Americans seek that final 3-day opportunity to show a little skin.  Commodity traders foresee a shortage for the gas-thirsty SUVs hitting the road this weekend, so the price of gasoline on the futures market hit $3.15/gallon today, up 22% since just June 21.  The news even drove up gas powerhouse Chevron (CVX) to become the blue chip-heavy Dow Jones Industrial Average’s top performer.  Normally gas prices start to fall off this time of year as the summer is coming to an end and demand for gasoline slips, but the cut in supply has more than offset the typical seasonal effect.

S&P/Case Shiller Home Price Index rises again, but Consumer Confidence falls

One of the major monthly housing reports, the S&P/Case-Shiller home price index analyzes value changes in residential real estate from 20 metropolitan regions.  Homeowners were psyched to today to see the index rose in June for the 5^th straight month, reaching a positive year-on-year rate for the 1st time since 2010.  Investors hope this trend indicates home prices are recovering, but consumer confidence didn’t fare as well today.  The non-for-profit research group The Conference Board takes a monthly survey of how folks feel about the economy and confidence in August dipped more than expected, falling to last year’s low (that was a dark time when Congress was stuck in its debt ceiling crisis and The Dark Knight Rises trailer hadn’t even been released yet).  Consumer confidence has been inconsistent recently and can change dramatically from month-to-month.

Tomorrow:

• A significant amount of economic news from all over Planet Earth…
• In the US, look for 2^nd quarter real GDP numbers, July pending home sales and the Federal Reserve’s Beige Book provides the central bank’s analysis of the US economy
• …And outside the US, some interesting reports: Italian retail sales, Japanese retail sales and the German Consumer Price Index will be scrutinized for signs of inflation

© 2012 MarketSnacks