“On Black Monday’s 25th Anniversary, Stocks Fall Big On Bad Earnings”

“With corporate earnings like these, I just need a friend to hold my hand. Now.”

Dow: 13,344, -205 (-1.52%)       S&P 500: 1,433, -24 (-1.66%)

25 years ago the Dow had its biggest single day drop ever – aka Black Monday – and maybe it’s too many Paranormal Activity commercials on the airwaves these days, but investors were spooked by this ghost of trading sessions past.  Instead of a creepy boy standing in the doorway pointing his finger at nothing in particular, investors saw a white collared financier clad in Gordon Gekko suspenders crying from the 22% drop in stock index on October 19th, 1987.  It sure felt like some sort of “black” day today, as blue chips were releasing negative earnings reports from Microsoft to McDonalds.  Although analysts bearish predictions for the 3rd quarter earnings season were finally true today, the Dow‘s 205 point drop today still means we’re in the green by a slim 0.11% this week.  Hey, take what you can get and enjoy the homecoming kegs and eggs being served at college campuses across the U. S. & A. this weekend.

Microsoft Office sales fall, GE earnings miss estimates…

Microsoft (MSFT) led tech stocks down today after it fell 2.9% on missed earnings today.  Their earnings felt the assault of Google as last quarter’s sales of Windows Office products dropped.  Google has word processing, powerpoint, and excel for free on Google Drive (formerly Google Docs) as they continue to move Googlers all over the world into the “cloud.”  While there are no drug addicts on the MarketSnacks team, we would rather spend our lives in Google’s cloud than drop $200 on Microsoft office.  General Electric (GE), the American conglomerate of conglomerates, which makes microwaves, airplane engines and everything in between, fell 3.4% after it missed revenues estimates, even though profits were slightly up.

…And McDonalds earnings disappoint

McDondalds (MCD), a rock of the Dow that rarely has large price declines due to the world’s inelastic craving for BIG burgers (the “Modest Mac” didn’t go over well with most demographics) dropped a whopping 4.5% today as same store sales slowed in the home US market.  During good economic times, MCD kills it cause people live large, and partying leads to late night food runs.  During bad times, your boyfriend brings you to MCD for Valentines Day (hence McDonalds stock’s “defensive,” or “recession-proof” nature). MCD also suffered in international sales, which make up 2/3 of MCD’s income and the culprit is the strong US Dollar.  When McDonalds sells a Große Mac in Germany, the euros it received this year were not worth as many dollars as last year cause the value of the Euro is way down and the dollar is way up.  Today’s big drop was the largest in 3 years and Ronald McDonald is officially frowning, red lipstick and all.

European 2-day Summit ends, still no clarity on Spanish Bailout

What? A two-day European vacation summit ended today?  The MarketSnacks team has put Euro-news on the back burner the past few weeks as Spain continues to stubbornly wonder whether it needs a bailout (it clearly does).  The uncertainty has caused European markets to suffer for weeks and today the sentiment crossed into American markets.  The Spanish prime minister knows that he can ask the ECB to purchase its bonds, relieve it of the high interest rates it’s paying (i.e. high bond yields), and secure funding to continue paying the bills.  But a request for bailout comes with austerity conditions that Spain’s poor and unemployed populace hardly needs right now.  Despite pressure from European leaders, Spain and Spain alone must make a bailout request and the uncertainty is killing everyone.

Next Week:

• Chipotle (CMG), the American ambassador of burritos & guac, fell 15% today after downright awful earnings, validating star stock picker David Einhorn’s October 2nd “Sell” suggestion of the stock.  Bold action is needed by Chipotle management or Taco Bell will be the only faux-mexican restaurant offering in these United States…

© 2012 MarketSnacks

“Stock Rally Sputters To Start Week”

Tired investors after last week’s long stock bender

Dow: 13,553 (-0.30%)        S&P 500: 1,461 (-0.31%)

Between the media frenzy surrounding Occupy Wall Street’s 1^st birthday and the Jewish New Year, we’d be lying if we said this was another typical Monday.  Thousands of creatively-dressed protestors attempted to human-link around the New York Stock Exchange while a big portion of the financial industry was simply at home for the holiday.  It was a weird combo.  After the Federal Reserve‘s announcement to initiate a quantitative easing program (“QE3”) to stimulate economic growth propelled last week’s stock rally, the Dow drifted down 40 points today.  Investors were turned off by fresh concerns over Europe and the Fed’s survey of New York State manufacturing, which showed business activity in one of the nation’s most economically significant states dipped in September, contrary to expectations.

Eurozone finance ministers cannot agree to timetable for the new banking union

It’s always a big decision to commit to someone; Vermont showed their commitment to commitment by passing laws for civil unions back in 2000, and the Eurozone is trailblazing as well with their banking union the 17 members agreed to in June.  It’s also a big move to tie financial strings with a loved one, and the 17 Euro nations did that last week, when the ECB decided it could print euros to fund struggling government budgets.  Now investors want these agreements to be acted on – and today at a meeting of euro finance ministers in Cyprus they hit a speed bump.  They couldn’t agree on a timetable to enact the rules & regulations of the continent-wide banking union.  The union is key for euro stability and investors were not thrilled to the delay in their first chance to discuss the logistics.  Remember, Europe is infamous for its slow bureaucracies…now 17 different ones need to agree to a single banking regulator with huge consequences to each their finances (it’s going to be slow and frustrating).  Stocks fell in Europe and the US on the sign of slow things to come for European unity.

Steel firms fall, Apple shares reach $700, GE and Boeing dip on plane engine news

After last week’s fancy product presentation, iPhone 5 sales reached 2 million units in the 1st day’s orders, over double the record set by the previous best-phone-ever.  The frenzy helped AT&T (T) add 1% and pushed Apple (AAPL) shares past the symbolically significant (everyone loves a round number) $700 a share in after-hours trading.  On the flip side, maker-of-everything General Electric (GE) dipped after the National Transportation Safety Board issued “urgent safety recommendations” on GE plane engines.  Boeing (BA) lost just under 2% on the news since jets need properly functioning engines to do what they do best.  The big sector move of the day though was in steel – JP Morgan analysts cut ratings of steel firms as they foresee a drop in steel demand, smacking US Steel (X) with a 5% loss.

Tomorrow:

• The National Association of Home Builders (NAHB) September Housing Market Index measures how home prices are doing in the US.
• The President of the NY Fed is more privileged than the other Fed presidents – he votes on every policy matter, where as the others have to take turns…this is no joke.  Gotham Fed president William Dudley speaks in NJ at 11:30. 

© 2012 MarketSnacks

“Better-Than-Expected US Econ Data Can’t Stop Stocks From Falling”

“Dammit, can’t you just finish positive?!”

Dow 12,599 (-.26%)        S&P 1,325 (-.44%)

A hearty barrage of financial news has been slapping investors around all week and the Dow Jones Industrial Average has now fallen in 10 of the 11 past trading sessions.  In the noisy background, Greece’s debt crisis continues to weigh on markets after European Central Bank officials indicated today they’re willing to let the country leave the Eurozone if necessary.  And JP Morgan CEO Jamie Dimon is now being sued by shareholders for misrepresenting the bank’s level of risk before last week’s $2 billion trading loss.  So what yanked today’s market up and then down?  General Electric news and better-than-expected US econ data pushed stocks positive early on, but a release from the Federal Reserve pulled them back down – overall, the Dow slipped 33 points to a 4-month low.

US economic data shows increased housing starts and industrial production

European political drama cannot deflate the muscle of the American construction and manufacturing industry, as proven by today’s positive data of improved home construction and industrial growth, which offered a respite to the market slide.  Investors were relieved to see that bicep-throbbing American workers started construction on 2.6% more homes in April than March and industrial production increased 1.1%.  Record low interest rates have encouraged consumers to buy autos and expensive manufactured products on cheap credit while recent improvements in the labor market have supported the housing market.

GE acquires two mining companies and boasts financial health with higher dividend

General Electric (GE), the imperialistic American conglomerate, stretched its international reach a bit further today by purchasing two mining companies in Australia and China.  These purchases fit GE’s company profile despite how generally “unelectric” they are.  “Manifest Destiny” has been GE’s motto over its glorious 120-year history of growing through acquisitions.  We assume Jack Donaghy is standing in his top-floor “30 Rock” office sipping brandy to celebrate the latest expansion into these lucrative mining businesses.  GE Capital, GE’s finance unit, also announced that it’s investment banking-like business is profitable enough to pay dividends to the parent company for the first time since the financial crisis. The stock led Dow components with a 3.26% increase as investors interpreted the purchases as a sign that GE is healthy, eager and has money to invest to continue growing despite the uncertain global economy.

Details of April Federal Reserve policy meeting reveal economic growth concerns

The Federal Reserve released a transcript (known as “the minutes”) from its April meeting and the details soured investor sentiment.  The Fed provides this information with a month-long lag because its superman-fortress-of-solitude-style closed-door monthly meetings cover critical monetary policy decisions and any leaks can have a major and immediate impact on markets.  Today’s report showed how several members of the central bank‘s policy committee thought a boost to the economy, like using a “quantitative easing” method that makes money more accessible for borrowing, might be necessary.  To investors, this was a red flag indication that the economic recovery might be losing momentum.

Tomorrow:

• Greeks have started a run on its banks, withdrawing over €700 million on Monday overs fears that the country will leave the Eurozone, sending the value of the euro down and destabilizing banks– what will stop the bleeding?
• Apple (AAPL) dropped 2% today after a major bearish hedge fund said it expressed doubts in how many iPads the company will be selling in the coming years – the tech beauty has slid a harsh 12% since its record highs in March.
• Weekly jobless claims (the amount of Americans filing for unemployment) hit in the morning and are expected to fall slightly again….

© 2012 MarketSnacks

“After a Choppy Week, Stocks Finish Up on Impressive Earnings”

"The Corporate Earnings Boogie"

Dow 13,029 (+.50%)        S&P 1,379 (+.12%)

Stocks have gone up and down so much recently we’ve been suffering daily nosebleeds.  But the Dow Jones Industrial Average finally reached its first weekly gain in April, finishing the week up 1.4% when all of the recent dips and spikes were said and done.  In this early portion of the second quarter, corporate earnings have been the dominant theme over the last few trading sessions, yanking the stock index back and forth.  Today’s positive corporate earnings from key blue chip companies, combined with surprisingly strong econ news out of Europe, led the Dow up a comfortable 65 points after yesterday’s 69-point loss.

Earnings from Blue Chip stocks Microsoft, General Electric and McDonald’s beat expectations

Microsoft (MSFT) led the way with the top performance in the Dow, leaping 4.6% after the software behemoth reported results on Thursday evening above Wall Street’s estimates.  Bill Gates’ baby cited increased Windows and Office product sales for the performance.  General Electric (GE) did see a 12% decline in earnings, but the first quarter number was still ahead of analysts’ forecasts.  GE stock advanced 1.15% on the news that profit growth was triggered by production in its energy-infrastructure division.  And finally, deep-fried shares of McDonald’s (MCD) bounced 0.69% after sales increased at a faster pace than expected.  Each of these companies is large enough to make a splash in the trading floor kiddie pool and with positive quarterly earnings news from each, investors jumped in too.

 Positive economic data from Germany and United Kingdom surprise economists

Okay – the following news was just as shocking for us to write as it is for you to read right now.  For over a year, Europe’s debt crisis has pushed the continent into a recession, as gross domestic product (GDP) shrinks, and investors refuse to lend to the countries they fear cannot pay them back – the result has been months of bearish economic news.  But this morning, positive headlines from two of the region’s stronger economies provided a unique moment of stability for traders to temporarily cherish.  In Germany, business confidence rose in April for the sixth straight month and in the United Kingdom, retail sales increased significantly – both against economists’ expectations.  While serious concerns over the financial state of the PIIGS nations of the Eurozone fundamentally remain, the news that two of the “healthier” economies are making progress was a (momentary) relief.

 “Week in Review”

Like some kind of baller hotel-style breakfast buffet, the past week featured a rich variety of headlines for investors to plop spoonfuls of on their plates.  And with a total mix of extreme results, markets were some of the choppiest we’ve seen all year.  Strong retail sales stats for March powered the Dow up to start the week, then weekly jobless claims, regional manufacturing and previously owned homes sales econ data disappointed later.  Verizon (VZ), Citi (C), Bank of America (BAC) and Morgan Stanley (MS) notably beat earnings expectations midweek, but slow growth from tech-giants IBM (IBM) and Intel (INTC) dropped markets earlier.  And Spain and Italy are still keeping investors tossing and turning at noche, yet Spain did manage a strong bond auction this week despite European debt fears flaring up.  Corporate earnings, US econ data and international concerns were all over the place, leaving us feeling like we just stepped out of a week-long Avicci rave.

Next Week:

•  The French Presidential election over the weekend – will President Sarkozy be unseated and how will Le stock market react on Monday?
• Apple (AAPL) stock was down 2.5% today, 5.3% this week and has fallen in 8 of the last 9 trading sessions, turning the tech-heavy Nasdaq stock index negative today – are investors “correcting” (reevaluating) its market value?  Does it still have further to go?  Will they buy the stock back at this discount next week?  Apple reports earnings next Tuesday….
• Economic data on manufacturing and housing – how will they affect the Federal Reserve‘s upcoming monetary policy decisions?
• Week #3 of earnings season, baby: US Steel (X), Boeing (BA), Xerox (XRX), Apple (AAPL)….

© 2012 MarketSnacks