Bad corporate earnings news has been trickling out for a little while now. But get ready – because we’re going to get a flood of numbers this week!
Market Roundup
Here’s just a sampling of the broad range of S&P 500 companies set to report earnings in the next few days …
Tomorrow: Railroad operator CSX (CSX) … semiconductor giant Intel (INTC) … drug and health-care company Johnson & Johnson (JNJ) … and megabank JPMorgan Chase (JPM).
Wednesday: Airline company Delta (DAL) … streaming video highflyer Netflix (NFLX) … and megabanks Bank of America (BAC) and Wells Fargo (WFC).
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| Delta is among the companies reporting this week. |
Thursday: Brokerage giant Goldman Sachs (GS) … casino operator Las Vegas Sands (LVS) … toymaker Mattel (MAT) … and chipmakers Advanced Micro Devices (AMD) and Fairchild Semiconductor (FCS).
Friday: Transportation and aerospace giants General Electric (GE) and Honeywell (HON) … insurer Progressive (PGR) … railroad Kansas City Southern (KSU) … and industrial products makers Parker-Hannifin (PH) and W.W. Grainger (GWW).
I’m going to be scouring these reports top to bottom for a very good reason. The profit picture will help determine whether the snapback rally we saw last week has legs … or not.
Color me skeptical. Second-quarter earnings and sales were the worst in six years. Third-quarter estimates have dropped firmly into negative territory. And fourth-quarter estimates have been falling week in and week out since late spring. That’s true whether you include energy sector results or not, suggesting the weakness that used to be cooped up in one or two sectors is now spreading throughout Corporate America.
| “The weakness that used to be cooped up in one or two sectors is now spreading.” |
Yes, there are still a handful of companies that can prosper, in a handful of safer sectors. One consumer staples company I’ve liked in my Safe Money Report for a little while now just broke out to a fresh all-time high.
But financials, industrials and materials remain in the soup. Energy is a basket case. And I have my doubts about other higher-risk sectors like technology.
So definitely listen to what companies have to say over the next few days. If the news is as troubling as I think it might be, this oversold bounce could run out of gas in a hurry.
Any thoughts on what the rails, the banks, the industrials, and the airlines will have to say? Are you expecting good news? Bad news? A mix of both? What does that say about the future direction of stock prices? Batten down the hatches or enjoy blue sky ahead? Let me know what your thoughts are over at the Money and Markets website.
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Just before the weekend, I talked about whether today’s market is more like 2007’s than 2011’s. Many of you seemed skeptical about the possibility of a new bear market, for a variety of reasons.
Reader Winky said: “Stocks always eventually go up. Look back a hundred years and stocks always eventually go up. The bears are only right once in a while.”
Reader Alan said: “This looks more like a 1998 or 2011 pullback. Like then, it should take the markets to one final rally high in either 2016 or early 2017. Then we should see a major decline everyone has been waiting for.”
Reader Steve T. said: “It should be obvious that currently the bulls are in charge. They were taken by surprise with the big drop in late August, but now they are awake and defending against further drops. You will notice that each time the indexes start sinking new buying comes in to support the markets.
“They are taking delight in ruining the bears’ plans and they are forcing the shorts to cover — and seem to have all the money necessary to keep it up. They are winning the battle for now and I don’t see what will change that unless something unexpected happens.”
Finally, Reader Gilbert W. said: “All bull markets get and need corrections. We finally got one. Nothing domestically has changed. Interest rates are still zero and going nowhere (maybe negative) since it would cost the Treasury hundreds of billions of dollars a year. Also, now that Japan and the EU are doing QE, that money has nowhere to go but here. New highs here we come!”
Not everyone is sold on that rosy outlook, though. Reader Bruce said: “I agree that we’re overdue for a serious correction now that the Fed’s printing presses have slowed down. All the QEs simply amount to ‘pushing on a string,’ a policy that’s always failed to stimulate the economy.”
Lastly, Reader Chuck B. said he’s keeping an eye on some key technical levels to see where we go next. His take:
“Back in July, the Dow broke through its 200-day moving average. The S&P 500 waited until later in September to do the same. But it was on the same day both had their recent big drops, and the same day, both MAs turned south. Now they both appear to moving to challenge their MAs. A failure to break and stay above would technically be a very negative sign.”
I appreciate everyone weighing in. It should be abundantly clear where I stand on this debate. Something fundamental appears to have changed in the markets for the first time in six-and-a-half years. That makes me extremely skeptical of the bull case – despite the rally we saw in the last several days.
As always, I’m happy to hear both opposing and confirming viewpoints. So if you’d like to share them, the website is there for you.
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Dell made it official Monday, saying it would team up with the private equity company Silver Lake. The price of $33.15 per share equates to a total cost of around $67 billion.
Want to buy a (share of) Ferrari? You’ll soon get your chance. That’s because the iconic Italian carmaker is going public soon, offering 17.2 million shares at a price of $48 to $52. That’s 9% of the company, with family scion Piero Ferrari and another family that controls Fiat Chrysler maintaining sizable stakes.
Troubled commodity trader and miner Glencore PLC is trying to save its bacon by selling off assets around the world. The latest plan is to unload two copper mines in Australia and Chile, which analysts estimate could bring in as much as $1 billion. That would still make only a minor dent in its large debt load.
Will Wisconsin representative Paul Ryan become the next Republican Speaker of the House? Many members of his party want him to do so, but Mitt Romney’s former running mate remains noncommittal.
Does this EMC deal mean the buyout boom still has legs? Or is it doomed to fall apart thanks to tighter credit markets? What about the Ferrari IPO and the Glencore fire sales? Any thoughts you’d like to share there? Hit up the website if you’d like to add them.
Until next time,
Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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good stuff. keep it coming…..
The bears are on solid ground but don’t fully know it yet. No major index has regained its 2011-2015 trendline, and it’s increasingly unlikely they will. OTOH, there’s still a lot of hype about the economy that lingers. That will change as the revisions for GDP and jobs keep coming in with significant downward changes. View the economy as being on recession watch.
the 3rd friday in october is a popular day for big market drops.
And this third Friday might follow a number of significant earnings declines. Those big banks, tomorrow and Wednesday could set the stage.
STOCKS LOOSE THEIR MOMENTUM WITH GLOBAL GROWTH DOUBTS
I agree with you that technology looks doubtful as a driver of higher stock prices this year, as does health care ( After Hillary Clinton to a shot at pharmaceuticals overcharging last week ). Biotech corrected -20% right after Hillary’s warning shot. So, institutional investors are front running the chances of Hillary becoming President Hillary. She also said she plans to increase the holding time for preferential capital gains tax rates and raise the capital gains tax rate to 6% on a sliding scale. Reads like a deferred sales charge on a (load) mutual fund, doesn’t it?
Apple looks like a slow mover, slowly increasing earnings at the margin, but no great momentum. Apple is acting like a value stock, which has remained stuck around $110.00/share since the August 24 correction. John Markham was correct in predicting the initial Apple Watch would be a dud. If China sales of I-phones slows, Apple stock is going to have a hard time moving up much.
Apple is still a “bellwether”, so the overall stock market will reflect its valuations. Political uncertainty may keep a lid on the indexes for the next year, until “start taking things” Hillary Clinton is eliminated or loses the election next year.
Apple is still better than a bond! Jim
I want to know how Union Pacific is doing. Any company who is willing to spend millions restoring the one of the largest steam locomotives ever built to operation to celebrate the Century and half anniversary of the Gold Spike in Utah. Then there is FEF-3 844, the only large steam locomotive never retired. UP kept the faith. Like the ad says owning a piee of that “Priceless”.
No one knows what the market will do, one terrorist attack can change the most accurate of predictions. Buy good stocks that pay dividends, maintain ample cash so downs can be ridden out with out needing to sell to survive( buying opportunity with cash), avoid margins that require the sale of stock to cover and remember Will Roger’s advice ” Buy low, sell high and if it don’t go up don’t buy it.” Summary: Good stocks w/ dividends when cheap and have some cash, take some profits on stocks where you get a good move and maybe hold on to a few of them if really good. What ever the market does this will serve the investor well. The market always goes up and down. The investors who do this do not lose sleep be it bear or bull and can ride it out to profits.
We might also sell, even at a modest loss, if we believe the markets will fall. Then we might have cash to take advantage of the “buy low” part.
I just read something another analyst said, “cash is like a no risk call option that never expires”. A very interesting observation. In a deflationary economy, it might even gain a trifle in value – my own addendum.. Also, when you sell a stock or bond, you are, in a sense “calling” that cash option, and you either gain or lose. Think of cash like you do stocks, etc. It is a kind of investment.
For several quarters the indexes have been running ahead of actual financial results. Now this has become apparent to a majority of investors. Hence, the “correction”. In the past, long term investors simply waited for the inevitable bounce back up. This time, political factors and lack of visibility are holding back any improvement until there is some clarity in the economic and political world. Present indicators are not encouraging.
It is interesting to read the opinion comments regarding the short term look at individual corporate earnings, price ratio’s, stock prices, stock evaluations, etc…etc…etc…
The greater issue is where the U.S. and global economies are headed…not positive…I might suggest perusing the reports and looking at cash holdings these companies have accumulated…cash is king in an economy headed south…which our’s is…
Ask not what the economy can do for you…ask what you can do for the economy?…
SMS/BS Engineering/MBA Accounting/Finance/Economics
If someone can show me some positive numbers on exports, underemployed, corporate earnings, GDP growth and emerging market countries debt repayment plans and a more internationally competitive U.S. dollar I’d regain some optimism. It took only $1 trillion in mortgage defaults to bring the markets down in 2007. According to Jim Rickards, there is $9 trillion in BRIC country debt that must be repaid in expensive U.S. dollars. In addition, serious credit defaults loom in $1.2 trillion student loans and another $800 B in junk auto loans. Governments at all levels are overburdened with debt. Even a small rate hike could ruin the bull’s party when leveraged credit default swaps start to fold. Happy Halloween!
I think we’re facing the Dump of the Century with a global debt collapse long overdue, then asset values will crash big-time! There’s no safety nets left, even the US Fed has negative equity. We’ve got way over-leveraged developed Nations in recession/depression and emerging Nations unable to service their highest debt balances on record.
Jean,
Despite the massive engineering by the GOP for a crash on Obama’s watch, history tells us that crashes ALWAYS happen during Republican Administrations … My guess is that a Democrat will be elected President in 2016 and the GOP despite, gerrymander and the Billions being spent by the CUWs, will lose it’s majority in Congress and the economy will take off again…
ALWAYS? What about the Dot com bust? That started on Clinton’s watch.
The GOP couldn’t engineer its way out of a toy train set. You give those incompetent get-alongs way to much credit. The Congress is feckless and irrelevant. The only thing that matters now is who the executive is. Jim
I would also like to predict that in the not too distant future the words Democrat and Liberal will be considered dirty words. Their stuff just hasn’t worked anywhere it’s been tried and people are starting to figure that out. Go Redskins! Jim
AND HOW ARE WE GOING TO DO THAT MICKEY S. also calling himself eagle495 REMEMBER………………. BARACK OBAMAS famous words let someone who knows how to run a country run it that was November 2008 he promised growth in the u.s. economy of over 6% every year that he was in office just another lie he promised to cut the national debt by 5 trillion in his first term bringing the national debt to around 5 trillion total ANOTHER LIE FROM OBAMA so here we are in 2015 and the national debt is on its way shortly to 18.5 trillion but what really scares me is the unfunded liabilities which now stands at close to $$$$ 830,000 per taxpayer in this country and since half of all taxpayers pay nothing the real debt per taxpaying taxpayer becomes astronomical the problem with OBAMA and other DEMOCRATS is they like to blame anyone they can for their own inefficiency their inability to perform their job as required see the difference is quite obvious republicans want…….LEADERS democrats want ( what are you going to give me ) they are the party that promises to anyone that will listen…………. the world of freebies…………..free everything their philosophy is the USA can afford it just raise taxes or create a new tax i.e…. add to the gas tax cigarette tax liquor tax road tax import tax airline tax state tax federal tax or lets just create a new host of new taxes like the CARBON TAX . One thing that the democrats cant give you all you people with your hand out for freebies is LEADERSHIP ……………. BARACK OBAMAS idea of leadership was to lead from behind see what that got us in the middle east complete turmoil ……. I will tell you what the problem is with the Obama administration we wanted a leader all we got was a little boy a liar in chief someone who the world doesn’t respect and who hides behind phrases like they aren’t working with me or its bushs fault not mine
I agree with Larry, I feel that we are still headed down. I feel that the earnings are going to make that happen.
Logically I agree with you bears. I just don’t think it can happen in an election year. Jim
The powers that be will move heaven and Earth to save Obama’s bacon and get Hillary into The White House. Jim
Agreed. But I don’t think they can stop this one. It will be huge. Have you ever heard of Herbert Obama? You will.
I could be wrong in that if anything bad does happen there is no way Obama will be blamed for it. I saw a dozen or so graphs from his watch. Everything that should be going up is going down and visa versa yet half the country still adores him. It really is an amazing phenomena. Jim
Larry DOESN’T say everything is headed down. If one thing is headed down, there must be something else headed up. Look for that something, and buy it.
Cash. Not there yet, however.
Jim the half that adores Obama is the half of America that is living off of wealth distribution… Your tax dollars…
Why wouldn’t they adore him…? And of course, why not elect a like replacement, after all, everything is not lost if you die… You will most certainly return as a Democrat if only at election time.
There is something odd going on here in the Midwest. People spent money in a big way this last year but suddenly I see things slowing up a little. Although restaurants aren’t dying off like they did in the Recession of ’08, people aren’t opening their pockets like they used to. They aren’t buying the fundraising stuff the kids are selling as much as they have in the past. Don’t know if it’s just a bad weekend for the kids or if people are tightening their wallets. On the flip side, an elderly friend of mine told me today that her daughter who lives in the Twin Cities said businesses down there are absolutely crying for workers. Hope that job market stays solid. It will help wages rise.
Beth: “…people aren’t opening their pockets like they used to.”
I think people are tired of being dollared to death!! I know I certainly am.
This is a strange idea, but, from a technical basis, do any of you think the formation in SP500 since August looks like a broadening formation? If it is, that has significant bearish consequences.
Larry……..I agree with your bearish prognostication.
The formation to me looks like we are at the top of wave FOUR. We are waiting for wave FIVE down. We MIGHT climb up to 2035 to fill a small gap prior to the start. There are a few other possibilities……but all of them still point to WAVE FOUR. But we should be very near the downhill slide and it should be a HARD FALL.
My calculations for WAVE 5 DOWN say something in the neighborhood of at least 1800, maybe much lower…..on the S&P CASH…..for the next move.
While the USA might have some serious problems, take a look at the rest of the world. Where would you rather put your money if you were a person of wealth from China, Syria, or even Europe ? The USA is the prettiest girl in the brothel. Investing in America has been a safe haven for many years and will continue to be. One only needs to look at the buying spree that foreigners with wealth have triggered in the high end real estate market. The USA education system is much maligned but there are 274,000 Chinese attending US Universities and Colleges. Why? America might be a sinking ship but it is sinking more slowly then many other “Ships of State”
Tom R.
As a graduate of two great engineering schools……I have often wondered about the value of educating so many Chinese students in subjects such as computer engineering, nuclear engineering, chemical engineering, physics, etc.
I would be happy to see them come to America to study poetry, art, sociology, theology, women’s studies, history, etc.
But educating the students of a country that hacks our computer systems and behaves in other belligerent ways…….with the science needed to conduct those belligerent acts……….does not seem wise.
Asians would love to enter the poetry, arts, etc., but those slots are already filled by the locals!!
If America is a “sinking ship”, I suppose China would be a surfacing submarine. I hope America is a “Q” ship made to take a Chinese torpedo and look in danger, but ready to unveil the guns and shoot back. Accurately, I hope.
There seems to be a lot of bullish talk still going on about the market. October earnings will say a lot, so it will be interesting to hear what these same bullish people have to say after the earnings reports have had their say. Sure there may be some influx of foreign money coming into the US but my bet is that a lot of foreign money will turn to gold and natural resources in countries like Australia and Canada; and not just into US Dollars as a lot of people seem to feel. The Australian Dollar and Canadian Dollar are down because of the influence that resources has had on them, but that is about to change in my opinion. Without demand for resources where can earnings come from; unless you think the world and the US In particular can grow on services and government jobs alone. Presently the biggest growth in jobs is with government jobs, and that does not make an economy strong. It only serves to buy votes. So how will the DNC survive another eight years after that; by cleaning you out to buy more votes, that’s how.
If you decide to start your own newsletter I want to subscribe! Jim
Today: “Energy is a basket case.”
May 18: “Greatest Energy Opportunity in 3 Decades”
…and it could stay a basket case for a long time.
Saw an interesting comment on Donald trump by Ilya Somin of USA Today: 40% of his Republican supporters are without a college degree, only 19% have degrees. He is a self-assured, highly entertaining celebrity who knows how to talk on TV (camera). That sounds more than a little like Ronald Reagan, doesn’t it, though Trump lacks Reagan’s open personality. He also points out that most of the supporters are low information voters who don’t even know their representative in Congress, or which party controls it. They are ripe for exploitation by candidates and interest groups. I guess, as President, he wouldn’t just sue somebody who opposed him, he would turn his Attorney General loose on them. That is more than a little frightening, when you think about it.
Ilya Somin also believes, “Mandatory e-verify – a popular proposal for preventing employers from hiring illegal immigrants – is a serious danger to the freedom of natives, as well. Similarly, efforts at mass deportation of illegal immigrants – such as that proposed by Donald Trump – inevitably inflict extensive civil liberties violations on natives.”
Somin also testified for Sonia Sotomayor at the United States Senate Judiciary Committee confirmation hearings for Supreme Court Justice. As such, he is hardy a political conservative and his opinions are only opinions.
I firmly believe those Americans who are fed up with the status quo of both houses of congress and the alien muslim president know much more about who their representatives are than the average American.
Chuck, you your statement about Americans who are going to vote for Trump “…ripe for exploitation by candidates and interest groups. I guess, as President, he wouldn’t just sue somebody who opposed him, he would turn his Attorney General loose on them. That is more than a little frightening, when you think about it. ”
Isn’t it a little more than frightening that obama not only turned his attorney general lose of conservative Americans but also the IRS who has been found guilty of numerous crimes and grievances against Americans.
His wife, Alison Somin works for the US Commission on Civil Rights, and is an expert on affirmative action in higher education and may not be quite as liberal as Ilya…!
greedy frackers will pump as much oil as they can keeping a lid on prices. the rest of the world hasn’t even begun to frack yet. this means the opec oil cartel is gone forever. add to that a lack of demand (mostly from china) for sometime to come and oil is not going to be so easy as buying low and watching your investment grow.
Chuck: “He (Trump) is a self-assured, highly entertaining celebrity who knows how to talk on TV…”
I think that Trump is popular because he voices the sentiment of alot of us who do NOT have the privilege of a having a microphone…..through Trump, for the first time in a long time, we average Joe and Jane Americans are finally being heard!
My disgust is completely bi-partisan!! I am sick and tired of ALL the political garbage from Democrats AND Republicans!!
HELL YES!!! I’ll vote for Trump!!! He CAN’T screw it up any worse than the last SEVERAL presidents we’ve had!
if the two choices are hillary and jeb, i’m moving to canada.
….and by the way, as far as knowing who your representative is in congress, I’m reminded of the Janet Jackson song…”What have you done for me lately??”
It doesn’t really matter what their names are…..evidently they’re ALL sitting around with their thumbs up their butts, drawing a big paycheck from MY tax dollars!!
i couldn’t agree more.
One more time…. the U.S. has ALWAYS done much better for the average American and therefore the economy under the leadership of a President who is a PROGRESSIVE LIBERAL and a Congress that is dominated by PROGRESSIVE LIBERALS…. To say otherwise is untrue and in direct contradiction of our history……
you sound just like heide.
i agree, eagle495. the best 8 years of the market in my lifetime were during the bill clinton years. worst were under george w bush. and let’s not for get the obama, another liberal democrat, who will get credit for rescuing amercia from the great recession. the last 8 years the market has increased from about 700 to 2,000 or so – over 300%. you’ll get no argument from me eagle495. i’m with on this one. but you still remind of heide.
whatever happened to heide, BFD, manny, etc? all the larry bashers left at once. were (pun intended) they the same person?????????????
You might want to open a U.S. Economics History Book, aye? Oh, and you might consider turning off Limphog…… :(
never heard of it.
just looked up limphog. i guess you mean rush limphog (limbaugh). never listen to the guy. i’m a libertarian. his show doesn’t work for me, since is market is statists and conservatives.
i sure miss those guys. i’ll bet larry does too. anyway, back to business. regarding oil … BMW says 100% of the cars they make now will be all electric cars within 10 years. this is just one example. whatever your energy investment plans are, this one statement by bmw should have some bearing on your future investment plans.
Also, Chuck: “…40% of his (Trump’s) Republican supporters are without a college degree, only 19% have degrees….”
From what I’m seeing on the computer, and even in the printed headlines on national news shows, a great MAJORITY of the population is operating on about a fifth grade level (and I may be too generous on that) when it comes to their grasp of the English language!! For example, there’s a difference between there and their, to and too, your and you’re, etc…
But, the ones doing all the miss-spellings, run-on sentences, typographical errors, and subject-verb disagreements…….that’s our voter base, democrat and republican alike!! That part is NOT just only about Trump’s followers!
btw, the BMW i3 all-electric car is only $40,000 list price (compare that with a tesla). also, the beemer electric is now outselling tesla by a nose. makes me wonder how many all-electric cars will be on the road in just 5 years? makes me wonder what the future is for xom, chv, cop, bp and the like?
commodities follow a simple supply & demand model. oil’s supply side will be adequate for years to come.
gold is just another commodity. gold’s supply side is fairly constant, so its price is mostly driven by demand. demand for gold continues to wane.
Who out there really trusts the numbers that companies spout each quarter?? They can spin them adjust them buy back their own stock everything but build new factories and hire new workers.
Historically the 200 day moving average or the 12 month MA have been support for bull market moves. Once crossed, they signal a bear market. But that hasn’t been the case in our current run up from 2009. What about 2010 & 2011? Those bear market attempts were foiled by QE2 & operation twist, respectively. If Yellen is entertaining thoughts of raising interest rates she is NOT in a current mindset for more quantitative easing. And let’s face it, as big as the fed balance sheet is, she is out of ammo. Desperation won’t set in until we hit the long term upward trend line on the S&P some 500-600 points south of here. I’m prepared for all heck to break loose.