Starbucks (SBUX)

EARNINGS SEASON IS GOOD ENOUGH

Major stock market averages opened higher this morning on some better than expected earnings reports (see below). The Dow is currently up 11 points, and the SPX is up .45%. The NASDAQ is up 1% in early trading. The communications services sector spiked 3% on the back of a much better than expected earnings report by Alphabet (GOOGL). On the other hand, industrial and energy sectors are down on the day. Commodities are mixed: gold and iron ore are in the green but copper and oil are down. WTI crude oil is back down around $55.90 per barrel. Bonds are trading slightly higher this morning. Yields edged lower right after the GDP report (see below).


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

November 5, 2018

November 5, 2018

The major stock market averages are higher this morning in front of the mid-term elections. The Dow is currently up 158 pts and the SPX is up .3%. Several sectors are up more than 1%: real estate, utilities, financials, consumer staples and energy. On the other hand, communications services, tech and consumer discretionary sectors are all down .6% to 1%. The FAANG stocks (Facebook, Amazon, Apple, Netflix & Google) are selling off and boring value stocks are catching a bid. The VIX Index is back up around 20, but VIX December futures are trading down around 19. So traders are perhaps expecting a little more volatility around the election. The US dollar is modestly weaker today and the Bloomberg Commodity Index is up .4%. WTI crude is bouncing up toward $64/barrel after a massive month-long slide. Bonds are trading slightly higher today. The 5-year and 10-year Treasury yields are hovering around 3.02% and 3.19%, respectively. We’re not hearing much chatter about the yield curve lately. That’s because the curve is steepening at the same time rates are rising. This is seen as a normal reaction to strong economic growth. The CEO of Federal Realty (FRT) says interest rates are only rising because the economy is doing well. “I gotta tell you, things look pretty good.”


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

July 28, 2017

Stocks are choppy in early trading (Dow flat; SPX -.27%). Gold miners, biotechs and real estate are up modestly, but most everything else is lower. Individual earnings announcements are the big stories of day. However, we note the US Senate voted down the Republicans’ ObamaCare “skinny repeal” bill, and also North Korea just conducted another ballistic missile test. Most commodities are higher in early trading. WTI crude oil is up around $49.70/barrel. Bonds are slightly higher on the day. The 10-year Treasury yield is trading at 2.29%.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

December 16, 2016

The major stock market averages opened mixed this morning (Dow +28 pts; SPX flat). Real estate and utilities are the best performing sectors, up over 1%. Financials, consumer discretion and materials are lower. So we’re seeing a risk-off trend today. The VIX Index is down 3% to 12.4, suggesting little fear on the part of investors. The dollar is flat today but has been trending upward (+4.5% this year). And yet, commodities are mostly higher on the year. That could possibly signal better global economic growth overcoming the currency headwind. At the moment, WTI crude oil is up to nearly $52/barrel. Bonds are flattish. The 5-year and 10-year Treasuries are yielding 2.07% and 2.60%. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

November 4, 2016

Stocks opened modestly higher this morning (Dow +25 pts; SPX +.25%). The healthcare sector is rebounding (+1%) on strength in biotechs. Banks, transports and telecoms are also in the green. The dollar is a bit weaker today and WTI crude oil is holding steady around $44.70/barrel. Bonds are rising in price this morning. The 5- and 10-year Treasury yields are back down to 1.24% and 1.78%, respectively.


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

October 3, 2016

Stocks opened lower this morning (Dow -72 pts; SPX -.5%). All eleven major sectors are lower in early trading. Utilities (-1.9%) and real estate (-1.6%) investment trusts (REITs) are really taking it on the chin. Cyclical sectors are down less. Emerging markets funds are modestly higher and Asian markets were higher overnight. But most everything else is in the red. The dollar is a bit stronger; WTI crude is hanging on to a modest gain at $48.50/barrel. Bonds are lower as yields move upward. The 5- and 10-year Treasury yields are back up to 1.17% and 1.61%, respectively. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

August 24, 2016

Stocks opened lower this morning (Dow -44 pts; SPX -.2%). The Nasdaq is flat. All ten major market sectors are in the red, led by utilities, telecoms and materials. Gold mining stocks are particularly hard hit (-3%) after a disappointing earnings report from Glencore. Banks, retailers and biotech are actually up modestly. So today is sort of counter-trend for 2016. The VIX Index is trading up to 13 and VIX September futures are up to 15. So a modest increase in expected volatility in the next couple of months. WTI crude oil dropped to $/barrel this morning and the Bloomberg Commodity Index is down .8% in early trading. Bonds are little changed today, with the 5- and 10-year Treasury yields at 1.14% and 1.56%, respectively. Corporate bonds (and junk bonds in particular) are seeing a bid this month, which, by the way, argues for a better economy. The iShares Barclays High Yield Bond ETF (JNK) is up 2% so far this month. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

July 12, 2016

The major stock market averages rose again this morning (Dow +95 pts; SPX +.6%). Cyclical sectors and industries are up the most (banks, transports, semiconductors, oil companies). And small-caps (Russell 2000 Index) have been outperforming large-caps for the last week. The SPX is now up 8% from its Brexit low on 6/27. The VIX Index has backed down to 13.5 and VIX August futures are down to 16.4. So less fear out there. The dollar is a bit weaker and commodities are broadly higher today. WTI crude oil is up 2.7% to $46/barrel. Bonds are selling off (finally), with yields heading higher. The 5- and 10-year Treasury yields are up to 1.06% and 1.49%, respectively. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.

Supplement: April 26, 2016

I'd like to provide a summary of some key earnings announcements over the last several days:

Southwest Air (LUV) beat revenue (up 9% y/y) and earnings (up 33%) expectations for Q1. Fuel expenses fell during the quarter (average down to $1.78/gallon vs. $2 a year ago). Management did their best to talk-down future growth prospects. Fuel costs are expected to rise to $1.85-1.90 this year. Competitors are adding capacity “aggressively” (should be up 4-5% in Q2/3), and that will likely drive revenue-per-seat-mile down. But it’s also true that end demand remains strong. The stock was up 1.8% yesterday after the announcement.

Polaris (PII) reported a 5% year-over-year decline in revenue and a 45% decline in earnings. Sounds terrible, but it was all factored into the stock price and Wall Street forecasts. Actually, revenue was modestly better than expected. Management appears to have issued strong earnings guidance for the year, but gave a very wide range ($6.20/share to $6.80) "due to the persistent unpredictability around overall economic trends and more specifically powersports industry trends for the remainder of 2016." The stock immediately dropped 3% in the wake of the announcement, but clawed its way back through yesterday’s session; it’s up over 3% today.

BB&T Corp. (BBT) beat first quarter earnings estimates and revenue climbed 10% y/y. Traditional banking got a little better: first quarter net-interest-margin rose 8 basis points to 3.43%. Loans to energy companies are in focus. During the quarter, the bank charged-off $154mil in loans, about $30mil of which were energy-related. Non-performing loans (i.e. not current on payments) were up 27% q/q, driven entirely by energy loans. Losses look very manageable. The stock is up 1.7% this morning.  

Schlumberger (SLB) posted first quarter earnings that narrowly exceeded expectations. Revenue also came in slightly better that Wall Street forecasts. Of course, the company noted persistent pricing pressure throughout the industry and said conditions aren’t great. But everybody knows that. The company continues to cut headcount (down by 1/3 since the oil crisis began). The CEO didn’t pull any punches: “This environment is expected to continue deteriorating over the coming quarter given the magnitude and erratic nature of the disruptions in activity.” The stock gapped down at the open this morning but quickly recovered and is now trading flat.   

Starbucks (SBUX) reported first quarter results that matched analyst forecasts. That’s not generally a good thing when your stock trades at 30 times earnings. Overall same-store-sales rose 6% vs. 6.7% expected. Asia-Pacific same-store-sales increased 3% whereas analysts were looking for about 4.5%.  So the stock is down 5.5% this morning, and investors are debating whether this is a good buying opportunity.

Alphabet (GOOGL) missed Wall Street forecasts in the first quarter. Revenue rose 18% y/y and earnings grew 14% y/y. Mobile search and YouTube were very strong. Paid clicks rose 29% vs. 31% in the prior quarter, so a little deceleration there. Investors aren’t pleased with the fact that expenses rose on new hiring activity and investments in non-core areas of the business. The stock is down almost 6% this morning.

Visa (V) narrowly beat Wall Street earnings estimates but came in line with revenue forecasts. In terms of growth, revenue rose 6% y/y and earnings grew about 8%. The company noted weakness in emerging markets economies as well as in regions dependent on oil production. That said, total payments volume grew 12% y/y and transactions processed rose 9%. Management says annual net revenue will grow 7-8% in fiscal 2016 (ending September). They previously guided to double-digit growth. So the stock is down 3.9% this morning. 

Whirlpool (WHR) missed Wall Street forecasts and the stock is down 4% today. Sales fell 4.7% y/y. Excluding the effect of currency (i.e. stronger dollar) sales increased 1%. Earnings shot up 23% y/y but still came up short of expectations. Sales in some regions (Latin America, Europe) were weak. North America, however,  posted growth. Despite disappointing results, management did not reduce earnings guidance for the full year. 


*The foregoing content reflects the author's personal opinions which may not coincide with the opinions of the firm, and are subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment advice or a recommendation regarding the purchase or sale of any security. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk. Asset allocation and diversification does not ensure a profit or protect against a loss. Finally, please understand that–as with other social media–if you leave a comment, it will be made public.