The media has a new darling, a new star the paparazzi cannot ignore. But, the new and the old are not all that different are they... same hair style, same love for music. Yeah baby! The pre-market report is back!
Major index futures look lower across the board this morning, but only mildly so.
We're enthused to relaunch our pre-market report, once called "Morning Coffee" and "Wake Up Call." You asked for it, you deserve and need it, and we're ready to provide it. However, we're just going to stick with the less-jazzy title "Pre-Market Report for now folks, if you don't mind.
Corporate News Driving the Day
We had a series of earnings reports this morning. The news flow was about 50/50, with half noting decent news and the other half, balding on the balance sheet.
Wachovia (NYSE: WB) is down heavy in the pre-market, after reporting a huge loss of $8.9 billion on $6.1 billion of write-downs. However, even excluding those one-timers, WB still missed expectations. Furthermore, the firm slashed its dividend 87%, this after cutting it 41% in April. While the action may enthuse bond holders, as it better insures the solvency of the company and its ability to pay its obligations, it's a signal of further tough times ahead for equity holders. WB also fired 6,350 folk, not good for greater America either. Nonetheless, the shares were down 9% in the pre-market. Optimists are arguing that the new CEO is cleaning house to set a low bar for himself, and limit future risk. If this is so, and you are confident in WB's balance sheet and potential (we have not looked), then this might offer a buying opportunity. Certainly, Vikram Pandit at Citigroup (NYSE: C) would have been better served employing this kind of strategy, and "The Greek" himself would employ it if I was in the role of new CEO.
American Express (NYSE: AXP) reported sad news last evening that sent the dollar free falling on renewed recession concerns. AXP is down 11% in the pre-market, after reporting Q2 EPS that were 38% short of the prior year result, and more importantly, well-below the street estimate. AXP is suppose to be the credit card of the rich and famous, so this news combines with reports of prime mortgage loans souring, and offers evidence that the broader economy is flailing. Clearly, while the report is bad for AXP shareholders it portends even worse news for firms like Capital One Financial (NYSE: COF).
Apple (Nasdaq: AAPL) reported strong results, with earnings rising 31%, 11 cents ahead of consensus; but the shares are down 9% in the pre-market, on concerns about the health of Apple's iconic leader, Steve Jobs. Truly, nobody can argue with the fact that Jobs represents corporate America's most important leader, and if ever there were value in a stock tied to its leader, it's in Apple. This is one of those intangibles folks. It's often missed by many naive analysts too caught up in the numbers to give the common logic consideration; it takes a special analyst to recognize the value of an intangible. This is clear characterization of the art within investing, which is of course comprised of both art and science.
A slew of companies reported weaker year-to-year results that still beat analysts estimates, including UnitedHealth (NYSE: UNH) and Halliburton (NYSE: HAL). DuPont (NYSE: DD) also exceeded views, and looks to be up in early trading.
The ICSC-UBS Weekly Same-Store Sales data showed a strong (stellar in fact) growth of 2.5%. But, before you go out and buy a bottle of top shelf champagne, remember folks, the stimulus checks just finished significant distribution. It should take a week or two more before the rest of you burn that cash like "The Greek" did on a month's supply of potatoes. Remember, the entrepreneurial Greek survives on a diet of potatoes, and now bananas as well. So, we expect the ICSC growth figures to begin heading back downward, toward the poor levels we saw in February.
Secretary Paulson for President!
How about this guy?! Compare Paulson's steady, firm leadership, strong conviction of tone and fearlessness against the meanies in Congress, to say, Ben Bernanke's squeaky, trembling testimonies before the dodo-birds on the Congressional panels. This guy is Reaganess. He's a general, a warrior, infallible. We can at least say he's working his tail off, and doing his best to keep the economy afloat and fix the wrongs. It's too early to say if he'll be good at foresight, and weed out tomorrow's failings before they impact us. But, he's good at clean up.
Here's what Paulson said today... Basically, he offered a vote of confidence, sort of a pep talk for the financial markets. It really was reminiscent of Ronald Reagan's uplifting addresses to the nation. He focused on two priorities, market stability and confidence. Paulson said that further difficulties lie ahead, but that he encouraged financial institutions to sure up capital by reducing dividends and raising new funds.
He said that in the future, intensified regulation and market discipline would prove the most important features of his tenure, to insure stable markets. He said that companies must fail in order to realize the penalties of risk-taking, but he also said the actions to aid Bear Stearns were called for. He discussed IndyMac's failure, the third largest bank failure in our nation's history. He noted that even so, NYSE: IMB represented only 0.2% of the nations banking assets. He reassured Americans on the safety of their insured deposits. He reminded us that the FDIC reports 99% of American banks are well-capitalized. He also urged Congress to pass the housing bill before them tomorrow.
You get the picture... it was a pep-talk. However, this is a far cry from last year's cheerleading that went on as Paulson, Bernanke and Bush tried to make us believe everything was okay. They thought they might prevent disaster by pretending it didn't exist. We can't really forgive Hank for that.
Philly Fed President Plosser also spoke this morning, and he's a notorious hawk. However, Paulson muted him with his address. Oil looks steady, but the dollar is weaker on economic concerns.