US stocks basically flat, after two straight rallies, as investors were mainly content to sit on their hands and wait to see how Alcoa’s earnings report panned out after the bell (and it wasn’t so bad after all.)
DJIA eases 6 to 9726, S&P 500 adds 3 to 1058, Nasdaq Comp rises 7 to 2110. Big Board volume’s low, again.
Family Dollar and Costo report earnings, and the former’s sharp jump in EPS shows how frugal consumers are getting. Speaking of frugal consumers, the Fed reports that consumer credit slid for a seventh straight month in August, matching the longest such move on record (in 1991.)
But most people were waiting for Alcoa’s earnings, which came after the bell, the first big name to post 3Q earnings. The aluminum giant actually posted a profit of 8c/share, when it was expected to post a loss of 9c a share. That broke a string of three quarter of losses. Still, profits were down from last year’s 3Q, when the company earned 33c/share.
It wouldn’t surprise us if corporate earnings overall turn out about roughly like that, too. Better than expected, down sharply from a year ago. And somewhere, somebody will tell you that’s a winning formula.
Maybe Hoenig's been wearing a set like this lately
Two bankers yesterday, sounding two very different notes.
“A vast amount of stimulus has been put in place to spark this recovery, and I believe it will prevent a double-dip recession,” Kansas City Fed President Thomas Hoenig said last night.
“I see nothing that conflicts with the widely held opinion that we are in recovery.”
Nothing? Nothing, at all, Tom?
And now this, also yesterday, from Marshal & Ilsley (MI) CEO Mark Furlong after his bank said its third-quarter loss will be wider than expected:
“There simply are an inadequate number of consistent trends to reinforce the sentiments that the economy is stabilizing and better times are within sight.”
Ugly September jobs report, consumers’ revolving credit contracting 13% at annual rate in August, capacity utilization near all-time lows, work week at all-time low, mounting delinquencies, foreclosures and still-falling home prices — just a few things that make us dubious that “we are in recovery,” with all due respect to Mr. Hoenig.
So Costco and Family Dollar posted earnings today, and while the former saw a slight dip in earnings, the latter saw a sharp rise. What that says to us is that even within the discount retailing world, consumers are being more selective about how and where they spend their money.
And that, dear readers, is Tomorrow’s News Today. (Well, it’ll probably get off the front page by Alcoa, actually, but still, you get the point.)
Well, I was right about two things. Consumer credit continued its slide in August, and the reporting of it still isn’t moving the market.
The Fed reported its consumer credit numbers for August, showing that credit contracted for a seventh consecutive month, by $12 billion. That was more than the $7.5 billion expected. And even during a month that saw a big spike in auto sales, nonrevolving credit, which includes auto loans, dropped.
In today’s Ahead of the Tape column for the Journal, I noted the seven months match a stretch hit in 1991 for duration. But this stretch has seen a steeper decline, and if it should stretch into an eighth month, it would represent a new record.
It’s hard to know how the numbers break down. The Fed doesn’t break it down by income levels or demographics; it also isn’t clear how much of it is consumers paying down debt, or just defaulting on their cards, leaving the banks to write-off the debt.
The report itself isn’t a market mover; it comes out late in the day, and until recently it generally just rose. But seven months is pretty much a trend.
And it’s a trend that’s dovetailing with other trends that is the concern. For one thing, unemployment is not improving as fast as the bulls expected. For another, retail sales tomorrow are expected to show a 13th consecutive month of declines. People are either unemployed, underemployed, having their wages cut or just generally worried about the job they have.
It seems clear at least to me that consumers will not be spending very freely this year. The only “must have” item this year is a job.
Karen Talley, who covers retail for Dow Jones, sent us the following bit of news for Market Talk (if you’re not aware, this blog is an offshoot of the Market Talk column we write for Dow Jones Newswires.)
MARKET TALK: Target Wants To Be Player For Holiday Toy Season
1:20 (Dow Jones) Target (TGT) joins the Christmas toy wars, cutting toy prices by as much as 50%, including GI Joe’s that will now go for $14.99 and Barbies for $5. The move follows Wal-Mart (WMT) saying last week it will offer more than 100 toys at $10 during the holidays and Toys R Us making a big Christmas push as well. TGT up 0.2% to $48.20. (KJT)
See that? It’s what, Oct. 7, and Target and Wal-Mart are already fighting for holiday sales. Not just setting up their strategies, not planning their pricing platforms, but they’re already slugging it out in the aisles. Forget that Christmas is nearly three months away; these guys don’t have three months to wait for you to buy a GI Joe.
The September jobs report was a perfect reminder that the labor front continues to get worse before it gets better. And with no drivers for job growth on the horizon, the government may look to take matters into its own hands.
NYT reports the government may reward companies in the form of tax credits for creating new jobs. It’s an idea that hasn’t been tried since the 1970s, but it’s increasingly gaining support – especially as the unemployment rate approaches the double-digit rate. The goal is to help jobless folks find work as well as encourage small-business development.
The Times has the details:
One version of the approach, to be unveiled next week by the Economic Policy Institute, a labor-oriented research organization, would give employers a two-year tax credit if they increased the size of their work force or added significant hours of work (for example, making a part-time worker full time). Employers would receive a credit worth twice the first-year payroll tax for each new hire, amounting to several thousand dollars, depending on the new worker’s salary.
“It’s beautiful if it can be timed at a dire moment like this, when unemployment is way too high and appears to be going somewhat higher,” said Mr. Phelps, an economics professor at Columbia, lamenting that the president dropped it from the $787 billion stimulus plan approved in February. “But it’s a pity that this wasn’t done a year ago.”
The Times says the proposal has some bipartisan appeal , which is definitely much-needed as its hard to find a sector of the economy that will fuel job growth in the near future.
My first job at Dow Jones was on the spot news desk, where all day long we rewrote press releases into wire stories. Earnings season was like organized chaos, 50-60 people sitting around, writing story after story after story, with pressure to turn them around within minutes and get to the next one.
We had these massive printers that would run nonstop for five or six hours at a stretch, churning out the press releases we’d rewrite. You could measure the piles in feet. The pressure was intense, but it was a great crash course in learning how to write fast, tight and accurately.
Tom Middleton was one of the copy editors on the desk back then, and I remember him calling me over one time to go over a story. One of the things I’d written was that such-and-such corp., I forget who it was, had posted “record earnings.” Tom deleted the words; companies, he explained, are supposed to report record earnings, because every quarter, every year, they’re expected to earn more money than the previous year.
That’s profit growth, and that is what investors are paying for. Them bragging about it is superfluous.
I relate this little story because today Alcoa, one of the 30 members of the DJIA, will report 3Q earnings, kicking off the 3Q earnings season. But there aren’t likely to be many record earnings reports this quarter. Mostly, companies are going to be happy to report earning anything. And the extent to which investors accept that depends largely upon how well they manage expectations.
Premarket tone for US stocks looks more relaxed after two sessions of fairly frenzied buying. Investors continue to embrace the dips as the fear of missing more upside continues to dominate concerns about losing money. Gold and oil keep moving higher as the US dollar has trouble gaining any traction.
Kansas City Fed’s Hoenig sounding hawkish last night, on the heels of Australia’s rate hike, suggesting rates here may move higher sooner rather than later. Even a 1% to 2% overnight rate is still very accommodative, he noted. Wounded banks in the midst of trying to outearn their massive losses might disagree.
August consumer credit due at 3:00 p.m; in July it fell $21.6B. Alcoa reports 3Q after the close.
S&P futures up 0.40; DJ futures up 8. Ten-year also flat, yieldat 3.25%.
J.P. Morgan reported some strong earnings today. But what this bloggers eye were some of the sub-numbers in the earnings report. The bank booked $1.8 billion in investment banking fees. But don’t be fooled – that wasn’t from big M&A advising. But $429 million was in advisory fees. Instead, that $1.3 billion + remaining fees […]
I am not going to apply online to be lululemon’s next CEO because I don’t want my application getting lost in the pile. The slightly troubled yoga clothing retailer is taking applications from anyone on its website. Click here if you would like to apply. And click here to read more details from The Associated […]
