Check out Paul Vigna and Madeleine Lim discussing Caterpillar’s quarterly results, U.S. producer prices and the latest statement from the Bank of Canada on Tomorrow’s News Today.
Archive for October 20th, 2009
Posted by Paul Vigna
on October 20, 2009
Dow Jones Industrials, Earnings, Markets, S&P 500 / Comments Off
Dow Jones Industrials, Earnings, Markets, S&P 500 / Comments Off
US stocks drop amid a flood of earnings reports, a surprisingly weak report on producer prices, and strength in the dollar.
DJIA loses 51 (0.5%) to 10041, S&P 500 drops 7 (0.6%) to 1091, Nasdaq Comp falls 13 (0.6%) to 2163. Stocks looked like they’d rise before the bell, given strength in futures trading and a strong reaction to Caterpillar’s earnings. But the strength evaporated quickly, given a reversal in the dollar.
Dollar was weak early, but put in a floor and climbed off it; that drove down stocks and kept crude from vaulting over $80/barrel, a level it breached early but couldn’t hold.
Caterpillar topped consensus views, but it’s becoming apparent that there’s consensus views, and there’s broad investor expectations, and the latter are higher.Producer prices fell in September, and more than expected; housing starts came in lower than expected.
Posted by Paul Vigna
on October 20, 2009
Banks, Economic Indicators, Economy, Markets, Recession, Retail Sales / Comments Off
Banks, Economic Indicators, Economy, Markets, Recession, Retail Sales / Comments Off
The long night's not over yet, but dawn's closer.
By John Shipman and Paul Vigna
Freight-haulers’ appraisal of customer demand over the summer was pretty bleak, and so far their views from the third quarter aren’t sounding much better.
Truckers and railroads tend to be a fair gauge of overall economic activity. If a recovery really is taking root, it should come through in the voices of the transport executives seeing it first.
There are hints of improvement, but maybe not enough.
“We have noted some recent signs of firming demand, however, the freight economy remains weak and we are not anticipating a rapid improvement,” J.B. Hunt Transport said in its third-quarter results Monday. The company reported volume rose in its biggest business, but revenue fell 14% due to, among other issues, competitive pricing.
The company did note some “seasonal improvements” in volume, but complained that pricing is still “challenging,” echoing comments made after its second quarter.
Continue reading…
Posted by Steven Russolillo
on October 20, 2009
Dow Jones Industrials, Earnings, Markets / Comments Off
Dow Jones Industrials, Earnings, Markets / Comments Off
Caterpillar’s (CAT) 3Q profit report had everyone amped up this morning, but delving deeper into the details suggests it may not be as great as first thought.
CAT’s sales were down 44% and profit fell 53% from a year ago. But it’s outlook excited investors as the maker of construction and mining equipment offered an optimistic take on the economy.
It tightened its full-year EPS guidance range by lowering the top end and bringing up what could’ve been considered an overly conservative bottom end, guiding to $1.85-$2.05 from a previous $1.15 to $2.25 range.
CEO Jim Owens believes 3Q “marked the low point” for sales and revenue “in what has been the toughest recession since the 1930s.” He says there are “encouraging signs” that recovery is underway, but strength and timing is still uncertain.
Posted by Steven Russolillo
on October 20, 2009
Deflation, Economy, Federal Reserve, Housing, Inflation, Markets / Comments Off
Deflation, Economy, Federal Reserve, Housing, Inflation, Markets / Comments Off
You will feel a great need to alter your prices...
September producer price index dropped 0.6%, a larger decline than economists were expecting, prompting bloggers to once again worry about the dreaded D-word.
Prices won’t close out 2009 in outright free-fall, as recent increases in industrial production suggest prices could actually rebound sooner than later. But housing prices are still dropping, labor costs are falling, holiday spending remains depressed and discount shopping is still prevalent, the Economist’s Free Exchange blog says.
“The bigger threat at this point is clearly deflation, rather than inflation, and so it is somewhat disconcerting to see the Fed working to convince inflation hawks that it takes their concerns seriously,” blog says.
It’s still unlikely the Fed will tighten before the second half of 2010, “but there is a good case to be made that it should be easing further,” blog notes.
Posted by Steven Russolillo
on October 20, 2009
Economic Indicators, Economy, Housing, Markets / 3 Comments
Economic Indicators, Economy, Housing, Markets / 3 Comments
This baby's still available
Home building rose for the third time in four months, but keep in mind this trend’s sustainability is certainly in question.
Housing starts increased 0.5% to a 590,000 annual rate, albeit less than economists were expecting, which proves that the housing market is still very reliant on government support and low interest rates despite earlier signs of recovery.
With the $8,000 first-time home buyer tax credit set to expire and no imminent signs that it’ll be extended, it’ll be interesting to see how the housing market will react if the government support doesn’t continue.
“The recent trends in starts becomes irrelevant in extrapolating future building if the tax credit doesn’t get extended,” says Miller Tabak equity strategist Peter Boockvar.
He thinks another “cash-for-clunker type hangover” could occur in the housing market, especially since “most of those who took advantage of the tax credit were going to buy a house anyway,” he notes.
“All we did was pull forward demand,” similar to what the auto industry did this past summer.
Investors are busy talking about the shape of the recovery. Will it be V-shaped, will it be W-shaped? Will it be L-shaped?
Maybe they should look for a recovery that’s O-shaped.
In an O-shaped recovery, the business cycle is restored. That means investors are buying products, which is driving activity at the nation’s companies, which spurs them to hire more workers, which pushes up wages, which creates demand for more products.
Right now, we don’t have that. Oh, sure, people are buying things. We all have to buy things. But there isn’t the kind of demand for goods that drives the whole business cycle. Any demand evident is coming via government stimulus: car buying, home buying, even stock buying (but that’s a more complicated story.)
That’s the subject John and I hit in today’s Journal:
The U.S. government is dousing the economy with trillions in stimulative dollars. Spending those dollars is supposed to clear inventories, drive new production, propel hiring and push wages higher—with the end result being a return to sustained year-over-year profit growth. But if this virtuous circle is to be restored, it should first start showing up in demand.
Without that demand, the circle may not get rolling again for some time.
Posted by John Shipman
on October 20, 2009
Dow Jones Industrials, Earnings, Economic Indicators, Markets, Recession, S&P 500 / Comments Off
Dow Jones Industrials, Earnings, Economic Indicators, Markets, Recession, S&P 500 / Comments Off
Substantial day for earnings news, with Dow Industrials Caterpillar, DuPont, Coca-Cola and Pfizer among the high-profile names reporting results this morning. And strong reports from Apple and Texas Instruments late yesterday have left some afterglow which should help tech stocks start out strong when regular trading gets underway.
US dollar index is weaker again, though oil isn’t benefiting, down a little. S&P futures up 5.80; DJ futures up 52. Ten-year slightly higher, yield at 3.38%. Two bits of economic data due at 8:30am — September PPI and housing starts.
Caterpillar shares up 5% premarket at $60.90 after 3Q results, and on the heels of a 6% run-up yesterday. Sales were down 44% and profit down 53% vs year ago. CAT tightened its full-year guidance range for EPS, excluding redundancy costs, and actually lowered the top end and brought up what could’ve been considered an overly conservative bottom end, guiding to $1.85-$2.05 from a previous $1.15 to $2.25. CEO Jim Owens believes 3Q “marked the low point” for sales and revenue “in what has been the toughest recession since the 1930s.” Says there’s “encouraging signs” recovery is underway, but strength and timing is still uncertain.
