TheStreet.com's Jim Cramer says the value guys threw this party, so respect the hosts.
Sometimes you just feel beaten into being positive. You just say, "OK, enough, I will accept the positives as they are being put out, not as I believe they are."
That's how I felt yesterday about Freddie Mac (NYSE: FRE) (Cramer's Take). The company put out financials yesterday that looked better than expected, and for once I didn't question whether they were.
I didn't because the earnings from so many of the feckless players -- the Fannies (NYSE: FNM) (Cramer's Take), the Washington Mutuals (NYSE: WM) (Cramer's Take) the MBIAs (NYSE: MBI) (Cramer's Take) and the Ambacs (NYSE: ABK) (Cramer's Take) -- are all being greeted with a bizarre positive response, so bizarre that I bought into the "better than expected" rhetoric because I don't want to fight the value guys who are in control right now.
Elsewhere on the site, Doug Kass has been putting up some very strong arguments that numbers from the likes of Freddie are less than meets the eye.
Macy's (NYSE: M), which was forecast to report a loss of a penny a share in the first quarter, said the difficult retail environment hurt sales and it incurred costs from a restructuring. The loss came to $59 million, or 14 cents a share, compared with a profit of $36 million, or 8 cents a share, a year earlier. (As the numbers are quite fresh, it's possible they include one-time item not yet sorted out and not comparable to analyst expectations.)
John Deere (NYSE: DE) said its second-quarter profit rose 22%. Deere experienced increased demand for its farm equipment, as crop prices kept rising, posting an 18% increase in sales. Profit for the quarter jumped to $763.5 million, or $1.74 per share, a penny below analyst estimates. From premarket early action, it seems shares of DE might start much lower.
Freddie Mac (NYSE: FRE) also reported this morning, saying its first quarter loss widened to $151 million as the U.S. housing market worsened. Somehow, though, the results were not as poor as expected and FRE's loss of 66 cents a share beat estimates of a 92 cents a share loss. FRE's shares are up over 6% in premarket trading.
Still on earnings, last night Whole Foods (NASDAQ: WFMI) and Electronic Arts (NASDAQ: ERTS) reported results. Shares of WFMI are plunging nearly 9% in premarket trading as the organic grocery chain reported a worse-than-forecast 13% profit fall.
Electronic Arts (NASDAQ: ERTS) shares are also declining over 2.8% in premarket trading after the suitor of Take-Two Interactive (NASDAQ: TTWO) reported a widening quarterly loss and a disappointing outlook.
The earnings party of last week was full of fun and frolic. For the most part, if you followed my list of recommendations, you would have had your very own "Fiesta de Finance." (See Week in Preview – May 5)
The earnings season is still in full swing and should provide a great deal of action for the companies that will be reporting. But these companies will have to fight through a few new economic barriers. With oil pushing past historic levels and questions beginning to surface concerning the ability of the investor to continue to support a market that has so many headwinds, the mood is likely to shift moving forward. It is time for discipline, short and simple. Now, more than ever investors need a plan. I cover this strategy in my book, The Disciplined Investor.
In the last installment of The Week in Preview, I was looking for party opportunities in honor of Cinco de Mayo. This week, Misery is the theme. That is the only word that comes to mind with oil at a level that you would have never expected, a massive and unrelenting credit and housing crisis and a banking system that is defunct.
Monday - May 12
We start the week with a report from IndyMac Bancorp (NYSE: IMB). This bank is smack in the middle of the housing problem. It is primarily a lending company that facilitates loans for single-family homes. It's also involved in the origination and trading of mortgages. How does that sound to you as an investment? Shares have slid from $23 in October 2007 to an unbelievable level of $3.50 recently. Ouch... If you are a shareholder still holding on with hope and a prayer for something...anything, keep on dreaming. The good news is that the stock is sporting a yield of 29%. But, if you think that yield is going to be maintained, I have a bridge for sale. Estimates are for a loss of $1.92 per share for the quarter.
TheStreet.com's Jim Cramer says there's some reason for caution, but no reason to get out of the market here.
There all right there. Don't you feel it? Hundreds of stocks at resistance. Hundreds have formed a nice base. The Transports and the Dow are moving in synch. The earnings period surprisingly great, with so many companies not stung by the raw costs. Three straight up weeks, with all the commodity stocks showing signs of rolling over; most at crucial "must hold" levels except for gold, which has already crashed, making the inflation case much dimmer in the eyes of the traders.
Yet, you simply can't read the papers. They are too awful. The cost to the consumers for everything from food to gasoline is humongous and going higher, according to all the food execs I had on last week. We are getting nowhere near a bottom in housing. The layoffs, while not significant in the Labor Report on Friday, sure seem endless. The two major presidential candidates from the Democratic side want to tax the oil companies into oblivion, the leaders of the last year. Exxon (NYSE: XOM) (Cramer's Take) blew the quarter. So did GE (NYSE: GE) (Cramer's Take).
Too far, too fast, based on those grim items.
To me, this is the first week since the Bear Stearns (NYSE: BSC) (Cramer's Take) bottom that I think seems aimless.
But perhaps there's a "split the difference" way to approach this week: options expiration.
TheStreet.com's Jim Cramer says the good stuff out there -- and there's a lot of it -- will keep us going up.
How high can we go? That's pretty much the only question worth asking after you put in a bottom, as we did after the Bear Stearns (NYSE: BSC) (Cramer's Take) collapse.
Nobody's talking about a new bull market. But let me give you some thoughts about what has happened in the past few weeks to make it so that you could become more positive.
First, we went down so much because the systemic risk in the biggest part of the S&P, the financials, was overwhelming. It is why we "overcorrected" because the market feared -- and shorts pressed their bets -- that the following institutions could go under: Bear Stearns, Washington Mutual (WM) (Cramer's Take), Wachovia (WB) (Cramer's Take) -- yes, Wachovia, because of the miserable buy of what turned out to be a really reckless lender, Golden West -- Lehman Brothers (LEH) (Cramer's Take), Merrill Lynch (MER) (Cramer's Take), Citigroup (C) (Cramer's Take), National City (NCC) (Cramer's Take), Capital One (COF) (Cramer's Take) and even Wells Fargo (WFC) (Cramer's Take). Fannie (FNM) (Cramer's Take) and Freddie (FRE) (Cramer's Take), too.
A newly published report by Standard & Poor's said that the performance of organizations such as Federal National Mortgage Association (NYSE: FNM), or Fannie Mae, and Federal Home Loan Mortgage Corporation (NYSE: FRE), or Freddie Mac, could directly affect the U.S. economy and the country's credit rating, especially if they have to be rescued by the government, according to the Wall Street Journal's "Credit Markets" column.
Seagate Technology LLC (NYSE: STX), a hard drive maker, filed a patent infringement suit in San Francisco against STEC Inc (NASDAQ: STEC) over four patents related to technology used to store data on computer chips, the Wall Street Journal reported.
The Financial Times reported that Citigroup Incorporated (NYSE: C) is allowing private equity groups such as Apollo, The Blackstone Group LP (NYSE: BX) and TPG that are bidding for up to $12B of its leveraged loans to 'cherry-pick' from a wide range of assets with different credit ratings and prices.
TheStreet.com's Jim Cramer says that until we have some clarity on the way out, we'll have a tough road ahead.
This is a confusing moment, for the same reason as always -- the darned mortgage market. Dueling plans seem destined to go nowhere while defaults continue to go up. We need something to stabilize the house price depreciation and someone to take the hit: FHA, Fannie Mae (NYSE: FNM) (Cramer's Take), Freddie Mac (NYSE: FRE) (Cramer's Take)? I don't care.
The president's plan sounds like it tries to address who should take the hit -- a little bit bank, a little bit government -- but it is piecemeal, as is everything that has been done about this issue.
I am and have been banking on an expanded FHA plan that would put the onus on that organization to do long, low-interest-rate loan guarantees. It is a simple plan, and I bet the government would make money from it. It would end the madness of trying to figure out how to deal with each one of these stopgappers.
KB HOme (NYSE: KBH) is set to report fiscal first-quarter results this mornings. Analysts expect the company to report a loss of $1.17 per share, according to Thomson Financial. The comparable year-ago profit was 34 cents per share.
Wyeth (NYSE: WYE) is laying off about 1,200 U.S. sales representatives as part of its major companywide program announced recently to cut jobs and other costs and redesign the struggling business as increased competition and fewer new drugs are taking their toll on the pharmaceutical company.
Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) may raise as much as $20 billion in capital as part of an agreement with the Office of Federal Housing Enterprise Oversight that allows them to buy more debt securities. They can raise the capital with common shares, preferred shares or convertible preferred shares, further diluting the already troubled stocks but helping the companies to stabilize. FNM shares are up over 2.5% in premarket trading.
Regional home loan banks will be allowed to boost holdings of mortgage-backed securities by more than $100 billion, federal regulators announced Monday, (pdf) in still another effort to both increase liquidity to and stabilize the mortgage market.
The decision by the Federal Housing Finance Board enables banks in the Federal Home Loan Bank system to increase their holdings of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) securities. The FHFB said it will let banks use their existing capital to increase their holdings of agency mortgage-backed securities for two years. The purchases are restricted to securities guaranteed by Fannie Mae and Freddie Mac.
The move comes one week after the regulator for Fannie Mae and Freddie Mac eased capital requirements for the two home mortgage purchasers, enabling them to add another $200 billion into the mortgage market.
Further, while the overall combined capital infusion amount, about $350 billion, represents a fraction of the $4.5 trillion in mortgage backed securities backed by Fannie Mae and Freddie Mac, economists generally agree the money represents a non-insignificant piece of the housing recovery puzzle. Housing Sector Analysis: Another positive data point for the U.S. housing sector, which brings the total positive data points this Monday to two, a record of late for the beleaguered sector. The additional capital amount is small, in market terms, but every additional capital amount, or investor, helps, to use a cliché. Still, investors (and homebuyers) should keep in mind that the nation faces at least another two quarters of housing sector consolidation, with a 9.6-month supply of existing homes for sale documenting that reality. Until inventory levels drop for several months in a row, economists and analysts will be reluctant to make bolder statements about the housing sector's health.
MOST NOTEWORTHY: Abbott Lab, Fannie Mae, Freddie Mac and Micromet were today's noteworthy upgrades:
Wachovia upgraded Abbott Lab (NYSE: ABT) to Outperform from Market Perform as they believe their earlier concerns have been addressed. Past concerns included the potential for a negative outcome from the FDA panel on Xience and slowing prescription growth of lead drug Humira.
Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) were raised to Outperform from Market Perform at Keefe Bruyette citing recent government actions to stabilize the mortgage markets.
Micromet (NASDAQ: MITI) was upgraded at RBC Capital to Outperform from Sector Perform as they expect positive data for its lead candidate, MT103, by year-end.
OTHER UPGRADES:
ThinkEquity raised Atheros Comm (NASDAQ: ATHR) to Buy from Accumulate.
Goldman upgraded US Steel (NYSE: X) to Buy from Neutral.
General Electric (NYSE: GE) was upgraded at Merrill to Buy from Neutral.
If you thought holding a rally after a huge day was too much, you weren't too far off the mark. Many people ask over and over if this is a real bear market or not. By a classic definition that may still be up in the air, but this is what every bear market feels like. It also goes to show that you almost want to sell every time you feel good about things and then buy when you feel like everything couldn't get any worse. Hearing traders and market technicians say, "Sell the rallies" is becoming quite commonplace. Visa Inc. (NYSE: V) was the largest US IPO ever with its shares soaring after their unprecedented debut yesterday at $44 per share. Investors see promise in electronic payments as shares rose 33% on its IPO debut. Here's the drop for the major averages:
DJIA 12,099.66 (-293.00; -2.36%)
S&P 500 1,298.42 (-32.32; -2.43%)
NASDAQ 2,209.96 (-58.30; -2.57%)
10YR-TBond 3.362% (-0.089)
There were many names on the 52-week lows, but many formerly hot names you wouldn't have guessed. If you look at the major collapse that was seen in the commodity stocks (and commodity prices) that have been major leaders, you'd think they were almost exposed to CDO's too. Oil fell $6.02 to $102.48 per barrel, and that took down Exxon Mobil Corp. (NYSE: XOM) by more than 4% to $84.43; Gold fell down over $59.00 to $944.70 per ounce late in the day and that took Barrick Gold (NYSE: ABX) down 8.7% to $45.25. The Mosaic Co. (NYSE: MOS) was also a huge loser as traders took off more of their agriculture trades with a drop of 11% to $97.25
Naturally, a rally like the one we've seen Tuesday -- spurred by a Federal Reserve rate cut -- can't go one, and today stock futures are indicating stocks may start the session with declines.
On Tuesday, the Dow industrials rose 420 points, or 3.5%, the S&P 500 added 54 points, or 4.2% and the Nasdaq Composite rose 91 points, or 4.2% after Lehman Brothers (NYSE: LEH) and Goldman Sachs (NYSE: GS) beat expectations when they reported earnings (despite reporting lower earnings), providing some relief after the collapse of Bear Stearns (NYSE: BSC). The Fed's rate cut of three-quarters of a percentage point also helped lift market sentiment.
Today, however, the same concerns are continuing to plauge the market, about the credit crisis and the mortgage sector problems. Without much economic data, investors will revert back to focusing on these problems as the dollar continued its fall against the euro, erasing most of yesterday's gains, "on speculation the worst U.S. housing slump in a quarter of a century will swell credit-market losses."
TheStreet.com's Jim Cramer says the value guys threw this party, so respect the hosts. 
The earnings party of last week was full of fun and frolic. For the most part, if you followed my list of recommendations, you would have had your very own "Fiesta de Finance." (
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