U.S. stock futures were lower Tuesday morning as economic concerns increased. China, which boosted markets only Monday with its own stimulus plan, today showed signs of slowing growth as well. World markets responded, with Asia markets posting losses and European markets opening down as well. Oil prices declined again to as low as $60 a barrel. Gloomy corporate reports as well as housing and financial sector woes are weighing heavily on markets today.
[Note: Extended hours indications can change as news progresses, changes.]
American Express Co. (NYSE: AXP) applied to become a commercial bank on Nov 5. Monday night the Federal Reserve approved the request due to "emergency conditions." AmEX could now accept deposits, thus bolster its cash, and gain quicker access to Fed financing.
Starbucks Corp. (NASDAQ: SBUX), the once high flying company, reported Monday 97% lower profit in its fourth quarter. Excluding items, Starbucks earned 10 cents per share, below analyst estimates of 13 cents per share. Fewer U.S. customers and higher costs for closing poorly performing stores led to lower sales and profit. SBUX shares declined 2.75% in after-hours trade 7:56 p.m.
"The economic crisis began in the housing sector and will likely end there," says Stephen Leeb. In his top-notch The Complete Investor he takes a contrary look at two homebuilders.
"Though my view may sound contrarian to a fault, a close look at the housing market, especially given recent government actions, suggests a recovery will happen sooner rather than later and be stronger rather than weaker.
"When home prices decline, buyers pull back, afraid of buying too soon. This leads to further declines and further buyer reluctance. No surprise, then, that housing starts have fallen dramatically.
"Meanwhile, consumers, who had been borrowing money based on the value of their homes, found this source of credit drying up, which dealt a further blow to the economy.
"It is a vicious circle indeed. Ultimately, though, it will almost certainly end with more willing lenders and a stronger housing market as the huge amounts of money being flooded into the system start boosting balance sheets of potential lenders.
Societe Generale upgraded shares of Credit Suisse (NYSE: CS) to Buy from Sell as they believe the company is the European investment bank investors should own as sentiment gradually improves.
Societe Generale also raised Deutsche Bank (NYSE: DB) to Hold from Sell as they believe it has managed the credit crisis well and that the government bailout of the GSEs will improve investor sentiment.
Citigroup upgraded shares of Kimberly Clark (NYSE: KMB) to Buy from Hold as they expect the company to benefit from falling materials and energy prices. The firm raised their target to $71 from $60.
UST Inc (NYSE: UST) was lifted at Morgan Stanley to Equal Weight from Underweight.
Corning (NYSE: GLW) was upgraded to Overweight from Market Weight at Thomas Weisel.
Analyst downgrades:
Credit Suisse downgraded the U.S. Homebuilders sector to Market Weight from Overweight to reflect deteriorating traffic trends and higher valuations. In addition, the firm cut Toll Brothers (NYSE: TOL), Pulte Homes (NYSE: PHM), D.R. Horton (NYSE: DHI) and KB Home (NYSE: KBH) to Neutral from Outperform.
U.S. stock futures were higher Tuesday morning, pointing to a continuation of Monday's strong rally, albeit with more moderate gains, as the government takes over mortgage giants Fannie Mae and Freddie Mac. Investors will eye data on pending home sales and wholesale trade due at 10:00 a.m. today, and will also be interested in the OPEC meeting as oil resumed its decline.
Meanwhile, British natural gas producer BG Group PLC abandoned its hostile takeover bid for Origin Energy Ltd., Australia's second-largest power retailer, on Monday, after Origin announced a $7.9 billion coal seam liquefied natural gas joint venture with ConocoPhillips (NYSE: COP).
In what seems to be appropriate on a day housing data is on tap, Credit Suisse downgraded four U.S. homebuilders -- Toll Brothers (NYSE: TOL), Pulte Homes (NYSE: PHM), D.R. Horton (NYSE: DHI) and KB Home (NYSE: KBH) -- to Neutral from Outperform due to lower traffic and valuation. The broker also said home prices need to fall 9% further and credit availability must improve to spur sales and restore affordability.
Staying with analyst calls:
Procter & Gamble (NYSE: PG) was downgraded by Merrill Lynch to Neutral from Outperform, citing valuation.
Hewlett-Packard (NYSE: HPQ) was upgraded by Bernstein from Market Perform to Outperform.
Kimberly Clark (NYSE: KMB) was upgraded by Citigroup from Hold to Buy. The target prices was upped from $60 to $71.
eBay (NASDAQ: EBAY) was initiated by Stanford Research with Hold and $26 target price.
The Wall Street Journalreported that a panel of medical experts think Pfizer (NYSE: PFE)'sproposed osteoporosis drug should be restricted to women at high risk of fractures.
Stock futures were lower this morning as oil rose back above $110 a barrel and investors awaited a barrage of economic data due today including weekly oil inventories. Other economic indicators include data on employment, manufacturing and productivity. Also, retailers will be announcing August same-store sales. Overall, sales are expected to rise 2%. Meanwhile, the Bank of England and the European Central Bank are deciding their interest rate policy today, where the ECB could tighten.
The first of the retailers has already reported August sales. Wal-Mart Stores Inc. (NYSE: WMT) said sales increased 3% in August, beating its forecast. Seems discounts drew shoppers. WMT shares are up over 1% in pre-market.
Unfortunately for Boeing (NYSE: BA), The International Machinists and Aerospace Workers union, which represents nearly 27,000 machinists, voted to strike as they rejected Boeing's contract offer. The union, however, postponed the strike by 48 hours as the two parties go to mediation. Boeing will likely suffer from a strike at a time it's struggling to stand by its Dreamliner obligations. BA stock is down over 1% in pre-market.
BP PLC (NYSE: BP) shares stand to rise after it finally reached an agreement with its billionaire Russian partners have over TNK-BP. While BP remains with a 50% holding in the venture, it has made many concessions, including agreeing to have the CEO Dudley leave. Shares are up over 2% in pre-market.
While the earnings crunch for this quarter is all but over, there is still plenty of action in the earnings arena this coming week. For instance, analysts surveyed by Thomson Financial are expecting America's Car Mart Inc. (NASDAQ: CRMT) and Campbell Soup Co. (NYSE: CPB) to be among this week's top earnings gainers.
Bentonville, Ark.-based America's Car Mart is expected to post net income of 38 cents per share (up 52.6% from the same period a year ago) on revenue of $73.8 million (up 25.8%). The used car dealer chain has tended in recent quarters toward positive surprises -- by 21 cents per share, or 73.5%, in the previous quarter. The long-term EPS growth forecast is 15%, about the same as the S&P 500. The consensus recommendation of analysts is to buy CRMT.
Campell is tentatively scheduled to report this week, and the world's biggest soup maker is expected to post net income of 25 cents per share (up 44.0% from a year ago) on revenue of $1.7 billion (up 7.5%). The Camden, N.J.-based company has just missed earnings estimates in the past three quarters. Its long-term EPS growth forecast is 7.5%, which is less than the industry average, but about the same as rivals Kraft Foods (NYSE: KFT) and Heinz (NYSE: HNZ). The analysts' consensus recommendation is currently to buy Campbell.
TOL opened this morning at $22.42. So far today the stock has hit a low of $22.33 and a high of $23.43. As of 12:15, TOL is trading at $23.43, up $1.10 (4.5%). The chart for TOL looks bullish and S&P gives TOL a positive 4 STARS (out of 5) buy ranking.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $17.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just seven weeks as long as TOL is above $17.50 at October expiration. Toll would have to fall by more than 25% before we would start to lose money. Learn more about this type of trade here.
I've been told that companies that are poised for long-term success operate based on a respect for the intelligence of their customers. In an interview on CNBC, Robert Toll, the CEO of leading homebuilder Toll Brothers (NYSE: TOL) demonstrated his lack of respect for consumers: "When we hold specials, which are not really specials, but just some reconfigured incentives to make it look as though something special is being given away . . ."
That's right, the CEO of a leading homebuilder went on CNBC and announced that the company's heavily-marketed sales promotions are essentially total bull crap -- just "reconfigured incentives designed to make it look as though something special is being given away . . ." Why would he say that? With that one statement, Mr. Toll has told anyone who might have dealings with his company -- either as home buyers or as investors -- that the company's tactics aren't exactly straightforward and honest.
So, if you're intrigued by an ad for a good deal on Toll Brothers homes, remember: it's just reconfigured incentives designed to make it look as though something special is being given away. The pounding that the market has given the stock over the past few years may be something similar.
Are you waiting for the malaise in the housing market to finally lift? Of course you are, who isn't? I can't wait for the day when headline news suddenly turns unambiguously positive. And I can't wait for the day when the market as a whole decides to anticipate it. For now, though, we've still got sour data to contend with. According to this article, famous luxury home-builder Toll Brothers (NYSE: TOL), whose competitors include Centex (NYSE: CTX) and Lennar (NYSE: LEN), reported preliminary results for the third quarter on Wednesday that showed a big decrease in home-building revenues. They decreased 34%, coming in at roughly $796 million. Seems par for the course, all things considered.
But there are more declines. Backlog orders decreased over 50%, and net signed contracts took a dive of 35% (both of these metrics are in dollar terms). The company is also issuing write-downs that will fall somewhere between $100 million and $200 million. Depressing stats, but according to the company press release, CEO Robert I. Toll believes that there is pent-up demand lurking out there in the marketplace for homes and he used the fact that total cancellations were down during the quarter as a tool for positive spin. Plus, the home-building revenue number did, in fact, beat estimates, according to Reuters. Does this make me want to run out and buy the stock?
No. Even though the stock has been strong in the last month, and even though it was up nearly 1% at the end of the trading session on Wednesday (a pretty nice showing on an otherwise overall downer of a day), I don't think I'm ready to initiate a position in Toll Brothers. I'd have to see a significant pullback in this one before my interest becomes piqued (some better economic news wouldn't hurt, either).
Disclosure: I don't own any company mentioned; positions can change at any time.
U.S. stock futures were mixed Wednesday ahead of retail sales, import price data and oil inventories reports. Analysts expect retail sales, to be reported at 8:30 a.m., rose 0.5% in July. Futures may find direction after the report. Meanwhile, oil futures rose ahead of the inventory report due out at 10:35 a.m., the dollar fell against some currencies and gold futures rose. [Update: Following a decline in retail sales in July, futures turned lower.]
Deere & Co. (NYSE: DE) has just reported quarterly results and shares sank 6.1% in premarket trade. The world's largest maker of farm machinery, said earnings in the latest quarter rose 7% and revenue increased 17% as soaring crop prices boosted global demand for its agricultural equipment. The company, however, missed on earnings and gave forecast that was lower than estimations.
Earnings are still due from Macy's (NYSE: M), among others.
Nvidia (NASDAQ: NVDA) shares rose 7.3% in premarket trading despite reporting a $121 million loss Tuesday. Investors liked that Nvidia announced a stock buyback of $1 billion and predicted margin improvement.
Applied Materials (NASDAQ: AMAT) also rose, up 1.2% in premarket trading after the largest maker of semiconductor-production machinery forecast better-than-estimated orders and CEO Mike Splinter said conditions will improve. Its fiscal third-quarter profit plunged 65%, but sales results beat estimates.
Toll Brothers (NYSE: TOL) shares are trading higher after the company reported a second-quarter loss of $93.7 million, or 59 cents per share, handily beating analysts' warnings of a loss of 89 cents per share. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on TOL.
After hitting a one-year high of $29.15 last June, the stock hit a one-year low of $15.49 in January. TOL opened this morning at $21.39. So far today the stock has hit a low of $21.10 and a high of $21.98. As of 12:30, TOL is trading at $21.77, up $0.81 (3.9%). The chart for TOL looks bullish and deteriorating, while S&P gives the stock a bullish 4 Stars (out of 5) buy rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $15 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in just three and a half months as long as TOL is above $17.50 at September expiration. Toll Brothers would have to fall by more than 31% before we would start to lose money. Learn more about this type of trade here.
U.S. stock futures were lower Tuesday morning as economic concerns increased. China, which boosted markets only Monday with its own stimulus plan, today showed signs of slowing growth as well. 
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U.S. stock futures were higher Tuesday morning, pointing to a continuation of Monday's strong rally, albeit with more moderate gains, as the government takes over mortgage giants Fannie Mae and Freddie Mac. Investors will eye data on pending home sales and wholesale trade due at 10:00 a.m. today, and will also be interested in the OPEC meeting as oil resumed its decline.
While the earnings crunch for this quarter is all but over, there is still plenty of action in the earnings arena this coming week. For instance, analysts surveyed by Thomson Financial are expecting 
I've been told that companies that are poised for long-term success operate based on a respect for the intelligence of their customers. In an 
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