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Wall Street Strategies has been providing independent stock market research since 1991 to individual, retail and institutional clients through a balanced approach to investing and trading. Charles Payne, our founder and chief analyst, is routinely sought after for his stock market, political,... More
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  • HOME SALES WEAKER IN CHINA, BETTER IN US - By Jennifer Coombs

    Despite the development of a new Ebola case in New York City, the market is surprisingly calm. All three major indices are in the green at the moment, with the Dow once again getting a boost from positive earnings. Earnings helped boost Microsoft (NASDAQ:MSFT) and Proctor & Gamble (NYSE:PG) this morning, plus Pfizer (NYSE:PFE) is getting a lift after announcing a $0.26 fourth-quarter 2014 dividend and that its Board authorized a new $11 billion share repurchase program. Markets continue to be weak overseas; China in particular is having quite the housing concern as of late. Chinese home prices fell for a fifth straight month in September, wiping out gains from the past year and raising expectations the government will have to implement more economic stimulus measures to cushion the blow. Average home prices in 70 major cities are down 1.3% from a year earlier and this is the first big drop since November 2012. The decelerating property market is bad across the board for China and international companies as the property sector accounts for about 15.0% of China's economy. This may cripple demand in over a total of 40 sectors from steel to cement to furniture. However, domestically, new home sales are actually showing some marginal improvement, which is a great sign for the broader economy.

    In the US, there appears to be a slight improvement in new home sales, which bodes well for the housing sector in general. New home sales in are currently at an annual rate of 467,000 and topped the surge in August, which was declined lower from 504,000 to 466,000. Nevertheless, this rate is the best of the recovery so far going back to July 2008. Some note that price concession may be a factor behind the gains over the last two months. The median price of a new home plunged by a monthly 9.7% to an average price of $259,000. Year-over-year, this rate is in the minus column for only the second time in the last four years, currently at -4.0%. Prior to September, the year-over-year price was trending upward in positive single digits. New home supply is currently stable at 207,000 new homes on the market compared to 204,000 units in August. However, supply relative to sales remains unchanged at 5.3 months.

    Regionally, the Midwest posted the largest monthly gain at 12.3% while the largest market, the South, gained 2.0% in September. As the chart below clearly demonstrates, total sales in the South far exceed all other regions combined. The West was the only region to show any declines as new home sales were down by 8.9%. However, this isn't too concerning following a whopping gain of 28.1% in August. Ultimately, we note that the new home sales report is always volatile, but the revision lower in August averages out the volatility this time around. Thanks to lower mortgage rates and an improving jobs market, new home sales are moving in the right direction.

    Oct 24 1:53 PM | Link | Comment!
  • Nothing But Net! By WSS Research Team

    By Jennifer Coombs, Research Analyst

    You would never know the market was recovering from a massive pullback last week based on how today's session is going. All of the major indices are trading well above 1.0% higher for the session, and even the small cap index, the Russell 2000, is showing some signs of life, trading over 2.0% higher in the morning. Some better-than-expected earnings and optimistic outlooks from the Dow components are lifting the index, namely 3M Co. (NYSE:MMM) and Caterpillar (NYSE:CAT). With light negative news and no crashing international economies, the market is left getting a nice boost from the following economic releases in addition to the weekly jobless claims report.

    Although lagging by a month, the Chicago Fed's National Activity Index (CFNAI) demonstrates that September was actually a very good month for the economy. The CFNAI jumped to +0.47 from -0.25 in August. During the month, three of the four components increased, led primarily by production indicators thanks to a boost in manufacturing. The employment component also got a boost thanks to the drop in the national unemployment rate. The only negative component was consumption, which was offset by a boost in housing starts and permits. However, overall the report shows that growth is accelerating with the 4-week rolling average now at +0.25 compared to the +0.16 reading in August. Below is a chart of the CFNAI since the start of the recession.

    While not as powerful as the ISM reading, Markit released their flash reading for the October purchasing managers' manufacturing index (PMI). The preliminary reading points to a slight slowdown in manufacturing activity during the month of October at 56.2, which is lower than September's final reading of 57.5 and the September flash reading at 57.9. New business growth was described as being weaker than September and the slowest of the last 3 months, although the report mentioned a significant slowdown in growth for export orders. Inflation readings for both raw materials and finished goods slowed to multi-month lows. Ultimately, today's report is roughly in-line with the Philly Fed report from last week, and far stronger than the Empire State report. In the end September proved a strong month for manufacturing, but it's appearing rather difficult for October.

    Lastly, the Conference Board's index of leading economic indicators (NYSEMKT:LEI) increased nicely in September by 0.8%, versus a relatively easy comparison in August at 0.0%. Low interest rates were the primary factor contributing to strength, and only one of the 10 components in the index (consumer expectations) was negative. There was substantial improvement in the labor market and manufacturing as well. Early indications during the month of October so far are mixed with interest rates moving even lower and the consumer sentiment and consumer comfort indexes both showing strength. However, unemployment claims and the early manufacturing readings are on the flat side.

    Oct 23 1:42 PM | Link | Comment!
  • Spending Boom...Or Just A Love Of Motorcycles? By Charles Payne

    Yesterday, the market sold off on disturbing news out of Canada. A lone psycho who recently converted to Islam decided to take matters into his own hands. He murdered a soldier and grazed a solemn monument, not unlike our Tomb of the Unknown Soldier. The frantic search and realization ISIS and other terrorists can reach North America directly or through sympathizers is unsettling. Yet, it is something we have come to understand and hopefully become more prepared. Not all such attacks will be carried out by drug- addicted losers, so vigilance and preemptive police work is crucial.

    On that note, I can only hope its influence on the stock market does not spill over into today's session. In the end, terror is only successful when people live in fear.

    That's a lot of dough for a broke country?

    Let's revisit a potential spending boom...there are intriguing signs Main Street is tired of austerity and ready to join their rich friends and live a little.

    Tuesday, Harley Davidson posted strong earnings in part to a 3% jump in sales of hogs in America.

    Harley Davison's earnings were followed by a report from Polaris yesterday which had great results across the board.

    • Off-road business $823 million +17%
    • Snowmobiles $163 million +13%
    • Motorcycles $63 million +28%

    Few things speak of "play money" than an off- road vehicle and snowmobiles.

    For consumers to start buying these things, they will either throw caution to the wind or feel better about their economic circumstance.

    FedEx reported this morning that it expects to ship 290 million packages between Black Friday and Christmas Eve, up 8.8% from a year ago.

    The question is, where is all this cash coming from? Well, people are going to have to dip into their savings; however, we could be on the cusp of another refinancing boom? In 2012, home refinancing added $1.2 trillion to the economy, which declined to $818 million last year, and until recently, was estimated to tumble to $358 million this year.

    Look at what is happening; the last couple of weeks, refinancing (refi) applications are soaring again at the same point they turned in 2002, 2006, and 2009.

    Investing 101 (Income Statement)

    How to Read Income Statements & Peer Review

    Mattel vs. Hasbro

    The market and investing is all about trends, and it is pretty clear in the toy business which company has the wind in its sails. Hasbro (NASDAQ:HAS) beat earnings estimates in three of the last four quarters, including a huge beat on Monday, while Mattel (NASDAQ:MAT) has missed consistently.

    • Always begin with top-line growth and the cost of revenue.
    • Global success is critical to most large publicly traded companies these days.
    • Make sure companies are not cutting back on advertising or in certain industries, or in research and development. In Mattel's presentation to analysts, they bragged about lower advertising and called it savings.
    • I'm all about margins - not the absolute number, but rather the direction they're moving in… Mattel's margins are better than Hasbro, but the latter's are improving rapidly while Mattel's are spiraling lower.
    • This takes us to earnings per share, the ultimate check on the checklist.

    Peer Review
    Income Statement

    Hasbro

    Mattel

    Earnings Trend

    Beat 3/4 Quarters

    Missed 4/4 Quarters

    Revenue

    +7%

    -7%

    Cost

    41%

    49.5

    US/Canada

    +4%

    -7%

    International

    +11%

    -7%

    Advertising

    +8%

    -12%

    Operating Margin

    19.4/14.5

    20.3/23.9

    Earnings Per Share

    $1.40 +46%

    ($0.24) -20%

    Interesting Trends

    Business with boys is fueling Hasbro, while Mattel's old standby, Barbie is floundering big-time; it has recent hit, The American Girl, may have run out of steam.

    Peer Review
    Income Statement

    Hasbro

    Mattel

    Girls

    +5%

    Barbie -21%
    American Girl -7%

    Pre-School

    -7%

    Fisher Price -16%

    Boys

    +22%

    -12%

    Today's Session

    Today is the busiest day of the week for earnings releases. There were many companies able to deliver on both the top and bottom lines including Alaska Air, Caterpillar, and Dr. Pepper Snapple. The strongest earnings reports from this morning should help boost the market in this session. With earnings beats from 3M Company and Catepillar, the Dow is indicating higher by triple digits. The markets should also be boosted by a stronger-than-expected weekly jobless claims report.

    Company

    Ticker

    EPS (Actual)

    EPS (Est)

    Rev (Actual $M)

    Rev (Est $M)

    AT&T**

    T

    0.63

    0.64

    $32,957.00

    $33,174.81

    Cheesecake Factory

    CAKE

    0.48

    0.57

    $499.10

    $497.03

    Logitech International*

    LOGI

    0.31

    0.17

    $530.30

    $526.22

    Skechers USA*

    SKX

    1.13

    0.91

    $674.30

    $626.64

    Weatherford

    WFT

    0.32

    0.33

    $3,877.00

    $3,983.46

    Yelp

    YELP

    0.05

    0.03

    $102.50

    $98.95

    3M**

    MMM

    1.98

    1.96

    $8,137.00

    $8,223.70

    Alaska Air*

    ALK

    1.47

    1.42

    $1,470.00

    $1,463.40

    American Airlines

    AAL

    1.66

    1.64

    $11,140.00

    $11,136.15

    Arctic Cat*

    ACAT

    1.44

    1.17

    $262.50

    $253.26

    Cabela's

    CAB

    0.81

    0.86

    $886.00

    $928.46

    Caterpillar**

    CAT

    1.72

    1.34

    $13,549.00

    $13,187.01

    Celgene

    CELG

    0.97

    0.94

    $1,982.20

    $1,954.53

    Comcast

    CMCSA

    0.73

    0.71

    $16,791.00

    $16,821.61

    Dr Pepper Snapple*

    DPS

    0.98

    0.88

    $1,580.00

    $1,541.02

    Dunkin Brands

    DNKN

    0.49

    0.47

    $192.60

    $197.05

    Eli Lilly

    LLY

    0.66

    0.67

    $4,876.00

    $4,836.28

    General Motors

    GM

    0.97

    0.93

    $39,300.00

    $38,592.84

    JetBlue

    JBLU

    0.24

    0.26

    $1,529.00

    $1,543.15

    Lorillard

    LO

    0.90

    0.89

    $1,424.00

    $1,325.33

    Mead Johnson Nutrition

    MJN

    0.93

    0.90

    $1,090.70

    $1,079.98

    Potash*

    POT

    0.38

    0.42

    $1,641.00

    $1,570.05

    PulteGroup

    PHM

    0.37

    0.36

    $1,594.70

    $1,594.03

    Raytheon

    RTN

    1.65

    1.60

    $5,474.00

    $5,610.93

    Royal Caribbean

    RCL

    2.20

    2.19

    $2,390.00

    $2,401.94

    Southwest Air

    LUV

    0.55

    0.53

    $4,800.00

    $4,796.03

    Under Armour

    UA

    0.41

    0.40

    $937.91

    $924.21

    Union Pacific

    UNP

    1.53

    1.52

    $6,182.00

    $6,102.38

    United Continental

    UAL

    2.75

    2.68

    $10,563.00

    $10,586.82

    Yandex N.V.*

    YNDX

    0.31

    0.28

    $331.50

    $327.51

    * = Open WSS Idea ** = Dow Component

    Jobless Claims

    Though jobless claims came in lower than expected at 283,000 (vs consensus at 285,000) for the week ended October 18th, this may not be the greatest sign for the October employment report. Initial jobless claims rose approximately 6.0% from lows of an upwardly revised 266,000 the week before. Prior to today's readings, initial jobless claims were steadily trending lower in October, which can be observed in the 4-week average which is at a 14-year low after falling 3,000 to 281,000. Continuing claims data which lag by a week fell by 38,000 to 2.341 million, also at a 14-year low.

    The 4-week average also decreased, down 23,000 to 2.381 million. As a result, the unemployment rate for insured workers remains steady at a recovery low of 1.8%. Overall, the report is a good sign for the economy, but lowers expectations for the October employment report.

    We would like to see the rebound hold, but out of the gate, we're not too sure where it will go.

    Oct 23 10:16 AM | Link | Comment!
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