• Today’s Fed Statement
    Posted by on April 29th, 2015 at 2:07 pm

    Here’s the surprisingly short FOMC statement:

    Information received since the Federal Open Market Committee met in March suggests that economic growth slowed during the winter months, in part reflecting transitory factors. The pace of job gains moderated, and the unemployment rate remained steady. A range of labor market indicators suggests that underutilization of labor resources was little changed. Growth in household spending declined; households’ real incomes rose strongly, partly reflecting earlier declines in energy prices, and consumer sentiment remains high. Business fixed investment softened, the recovery in the housing sector remained slow, and exports declined. Inflation continued to run below the Committee’s longer-run objective, partly reflecting earlier declines in energy prices and decreasing prices of non-energy imports. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations have remained stable.

    Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Although growth in output and employment slowed during the first quarter, the Committee continues to expect that, with appropriate policy accommodation, economic activity will expand at a moderate pace, with labor market indicators continuing to move toward levels the Committee judges consistent with its dual mandate. The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced. Inflation is anticipated to remain near its recent low level in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate. The Committee continues to monitor inflation developments closely.

    To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term.

    The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. This policy, by keeping the Committee’s holdings of longer-term securities at sizable levels, should help maintain accommodative financial conditions.

    When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run. 

    Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Charles L. Evans; Stanley Fischer; Jeffrey M. Lacker; Dennis P. Lockhart; Jerome H. Powell; Daniel K. Tarullo; and John C. Williams.

  • Twitter’s Plunge
    Posted by on April 29th, 2015 at 10:41 am

    Almost all companies report their earnings before or after the market’s bell. Very few report during trading.

    Yesterday, somehow, Twitter’s earnings were released before the closing bell. The results were bad and the stock plunged. You really can’t beat the market for spreading information, good or bad.

    The exchange quickly halted trading in the stock but the damage had been done. The stock opened up for normal trading this morning.

    big04292015

    The Nasdaq has said the mistake was their fault. Ironically, the bad results were spread around the world thanks to…Twitter.

  • Q1 GDP = +0.2%
    Posted by on April 29th, 2015 at 9:39 am

    I usually look forward to the first estimate of GDP growth, but not this time. I knew the Q1 number was going to be bad and it was.

    The economy grew at a real annualized rate of 0.2% for the first three months of the year. That’s quite poor. Yes, some of it is weather but that can’t explain it all.

  • Morning News: April 29, 2015
    Posted by on April 29th, 2015 at 7:06 am

    German 10-Year Yields Reach the Highest Level in Six Weeks

    Sweden Holds Interest Rates Steady, Increases Asset Purchases

    Once Concerned, China Is Quiet About Trans-Pacific Trade Deal

    Russia’s Gazprom Profits Collapse on Low Oil, Weak Ruble

    Alibaba Freezes Hiring as Ma Says Company Needs to Be Efficient

    Twitter’s Fall Means A Buying Opportunity

    Barclays Investment Bank Profit Rises 37% on Cost Cuts, Advisory

    Time Warner Earnings Tops Views

    Lumber Liquidators Is Crashing After Earnings

    American Airlines Flights Delayed by Apple iPad Glitch

    Volkswagen’s Net Profit Rises 19% Amid Recovery in Western Europe’s Car Market

    Deposit Outflows From Greek Banks Slow in March, Credit Shrinks

    Uber Says It Can Deliver Food in NYC in 10 Minutes

    Howard Lindzon: FOMO meets DOMO meets POMO – What that Means for Markets

    Joshua Brown: The Street Loses Faith in Twitter

    Be sure to follow me on Twitter.

  • AFLAC Earned $1.54 per Share
    Posted by on April 28th, 2015 at 5:02 pm

    AFLAC (AFL) just reported Q1 operating earnings of $1.54 per share. That also matched Wall Street’s estimate. The strong dollar knocked 13 cents per share off earnings.

    “I want to reiterate that our objective for 2015 is to increase operating earnings per diluted share 2% to 7% on a currency neutral basis. If the yen averages 120 to 125 to the dollar for the second quarter, we would expect earnings in the second quarter to be approximately $1.46 to $1.57 per diluted share. Using that same exchange rate assumption, we would expect full-year reported operating earnings to be about $5.74 to $6.15 per diluted share. In April, we executed a make-whole transaction to enhance our consolidated capital position. As a result of this transaction, we will incur a non-operating charge of approximately $.34 in the second quarter of 2015. However, operating earnings per diluted share for the remainder of 2015 will benefit by approximately $.07 due to a net reduction in interest expense. Challenging financial markets and significantly depressed interest rates make it difficult to invest cash flows at attractive yields. Therefore, we will remain very disciplined in selling first sector products in Japan, which will reduce investable cash flows. As always, we are working very hard to achieve our earnings-per-share objective while also delivering on our promise to policyholders.”

  • Express Scripts Earned $1.10 per Share
    Posted by on April 28th, 2015 at 4:15 pm

    After the bell, Express Scripts (ESRX) reported Q1 earnings of $1.10 per share. That matched Wall Street’s consensus. Overall, it was a good quarter.

    “As our industry evolves, and plan sponsors have more business models to choose from, it is increasingly clear that Express Scripts is the best choice to manage America’s pharmacy benefits,” stated George Paz, Chairman and Chief Executive Officer. “At every turn, we add value to healthcare by combining a superior model of patient care with aggressive payer advocacy. Our unique combination of scale, client alignment and unmatched will, consistently creates greater value for patients and payers, while delivering solid results for our shareholders.”

    “Client retention starts with a simple concept: patient care,” said Tim Wentworth, President. “Our model, which surrounds patients with clinically-rooted, data-driven specialized care, is embedded in our innovative solutions that are clearly differentiated and in high demand.”

    Express Scripts also narrowed their full-year guidance by two cents per share at both ends. The old range was $5.35 to $5.49 per share. The new range is $5.37 to 5.47 per share. The new range translates to a growth rate of 10% to 12%. For Q2, which ends on June 30, ESRX expects earnings of $1.39 to $1.43 per share. That’s better than the $1.37 Wall Street had been expecting. The stock is up 3.1% after hours.

  • eBay’s CEO on the Spinoff
    Posted by on April 28th, 2015 at 11:49 am

  • A September Rate Increase
    Posted by on April 28th, 2015 at 9:22 am

    The Federal Reserve begins its two-day meeting today. We already had an earnings report from Ford Motor (F). AFLAC (AFL) and Express Scripts (ESRX) follow after the ball. Plus, we get GDP tomorrow morning.

    Economists aren’t expecting much from Q1 GDP. It looks like there’s an emerging consensus that the Fed will raise rates in September.

    Policy makers meeting on Tuesday and Wednesday in Washington will assess the impact of a harsh winter and a stronger dollar, which may have helped reduce the pace of economic growth to the lowest in a year, economists said. A hiring slowdown last month is adding to caution inside the Federal Open Market Committee, said Thomas Costerg at Standard Chartered Bank in New York.

    “They would like to see more signs of a rebound in the second quarter,” said Costerg, the New York-based senior U.S. economist. “There are some fears that the headwinds from the strong dollar and the drop in oil investment may persist.”

    Seventy-three percent of 59 economists said the first rate increase since June 2006 will come in September, according to a Bloomberg survey conducted April 22-24. That’s up from 37 percent in a March survey, when a majority of economists predicted an increase in June or July.

    Economic growth may have slowed to a 1 percent annual pace in the first three months of 2015 from 2.2 percent in the prior quarter, according to a separate survey. Among the reasons: a decline in energy-related investments caused by a slump in oil prices. The GDP report will be released at 8:30 a.m. on Wednesday in Washington.

    The Fed last month dropped an assurance that it will be “patient” in raising rates. Instead, officials said they want to see further labor-market gains and be “reasonably confident” inflation will move back up toward their 2 percent goal before tightening policy.

  • American Manufacturing Is Back?
    Posted by on April 28th, 2015 at 9:14 am

    From James Surowiecki in the New Yorker:

    Meanwhile, the outlook for industry is better than it’s been in a long time. American manufacturing was decimated during the first decade of this century, with six million jobs gone, and it was easy to believe that manufacturing was a lost cause. Yet it still accounts for more than two trillion dollars in output, and American factories are still among the most productive in the world. What’s more, energy costs here are falling, and labor costs abroad are rising. Suddenly, the U.S. seems like a reasonably affordable place to make high-end products, like G.E.’s jet engines and gas and wind turbines. There’s a growing market for such products, too. As developing countries get richer, they’re spending more on power, transportation infrastructure, and health care. The energy sector, even with the recent drop in oil prices, has a voracious appetite for exploration and drilling. These are all industries that G.E. specializes in.

    This kind of manufacturing, with its automated, high-tech factories, doesn’t create as many jobs as old-fashioned heavy industry, but the gains are still significant. In the past six years, G.E. has opened more than twenty new plants and added more than sixteen thousand new workers in the U.S. “We’re not talking about some nostalgic, morally attractive American folkway,” Muro said. “Advanced manufacturing is a major driver of innovative activity, exports, and economic growth. So it’s good to see a hallmark company refocussing on it.” After twenty-five years of the financial tail wagging the industrial dog, it’s time to try something new.

  • Ford Earned 23 Cents per Share
    Posted by on April 28th, 2015 at 7:44 am

    Our earnings winning streak has come to an end. This morning, Ford Motor (F) reported Q1 earnings of 23 cents per share. That’s three cents below estimates. Fortunately, Ford is sticking with its full-year guidance.

    From the WSJ:

    Ford Motor Co. reported net income was down 7% in the first quarter as profitability in North America and Asia was offset by losses in Europe and South America.

    The Dearborn, Mich., auto maker said it earned $924 million, or 23 cents a share, in net profit for the just-ended quarter, about flat with the $989 million, or 24 cents a share, booked in the same year-ago period when the company had to spend more to recall and fix defective vehicles.

    Revenue totaled $33.9 billion for the quarter, down 6% from a year earlier. Profits before taxes were $1.4 million, about flat from a year earlier.

    Ford’s results missed analysts’ expectations of 26 cents a share, signaling a slow start to a year that Chief Executive Mark Fields has pledged would be more profitable than the last. Ford attributed the miss to analysts factoring in a lower tax rate than the actual rate for the quarter, a difference of about 2 cents.

    Ford’s stock has budged little in the past year, down less than a percentage point through close Monday.

    Ford looks to open a little higher today.