We're a couple weeks from the decisive day for Election 2012 – meaning no one is exactly sure what the market is about to do. "Once the sun comes up on Nov. 7, all bets are off," Money Morning's Global Investing Strategist Martin Hutchinson told readers of his Permanent Wealth Investor newsletter recently. "After that, […]
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Stock Market Today: These Earnings Expose a Huge Concern for 2013
The stock market today opened lower as yet another American corporation, Caterpillar Inc. (NYSE: CAT), disappointed investors with its earnings call.
Here's the market roundup, along with one stock that is soaring today because analysts say there is a "50% chance" it could be acquired.
- Caterpillar lowers earnings outlook for second time this year– The world's largest construction maker reported third-quarter earnings that beat expectations but cut its 2012 sales and earnings forecasts. CAT joins a growing list of American firms including McDonald's Corp. (NYSE: MCD), Google Inc. (Nasdaq: GOOG), and General Electric Co. (NYSE: GE) that have either missed expectations or lowered their outlook this earnings season. Caterpillar reported third-quarter net income of $1.7 billion, or $2.54 per share, compared with $1.14 billion, or $1.71 per share a year ago. Adjusting for one-time items CAT earned a profit of $2.26 per share, ahead of analysts' estimate of $2.22. The troubling facts for CAT include its order backlog fell 18% from the second quarter of this year and the Peoria, IL-based company now expects to generate much lower sales for the remainder of this year and 2013.
The company currently estimates it will generate net income between $9 and $9.25 per share on sales of $66 billion for fiscal 2012. This is down from a July forecast calling for EPS of $9.60 on revenue between $68 and $70 billion. In 2013 the company said its revenue could range between 5% higher or lower than this year's results. "The biggest concern is the declining backlog, which would imply a more challenging year next year, especially for mining, and whether or not North American construction will re- accelerate," Larry De Maria, a New York-based analyst for William Blair & Co. who has a buy rating on the shares, told Bloomberg News today in a telephone interview. "Caterpillar's business is very economically sensitive. Due to the softening of the global economy and increasing uncertainty, order rates have declined." After a bad start in trading today CAT stock has rebounded and is up 1.1% as of noon.
While earnings have taken their toll on corporate giants, this stock is up almost 30% today on hopes of a buyout:
Adult Stem Cell Cures Are Ready to Blow the Lid Off the Market
You probably know that macular degeneration is the leading cause of vision loss among the elderly.
The disease affects the retina, a section of the eye that provides the kind of sharp, central vision needed to see objects clearly.
Indeed, age-related blindness affects between three and 10 million people in the U.S. alone, including some of your fellow Money Morning readers.
So it's no small news that a new type of treatment based on stem cells could provide a cure for blindness – and in the very near future.
As I explained on Friday, this is just one part of the exciting new field of adult stem cells.
A research team from Columbia University is responsible for this one. Their findings center on induced pluripotent stem (iPS) cells.
These are adult cells – culled from a patient's own skin – that are tweaked to induce embryonic properties. Team members noted that, just like embryonic ones, IPS cells can grow to become a wide range of different human tissues and organs.
In this case, the transformed human skin cells were shown to restore vision in blind mice who suffered from macular degeneration.
In the study, team members got the IPS cells from a donor who is 53 years old. They added a cocktail of growth factors for use in the eyes of 34 blind mice that had a genetic mutation that caused their retinas to break down over time.
Control mice that got either saline or dormant cells showed no improvement in their vision. But mice that received the treatment had better vision that lasted well into old age.
"It's often said that iPS transplantation will be important in the practice of medicine in some distant future," noted team leader Dr. Stephen Tsang. "But our paper suggests the future is almost here. With eye diseases, I think we're getting close to a scenario where a patient's own skin cells are used to replace retina cells destroyed by disease or degeneration."
And it gets better…
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Google (Nasdaq: GOOG) Earnings: Early Release Adds to Woes
Google Inc. (Nasdaq: GOOG) found out the hard way yesterday (Thursday) that the only thing worse than having earnings released prematurely is when those earnings are disappointing.
A human error by financial printer R.R. Donnelley (NYSE: RRD) accidentally released Google's third quarter earnings three hours early.
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Is Now the Time to Buy These Tech Leaders?
After Microsoft Corp. (Nasdaq: MSFT), Google Inc. (Nasdaq: GOOG) and Apple Inc. (Nasdaq: AAPL) have all had recent dips would you buy these titans of tech? Money Morning's Shah Gilani appeared on Fox Business' Varney & Co. program on Friday and gave his opinion of each of these companies. Shah likes Microsoft because of its […]
Stock Market Today: Earnings Crush Giants as This Stock Gains 30%
The stock market today opened well in the red after earnings from industry leaders disappointed investors on the 25th anniversary of Black Friday.
Here's today's roundup and one stock that has gained over 30% this week.
- General Electric Co. (NYSE: GE), Microsoft Corp. (Nasdaq: MSFT) fall short of estimates– Two American titans, software leader Microsoft and diversified conglomerate General Electric, reported their latest earnings. GE saw its third-quarter profit rise 8.3% to $3.49 billion, or 33 cents per share, from $3.22 billion, or 22 cents per share a year earlier. Yet the company's revenue fell short of expectations and its outlook for next year did not inspire much confidence. Microsoft saw its fiscal first-quarter earnings drop 22% from a year ago and missed analysts' forecasts for earnings and revenue. GE and Microsoft are struggling with the same obstacles that have scared investors and hurt other businesses: the global economic slowdown and uncertainty regarding the fiscal cliff. "We're not assuming that Europe gets any better," GE's Chief Executive Officer, Jeff Immelt, told investors on a conference call. "We're looking at '13 being kind of like '12, with the big variable being the fiscal cliff." GE stock is down 2.5% in early trading and MSFT stock is down almost 3%.
- Restaurant stocks hurt by drought- McDonald's Corp. (NYSE: MCD) and Chipotle Mexican Grill Inc. (NYSE: CMG) both reported weak third-quarter earnings, an indication they are still feeling the effects of this summer's epic drought. Same-store sales were the driving negative factor for both restaurants. McDonald's posted global same-store sales growth of 1.9%, the first time that number has been below 2% since 2003. Chipotle's comparable sales rose 4.8% in the quarter, its lowest growth in almost three years. "I think that competition has certainly gotten more aggressive the past several quarters," Morningstar analyst R.J. Hottovy told Reuters. "Between commodity costs coming in and companies being able to price more aggressively, but also consumers still being very fixated on value, it's led to a very cutthroat restaurant environment." Chipotle has seen its stock plunge to under $250 from above $400 earlier this summer after two consecutive dismal earnings reports. "They're coming up against a little bit of a ceiling," Peter Saleh, a New York-based analyst at Telsey Advisory Group, told Bloomberg. "They need to do something more either on advertising or new product news to draw more customers into their stores." MCD stock is down 3.4% today and CMG stock is down over 14% as of noon.
While most companies are suffering this quarter as they report earnings, this company has quietly soared over 30% this week and could be set for even more gains.
If Romney Wins Election 2012 Buy and Sell These Sectors
Over the past several weeks, GOP presidential hopeful Mitt Romney's momentum has spiked. Recent polls place him running neck-and-neck with or even edging ahead of President Barack Obama.
Besides strong debate performances, key factors have turned in Romney's favor.
Myriad surveys in a dozen crucial swing states show voter's concerns are increasing regarding the mushrooming fiscal deficit, debt issues and the depressed job market, issues that favor Romney.
Since the election won't be decided for another two weeks there is still time to act if you expect a Romney victory.
Here's what several top Wall Street analysts think a Romney win would mean for stocks.
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Dip in Gold Prices Nothing to Fear; Long-Term Outlook Bullish
A drop in gold prices earlier this week made some investors nervous, but the long-term factors pushing the yellow metal higher haven't changed.
Following a 5% increase and a rise in exchange-traded funds holdings in the third quarter, gold prices fell back to earth Monday, falling 1%.
It was gold's greatest one-day fall since July.
Most of the news that hurt gold prices was fleeting.
Positive U.S. retail sales data raised concerns the Fed would abbreviate its purchases of mortgage-backed securities. Investors were also worried early in the week about the possibility of weak Chinese economic data, although that didn't materialize – China posted growth of 7.4% on Thursday, as expected.
Finally, as Mitt Romney rises in the polls there's concern that as president he would implement bigger cuts to U.S. government spending, which would be bad for gold prices.
QE Infinity Won't Work, But Here's What Will
Dallas Federal Reserve President Richard Fisher recently offered a stunning assessment about our policymaking central bankers down in Washington.
They're winging it.
In a talk before a Harvard Club audience, Fisher presented a candid assessment about all the levers the Fed has been pulling in the aftermath of the 2008 financial crisis. And that includes the recently announced QE3.
"Nobody really knows what will work to get the economy back on course. And nobody-in fact, no central bank anywhere on the planet-has the experience of successfully navigating a return home from the place in which we now find ourselves. No central bank-not, at least, the Federal Reserve-has ever been on this cruise before."
I don't know about you, but the idea that four years and trillions of dollars into this quantitative easing voyage we're still sailing without a compass isn't just appalling.
It's terrifying.
Yet this ship of fools sails on.
The problem is, Fisher is right: QE3 won't work. QE1 and QE2 didn't fix this mess. Nor will QE4, QE5, onwards to infinity.
What's more, there's a cottage industry of pundits and consultants who'll agree.
Trouble is, just like Fisher and his colleagues at the Fed, none of them can tell you why it won't work.
That's what we're going to do here today.
We'll start by giving you the lowdown on how this nation's central bankers view "Quantitative Easing." Then we'll show you how the Fed thinks QE is supposed to work.
Finally, we'll punch some (actually, many) holes in in the Fed's hull by discussing why it's not working.
We'll even demonstrate what could still be done to fix this wretched mess.
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Stock Market Today: This Stock's Dip Could Be Promising
The stock market today opened flat as positive housing data was weighed down by somewhat mixed earnings.
Here's our market roundup and one stock that's soaring today.
- Housing starts reach four-year high– The housing market continues to show signs of recovery as the rate of home building in September grew to levels not seen since July 2008. Housing starts rose to an annual pace of 872,000 homes, up 15% from August. Builders also filed for permits at an annual rate of 894,000 homes, up 11.6% from last month and 45.1% year-over-year. Demand for housing will continue to be helped by the Federal Reserve's pledge to keep interest rates near historic levels and the implementation of QE3. Housing prices have rebounded from their nadirs in part because foreclosures are at five-year lows and because the number of U.S. households grew 2% in 2011, its largest rise in 10 years. "There is going to be a continued housing recovery over the next few years," said Larry Seay, chief financial officer at Meritage Homes Corp. (NYSE: MTH) in Scottsdale, AZ, at an investor conference. "Pent-up demand that has built up from people deferring household formation is going to help buoy the recovery. High affordability not only with house prices being very low, but also interest rates being as low as they've been in decades, and all that translating into an improved buyer confidence."
- Bank of America Corp (NYSE: BAC) delivers a mixed bag– Charlotte, NC-based Bank of America barley managed to squeeze out a profit for the third quarter after $1.6 billion in litigation charges ate away at its earnings. The financial giant earned $340 million – a little more than zero cents per share. That was better than analysts' average estimate of a loss of 7 cents per share, but well below last year's third-quarter profit of $6.2 billion, or 56 cents per share. Revenue also fell, slumping to $20.4 billion from $28.5 billion a year ago, missing expectations. A day after Citigroup CEO Vikram Pandit abruptly resigned, Bank of America's CEO Brian Moynihan sounded confident about his bank's future. "We are doing more business with our customers and clients, deposits are up, mortgage originations are up," he said. "Our strategy is taking hold even as we work through a challenging economy and continue to clean up legacy issues." BAC stock is up 0.6% in early trading.
Here's one stock that beat earnings and is poised for future success.