O chão do futuro rally esprado para celebrar o fim da guerra
Enviado: 6/4/2003 21:55ECONOMY WATCH
1. MORE EVIDENCE OF A MANUFACTURING DECLINE
The Institute for Supply Management's manufacturing index fell below the 50% mark in March, suggesting a contraction in the sector. The index dropped from 50.1% in February to 46.2% last month, significantly lower than the reading of 48.8% that economists expected. This comes one day after the Chicago purchasing managers index showed a decline in factory activity in the Midwest. "There is nothing positive that can be taken from this report," said one economist. That basically sums up our thoughts, too. There's no doubt about it: This economy is WEAK.
2. CONSTRUCTION SPENDING FALLS
In another sign that the booming real-estate market is slowing down, the Commerce Department reported that construction spending dipped 0.2% to $870 billion in February. However, the spending decline was less than the 0.8% drop that economists expected, and residential construction remained strong. In fact, residential construction reached a record level of $455 billion for the month. It was the public sector that dampened total construction spending. Public construction fell nearly 3% in February, reflecting tighter budgets for state and local governments.
3. FACTORY GOODS ORDERS FALL
If the declines in the Chicago Purchasing Managers' and the Institute of Supply Management's indices weren't enough to convince you that the Manufacturing sector is struggling, here's another piece of bad news to add to the pile. The Commerce Department reported that factory goods orders dropped 1.5% in February, reversing a 1.7% rise in January. Economists expected a mere 0.6% decline, less than half of the actual fall. Even a 27% surge in defense goods orders wasn't enough to keep the overall number from sinking. Although the negative report did little to stem the market's rise this week, it just adds to the economic negativity that could plague stocks in the longer term.
4. JOBLESS CLAIMS SOAR
The news from the job market wasn't much better. After notching a welcome fall in the previous week, initial jobless claims resumed their upward move in the week ended March 29th, surging by 38,000 to 445,000 claims. That's the highest level in nearly a year, and it pushed the four-week average (a more stable measure of the job market) up by 2,500 to over 425,000. Obviously, companies aren't placing major bets on an economic improvement by hiring more help. Instead, they continue to lay off unneeded employees. This economy is UGLY. But, the economic news went unnoticed, as investors chose to focus on war developments instead.
5. JOB LOSSES CONTINUE
The U.S. labor market continued to contract in March, as 108,000 jobs were destroyed following a loss of 358,000 in February. The unemployment rate remained at 5.8%, with 8.5 million Americans looking for work. Financial markets largely ignored the jobs report on Friday though, marching to the beat of a different drummer.
MARKET MOVERS
I. AOL TIME WARNER MAY RESTATE REVENUES
Struggling media giant AOL TIME WARNER (AOL, $11.55) announced a week ago Friday that it may restate revenues for its beleaguered America Online unit. The SEC is looking into the recording of $400 million in advertising purchases by Bertelsmann over the past two years. The regulating body believes that not all of the total should have been marked as revenue. This isn't the first time that AOL would have to restate revenues. The company already has restated $190 million in ad-related sales. These accounting concerns have helped the stock fall over 50% in the past 12 months, and investors likely won't spark a big rally in the stock until these clouds dissipate.
II. CHIP SALES SINK AGAIN
Global chip sales fell 3.3% to $11.8 billion last month, according to the World Semiconductor Trade Statistics group. That marks the third straight month of declines. After a big sales slump over the past two years, investors were hopeful of a recovery this year. But so far, businesses aren't buying it, literally. The Semiconductor Industry Association still expects sales to grow 20% this year, but more cautious analysts predict just a 10% revenue expansion. In fact, Goldman Sachs said that the industry needs to see a "very significant March uptick" to reach those expectations. In this business spending environment? We don't see it.
III. BEST BUY'S EARNINGS FALL
BEST BUY (BBY, $30) released its fiscal 4Q02 (ended March 2nd) financial results, reporting lower year-over-year earnings. The leading electronics retailer posted net income of $310 million, or 96 cents a share, well short of the year-ago profit of $1.08. Income from continuing operations, however, rose from $335 million in 4Q01 to $380 million, or $1.16 a share, last quarter, beating Wall Street expectations by 3 cents. The discontinuation of the company's Musicland operations and the ensuing $65 million charge aided the net earnings decline. The profit drop should continue this quarter, but for different reasons. Best Buy expects same-store sales to register low single-digit contraction leading to profits of 14-20 cents a share -- short of last year's 24-cent profit. Even for one of the nation's leading electronics retailer, this Retail environment is tough to manage. Surprisingly the stock held strong this week and closed higher.
IV. CHARTER COMMUNICATIONS POSTS A BIG LOSS
CHARTER COMMUNICATIONS (CHTR, $1.14), the nation's #3 cable company, reported a HUGE 4Q02 loss and said that it overstated its revenue and cash flow as far back as 2000. The firm posted a loss of $1.9 billion, an astounding $6.36 per share, compared to a tamer but still sizable $300 million loss in the year-ago quarter. Included in that loss was a large write-down of newly-acquired cable systems. Revenue, however, rose 13% to $1.2 billion, and earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 12% to $455 million. In addition to last quarter's weak earnings, Charter said that it had overstated 2000 revenues by 3% ($110 million), 2001 revenue by 4% ($145 million), and last year's revenue by 1% ($40 million). Shares surged 24% on Tuesday, mostly as a result of chairman and MICROSOFT (MSFT, $25.09) co-founder Paul Allen's offer to lend the firm $300 million. Despite this assurance of some liquidity, this was NOT a good announcement for the company. How can a $1.9 billion loss EVER be a good announcement?
V. THE GATEWAY TO MORE ACCOUNTING GAFFES
In the latest bout of accounting impropriety, PC maker GATEWAY (GTW, $2.26) announced that it overstated 2000 and 2001 revenues by a combined $500 million. The company will lower its 2000 sales figures by $340 million (3.5% of total annual sales) and its 20001 sales by $160 million (2.5%). This is the second time that the firm has restated its 2000 results. Last time, the firm reduced 2000 revenue by $50 million and net income by $75 million. The new missteps relate to a business deal with AOL TIME WARNER, as Gateway wrongfully accounted the revenue it received for offering 12-month subscriptions to America Online with its computers. As investors grow ever scrutinizing of corporate accounting techniques, we can expect to see more restatements as companies come clean.
VI. GOOD NEWS, BAD NEWS FOR H&R BLOCK
Financial Portfolio holding H&R BLOCK (HRB, $40) backed its previous 2003 earnings forecasts this week. The tax services firm projected profits of $3.10-3.25 per share for fiscal 2003 (ending April 30th). Normally, that would be good news that would result in a nice jump in the stock. But instead, shares fell 10% in Thursday's trading. Why? Because Block also said that it prepared less than 12 million tax returns as of March 15th, a 3% decrease over the total at the same point last year. In addition, the firm announced that it will take a 27-cent charge this fiscal year related to a legal settlement. Investment bank Goldman Sachs downgraded the stock as a result of the weakness, lowering the firm from "in-line" to an "underperform" rating. This is just a little bump in the road for long-term investors. The Tax Services industry is a stable, steadily-growing business that will produce major profits for the company year in and year out. Stick with this stock for the long run. (Note: If you're not receiving The Bull Market Financial Investor, click here to subscribe. It's FREE!)
VII. WEAK SALES LEAD TO EXTENDED AUTO PROMOTIONS
GENERAL MOTORS (GM, $35) announced that it will extend its 0% financing promotion on nearly every one of its vehicles for up to five years. In fact, the new promotion is even broader than its 0% financing deals in the wake of the September 11th attacks, reflecting the continued sales decline in the Auto industry. Back then, the move was seen as just a temporary action to prop up sales during a heightened state of fear. But while terror concerns have waned somewhat, the Big Three U.S. automakers still need to offer incentives to keep shoppers buying.
GM claims that the war hasn't cut into sales, but obviously they expect sales to decline significantly in the near future. March sales numbers weren't good for the Big Three; FORD MOTOR'S (F, $7.89) sales fell nearly 5%, while both GM and DAIMLERCHRYSLER'S (DCX, $31) Chrysler division posted 3% sales declines. Transportation in general isn't doing so well. Though the Auto industry isn't hampered by nearly as many problems as the Airlines, we're not ready to suggest investing in the sector.
Good investing next week!
Todd Shaver
Editor in Chief
The Bull Market Report
Washington, DC USA
Educating investors since 1997
1. MORE EVIDENCE OF A MANUFACTURING DECLINE
The Institute for Supply Management's manufacturing index fell below the 50% mark in March, suggesting a contraction in the sector. The index dropped from 50.1% in February to 46.2% last month, significantly lower than the reading of 48.8% that economists expected. This comes one day after the Chicago purchasing managers index showed a decline in factory activity in the Midwest. "There is nothing positive that can be taken from this report," said one economist. That basically sums up our thoughts, too. There's no doubt about it: This economy is WEAK.
2. CONSTRUCTION SPENDING FALLS
In another sign that the booming real-estate market is slowing down, the Commerce Department reported that construction spending dipped 0.2% to $870 billion in February. However, the spending decline was less than the 0.8% drop that economists expected, and residential construction remained strong. In fact, residential construction reached a record level of $455 billion for the month. It was the public sector that dampened total construction spending. Public construction fell nearly 3% in February, reflecting tighter budgets for state and local governments.
3. FACTORY GOODS ORDERS FALL
If the declines in the Chicago Purchasing Managers' and the Institute of Supply Management's indices weren't enough to convince you that the Manufacturing sector is struggling, here's another piece of bad news to add to the pile. The Commerce Department reported that factory goods orders dropped 1.5% in February, reversing a 1.7% rise in January. Economists expected a mere 0.6% decline, less than half of the actual fall. Even a 27% surge in defense goods orders wasn't enough to keep the overall number from sinking. Although the negative report did little to stem the market's rise this week, it just adds to the economic negativity that could plague stocks in the longer term.
4. JOBLESS CLAIMS SOAR
The news from the job market wasn't much better. After notching a welcome fall in the previous week, initial jobless claims resumed their upward move in the week ended March 29th, surging by 38,000 to 445,000 claims. That's the highest level in nearly a year, and it pushed the four-week average (a more stable measure of the job market) up by 2,500 to over 425,000. Obviously, companies aren't placing major bets on an economic improvement by hiring more help. Instead, they continue to lay off unneeded employees. This economy is UGLY. But, the economic news went unnoticed, as investors chose to focus on war developments instead.
5. JOB LOSSES CONTINUE
The U.S. labor market continued to contract in March, as 108,000 jobs were destroyed following a loss of 358,000 in February. The unemployment rate remained at 5.8%, with 8.5 million Americans looking for work. Financial markets largely ignored the jobs report on Friday though, marching to the beat of a different drummer.
MARKET MOVERS
I. AOL TIME WARNER MAY RESTATE REVENUES
Struggling media giant AOL TIME WARNER (AOL, $11.55) announced a week ago Friday that it may restate revenues for its beleaguered America Online unit. The SEC is looking into the recording of $400 million in advertising purchases by Bertelsmann over the past two years. The regulating body believes that not all of the total should have been marked as revenue. This isn't the first time that AOL would have to restate revenues. The company already has restated $190 million in ad-related sales. These accounting concerns have helped the stock fall over 50% in the past 12 months, and investors likely won't spark a big rally in the stock until these clouds dissipate.
II. CHIP SALES SINK AGAIN
Global chip sales fell 3.3% to $11.8 billion last month, according to the World Semiconductor Trade Statistics group. That marks the third straight month of declines. After a big sales slump over the past two years, investors were hopeful of a recovery this year. But so far, businesses aren't buying it, literally. The Semiconductor Industry Association still expects sales to grow 20% this year, but more cautious analysts predict just a 10% revenue expansion. In fact, Goldman Sachs said that the industry needs to see a "very significant March uptick" to reach those expectations. In this business spending environment? We don't see it.
III. BEST BUY'S EARNINGS FALL
BEST BUY (BBY, $30) released its fiscal 4Q02 (ended March 2nd) financial results, reporting lower year-over-year earnings. The leading electronics retailer posted net income of $310 million, or 96 cents a share, well short of the year-ago profit of $1.08. Income from continuing operations, however, rose from $335 million in 4Q01 to $380 million, or $1.16 a share, last quarter, beating Wall Street expectations by 3 cents. The discontinuation of the company's Musicland operations and the ensuing $65 million charge aided the net earnings decline. The profit drop should continue this quarter, but for different reasons. Best Buy expects same-store sales to register low single-digit contraction leading to profits of 14-20 cents a share -- short of last year's 24-cent profit. Even for one of the nation's leading electronics retailer, this Retail environment is tough to manage. Surprisingly the stock held strong this week and closed higher.
IV. CHARTER COMMUNICATIONS POSTS A BIG LOSS
CHARTER COMMUNICATIONS (CHTR, $1.14), the nation's #3 cable company, reported a HUGE 4Q02 loss and said that it overstated its revenue and cash flow as far back as 2000. The firm posted a loss of $1.9 billion, an astounding $6.36 per share, compared to a tamer but still sizable $300 million loss in the year-ago quarter. Included in that loss was a large write-down of newly-acquired cable systems. Revenue, however, rose 13% to $1.2 billion, and earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 12% to $455 million. In addition to last quarter's weak earnings, Charter said that it had overstated 2000 revenues by 3% ($110 million), 2001 revenue by 4% ($145 million), and last year's revenue by 1% ($40 million). Shares surged 24% on Tuesday, mostly as a result of chairman and MICROSOFT (MSFT, $25.09) co-founder Paul Allen's offer to lend the firm $300 million. Despite this assurance of some liquidity, this was NOT a good announcement for the company. How can a $1.9 billion loss EVER be a good announcement?
V. THE GATEWAY TO MORE ACCOUNTING GAFFES
In the latest bout of accounting impropriety, PC maker GATEWAY (GTW, $2.26) announced that it overstated 2000 and 2001 revenues by a combined $500 million. The company will lower its 2000 sales figures by $340 million (3.5% of total annual sales) and its 20001 sales by $160 million (2.5%). This is the second time that the firm has restated its 2000 results. Last time, the firm reduced 2000 revenue by $50 million and net income by $75 million. The new missteps relate to a business deal with AOL TIME WARNER, as Gateway wrongfully accounted the revenue it received for offering 12-month subscriptions to America Online with its computers. As investors grow ever scrutinizing of corporate accounting techniques, we can expect to see more restatements as companies come clean.
VI. GOOD NEWS, BAD NEWS FOR H&R BLOCK
Financial Portfolio holding H&R BLOCK (HRB, $40) backed its previous 2003 earnings forecasts this week. The tax services firm projected profits of $3.10-3.25 per share for fiscal 2003 (ending April 30th). Normally, that would be good news that would result in a nice jump in the stock. But instead, shares fell 10% in Thursday's trading. Why? Because Block also said that it prepared less than 12 million tax returns as of March 15th, a 3% decrease over the total at the same point last year. In addition, the firm announced that it will take a 27-cent charge this fiscal year related to a legal settlement. Investment bank Goldman Sachs downgraded the stock as a result of the weakness, lowering the firm from "in-line" to an "underperform" rating. This is just a little bump in the road for long-term investors. The Tax Services industry is a stable, steadily-growing business that will produce major profits for the company year in and year out. Stick with this stock for the long run. (Note: If you're not receiving The Bull Market Financial Investor, click here to subscribe. It's FREE!)
VII. WEAK SALES LEAD TO EXTENDED AUTO PROMOTIONS
GENERAL MOTORS (GM, $35) announced that it will extend its 0% financing promotion on nearly every one of its vehicles for up to five years. In fact, the new promotion is even broader than its 0% financing deals in the wake of the September 11th attacks, reflecting the continued sales decline in the Auto industry. Back then, the move was seen as just a temporary action to prop up sales during a heightened state of fear. But while terror concerns have waned somewhat, the Big Three U.S. automakers still need to offer incentives to keep shoppers buying.
GM claims that the war hasn't cut into sales, but obviously they expect sales to decline significantly in the near future. March sales numbers weren't good for the Big Three; FORD MOTOR'S (F, $7.89) sales fell nearly 5%, while both GM and DAIMLERCHRYSLER'S (DCX, $31) Chrysler division posted 3% sales declines. Transportation in general isn't doing so well. Though the Auto industry isn't hampered by nearly as many problems as the Airlines, we're not ready to suggest investing in the sector.
Good investing next week!
Todd Shaver
Editor in Chief
The Bull Market Report
Washington, DC USA
Educating investors since 1997