Thursday, October 08, 2009

BAGAKOAA October 8, 2009 The market was sittin' on ready


 October 8, 2009 The market was sittin' on ready.

AA reported a small gain, that is right a small teeny tiny gains of 8 cents a share.  Better than analyst expected.  So the market this morning was, as Elvis used to say, “sittin’ on ready”.  So the futures market was strong and as I put this together, the DJ is up about 66 points.  AA has moved almost 4 %.  So do I think it is an 8-9 dollar stock.  Heck ya, they had no top line growth and all of the profit squeeze came from cost cutting. 

Some of the market Euphoria, well lack of apathy anyway, is coming from a series of fairly positive earnings reports.  COST, MON, PEP were all better than expected, as well as MAR.  Look close at the MAR numbers.  Marriott revenue was 17% down.  Ouch.  If the market is recovering this well to earning without top line growth, can you imagine when we actually see revenues increase? 

Across the pond, The Bank of England (BOE) did not surprise anybody (Australia are you listening?) and left their key interest rate at .5%.  Remember their inflation goal is 2%.  If the prevailing wisdom was that inflation was an issue they may have bumped the key rate.  (Inflation in Australia?)  Like the BOE, the European Central Bank left its key rate at 1% and their inflation goal is also 2%.

Also this morning at 5:30 am PST, jobless claims came in better than expected.  Much better than expected with a decrease in claims by 33,000.  That still leaves 521,000 claims but an improvement from last weeks 554,000, but a long way to go.  We got to get these people back to work so that top line growth I talked about starts improving.

Less covered but important; the RBC CASH report came out this morning with a significant 12% improvement.  The RBC is the Royal Bank of Canada and it does this survey of US Households to measure consumer attitudes and spending by household. (CASH).  This is a monthly report and is over 50 for the first time in almost a year.  Its all time low was 1.9 in February 2009.  This survey is a good tell about consumer spending and investment.

Business inventories were also report this morning and they continue to erode to a near 15% drop from last year.  This is a forward looking stat that COULD imply that factories will have to start gearing up for new products to fill the drop in inventories.  Keep an eye on the Baltic dry Index to track how many ships have left and are leaving China to see if production is up.





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