As mentioned in an earlier post from this morning, consumer spending dropped a whopping 1.2 percent in September (largest drop in three years) and the Producer Price Index dropped .4 percent. But excluding food and energy, it increased .4 percent, indicating that even though inflation is moderating in the food and energy sector, price pressure remains an issue for manufacturers. The question then is whether: (1) the higher prices can be passed on to consumers (who are not spending), (2) the higher costs must be eaten by the producers, or (3) the cost of goods and services necessary to produce other goods and services can be pushed down. Added to that depressing mix was a Federal Reserve Board Beige Book (a report that summarizes comments made by businesses and other sources from all 12 Federal Reserve Districts) that used words to describe the economy that included “weak, decline, decrease, slow, and pessimistic.” For those interested in the beige book report, it can be found at the Federal Reserve Board’s website. Now consider that data in light of earnings reports from bellwether companies that declined to offer any forecast for the coming year, such as Intel, and it is no wonder the stock market sold off today.
For what it’s worth, here are a couple of more earnings reports from today:
Ebay, Inc. (EBAY): The online auctioneer reported third-quarter net income of 38 cents per share (46 cents when backing out non-recurring items) – analysts had expected a 41-cent-per-share profit. In addition, the company cut its fourth-quarter projections to between 39 and 41 cents per share – analysts had forecast profit at 47 cents per share given that the holiday season is usually good to retailers of all stripes. However, Bob Swan, the company’s chief financial officer, said eBay saw a ” considerable” slowdown across all of its businesses beginning in mid-August, and there are no indications those trends are easing in the fourth quarter.
Coca-Cola (KO): The offered a spot of good news with third-quarter earnings of 83 cents per share, topping analysts estimates of 77 cents per share. In its outlook, the company made similar comments to those of PepsiCo the day before that the upcoming quarter will be challenging. I’d like to point out that Coca-Cola is an excellent example of why earnings matter. On a day where the market indicies were down 8 or 9 percent, Coke was one of the very few stocks to close up – it finished up 1.1 percent at a closing price of $44.21. Unfortunately, we cannot say the same for Johnson&Johnson (JNJ) – it was down more than 5 percent today, as even quality companies with solid earnings are being dragged under by the rest of the market.
Tomorrow, Google and Citigroup are among the earnings reports to watch.
Economy Continues To Weigh on Market
Posted by Gregg Killoren on October 15, 2008
As mentioned in an earlier post from this morning, consumer spending dropped a whopping 1.2 percent in September (largest drop in three years) and the Producer Price Index dropped .4 percent. But excluding food and energy, it increased .4 percent, indicating that even though inflation is moderating in the food and energy sector, price pressure remains an issue for manufacturers. The question then is whether: (1) the higher prices can be passed on to consumers (who are not spending), (2) the higher costs must be eaten by the producers, or (3) the cost of goods and services necessary to produce other goods and services can be pushed down. Added to that depressing mix was a Federal Reserve Board Beige Book (a report that summarizes comments made by businesses and other sources from all 12 Federal Reserve Districts) that used words to describe the economy that included “weak, decline, decrease, slow, and pessimistic.” For those interested in the beige book report, it can be found at the Federal Reserve Board’s website. Now consider that data in light of earnings reports from bellwether companies that declined to offer any forecast for the coming year, such as Intel, and it is no wonder the stock market sold off today.
For what it’s worth, here are a couple of more earnings reports from today:
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