H&R Block [HRB: 12.54, -0.40 (-3.09%)] released earnings yesterday, reporting a profit of $706.9 million, or $2.09 per share, better then the earnings of $543.6 million, or $1.66 per share, released the same period the year before.  H&R Block missed on revenue, reporting that revenue fell 2.9% to $2.47 billion as opposed to the average analyst estimate of $2.52 billion, H&R Block however did beat earnings estimate of $2.05 per share.  The company’s tax unit was hurt as it saw a weak tax season, with revenues falling 3.2% in tax service revenue.  The company has noticed this fall in revenue, and as a result H&R Block’s CEO Russ Smyth said that it would be combining its tax and corporate structures into one unit in an effort to cut costs.  This is another move by H&R to cut down its management structure to make the company more efficient.  These actions follow its recent elimination of its brokerage and loan services.  H&R Block expects to see fiscal 2010 earnings between $1.60 and $1.80 per share, with the street estimating earnings of $1.66 per share.

In health care news, a federal jury in Texas ordered Abbot Laboratories [ABT: 50.39, +0.12 (+0.24%)] to pay rival Johnson & Johnson [JNJ: 58.44, +0.15 (+0.26%)] $1.67 billion for patent infringement on J&J’s arthritis drug, Remicade, which was infringed upon with Abbot’s Humira.  Humira is Abbot’s leading drug and accounts for $4.5 billion in revenue last year, or 15% of total revenue.  Johnson & Johnson was thrilled with the news and were happy that the court recognized its intellectual property with its arthritis drug.  Abbot said that they are disappointed with the verdict and are going to appeal the findings of the jury.  Abbot has seen great success recently, with a good part being attributed to Humira, it will be interesting to see how Abbot will handle and move on from this.

The Conference Board announced that its index of consumer confidence in June fell to 49.3 from May’s 54.8.  This is bad news, especially as economists believe that confidence below 50 following a month when it was above 50, indicating economic growth, changes the general feeling that the economy was starting to bottom out.  This is bad news as consumer spending is tied to consumer confidence and with these poor numbers this could severely affect GDP, as spending accounts for about 66% of GDP.  Economist and investors alike are looking for consistent economic data to indicate if the market is bottoming or not, and they have been presented with data that is mixed and therefore makes it hard to tell.

Check back tomorrow to Bullish Bankers for another market recap.

- Matt Shannon

Disclosure: The fund the author is associated with is long ABT and JNJ.

KB Homes [KBH: 11.53, +0.08 (+0.70%)] was down over 9% today as it reported a loss $78.4 million, or $1.03 per share, better then a loss of $255.9 million, or $3.30 a share, from the same period a year ago.  Revenue came in at $384.5 million beating the average analyst estimate of $339.1 million, but failed to beat the average analyst estimate of earnings per share which was a loss of $0.64.  The company’s impairment charges fell from $176.5 million to $49.5 million with new orders also falling 31% to 2,910.  Investors reacted positively to a decline from 28% to 20% in cancellation as some believe that the housing market is starting to show signs of a possible bottoming.  The fifth largest home builder by annual closings is trying to redesign their product in an effort to position itself to profit in the future.  The real test for KB is going to be how they perform after the tax credit for those buying new homes ends.  The Los Angeles home builder has a tough road ahead of itself and it will be interesting to see how they deal with the housing mess that currently exists, especially in California.

In tech news, Palm [PALM: 0.00, N/A (N/A)] announced earnings after the bell yesterday, reporting a loss of $105.0 million, or $0.78 per share with revenue of $86.77 million beating the estimates of a loss of $0.62 per share on revenue of $80.64 million.  Palm’s revenues were up after it released its first smart phone the Pre, which many analysts believe will either make or break the company.  Palm did not release the number of Pre units sold, but estimates are around 70,000.  The Pre is the reason behind the price appreciation of Palm’s stock reaching a new 52-week high today of $16.59.  Palm announced that they could have positive cash flow in the second half of the year and become profitable sooner than earlier anticipated.  Currently the Pre is only available on Sprint [S: 4.301, +0.161 (+3.89%)], but is believed to be soon available on other carriers.

The Commerce Department released May consumer spending numbers, which showed consumer spending increasing 0.3%.  Some of the results are a result of Obama’s administrations stimulus plan, leading to a jump in American’s incomes.  This government activity is leading to a better flow of credit and higher incomes leading people to spend even though unemployment is on the rise.  The report also stated that earnings climbed 1.4% higher driving the savings rate to a 15 year high.   This increase in consumer spending is a positive sign for the economy, but a continuing increase in this number is needed to prove that this is not just a temporary result of government spending, but a long lasting trend. 

 Check back next week for another market recap from Bullish Bankers, enjoy the weekend. 

- Matt Shannon

Disclosure: None

American International Group [AIG: 35.60, -0.06 (-0.17%)] and the Federal Reserve Board of New York agreed that AIG can repay $25 billion that they owe the New York Reserve through initial public offerings of the two of its international life insurance units.  AIG will put equity from American Life Insurance Co. and American International Assurance Co. into vehicles and receive preferred and common interest in exchange.  AIG will hold the common interest while the New York Fed will receive $25 billion in preferred interest from these two vehicles, there in fact reducing AIG’s debt.  This deal benefited AIG, as it makes it easier to pay back the government debt, while also giving greater independence to American Life Insurance allowing them to maintain the value of the name.  The deal is expected to close in the second half of the year.

Federal Reserve Chairman Ben Bernanke appeared before Congress today and denied allegations that he pressured Bank of America [BAC: 13.241, +0.0335 (+0.25%)] into buying Merrill Lynch.  He testified that he made no threat to BofA’s CEO Kenneth Lewis or the bank’s board members of the consequences if the deal did not go through.  This testimony comes after Lewis testified earlier this month that former Treasury Secretary Henry Paulson made it clear that if Bank of America did not go through with their promise to acquire Merrill he and the board would have been removed.  Bernanke denied this claim and defended the deal saying that the deal was needed to avoid another shock to the already shaken financial system.  Bank of America received $45 billion in total from the government in the bailout, with $20 billion directly coming from the acquisition of Merrill.

In earnings news, Nike [NKE: 72.84, +0.98 (+1.36%)] reported after hours yesterday, announcing earnings of $341.4 million, or $0.70 per share down from the year ago period when they reported earnings of $490.5 million, or $0.98 per share.  Nike missed on both earnings and revenue, as the street expected earnings to be $0.96 per share and revenue to be $4.71 billion as opposed to the reported $4.7 billion.  Future orders fell 12%, with Nike saying that they would have only fallen 5% but were negatively affected by the exchange rate.  Restructuring charges also hurt the Beaverton, Oregon company as it faced a $144.5 million charge that reduced earnings by $0.29 per share.  Gross margins also fell for the shoe maker due to higher manufacturing costs and markdowns, lowering margins from 45.8% to 43.4%.  Some analysts and investors are still bullish Nike as they believe in their innovation and cutting edge technologies.  Nike is down over 3% today as the majority of the market reacted poorly to Nike’s announcement.

Check back tomorrow to Bullish Bankers for another market recap.

- Matt Shannon

Disclosure: None

Monsanto Co. [MON: 54.14, +0.15 (+0.28%)] released earnings today of $694 million, or $1.25 per share.  This represents a decrease in profits of 14% of $811 million, or $1.45 per share from the same quarter a year earlier.  Their shares traded down 4.06% today after they announced earnings and the elimination of 900 jobs.  The restructuring and layoffs are expected to lower Q4 revenue by $0.41-$0.47 per share and that FY earnings will be at the low end of their $4.40-$4.50 per share guidance.  The restructuring costs are expected to be between $350 and $400 million, but will save almost $180 million in future costs.  Monsanto anticipates releasing one or two new strains of seeds per year, which will give the company an addition of $300 million to its revenue.

Rite Aid Corp. [RAD: 0.9134, +0.0142 (+1.58%)] released earnings of  negative $0.11 per share this quarter, or a loss of $98.4 million.  Management also lowered guidance to a range of  negative $0.59 to negative $0.33 for fiscal year 2010 as the company struggles to pay of over $6 billion in debt.  Rite Aid expects to save money in the future by eliminating 117 stores by the end of the year.  The company was also burdened $68 million this quarter of lease termination charges.

Boeing Co. [BA: 63.16, +0.87 (+1.40%)] fell 5.81% by the market’s close after management announced a postponement of the first flight of the highly anticipated, much delayed 787 Dreamliner.  The hype for the 787 builds as Boeing keeps pushing back the plane’s release date, but customers have to be getting impatient.  Some investors are afraid that managements inclination and disregard for schedules will hurt sales in the future if customers switch over to Boeing’s big rival Airbus.

The FOMC held a meeting today and decided to target the Federal Funds Rate at the same range of 0.00% to 0.25%.  This did not come as a surprise to investors, although the Fed Funds Rate has been closing in on the upper end of the range more recently compared to the past month.

Good news in the housing market, the weekly MBA Purchase Applications jumped 7% from 261.2 to 280.3, however, new home sales was at the low end of consensus range at an annualized rate of 342K, 23K lower than consensus.  This represents a 0.6% decrease in May.

- Brendan Stevens

Disclosure: The fund the author manages is long MON.

Kroger [KR: 20.30, +0.24 (+1.20%)] announced earnings today, reporting net income of $435.1 million, or $0.66 per share, compared with net income of $386 million, or $0.58 per share from the same period a year ago.  Kroger said that sales fell from $23.1 billion to $22.8 billion; Kroger fell short of the street’s estimate of sales of $23.2 billion, but beat the earnings estimate of $0.62 per share.  Same store sales rose 3.1%, mainly driven by growth in Kroger brand products as customers are more price conscious and are attracted to them in the bad economy; brand products make up 35% of sales.  Kroger and all other traditional supermarkets have faced increased challenges lately, as Wal-Mart [WMT: 51.69, +0.49 (+0.96%)] has continued to steal customers.  Kroger has been able to lose fewer customers as they have lowered prices and have benefited as consumers trade down to their store brands.  Kroger expects to earn between $2.00 and $2.05 per share in 2009 with analysts predicting $2.04 per share. 

In tech news, it was announced that Intel [INTC: 18.185, +0.045 (+0.25%)] and Nokia [NOK: 8.98, +0.08 (+0.90%)] will collaborate on a new mobile device that is different from both smart phones and netbooks.  Both of these companies have recognized the current trend of consumers even in this current down market to continue to buy smart phones and netbooks.  These two companies are currently both major players in the smart phones and netbook market, as Intel’s Atom processor is predominant in netbooks and Nokia is the market leader in smart phone technology.  The two companies are looking into the future for the next great mobile technology and are hoping with the great ideas that both companies generate separately, that they can create even better ones by joining forces.  The financial terms have not been announced yet, but many in the tech world are looking forward to the collaborative work of the company, and investors should keep an eye on it as well.

The National Association of Realtors released new housing data today that showed existing home sales were up 2.4% to an annual rate of 4.77 million in May, up from 4.66 million in April; existing home sales are down 3.6% from May 2008.  Of these 4.77 million, 33% were from foreclosures or short sales below the earlier numbers this year between 45% and 50%.  May inventories were down 3.5% from April, representing a 9.6 month supply at the current sales pace.  Despite improving existing home sales numbers, prices are still low.  Prices were down 16.8% to $173,000 in May down from $207,900 the same month last year.  Prices have fallen as the demand for housing is week as higher credit and increased unemployment is discouraging buyers.  Many economists cannot see prices bottoming until sales consistently increase.

Check back tomorrow for another market recap from Bullish Bankers.

- Matt Shannon

Disclosure: The fund the author is associated with is long WMT.

The major news on the day that contributed to the negative sentiment was the updated economic forecast from the World Bank.  The agency revised its forecast for global economic growth, calling for a drop of 2.9 percent this year as the financial crisis bottoms out towards the latter half of the year.  The reason this news spooked investors so severly was because the previous forecast was for a drop of only 1.7 percent this year.  Many analysts argued that this should have already been priced into the markets and should not have come as that big of a shock.

In Washington today, President Barack Obama’s administration announced that it had reached a deal with the large drug makers to have them foot $80B of the bill for healthcare reform over the course of the next decade.  Most of this money will go towards lower and middle income senior citizens who need help with rising healthcare costs.  Analysts view this as an important first step of the plan, but some have said that the administrations current plans for healthcare reform could cost over $700B, leaving the government to front at least $620B over the next few years.  It will be interesting to see how Americans respond to this spending after two bailout packages and the bailout for the financial companies such as American International Group (AIG) [AIG: 35.60, -0.06 (-0.17%)].

Walgreen Co. [WAG: 28.36, +0.67 (+2.42%)] reported earnings today seeing a drop of 9% on the bottom line.  This however was accompanied by a growing top line and news of potentially $1B+ in cost cutting by the drug store operator through fiscal year 2011.  Many investors are looking towards companies such as Walgreens to see if there is any type of bottom forming in consumer spending, something that to this point has definitely not be confirmed.  The company was able to earn $522M or $0.53 per diluted share, down from $0.58 per diluted share last year in the same quarter with a net income of $572M.  Gross margins slipped 0.8% to 27.2%.

Please join us tomorrow for another market recap from Bullish Bankers.  Have a great evening.

- Charles W. Petredis

Disclosure: None.

Apple [AAPL: 250.98, +0.65 (+0.26%)] released their new iPhone today at stores around the nation, but the fever this time around was not nearly as big as the original iPhone release because the company allowed pre-orders to take place over the internet.  This 3G S iPhone is much faster than the original version, and is more suitable for viewing video content on the go.

In related news the FCC is looking into the legality of cell phones being tied to only one carrier, in the way that the iPhone has a mutually exclusive contract with AT&T [T: 27.265, -0.085 (-0.31%)].  Arguments are being made that this is not the best business practices from the consumers point of view, and many industry analysts are predicting that new laws may arise to make these types of practices illegal in the mobile phone market.

R. Allen Stanford, the Texas Billionarie, was arrested today by the Federal Bureau of Investigation (F.B.I.) for what the Securities and Exchange Commission (S.E.C.) believes is at least an $8B dollar fraud.  This fraud was based around Certificates of Deposit, or CD’s, that offered rates much higher than competitors which were unrealistic.  During the heart of the financial crisis Stanford Financial Group could no longer cover up their tracks and their fraud was exposed.  This, along with the Bernie Madoff, incident, has left an extremely sour taste in the mouth’s of many individual investors who were not familiar with the financial markets.  Only time will tell if so called “Main Street” will ever forgive “Wall Street” for their transgressions.

That’s all for this week, please join us again on Monday as we bring you another Bullish Bankers market recap.

- Charles Petredis

Disclosure: The mutual fund the author manages is long T.

Financials were led higher today as they piggy-backed on strong earnings news from Discover Financial Services [DFS: 15.3313, +0.1713 (+1.13%)].  Discover reported earnings of $209.2 million, or $0.43 per share, down from $234.1 million, or $0.48 per share the same period the year before, but beating the average analyst estimate of $0.30 per share.  The credit card company would have reported a loss, but did not due to receiving a $473 million payment from Visa [V: 71.94, +1.41 (+2.00%)] and MasterCard [MA: 204.155, +3.075 (+1.53%)] for an anti-trust settlement, boosting Discover’s after tax profit by $295 million.  The payment was part of a $2.75 billion settlement for Discover as they claimed that both Visa and MasterCard harmed its business by preventing its member banks from issuing Discover credit cards.  Discover also commented on paying back government money, saying that they are intent on repaying sooner than expected, but does not expect to repay it next week as it is helping the companies lending efforts.   Discover’s sales volume declined 4%, while average loans increased from $47.5 billion to $51.1 billion, and total deposits rose 8%.

In other earnings news, Research in Motion [RIMM: 44.019, -0.111 (-0.25%)] reported results afterhours, announcing earnings of $643 million, or $1.12 per share, compared to earnings of $482.5 million, or $0.84 per share in the same period in 2008.  RIM said that without onetime items the company would have reported net income of $564.4 million, or $0.98 per share.  Revenue was $3.42 billion up 53% from the previous year as the company saw 3.8 million net new Blackberry customers and shipped 7.8 million devices.  Despite RIM beating the street’s estimate of earnings, $0.94 per share, and revenue, $3.4 billion, the wireless device maker traded down afterhours as investors were disappointed with the second quarter forecasted numbers.  RIM expects second quarter revenue to come in between 3.45 billion and $3.7 billion, while analysts are expecting $3.6 billion, while they also announced that it expects earnings to come in between $0.94 and $1.03 per share, while analysts expect $0.95 per share.  RIM is up over 80% year to date.

The Labor Department announced today that initial jobless claims rose 3,000 to 608,000 in the week ended June 13, bigger than the expected 2,000 rise predicted by economists.  These initial claims numbers have risen slightly from last week and show that the economy is beginning to stabilize, but by no stretch of the imagination are the numbers showing signs of a immediate recovery.  The Labor Department said that continuing claims fell 148,000 to 6,687,000 in the week ending June 6, the first weekly decline since the week ending, January 3.  Economists believe that the recession is slowing down giving the markets less volatility and more confidence, all good things for Americans and the investor.

Check back tomorrow for another market recap from Bullish Bankers.

- Matt Shannon

Disclosure: None

This afternoon, Obama released big news of a reconstruction of the financial regulatory system as the government plans to shift power and responsibility onto the Fed, hoping to stabilize the economy.  The Fed’s new power will allow a greater regulation in areas unseen before, such as hedge funds and credit default swaps.  The financial markets retracted today on news of this plan due to the massive uncertainty it brings to the table.

The Obama Administration also aims to create a new consumer protection agency to prevent abuses to mortgage and credit markets in the future, hoping to curb the chances of a deep recession due to financial instability again.  Roughly everything in the financial markets is impacted by this plan.  Banks and companies deemed too big to fail will now be at the mercy of the Federal Reserve.

FedEx [FDX: 81.54, +0.17 (+0.21%)] released earnings this morning at FQ4 EPS of $0.64 which beat analyst expectations by $0.13.  However, revenues were down from $8.32B to $7.85B over the same quarter last year.  Earnings are down 56% over last year, and management continued to slash FQ1 guidance from $0.68 to $0.30-$0.45.  Management cited the decrease in revenue and guidance is due to lower volumes at FedEx Express and FedEx Freight.  FedEx Express revenues were down 25% from $6.4 billion to $4.8 billion over the same quarter last year.  There was also a $260 million dollar operating loss due to aircraft related charges.  This weighed down the stock 1.49% today, bringing shares down to $50.70

To further increase consolidation in the generic pharmaceutical industry, Watson Pharmaceuticals [WPI: 44.47, +0.32 (+0.72%)] announced a plan to purchase Arrow Group for $1.75 billion.  This will give Watson a promising new drug pipeline with an increased foreign exposure.  Watson primarily operates in the U.S., the Arrow acquisition will give them a greater exposure to Canada, France, Germany, U.K., and Scandinavia.  Watson expects this deal to go through by the end of the year, pending review by regulators.

Prices increased in May at the lower end of expectations, pushing the consumer price index up 0.1% on a month to month basis.  This is a pretty tame number when considering energy costs increased significantly over the past few weeks.  This report was good news for the Fed and bond markets, possibly indicating a longer wait for a raise in interest rates.

Be sure to read tomorrow’s Market Recap for a greater understanding of the financial markets

- Brendan Stevens

Disclosure: None.

Best Buy [BBY: 33.44, +0.78 (+2.39%)] reported earnings of $153 million, or $0.36 per share for the quarter which ended May 30.  This was down from the same period the year before, when they reported earnings of $0.43 per share or $179 million.  Revenue was up 12% to $10.1 billion for the Minneapolis-based retailer, this however missed the average analyst expectation of $10.4 billion, with the Best Buy also reporting that sales fell 6.2% at stores which have been open for at least 14-months.  Best Buy also announced in their earning release that they saw a gain in market share of 2% in the US primarily due to the liquidation of Circuit City, but this was still less than the 5% annualized market share gain that analysts were expecting.  Best Buy has been hurt significantly in the current economic state as demand for consumer electronics has been crippled with people spending less on wants and more on needs.  Best Buy’s management announced that they would be cutting back on capital expenditures and trying to cut cost in an effort to offset poor demand.

In tech news, Microsoft [MSFT: 23.90, 0.00 (0.00%)] was one of the few members of the NASDAQ that was able to hold on to early gains.  Microsoft was up, as the Redmond, Washington company was upgraded by an analyst for Jefferies & Co. who raised its target price from $22 to $26.  The upgrade comes as the analyst cites that companies will buy software from Microsoft this coming year as Microsoft has ended service for Windows XP forcing corporate clients to upgrade to Microsoft’s Windows 7.  Windows 7 release date was moved to October 22 from January so that PC’s sold during the holiday season will have Windows 7.  In addition to Windows 7 the analyst cites that the software giant deserved the upgrade as they have been cutting costs, in particular by eliminating reimbursement for discretionary items.  Microsoft has also benefited as their new search engine, Bing, as received good reviews.  Microsoft is up over 20% year to date.

Housing news was very positive today, as home starts rose 17.2% to a seasonally adjusted 532,000 in May, far exceeding the expected 7% rise in starts.  Permits also increased 4.0% to a 518,000 annual rate, beating economists’ estimate of 2.4%.  Single-family starts were up 7.5% to 401,000, as single-family starts have been up for the past three months.  Construction was also up in housing with two or more units and in homes with five or more units, up 61.7% and 77.1% respectively.  Despite this, the housing crisis is not over yet as inventories remained high and tight credit and rising unemployment deterring demand.  Housing starts are 45.2% then they were in May of 2008.

Check back tomorrow to Bullish Bankers for another market recap.

- Matt Shannon

Disclosure: None