Wall Street Too Lazy To Sleep

Stocks poised themselves for a higher opening Thursday, but it may be that Wall Street simply has gotten too indifferent to care about the recent selloff.
Stocks have fallen in four straight sessions, but only one of them amounted to anything of any consequence. Aside from Tuesday’s 20-point selloff by the S&P 500 Index(SPX), Wall Street has behaved much the way it did Wednesday, when the index hugged the flatline for most of the session before finishing just 3 points lower on the close.
Futures suggest an eight-point improvement from the open, which would push the S&P back above the 1000-point mark, a level that has manifested a bit of psychological – if not actually technical – resistance.
On the other hand, the market has been – and can be expected to continue – battling a host of headwinds: Sluggish trading, owing to seasonal factors. An uptick in risk aversion. A speculative bubble forming that’s formed in some financials. And a rise in the kind of momentum moves in individual issues that smacks of day traders with no real commitment to fundamentals.
The one thing that has been working the bulls’ corner has been the economic data. This week’s reading on industrial trends showed the manufacturing sector of the domestic economy improved for the first time since the recession started. Wednesday’s release of the minutes of the last FOMC meeting suggested the central bank had evidenced increased confidence the recession has ended.
The stumbling block could be the consumer, especially as an iteration of the labor market. Friday brings the release of the monthly nonfarm payrolls report, expected to show that job losses persisted in August, but at a slower pace than in prior months; the forecast calls for a decline of 233,000 jobs, versus a loss of 247,000 in July.
The weekly unemployment claims reading came in just about where expected, showing 566,000 people without jobs filed claims for t! he week, down from 570,000 the prior week.
Monthly same-store sales figures from retailers can be expected to show the reticence of consumers amid the persistent weakness in the labor markets.
Furthering the bearish case, risk aversion has percolated over the course of the week’s action. Treasuries have risen in price for much of this week, although they have retreated a bit Thursday on some profit-taking. The decline in risk appetite has manifested itself more dramatically in the gold market, a conventional safe-haven for the inflation bugs. Gold prices broke out Wednesday, and continued to rally Thursday.
The session’s equity action has a constructive look on the open, but there’s a real chance that, with dwindling trading levels in the last week of the summer season, investors could opt to book some profits on any improvement, and think about answering the call of the open road.

Oracle Flies Past Targets & Taking Share (ORCL, SAP, IBM)

Oracle Corp. (NASDAQ: ORCL) just posted earnings.  Its GAAP EPS was $0.25 but non-GAAP was $0.31 EPS on revenues of $5.3 Billion.  First Call had estimates at $0.27 non-GAAP EPS on revenues of $5.04 Billion.  Look at these metrics individually:

• software license revenues up 35%, the strongest growth of any quarter in ten years,
• software license sales up 38%
• applications new license sales grew 63% compared to SAP’s new license sales growth rate of 15%

QUOTES FROM OFFICERS:

• Charles Phillips, president, said, "We like our growth strategy of expanding beyond ERP into high-end industry specific vertical software in contrast to SAP’s strategy of moving down market to sell ERP systems to small companies."
• CEO Larry Ellison said, "Our database and middleware new license sales grew 28% in Q2. We continue to take market share from IBM in both product categories."

While the earnings guidance is not yet out, this last quarter was a phenomenal report and it is really hard to call anything bad so far.  When it offers guidance, First call has next quarter’s estimates at $0.29 EPS and $5.19 Billion in revenues and it has fiscal May 2008 shows estimates at $1.22 EPS on almost $21.5 Billion.
Oracle’s stock closed down 2.3% at $20.76 today, and shares are at $21.70 in after-hours trading.  The 52-week trading range is $15.97 to $23.00.
Jon C. Ogg
December 19, 2007
Jon Ogg can be reached at jonogg@247wallst.com; he produces the SPECIAL SITUATION newsletter and he does not own securities in the companies he covers.