Stock Market Commentary
With the Government shutdown seemingly behind us now all eyes will be on company quarter 3 earnings announcements which will be used to help gauge the health of the economy. Earnings season is here and in full force with 104 of the S&P 500 now having reported earnings which have not been overly enthusiastic but good enough to keep the markets up. So far earnings for the 104 companies reporting on the S&P are up by an average of 4.4%, with 62% of the companies actually beating expectations. Excluding J.P Morgan, the financial sector has fared the best currently coming in at a 14.7% year-over-year growth.
Last weeks big winner, Google set a new intra-day high today trading at 1,019.00, before closing down at 1,003.30. Google cracked the $1,000 mark on Friday following a better than expected Q3 earnings report with Revenue rising to $14.89 billion, up 12%, yielding EPS of $10.74. Analysts had been modeling $14.79 billion and $10.36 per share. Today, after market close we saw Netflix win big as earnings more than quadrupled year over year, earning $32 million or $0.52 per share in Q3 of 2013. Netflix ended September with 31.1 million U.S. subscribers, eclipsing the estimated 29 million subscribers that HBO’s 41-year-old pay-TV channel is believed to have in the country. The also added 1.44 million subscribers outside of the U.S. to bringing its world wide total to 40.3 million users. They also do not anticipate a slow down with expectations of an additional 2.5-4.1 million worldwide&n bsp;subscribers added during the fourth quarter. Shares approached the $400.00 mark in after hours trading and are now up from $64.00 a year ago. WHO TRADED THAT WOW!!
The Dow Jones was unable to stay in the green today closing down 7.45 points to end at 15,392.20 after trading the session in a very tight 48 point range. The S&P 500 set a new intra-day trading high before ending at 1,744.66 a gain of 0.16 points. The NASDAQ also had another strong day hitting a fresh 13-year high before ending the day up 5.77 points to close at 3,920.05.
Tomorrow we will see 115 companies reporting their Q3 earnings including Amgen Inc, Broadcom Corp, CIT Group Inc, Delta Airlines Inc, and Lockhead Martin Corp. Be sure to tune into Trading Room tomorrow night at 4:00 pm PDT.
An Incredible day for the markets as we head straight into the overhead ceiling of the rising wedge formation on the S&P 500 at the same time that we hit the wall with the debt ceiling. This will likely be some awesome trading markets ahead.
Despite the bearish formation on the index we are seeing some extremely good strength in the sectors across the board. Particularly XLU, XLY ,XLE and XLK.
While the pattern suggests bearish the signs are pointing towards the indication we may just break on through to the other side. (music pun).
Now is the time to knuckle down and make hay while the sun shines.
Exciting day tomorrow! Why? It’s October. The time for making money, avoiding the cold and…..making more money!!! Yep, its typically the start of the best season of trading all year round.
Now boy do I have a treat for you tonight. The potential answer to where we are going next in the market. Tomorrow is the first day of October and one thing everyone might not know is that the first day of the month and option expiration Friday (third Friday of the month) are very important as often key turning points are established on these days. In the graph below for example you will notice that the last two major turning points on the S&P were on those days exactly.
So! Tomorrow brings another month around and at the same time we are about to touch on the 23.6% Fibonacci line as well as the uptrend line forming the bottom of the Rising wedge.
Predictions? Well i think that if we hold these two levels we are in store for another leg up in the market testing 1,720 – 1,740. Longer term prediction….. that will be the last high we see before a correction.
If we hold ….. its “short term long hunting season..” (Wish I could do an Elmer Fudd impression better than that.. but you get the jist).
All eyes will be on tomorrows Fed address as to speculation that it will start tapering off asset purchases in September, cutting back from $85 billion per month to $70 billion to $75 billion. With this as the census opinion any deterrence could send the market spiraling down or shooting to all new highs anyone’s guess at this point.
Markets seem to be fine with the expectations of minimal tapering as the Dow Jones and S&P 500 both closed higher for the third consecutive day. The Dow Jones closed near the middle of its days range closing up by 34.95 points to end at 15,529.73. It is currently on pace for its second best monthly gain of 2013. The S&P 500 added 7.16 points to end at 1,704.76, finishing above 1,700 for the first time since Aug. 5. The index is set to post its strongest first three quarters of a year since 1997. The NASDAQ was the big winner today rallying by 27.85 points to close at 3,745.70.
Tomorrow will be a very interesting day and could set the tone of the markets for the remainder of the year. With the Feds wrapping up their 2 day meeting we will a statement from them at 2:00 pm EST followed up with a question and answer period with Ben Bernanke. We will also see new housing starts numbers and crude oil inventory numbers as well. There will be 12 companies reporting earnings tomorrow including FedEx Corp, General Mills Inc, and Oracle Corp. Happy Trading!
As the U.S. Government gets closer and closer to reaching the cap of its $16.7 trillion debt ceiling we get closer and closer to running the risk of the U.S. Government going into default. Since May the government has avoided defaulting on any of its bills by employing emergency measures to manage its cash, such as suspending investments in pension funds for federal workers. Currently the government is in a stalemate as the Obama administration has vowed not to negotiate with Congress over the debt ceiling. Today Treasury Secretary Jack Lew said that he United States could have less than $50 billion in cash in mid-October when the government exhausts its legal borrowing capacity.
The debt ceiling idea came about in 1917. Before then, Congress had to approve borrowing for each item when the government needed money. Since 1960, Congress has acted 78 times to permanently raise, temporarily extend or revise the definition of the debt limit—49 times under Republican presidents and 29 times under Democrats.
Concerns have obviously taken an effect on the U.S. markets which has now given up all of its gains from last week with the Dow Jones and S&P 500 currently on 4 day losing streaks. The Dow Jones fell a further 66.79 points to end at 15,334.59 and is now down 375 points since its peak last week. The S&P 500 slid back beneath 1,700 to close at 1,697.42 and has seen significant divergence in its money flow. The NASDAQ was able to stop the bleed for now and closed up by 2.97 points to finish at 3,768.25. On the other hand the Russell 2000 Index, which measures the performance of the small-cap segment of the U.S. equity universe, rose to a new all time high today. Small-cap stocks have led for most of the year, surging nearly 27 percent.
Tomorrow we will see earnings announcements from 8 companies including AutoZone Inc, Bed Bath & Beyond Inc, Jabil Circuit Inc, and SYNNEX Corp. On the economic front we will also see numbers from the change in the total value of new purchase orders with manufacturers for durable goods; New Home Sales; and Crude Oil Inventories the Richmond Manufacturing Index. Be sure to listen to tonight’s Trading Room if you have not already as it most surely provide some fantastic knowledge and education. Happy Trading!!
All three major U.S. indexes closed down during today’s session for the third straight day as profit taking and fear of stimulus tapering has been evident. The Dow Jones Industrial Average dropped by nearly 100 points before regaining some of its early session losses to close at 15,470.67, down 48.07 points. The S&P 500 and the NASDAQ also regained some of its early morning losses to both close down by about 1/3%. The S&P 500 should find support at 1,650 levels, with any break through this level we could see a much more dramatic pullback than what’s expected.
With two Fed Presidents scheduled to speak today we knew that once again that the day’s trading would be largely focused on the stimulus program. Philadelphia Fed President Charles Plosser ended up cancelling his speech while Cleveland Fed President Sandra Pianalto reiterated what most of the Fed members have been saying for the past month. Pianalto failed to give any time frame, but did say she would be ready to scale back the bond-buying program if the labor market continues to improve.
On the economic front we saw the number of mortgage applications increase by 0.7% after having fallen in four of the past five weeks. With increasing interest rates worries have emerged that higher costs could take some of the strength out of the housing market’s recovery. Fixed 30-year mortgage rates rose again last week to average 4.61 percent, and have now risen over 1% since early May 2013.
U.S. consumer debit numbers for June was also reported today coming in at a less than expected $13.8 billion raising the total to $2.8 trillion. Non-revolving credit, which includes loans for cars and college tuition, rose by $16.5 billion. Revolving facilities, which mostly measure credit card use, declined by $2.7 billion, the most since June 2012.
Tesla continued its unbelievable year after reporting a surprising second-quarter operating profit causing the stock trade above $152.00 a share in after-market trading. Analysts had expected the company to report a loss excluding items of 17 cents a share on $383 million in revenue. These numbers were easily beat coming in at a profit of 5 cents on revenue of $405 million. The carmaker said it had increased its rate of production 25 percent to 500 cars a week and that it had surpassed its expected sales of 4,500 vehicles for the second quarter by 650.
As we begin to come to the end of second quarter earnings season we will see 248 companies releasing their earnings tomorrow. Of the 248, 138 have seen an increase in insider ownership with the likes Chiquita Brands International Inc, Coeur d’Alene Mines Corporation, Allscripts Healthcare Solutions, Inc., and NVIDIA Corporation seeing very strong growth in insider ownership over the past 6 months. On the opposite side of the spectrum we will see 75 companies have seen a drop in insider ownership over the past 6- months including Beam Inc, AMC Networks Inc, Plug Power Inc, and Monster Beverage Corporation.
Economic numbers for the week have been coming in beating expectations and this has given the U.S. markets the added boost to push through to new all time highs. The S&P 500 traded above the 1,700 level for the first time after gaining 1.25% to finish the session at 1,706.87 after setting a new intraday high of 1,707.85. The Dow Jones Industrial Average climbed by 128.48 points, or 0.83 percent, to finish at 15,628.02. The NASDAQ, which has had the best week of the major indexes, added another 49.37 points to close the session at 3,675.74. Following today’s upbeat action the Dow and S&P 500 have climbed more than 19 percent, while the NASDAQ has surged an impressive 21 percent for the year to date.
These positive rallies have been driven by the success of a seemingly improving economy and with the FED confirming that they will continue their bond purchasing program, good news is no longer bad news. Weekly jobless claims fell to a 5.5 year low according to the Labor Department. Also being reported was that the number of planned layoffs at U.S. firms declined although modestly in July, with employers announcing 37,701 cuts last month, down 4.2 percent from June. The reports came ahead of Friday’s widely-watched government job report. Analysts polled by Reuters expect to see a gain of 184,000 in July, after a 195,000 uptick in the previous month. New orders surged, according to the Institute for Supply Management raising the pace of growth to its highest levels since June 2011. The one negative note today was that construction spending declined in June marking its biggest decline since January.
It’s very hard to gauge the markets at these levels and although a pullback seems more than likely, continued positive economic and earnings numbers may keep this rally alive. So far, three-quarters of the S&P 500 companies have reported results, with 67 percent of firms topping earnings expectations and 55 percent beating revenue estimates. If all remaining companies report earnings in line with estimates, earnings will be up 4.2 percent from last year’s second quarter.
The big news tomorrow on top of the government jobs report will be surrounding PC maker Dell. After delaying its shareholder vote on an an offer from CEO and founder Michael Dell to buy the company, shareholders will convene once again on Friday. Unless it’s postponed again, Friday’s vote may prove crucial in determining the future of the struggling company. Its founder and private equity firm Silver Lake want to buy and take the company private, arguing that a painful restructuring can best be performed away from Wall Street’s scrutiny. In an attempt to stop the buyout Carl Icahn, who owns nearly 9% of the company filed a lawsuit today against Dells CEO and Board of Members. Icahn, who has urged fellow shareholders to reject Chief Executive Officer Michael Dell’s and Silver Lake’s offer to buy and take the company private, included a list of demands in his lawsuit, such as that the CEO and his affiliates be prevented from voting any shares bought after Feb. 5.
Tomorrow we will see 45 companies releasing their earnings which is considerably less than what we have seen on average this week. Of the 45, 32 have seen an increase in insider ownership with the likes of Alpha Natural Resources, Cowen Group, Chevron Corp, and Pinnacle West Capital seeing very strong growth in insider ownership over the past 6 months. On the opposite side of the spectrum we will see 9 companies have seen a significant drop in insider ownership over the past 6- months including Immunogen Inc, Viacom Inc, and The Washington Post. Happy Trading!
Although many believe criminal charges are in order, Steven Cohen founder of SAC Capital Advisors, has not been able to avoid accusations and will now be forced to deal with civil claims. The SEC announced late Friday afternoon that Cohen is subject to civil claims after he failed to “reasonably supervise” two senior people at SAC Capital who have been accused of engaging in criminal insider trading.
“Both portfolio managers provided information to Cohen indicating that they may have had access to inside information to support their trading,” the SEC said in a statement. “In each case, Cohen received highly suspicious information that should have caused any reasonable hedge fund manager in Cohen’s position to take prompt action to determine whether employees under his supervision were engaged in unlawful conduct and to prevent violations of the federal securities laws. Cohen failed to take reasonable steps to investigate and prevent such violations. ”
As one of the top 150 richest people on Earth and with the strong beliefs by many at SAC Capital that there is very little to build a case on it should be very interesting to see what happens moving forward.
Trading ranges on all major indexes have really tightened over the past few trading sessions but have managed to continue higher. The Dow Jones Industrial Average traded in a very narrow range of only 60 ending the day up a dismal 1.81 points to close at 15,545.55. Microsoft was the big winner on the Dow today trading up by nearly 2% closing at its day high. After suffering a significant sell off on Friday following a miss in earnings expectations. Clearly supported by its 200 day moving average shares have since bounced from its lows and Friday and closed fairly positively today.
The S&P 500 continued its rally which now sits at four days, adding 3.44 to close at 1,695.53, posting a record closing high. The S&P 500 is on pace for its best monthly gain since October 2011. And the Nasdaq advanced 12.77 points to finish at 3,600.39.
Gold has been on quite the terror after hitting as low as 1180.64 on June 28/2013 hitting its highest levels in almost a year after a 3% rally today. Once gold broke above $1,300 an ounce we say a rush of buying by funds and short covering by futures traders. Silver also jumped by 6%. During tomorrows Trading Room tune in for a review on these precious metals to get the inside look from expectations by John and Strath. Happy Trading!