Posts Tagged ‘Dow Jones Industrials’
With remarkable consistency, oil stocks continue to do great on the stock market. Even though spot oil seems to be stuck below $100.00 a barrel, gasoline prices have been going up for the last month, as U.S. refiners use January and February for maintenance shutdowns.
Any way you cut it, oil remains a huge part of our daily lives, and most oil stocks are trading at or very near their all-time record highs. I should qualify that—what I mean is that most big oil stocks are trading right at their highs. Even with the U.S. oil production boom (which is very real), smaller oil stocks just don’t go up in value unless the spot price is doing so as well.
I always love consistency in a stock market investment. Consistent growth in earnings, dividends, and share price is absolutely golden, considering the volatility we get in capital markets. Save for pumping from your own oil well, you can only beat rising gasoline prices by owning a part of the company, and the biggest ones offer some of the best consistency the stock market has to offer.
Consider Chevron Corporation (NYSE/CVX), which is one of the large, integrated oil stocks that are trading at their all-time record highs on the stock market. But the stock isn’t expensive, with a current price-to-earnings (P/E) ratio of 8.7. The company has about $11.00 a share in cash and a price-to-sales ratio of around one. Its long-term stock chart is below:
Chart courtesy of www.StockCharts.com
Chevron is a member of the Dow Jones Industrials and has an outstanding track record of increasing its quarterly dividends … Read More
The stock market’s recent breakout has legs, and there’s more optimism for the economy and corporate earnings this year. The stock market had a very strong start to the year, with the Dow Jones Industrials leading the way. Transportation stocks have turned strong, and the NASDAQ Composite is moving solidly. Even the price of oil is slowly ticking higher—$100.00 oil is a near-term reality.
There is a renaissance taking place in the domestic U.S. oil and gas business, and there is a ton of money sloshing around in the system. Countless companies are drilling in Montana, North Dakota, and California, along with the traditional regions. There is a glut of natural gas on the market, and low prices are supplanting coal for electricity production. It won’t be long before the U.S. is actually energy independent, especially if natural gas is used in more applications (as T. Boone Pickens advocates). Plus, there’s a lot of oil and gas drilling going on outside of the U.S. market, and the big oil and gas services companies just reported great financial results.
On the stock market, resource investing is always cyclical. Even the fastest growth story (say, an oil producer with new discoveries and a verifiable production forecast) won’t move upward on the stock market without a commensurate move in oil prices. An oil producer not only has to find the commodity and get it to market; it also has to worry about the prices for that commodity, which are set by a marketplace beyond its control. It’s a different business from speculating among technology stocks, for example.
That being said, however, … Read More
The Dow Jones Industrials gave up most of their gains this year in the recent stock market selloff; given current fundamentals, this market is oversold. Strife in the Middle East definitely affected investor sentiment last week, but the market is now betting that U.S. policymakers will address the fiscal cliff issue before the end of the year. Across the board, expectations among equity investors have come downward; this gives stocks the potential to outperform in the fourth-quarter earnings season.
During the third-quarter earnings season, we saw large-cap, international businesses impacted by economic weakness in the eurozone and China. Chinese economic data has improved in recent weeks, although like everything nowadays, you have to consider the numbers with a grain of salt. In order for this stock market to advance, it requires improvement on the part of the Chinese economy; it goes without saying that the eurozone will be in no-growth mode well into 2013.
The latest earnings season saw large-cap companies report very conservative outlooks for the rest of this year. Corporations also showed difficulty in growing revenues, while earnings themselves held constant. (See “Where’s The Good News? Companies Just Meeting Expectations.”) Stock market valuations, however, are very reasonable at this time, and this provides a floor to the recent selloff. Still, without earnings growth, the stock market won’t really be able to advance in a meaningful trend.
One company that’s really been hit hard over the last six months on the stock market is Intel Corporation (NASDAQ/INTC). After reporting that its earnings were affected by weakness in Europe and, to a lesser extent, strength in the tablet … Read More
The S&P 500 is up against a bit of a wall and has to convincingly break 1,465 again, which it achieved in mid-September, in order to accelerate. A lot of corporate earnings have been decent, but quite a few are reporting light visibility for the fourth quarter, and this is no surprise. The stock market peaked mid-September when the mini-rally, driven by a third round of quantitative easing (QE3), consolidated; it has now recovered. We’ve seen large, international companies report earnings or visibility below consensus due to very slow business conditions in the eurozone. Despite the S&P 500’s fair valuation, I think it’s going to be quite difficult for the main stock market averages to accelerate much further.
While Johnson & Johnson’s (NYSE/JNJ) earnings were good and the company’s share price helped the Dow Jones Industrials, earnings results for International Business Machines Corporation (NYSE/IBM) had the opposite effect. This former stock market leader broke down significantly, as you can see in the stock chart for International Business Machines (IBM) below:
Chart courtesy of www.StockCharts.com
Expectations were already lowered for third-quarter earnings season. My reading of current corporate results is that blue chip companies are now running out of cost-cutting options to keep their earnings afloat. The likelihood of corporations being able to accelerate their earnings going into 2013 is very low, considering business conditions in the eurozone and declining economic growth in China, which is now the world’s second-largest economy.
The “AGA” stocks, which include Apple Inc. (NASDAQ/AAPL), Google Inc. (NASDAQ/GOOG), and Amazon.com, Inc. (NASDAQ/AMZN), have all retreated from their recent 52-week highs. Amazon.com recently hit $264.00 a share; now … Read More
Automatic Data Processing, Inc. (NASDAQ/ADP) is one of those blue chips that have a good thing going with their private sector U.S. jobs reports. The stock market moves on the news, and so does Automatic Data Processing (ADP). According to ADP’s National Employment Report, the nonfarm private sector added 162,000 jobs from August to September on a seasonally adjusted basis. Manufacturing added 4,000 new jobs, while construction added 10,000, the strongest showing since March (which had a boost in construction jobs due to mild winter weather). The financial services sector added 7,000 jobs in September, representing the 14th consecutive monthly gain. The vast majority of new employment growth was from small and medium-sized businesses.
ADP is another one of those blue chips that is trading right at its 52-week high on the stock market and boasts a current dividend yield of just under three percent. The stock is about nine points away from its all-time high set in September of 2000 and has done well since the financial crisis of 2008/2009 on consistently lower trading volume. ADP’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
ADP belongs to the NASDAQ-100 Index, which is full of many stock market blue chips, both domestic and international, which are non-financial companies trading on the NASDAQ. Weighted by market capitalization, this index has significantly outperformed all other blue chip averages, including the Dow Jones Industrials, S&P 500, and even the NASDAQ Composite over the last several years.
Even though the Dow Jones Industrials just hit their best level since 2007, the Dow Jones Transportation Index began to appreciate with the other major indices only in the last week—and this is with buoyant oil prices. It all leads me to believe that the stock market is technically overbought and almost a little ahead of economic fundamentals. (See “Stock Market Investor Sentiment Drops Again…Why?”)
However, I can’t argue with the momentum in the Dow Jones Industrials. Institutional investors continue to snap up dividend paying blue chips with fervor. There are two things the stock market needs for this mini bull market to continue until the end of the year: one, large-cap technology benchmark stocks must not break down; and two, the Dow Jones Transportation Index has to make up some lost ground. The risk of a stock market correction rises significantly if any of these two factors don’t occur.
With the Federal Open Market Committee (FOMC) meeting upon us, anything could happen with the stock market. We’ve seen the Dow Jones Industrials, the NASDAQ Composite, and the S&P 500 Index move strongly higher in anticipation of new stimulus from the FOMC; and most often, the stock market sells on the news. But things are a little wacky this year, and even though I think the stock market is in the process of topping out, a third round of quantitative easing (QE3) could send shares soaring anyway. It’s all because the stock market isn’t expensively priced and investors have no other place to put their money to beat the rate of inflation. Dividends are the only game in … Read More
Following a weak second quarter, the Dow Jones Industrial and S&P 500 indices are now in positive territory for the first time since the end of the first quarter on the backs of a positive July and August.
So far, August has proven strong for technology, growth, and small-cap stocks, with the NASDAQ and Russell 2000 up 4.2% and 3.4%, respectively, as of the close of Thursday. The S&P 500 is holding at 1,400, a level that I believe will be tough to hold. Every time I look at the long-term technical picture of the S&P 500, I’m concerned about the vulnerability. Since 2000, there have been two major tops at above 1,400, and the current bull market rally from March 2009 appears to be heading for a third top.
What I continue to see is an expectation-driven buying based on a best case scenario that includes a third round of quantitative easing (QE3) from the Federal Reserve, the saving of the eurozone, and strengthening in the U.S. economy. And then you have the uncertainty of the upcoming presidential election.
Yet the reality is that Europe remains in a financial mess, with six eurozone countries in a recession and straddled with major debt and growth issues. Britain is also in a recession. Germany, the largest and strongest economy in the eurozone, is showing positive signs, but the problem will be the country’s focus and distraction in helping to save the eurozone. German Chancellor Merkel appears to be backing the desire of European Central Bank (ECB) to keep the eurozone together, but so far, we have yet to see any concrete … Read More
Alcoa, Inc. (NYSE/AA) will be the first Dow Jones Industrials stock to report in the second-quarter earnings season, as it kicks off with its results on July 9. The company is one of the world’s top aluminum makers and a good indicator for the global economy, as the metal is used in many industrial applications, including aircraft, automobiles, commercial transportation, packaging, building and construction, oil and gas, defense, and consumer electronics. In the first quarter, Alcoa had Wall Street rejoicing after surprising on the upside and raising its global revenue guidance to seven percent for 2012. That was then. So far, based on the stagnant stock price and decline from the $10.00 level, the results may not be that good for the second-quarter earnings season, leaving traders nervous.
While there is hope and optimism for the second-quarter earnings season, I expect disappointment, but I could be proven wrong as companies report.
Based on the current estimates, earnings growth for the S&P 500 is estimated to be a decent 6.5% in the second quarter, down from a much more optimistic 9.2% as at April 1, according to Thomson Reuters. In the first-quarter earnings season, 67% of the S&P 500 companies beat estimates, which was a decline from the fourth-quarter earnings season.
The three top-performing earnings growth areas in the first-quarter earnings season were Industrials (+17.6%), Technology (+14.7%), and Financials (+13.6%). I still believe technology will remain one of the top areas to make money going forward, but boring dividend paying stocks also look attractive at this time, as I discussed in “Why the Pros Are Dumping Tech Stocks in … Read More
We have a week remaining in June, and so far, the month has turned in better stock market results after a disastrous May. The key stock indices are over three percent this month but remain negative since the end of the blistering first quarter. The NASDAQ, S&P 500, and Russell 2000 joined the Dow Jones Industrials in rallying back above their respective 50-day moving averages (MA).
The near-term technical picture is neutral to moderately bullish given the break of the 50-day MA on above-average relative strength, but there could be some near-term selling pressure, given the overbought technical condition and the failure to hold gains, based on my market view.
As has been the case in the recent months, my market view is that any upside gains may not be sustainable. Trading continues to be news-driven, and there are plenty of unknowns in Europe, China, and the U.S, according to my market view.
Greece managed to elect a coalition government to accept the austerity measures, but the country is clearly seeking some leeway on the measures. I don’t think Germany is amused.
Spain has surging bond yields. The country’s 10-year bond yield is over seven percent. In my market view, this is a red flag and a dire situation if the Spanish banking system does not get help. Over $130 billion is required as an infusion into the system, but then this is only a bandage solution, according to my market view, as I believe there are major structural issues in not only Spain but Europe as well. Italian yields are also at over six percent as the country … Read More
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