Posts Tagged ‘economic news’
Are the Stock Market Bears About to Be Proven Right?
By Mitchell Clark, B.Comm. for Profit Confidential
Are the stock market bears right?
This week will offer up a slew of economic news, but the most important is what Visa Inc. (NYSE/V) and MasterCard Incorporated (NYSE/MA) report with their earnings.
These are two powerhouse wealth creators.
The credit card business has proven to be a good one. On the stock market, the performance of these two companies has been exemplary, backed by strong growth in revenues, earnings, earnings per share, and shareholders’ equity on an annualized basis.
Credit card companies are important benchmark stocks. They are a gauge of not only consumer spending, but also consumer confidence. People spend money when they have more confidence and there is more certainty.
If only corporations would do the same.
Visa is much more expensively priced on the stock market compared to MasterCard. American Express Company (NYSE/AXP) recently broke out to the upside, but the stock really hasn’t done anything for the last 13 years.
Discover Financial Services (NYSE/DFS) is one of the most reasonably priced credit card companies. Comparatively, the company pays more dividends than its counterparts.
MasterCard’s stock chart is below:
Chart courtesy of www.StockCharts.com
Wall Street earnings estimates recently came down for MasterCard. This likely reflects the weaker economic output in March.
But current consensus is still calling for the company’s revenues to grow approximately 12% this year and the same in 2014. This is impressive for such a mature and competitive business.
One very noticeable trend with MasterCard is that its trading volume on the stock market has been declining since the financial crisis. At the same time, its stock market value has basically doubled over … Read More
Apple Sees Significant Downturn; Can It Recover?
By Mitchell Clark, B.Comm. for Profit Confidential
Stock market action has been exceptionally strong since the beginning of the year, and Wall Street must be making a killing with so many new initial public offerings (IPOs).
The lack of consistency in economic news is a real problem. Wall Street has been upgrading many popular stock market brands. It really is cheerleading.
Companies like AOL Inc. (NYSE/AOL), The Gap, Inc. (NYSE/GAP), priceline.com Incorporated (NASDAQ/PCLN), Under Armour, Inc. (NYSE/UA), and even Yahoo! Inc. (NASDAQ/YHOO) got upgraded. Google Inc. (NASDAQ/GOOG) was just rated a “Buy” by UBS after the position jumped $100.00 a share on the stock market.
The proof will be in the pudding. With so many of the big names at all-time record highs on the stock market, they should correct when they report. If they don’t, I will be very surprised. (See “Breakouts All Around; Final Countdown or the Beginning of a New Cycle?”)
The one stock I don’t know what to do with is Apple Inc. (NASDAQ/AAPL). It’s like there is a tremendous groupthink on Wall Street with this position.
Did the company just price itself out of its own market? Is it the revolt taking place in Apple retail stores? Or is it just a unified Wall Street trade? I don’t know what to do with this company.
I don’t use an “iPhone,” but when I bought a “MacBook Pro,” I received good in-store service from a particular associate. When I decided to buy more RAM (random-access memory), I called the store and asked for the same guy. Then I got berated by this punk kid who said that they don’t do this, … Read More
From Financial Crisis to Bubble, Is the Next Cycle Now in Play?
By Mitchell Clark, B.Comm. for Profit Confidential
What if the powerful breakout in the Dow Jones Transportation Average in December of 2012 was the beginning of a new, multiyear upcycle for the stock market?
The stock market has clawed its way upward since the financial crisis hit in 2008. Recent trading volume has been mediocre, accentuating the move, but the majority of companies on the Dow reported solid fourth-quarter earnings.
Corporations are buying back shares, increasing their dividends, and for a lot of blue chips, balance sheets are in excellent shape—way better than before the financial crisis. Valuations are below historical norms.
Bull markets typically start in a stealthy manner. All of a sudden, institutional sentiment changes on a dime. At the beginning of a new upcycle in the stock market, it’s corporate profitability that leads all other metrics. Regrettably, it’s not about Main Street.
Current aggregated data by FactSet on earnings are calling for a solid advance in the bottom half of 2013 and 2014. It may not be believable yet, but many corporations are expecting this.
There is a tremendous amount of cynicism and doubt among individual investors (and rightly so). Many people have been sidelined since the financial crisis and throughout the recession. Since the financial crisis, individual investor sentiment has grown worse. A contrarian indicator? Maybe. Overperformance in the Dow Jones Industrials produced two significant periods of underperformance within the last 12 years. But the normalized trend of the Dow Jones Industrials is good.
Chart courtesy of www.StockCharts.com
The Federal Reserve is absolutely committed to re-inflating assets and keeping interest rates low. U.S. national debt is growing significantly (along with the … Read More
What’s Signaling the End of the Current Recovery
By Mitchell Clark, B.Comm. for Profit Confidential
Although the stock market is experiencing exceedingly light trading volume, strength in the Dow Jones Transportation Average is strong confirmation that this market will hold up over the near term.
There have been some powerhouse breakouts within this index. FedEx Corporation (NYSE/FDX) experienced a total 180-degree shift in sentiment right at the very end of December. On the stock market, FedEx was trading range-bound for the last three years, then bam! It broke $100.00 a share.
And United Parcel Service, Inc. (NYSE/UPS) experienced a breakout that was even more pronounced, flying from $72.00 a share to over $82.00 a share in just four weeks. It’s no wonder the Dow Jones Transportation Average broke out so significantly; countless names are trading at their highs. J.B. Hunt Transport Services, Inc. (NASDAQ/JBHT) is up 20 points since last September, now trading at an all-time record high.
Transportation stocks are the confirming trend to a stock market that’s gone up meaningfully on mediocre news. There’s been significant strength in the Dow Jones Industrial Index; and considering that earnings have been flat, stock market valuations are still fair.
But the real worrisome trend is trading volume, which has been in steady decline since 2009. Declining volume is a classic bear market signal that reveals a lack of confidence in the market’s future. While U.S. economic news might be showing improvement, for the individual, investor sentiment is not.
There is a disconnect between the economy and the stock market, and it’s not healthy. If you look at the components of the Dow Jones Industrials, you’ll notice that the companies that are doing well are doing exceptionally … Read More
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