Posts Tagged ‘investor sentiment’
Who Wins in an Artificially Monetized World?
By Mitchell Clark, B.Comm. for Profit Confidential
If there is going to be genuine economic growth in mature economies, the leadership will have to come from the U.S. economy.
The convulsions taking place in the Japanese capital markets are emblematic of the monetary exuberance that both captivates investor sentiment and distorts its reality.
It’s a trader’s paradise with such volatility, based not on Main Street fundamentals, but on the ability and willingness of policymakers to puppeteer capital markets.
While liquidity and certainty are hugely important to investor sentiment, all the financial engineering should soon produce its own blowback. Investment risk in capital markets remains high.
Investor sentiment among institutional investors in U.S. equities still has strength to carry this market higher if corporations perform.
Corporate earnings are managed, but that’s how the system works. There’s been a paring down of earnings estimates for the second quarter.
E. I. du Pont de Nemours and Company (NYSE/DD), or simply DuPont, reduced its expectations for its first half of operating profits due to the weather (the wettest spring in almost 120 years in the farmbelt states). The company said full-year earnings per share will be at the low end of its forecast, between $3.85 and $4.05. Agriculture is the company’s most important operating division. (See “Why DuPont’s Earnings Results Are So Typical for This Stock Market.”)
Capital markets, especially the equity market, are looking for catalysts. From what I read, there are still great expectations for the Japanese equity market. Unscientific investor sentiment among fund managers maintains an outlook of perpetual volatility in that market.
Getting back to the U.S. market, economic news is not robust, but there … Read More
Action in Dow Jones Transports, Utilities Signaling Caution
By Mitchell Clark, B.Comm. for Profit Confidential
The equity market and other capital markets are gyrating on the rise in 10-year Treasury yields. There’s been a lot of unusual movement in currencies as well.
Speculation regarding what the Federal Reserve is going to do about quantitative easing and the lull between earnings seasons are definitely factors.
There is always equity market uncertainty in the weeks before the end of a quarter (though the Dow Jones industrials have held up well). Investor sentiment reflects the collective ambiguity of whether earnings will hold up. In a sense, there’s not enough data to keep equity market speculators happy with their bets. When speculators can’t justify their positions, capital markets get cranky.
Both gold and oil prices have been bouncing off the weaker U.S. dollar. There’s always churn before a quarter ends.
I repeat my view that an equity market sell-off could occur at any time and that investors who are long should not be surprised by some pronounced downside (I wouldn’t sell Dow Jones blue chips).
The correction that both Wall Street and many investors expected did not transpire. The willingness of institutional investors to be buyers has been robust.
The equity market was led this year by a pronounced breakout in blue chips and components of the Dow Jones Transportation Average. It’s still very much worth following these companies and transportation stocks for overall market direction.
The Dow Jones Transportation Average is well off its high of 6,568.41, and this is meaningful. The retrenchment, while well deserved, is a sign that the rest of the equity market is ahead of itself.
Alaska Air Group, Inc. (NYSE/ALK) is down … Read More
What Was Behind the Stock Market’s Massive Breakout?
By Mitchell Clark, B.Comm. for Profit Confidential
Something big happened at the beginning of the year—Wall Street gave up on Washington.
I’ve been trying to figure out how this incredible stock market action started at the beginning of the year. Things were trending fairly normally, and then institutional investors just started buying—blue chips first, a little break in February, then blue chips again, with a broadening out into the NASDAQ.
But there wasn’t any big catalyst that suddenly galvanized a change in investor sentiment. There wasn’t anything new from the Federal Reserve, and fourth-quarter earnings season hadn’t started yet.
But the Dow Jones Transportation Average and blue chips just took off.
It’s as if big investors just threw up their hands and said, “Forget policymakers; we’re going ahead anyway.”
The Dow Jones Transportation Average continues to be one of the key indices for the stock market. This is nothing new. The stock market run-up was led by this index and followed by blue chips.
Chart courtesy of www.StockCharts.com
The action in this index now is similar to the break it took in the last half of March. The index didn’t re-accelerate until the beginning of May.
Both transportation stocks and blue chips are definitely due for an extended break after this big run-up. It could very well last until second-quarter earnings season begins, or right into the fourth quarter.
But while the stock market needs to experience a retrenchment, there is still buying on the part of institutional investors. On a number of occasions, when the stock market opened down recently (either technically or on bad news), the main indices fought their way higher, often closing … Read More
Stock Market Fake-Out: Where Is the Retrenchment?
By Mitchell Clark, B.Comm. for Profit Confidential
This is unbelievable.
Johnson & Johnson (NYSE/JNJ) jumped about 23% since the beginning of the year, not including its dividend payment.
This upside on the stock market from such a mature brand is striking. And here’s the thing: the company actually delivered with its earnings results.
Companies like PepsiCo, Inc. (NYSE/PEP), Kraft Foods Group, Inc. (NASDAQ/KRFT), Colgate-Palmolive Company (NYSE/CL), The Walt Disney Company (NYSE/DIS), and even McDonalds Corporation (NYSE/MCD) performed similarly.
I can’t recall a time of such coordinated stock market strength from blue chips.
Of course, the stock market breakout has been all about the safest names. Institutional investors wanted to buy this market, but they needed the earnings safety to do it.
Over the last two weeks, the NASDAQ Composite saw a turnaround from its little slump, based on good earnings news. This broadening of the stock market breakout is definitely necessary for price strength to continue.
Oddly, there hasn’t been a correction yet.
Quite often on Wall Street, when you get groupthink or a group expectation about an event taking place in the financial markets, it doesn’t happen. There has been no correction so far, and this is truly amazing.
Without question, an abundance of caution is appropriate considering where the stock market just came from.
First-quarter earnings season is winding down, and a lot of smaller companies are reporting now.
Companies like LKQ Corporation (NASDAQ/LKQ), Alaska Air Group, Inc. (NASDAQ/ALK), Qlik Technologies Inc. (NASDAQ/QLIK), Global Medical, Inc. (NASDAQ/GMED) and NeuStar, Inc. (NYSE/NSR) reported improved earnings results. (See “Old Economy Auto Parts Stock a Better Play Than Any Tech Stock?”)
I consider the stock … Read More
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