Posts Tagged ‘large-cap companies’
Stock Market: All the Cards Have Been Played
By Mitchell Clark, B.Comm. for Profit Confidential
On the day of the Federal Reserve’s announcement regarding targeted low interest rates and a new bond-buying program, the stock market started out strong, only to sell off by the end of the day. This has happened countless times over the last couple of months, and it’s a sign that this market is tired. The stock market is finally seeing through the Federal Reserve, and investors now realize that no further policy action can do anything to help U.S. employment numbers.
This has got to be one of the most accommodative Federal Reserve’s in history. On Wall Street, you couldn’t really ask for a more compliant central banker, and the artificially low interest rates are very helpful for the bond market (by bond market, I mean the system itself, not investors). Corporations are benefiting from the Federal Reserve with lower borrowing costs, but they aren’t investing in new plant and equipment. Large-cap companies are awash in cash, and it’s a lot easier for them to keep hoarding it, or return it to shareholders in the form of dividends or share buybacks. (See “More Dividend Increases Coming Soon—Is This Good or Bad?”) A lot of participants are benefiting from the Federal Reserve’s action, except for the average individual who is looking for work.
One stock market index that just can’t seem to go anywhere these days is the Dow Jones Transportation Index (or average). This index basically hasn’t done anything for the last five years, and if you believe in Dow theory, the stock market will not advance materially without confirmation from transportation stocks. This index is stuck … Read More
S&P 500 Index: Technical Rebound Likely This Week
By Mitchell Clark, B.Comm. for Profit Confidential
The S&P 500 index is down almost 100 points, or about six percent, since stock market highs in September and October. The broader stock market has pulled backed meaningfully, but it is not yet in correction territory. I think it’s likely that we’ll get a little upside this week—a small, technical rebound in a market that’s basically without a trend.
The stock market has been producing a recurring trend in share price action since the low set in March 2009. But what stands out from the charts is the declining duration of the price advances and the sobering reminder is that the S&P 500 is still well below its highs set in 2000 and 2007. Real economic growth is a difficult thing for companies to achieve nowadays.
I continue to view the stock market as being in the process of topping out, but I do recognize that there’s good potential for a new upward business cycle to begin in the U.S. economy if global risks can be addressed. The only near-term catalyst that I see lifting the stock market and the S&P 500 before fourth-quarter earnings season begins is if policymakers take action on the sovereign debt crisis in Europe and the upcoming “fiscal cliff” in the U.S.
Many stocks within the S&P 500 have broken down significantly from recent highs. 3M Company (NYSE/MMM) closely mimics the changes in the S&P 500, but this stock recently dropped quite a bit lower after reporting lackluster third-quarter earnings. (See “Many Stocks Are Already Experiencing Their Own Market Correction.”) The company’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
The … Read More
Agriculture Stocks—These Two Are Doing Very Well on the Stock Market
By Mitchell Clark, B.Comm. for Profit Confidential
I firmly believe that the commodity price cycle still exists and that agriculture is going to be a key asset for stock market investors over the next decade. We’ve already had a terrible drought this year that affected agricultural commodities, but the global business cycle in terms of supply and demand is still promising for agribusiness and agriculture stocks.
One agriculture stock that’s been a real standout this year is Bunge Limited (NYSE/BG), and I bet it’s a company you’ve never heard of. On the stock market, Bunge has been rocketing higher since April, and one look at the company’s financial results tells the story.
Bunge is in the business of transporting and processing agricultural commodities. The company is based in White Plains, New York, with global operations at the wholesale and retail levels. It has approximately 35,000 employees in more than 40 countries and is a well-known player in global agribusiness.
The company originates oilseeds and grains from the world’s primary growing regions and transports them to customers worldwide. Bunge also crushes oilseeds for the livestock industry; produces bottled oils, mayonnaise, margarines, and other food products for consumers; crushes sugarcane to make sugar and ethanol; mills wheat and corn for food processors, bakeries, brewers, and other commercial customers; and sells fertilizer to farmers in North and South America. (Source: “Company: About Bunge,” Bunge Limited, last accessed November 6, 2012.) You name it; if it’s related to agricultural commodities, Bunge is likely involved in the process.
The company’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
According to Bunge, its 2012 third-quarter revenues grew to $17.3 billion, up from … Read More
World Hurting U.S. Revenues, But U.S. Economy Holding up Earnings
By Mitchell Clark, B.Comm. for Profit Confidential
There are still a lot of earnings reports hitting the wires, and there’s a trend in the numbers. The global economy is dragging down U.S. business conditions, which are actually showing improvement. The stock market is down, but it’s not out yet.
Currently, shares in Apple Inc. (NASDAQ/AAPL) are leading the stock market lower. Shares in Amazon.com, Inc. (NASDAQ/AMZN) and Google Inc. (NASDAQ/GOOG) are down a solid 10% from their highs. Without upward price momentum from these market leaders, the broader stock market is going nowhere.
I still think the stock market is headed lower over the near term, but that it might bottom out around 1,350 on the S&P 500 Index. What third-quarter earnings season has shown is that companies with large overseas operations are hurting relatively stable earnings results from U.S. operations. NIKE, Inc. (NYSE/NKE) represents this trend both operationally and on the stock market. The company’s stock chart is below:
Chart courtesy of www.StockCharts.com
From what I’m reading, large-cap companies are reporting stability and even some growth in their U.S. operations. Colgate-Palmolive Company (NYSE/CL) has shown strong resilience in its earnings reports, but like many other multinational companies, operations in Europe are hurting the bottom line. Colgate-Palmolive’s stock chart is below:
Chart courtesy of www.StockCharts.com
So, while the stock market is right at the point of breaking its 100-day moving average (MA), expectations for fourth-quarter earnings are minute, but not in decline. With stability in the eurozone and China, a recovering U.S. economy has the potential for fourth-quarter earnings to surprise to the upside.
Investor sentiment isn’t that great right now, and third-quarter earnings season will … Read More
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