Posts Tagged ‘market view’
Since August, the market view appears to have turned quite bullish. The negativity in investor sentiment that was evident during the decline in the market from spring until early summer seems to have evaporated. This is quite interesting, as the change in investor sentiment was primarily a result, I believe, of the rumor and eventual announcement by the Federal Reserve of additional quantitative easing in September.
This rise in investor sentiment was not built on a market view of substantially higher revenue and earnings for corporations, but on the rush of additional cash into the financial system. The problem with such a market view is that this is not a sustainable, long-term solution for either stocks or the economy.
Since the announcement in September, investor sentiment has once again started to become bearish. People are realizing that there are significant economic structural issues that cannot and will not be resolved by simply pumping more money into the financial system.
An interesting divergence in the market view between sectors has been that the high-end retailers are immune to the negativity purveying the general economy. However, this might not be the case in reality.
Tiffany & Co. (NYSE/TIF) just released its earnings guidance for the full fiscal year, coming in at $3.20–$3.40 per share. This is a dramatically reduced amount of corporate earnings from its earlier guidance of $3.55–$3.75. (Source: “Tiffany Reports Its Third Quarter Financial Results,” Tiffany & Co., November 29, 2012.)
For the 2012 third quarter, which ended October 31, the company reported corporate earnings of $63.0 million; a decrease of 30.0% from the same quarter last year. Two areas … Read More
When it comes to technology stocks, one must develop an investment strategy that has long-term implications. Technology stocks can be quite volatile, so it helps to have a long-term horizon and an understanding of what the companies are trying to do over the next few years.
Of the older technology stocks, Yahoo! Inc. (NASDAQ/YHOO) is still a player in the Internet sector, albeit quite diminished in stature. Yahoo!’s share price has been in a well-defined trading range for an extended period of time. However, the recent appointment of Marissa Mayer as the new CEO has certainly re-energized the firm as well as the share price.
I made my readers aware of Yahoo! as a possible addition to one’s investment strategy when it was trading at $15.98; the recent run-up in stock price is a clear indication that investors believe that the firm can unlock significant value going forward.
Another stock that has had questions raised about whether it can unlock any future value is Facebook, Inc. (NASDAQ/FB). We all know Facebook is one of the leading social media technology stocks; however, questions have been raised about this company’s long-term investment strategy and whether it’s viable.
For both of these firms, the monetization of their user base has always been questionable. An interesting article in The Telegraph reports that sources involved with both Yahoo! and Facebook have been in discussions about forming an alliance. (Source: “Yahoo! plots alliance with Facebook in new search deal,” The Telegraph, November 17, 2012.)
These two large technology stocks would have several interesting ways to develop an investment strategy together. By combining Facebook’s members … Read More
The smartphone and tablet markets continue to be extremely competitive, and stock analysis indicates that this competition will heat up further.
Apple Inc. (NASDAQ/AAPL) dominates the tablet market with its “iPad,” but watch for new entries from Microsoft Corporation (NASDAQ/MSFT) with its “Surface” tablet, Google Inc. (NASDAQ/GOOG) with its “Nexus” tablet, and Samsung with its “Galaxy” series. And then there area also some believers surfacing as “BlackBerry”-maker Research In Motion Limited (NASDAQ/RIMM; TSX/RIM) gets set to launch new devices powered by its “BlackBerry 10” (BB10) operating system in the first quarter of 2013, though it has always delayed launches.
The question is: can Research In Motion (RIM) ever regain its former luster? My stock analysis tells me that the company has a long and tough road ahead of it, and while it’s unlikely it will catch Apple, the best-case scenario would be to take some market share away from Apple and the other players. The BB10 devices and operating system moved in the right direction after passing stringent security requirements from the U.S. government last week, which should help in the key advance sales.
On the Street, there appears to be some optimism, albeit it’s speculative that RIM can mount a comeback. Based on my stock analysis, I’m not convinced.
The market view appears to be more positive. When doing technical analysis of the chart, we can see that the stock has rallied 32% since trading down to a 52-week low of $6.22 on September 24, but is still below its 50- and 200-day moving averages (MAs). Strong pre-sales of its BB10 smartphone could drive RIM higher.
Chart courtesy of … Read More
In what will most likely be a landmark ruling, Australia’s federal court has ruled that one of the world’s leading credit ratings agencies Standard & Poor’s (S&P) misled investors by issuing a AAA rating, its safest rating, to securities that were extremely complex and risky, and that ultimately lost most of their value.
One of the biggest problems following the crash is that investor sentiment has soured on the financial industry. Many people have the market view that the game has been rigged against the retail investor. During the bubble prior to the crash, rating agencies like S&P continually slapped AAA on risky investments. The entire system was built on generating revenue and commissions by packaging products that could be sold to people who should not have been buying them in the first place. By creating a false market view, investors who normally wouldn’t buy risky assets were tricked into believing that they were safe. This blatant misrepresentation has led to a lack of positive investor sentiment across many facets of the financial system.
Investor sentiment can be extremely fragile. Rulings such as this finally capture the anger that many have felt over the past few years. While investors have lost untold amounts of money, the rating agencies that people and institutions have relied upon have gotten off without any liability. The market view was that rating agencies could do whatever they wanted without repercussions. This appears to be changing.
Justice Jayne Jagot of Australia’s federal court stated that S&P was “misleading and deceptive” when it came to rating structured debt instruments during 2006. The debt instruments themselves were grotesquely … Read More
If you based the condition of the market on the current trading action of stocks, you would think everything was fine and there were no worries. Yet with the recent 25th anniversary of the infamous Black Monday, when the DOW plummeted 22.6% on October 19, 1987, the current situation is far from being risk-free and is vulnerable, according to my stock analysis.
We have what will likely be a disappointing earnings season. Of course, you likely realize this, but accepting it is another story. You also have the stalling in China, where the country’s gross domestic product (GDP) fell to 7.4% in the third quarter, as the country’s economy is hampered by the mess in the eurozone. Should China fail to ignite its economic engine, it will send a ripple effect throughout Asia and the global economy, based on my stock analysis. Then there’s the inability of the eurozone to come up with a viable solution to its credit crisis, while Greece asks for more time to straighten out its austerity measures and Spain says it doesn’t need a bailout in spite of its massive debts, which makes little sense, according to my stock analysis.
And in spite of it all, my stock analysis tells me that stocks are holding up, as if the market was expecting the global economies to suddenly expand and the debt to go away. In reality, my stock analysis reveals that the eurozone could be heading for another recession in 2013, and America could see a stalling in economic growth with the looming fiscal cliff.
I recently warned you not to read too much … Read More
The market view for gold has varied substantially this past year; this shift in the market view has also led to substantial volatility in the price of gold. Coming in at the lows of December 2011, gold was approximately $1,525 per ounce, rising in late February to just short of $1,800. That kind of volatility in a short period of time can be quite unsettling for gold investors.
Following this rapid move, the market view of gold subsided into a tighter, range-bound market. From May until the middle of August, the price of gold essentially traded sideways. This coincided with a market view in which geopolitical events complicated forecasting efforts by analysts and investors in the gold market. There was much concern that the Federal Reserve might withhold additional monetary stimulus, which kept a lid on the price of gold. With the recent release of economic data and additional comments by the Federal Reserve, the market view has become decidedly bullish in the gold market over the past month.
Several important points are evident in the charts for gold that indicate a dramatic shift in the market view by investors. First was a break of the downtrend in late July, which was then successfully tested in early August. Essentially, the market view has shifted from bearish, in which rallies for gold were sold into, to bullish, in which any pullback in gold is being used as a buying opportunity.
Chart courtesy of www.StockCharts.com
This bullish market view is also evident in larger volumes on up days, as well as higher highs and lows. The next test was the 200-day moving … Read More
Natural gas prices are notoriously volatile. From approximately $4.50 per one million British thermal units (MMBtu) last year to a low near $1.90 MMBtu in April, this represents a huge swing with massively divergent market views. Natural gas has become a great asset for the U.S., as we’re able to produce natural gas at a significantly lower cost than anywhere else in the world. This has led to a large increase in the supply of natural gas, leading to a negative market view on price over the past year. The reason for the negative market view on the price of natural gas is a lack of storage facilities and an inability to ship the commodity overseas.
The storage facilities for natural gas earlier this year were on pace to be completely filled. If that were the case, the price for natural gas would have collapsed completely. Oil producers that also have natural gas being pumped out of wells have nowhere to store it; they would have no choice but to burn it up through flaring it. However, Mother Nature has come to the rescue for natural gas prices, as the high temperatures across the nation have increased natural gas consumption for electricity use to generate air conditioning, improving the market view.
Much of the market view for natural gas is based on external factors, such as weather, and this can be extremely difficult to predict. We all know how difficult it is for the weatherman to be accurate; now you have to combine supply and demand dynamics with Mother Nature. As Texas accounts for a large portion of natural gas … Read More
Just when you think it couldn’t get any worse for Research In Motion Limited (NASDAQ/RIMM), the company seems always to find a way to disappoint. Another quarterly earnings report and more disaster lead to an increasingly gloomy market view. Technology stocks continue to miss targets and estimates are to be avoided like the plague, as this is a sign that management has no idea of how to run their company properly. The market view was extremely poor following the results that revenue fell in the quarter by 33% from the prior quarter.
Even worse than the latest quarter’s sales numbers is news that Research In Motion (RIM) is delaying the launch of its new “BlackBerry” phones once again. The new operating system and BlackBerry phones won’t be on the market until the first quarter of 2013, a huge delay for a technology stock. This is truly mind-boggling and a sign that investors should focus on other technology stocks.
RIM has been out of touch with what the market wants for the past few years and it shows. Yes, RIM is trying to cut costs by laying off 5,000 people, but management should have realized they were far behind other technology stocks a long time ago and adjusted their cost base then. RIM’s shipment of phones for the quarter was only 7.8 million, as compared to 13.2 million BlackBerrys shipped during last year’s quarter, a drop of 40%! Technology stocks can’t continue to exist at that pace of decline.
While many are talking about the upcoming fiscal cliff, a perfect example of the market view for this serious issue comes through the CEO of Lockheed Martin Corp. (NYSE/LMT), Robert Stevens. Stevens went to Washington to inform politicians of the gravity of the situation. In essence, if nothing is done and spending cuts are enacted at the beginning of 2013, Stevens predicts massive layoffs, a drop in corporate earnings and an extreme disruption throughout the entire defense sector. If that’s not a negative market view, I don’t know what is. This is obviously impacting analysts as they generate estimates for corporate earnings over the next several years, a difficult task to do when much rests on political maneuvering.
The cost, though, is very real. Stevens estimates of the total $38.0 billion in government contracts Lockheed earns, $3.8 billion would be lost due to the upcoming government cuts. This will trigger not only job cuts within the firm, but also down the supply chain as Lockheed Martin deals with approximately 43,000 suppliers and they then see less revenue and significantly lower corporate earnings.
An interesting point raised by Stevens is that, on top of the hit to corporate earnings, the savings are not going to be as significant as some people think. Because many of these contracts with suppliers are fixed, Lockheed will bring any losses associated with breaking the contracts or renegotiating them to the Pentagon. He estimates this will be more than tens of millions of dollars that the Pentagon will need to compensate for the broken contracts. This is on top of the thousands of jobs that will … Read More
Apple Inc. (NASDAQ/AAPL) appears to be tightening its grip on the smartphone market on news that former high-flying cell phone maker Nokia Corporation (NYSE/NOK) is hurting. The Finnish company seems to be on its way down. Recently, Nokia announced it would be axing 10,000 jobs in its struggle against Apple and Samsung.
Nokia has seen about 90% of its market value lost since the launch of the Apple “iPhone” five years ago. And Nokia’s once-promising venture with Microsoft Corporation (NASDAQ/MSFT) building the new smartphones built on Microsoft’s “Windows 8” mobile platform has not done well, as Apple and Samsung continue to dominate.
With the problems at Nokia, Microsoft will need to find another avenue to drive its business in the lucrative smartphone and tablet markets. The company’s recent venture in paying $300 million for a 17% stake in a new division of troubled Barnes & Noble, Inc. (NYSE/BKS) that includes the “Nook” e-book reader and downloadable material was a tiny step in this direction.
There is speculation that Microsoft may try to build its own tablet; but, at this stage of the game, it may be too little, too late. Apple remains the “best of breed” and will not be easily toppled, as I discussed in Apple: This Technology Stock Still Has its Mojo.
Samsung also has an excellent tablet that is gaining wide acceptance. Just ask Dell Inc. (NASDAQ/DELL) and Hewlett-Packard Company (NYSE/HPQ) about the competitive advantage that Apple has. Dell is getting slammed in the sale of its PCs and laptops, as the demand for tablets continues to pick up with increased functionality.
An option that could … Read More
When consumers are cautious, they tend to hold back on any major purchases, such as homes, vehicles, furniture, appliances and travel, to list a few. This will impact spending and gross domestic product (GDP) growth and the ability of companies to expand their businesses and hire new employees, according to my market view.
Consumer confidence in May was another disappointment, with a reading of 64.9. This was below the estimate of 69.4 and the downwardly revised 68.7 in April. The reading is at a multi-year low. To tell you how bad the readings are: economists suggest a reading of 90 indicates a healthy economy, something that has not happened since December 2007 when the recession began. My market view is that it will be some time until the confidence reading heads back towards the pre-recession reading level of 90. This cannot be good.
And, while home building and permits are much improved, the critical home prices continue to fall, which I discussed in Homebuilders Show Improvement, But Stay Selective. The Case-Shiller 20-city Index contracted another 2.6% in March, following a 3.5% decline in February. Lower home values translate into less home wealth and less desire to spend until the situation improves, based on my market view. A strong housing market is important in many ways; for example, homeowners buy new furnishings, including many big-ticket items. This is not happening; home prices continue to decline, dragged down by continued high foreclosures and short sales where homes are dumped at prices below mortgage value.
My market view is that, to drive the economy, consumers need to spend. We have historically … Read More
Spain technically blundered into its second recession since 2009 in the first quarter and the country appears to be ravaged by heavy debt and muted growth. The Spanish government is trying to cut the budget deficit, but, with the country’s jobless rate at near 25%, it will not be easy based on my market view. The country’s gross domestic product (GDP) is predicted to contract 1.7% this year and expand an anemic 0.2% in 2013, with the unemployment rate stuck at around 24%.
And like Greece and Italy (some of the other PIIGS), my market view is that Spain will need aggressive austerity measures to put the country back on track. It will not be easy and the concern is that, with Spain being the ninth largest economy in the world, fallout here will be devastating to Spain and the rest of the world, according to my market view. Monitor the Spanish Bond Auction that showed the 10-year yield at 5.80%. A move to above six percent would be a red flag and, if yields rise to seven percent, my market view says watch out.
In all, my market view is that the world economies have changed dramatically since September as a result of the sharp slowdown in Europe’s growth along with the unrest and political turmoil in the Middle East and North African region. The economic prospects are gradually strengthening, according to my market view, as a result of the better policy steps in the eurozone and improved activity in the U.S. where the growth is rising and unemployment is falling, but there is still real risk to … Read More
Is this a sucker’s rally?
The bull market is into its fourth year and my market view is that the near-term technical picture shows tough chart resistance.
The S&P 500 and Dow Jones Industrials have declined in four straight sessions, and they are searching for buying support, according to my market view.
The Russell 2000 is down 3.25% in April. The Dow is down 2.14%. More importantly, the Dow and Russell 2000 have breached below their respective 50-day moving average (MA).
Despite the near-term weakness in small-cap stocks, in my market view, I continue to feel that the smaller growth stocks, especially in technology, have the biggest upside. I discussed this in Where to Look for the Biggest Potential.
Chart courtesy of www.StockCharts.com
A market view of the S&P 500 shows a 14-week upward move. My market view is that there’s some near-term topping action and a downside break. The S&P 500 is within 11 points of its 50-day MA as of the close of Monday. My market view is that a break below could trigger additional weakness down to as low as the 100-day MA at 1.312 and 1,300, a possible correction as much as 9.4%.
My market view is not that this will happen, but that there is some technical evidence a market adjustment may be coming, especially if traders cannot find any fresh reasons to buy.
The next several days and … Read More
The bulls have been in full control for the past three years, but with the key stock indices at multi-year highs, it’s time to pause and take a look at where we are with my market view.
On Wednesday, stocks plummeted after several days of hesitation on the charts. My market view is that traders appear to be looking more for reasons to sell than to buy.
With the S&P 500 at its highest level since 2008, I expect to see some hesitancy. My market view is that stocks have had an amazing run so far this year and could pause.
Triggering the selling on Wednesday was the non-response by the Federal Reserve on additional stimulus (aka QE3). The Fed appears to be content with what it has done so far, but at the same time warned that the jobs growth may stall should the economic renewal pause.
The private ADP jobs report was softer than expected, which in my market view may signal a soft non-farm payrolls on Friday with jobs growth estimated at 200,000 jobs, down from 227,000 in February. For a healthy jobs market, you want to see job creation at around 500,000 monthly. I still have concerns towards the jobs market, which I discussed in Don’t Tell the Unemployed the Good Times are here. (PC031212)
The risk in the eurozone is also prevalent, with speculation of another recession looming. Spain received a poor response to its bond auction. With a high unemployment rate and muted growth in Spain, things will not be easy in my market view.
The Chicago Board Options Exchange Market Volatility Index … Read More
In 2011, small-cap stocks lagged blue-chips and large-cap stocks following a strong 2010. In my market view, the big difference in 2011 was the uneasiness of the economic renewal in the U.S. and global economies. And, despite a positive January 2011, stocks largely fell last year.
The general market view is that what happens in January is an important indicator for the year as far as performance goes. Historical records indicate that stocks have increased an average of 1.6% in January since 1969, according to Stock Trader’s Almanac.
I was off last year as far as my forecast and market view, as I underestimated the weakness of the eurozone debt and the inability of domestic jobs and housing market to turn around.
For 2012, my market view is cautious to start the year based on the high global risk.
The fact that the economy is expanding in spite of a lack of strong jobs growth is encouraging. We are seeing what economists call a “jobless recovery.” And my market view is that this will likely continue in 2012, as the unemployment rate is expected to remain high at over eight percent, despite the extended tax cuts to drive consumer spending and economic renewal.
This is also an election year, so there will be haggling as far as policies go, as both parties are aiming to set themselves up for the election. As such, many pundits are expecting to see political gridlock to start the year and this will likely impact President Obama.
My market view is that we need to see leadership from such areas … Read More
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