Posts Tagged ‘NASDAQ’
This market is definitely looking tired after such a strong run since mid-October.
The performance of transportation stocks has been noticeable this year. The Dow Jones Transportation Average has actually outperformed the NASDAQ Composite year-to-date. In my mind, when there’s leadership from this group, it’s a compelling, traditional bull market indicator. Countless component companies are pushing record highs.
Equally as impressive is the performance of the Russell 2000 index, which has pretty much mimicked the NASDAQ Composite over the last two years.
A divergence became apparent in the beginning of July, as the Dow Jones Industrial Average began underperforming the other indices. It’s as if investors upped their risk tolerance, willing to bet on more risky equity assets as they felt more comfortable being bullish on a stock market that’s already gone up.
Over the last 12 months, the Dow Jones Transportation Average has been the leading index (excluding biotechnology stocks, which aren’t comparable). While outperforming the Russell 2000 by a slim margin and the Dow Jones Industrial quite significantly, I think the Dow Jones Transportation Average remains the leading index going into 2014 and a great indicator for the broader market.
Among the railroad stocks that are included in the Dow Jones Transportation Average, Union Pacific Corporation (UNP) bounced back nicely higher over the last five weeks after experiencing a lasting price consolidation the past six months. It will be interesting to see if the stock can hold above its all-time record-high of $165.18. Doing so will be meaningful.
CSX Corporation (CSX) is also a component of the Dow Jones Transportation Average, and it, too, seems to have broken … Read More
It’s hard to believe we are nearing the end of another year. It seems as though the move into 2013 was just yesterday. I was bullish at the start of the year, but I was not expecting the kind of stock market advances we have seen with the NASDAQ and Russell 2000 up more than 30% and the S&P 500 nearing that level with multiple record-highs.
Recently, I wrote about the need to ride the current market higher, as the signs point to more upside moves ahead. (Read “Why Stocks Likely to Head Higher into the New Year.”) But at the same time, I remain nervous about the vulnerability of the stock market.
The soft results from what was pumped up as a killer Black Friday failed to materialize, as sales on the Thanksgiving weekend fell 2.7% year-over-year, according to the National Retail Federation (NRF). The NRF did estimate sales during the next few weeks prior to Christmas could rise 3.9%, but while it may pan out, it will only do so because of heavy discounting to clear inventory.
What continues to linger on my mind is the fact that we have yet to see a correction of 10% or more during this four-year bull market, which began in March 2009. This makes me nervous.
Robert Shiller, who was one of three Americans who just won the 2013 Nobel prize for economics, believes there is a bubble in the U.S. stock market, especially given the run-up in stocks in spite of what has been a fragile economic recovery. (Source: Clinch, M., “Nobel Prize winner warns of … Read More
Key stock indices are roaring higher each day. The S&P 500 is breaking through to new records; the Dow Jones Industrial Average sits above the 16,000 level, and the NASDAQ Composite Index trades at a level not seen since the Tech Boom. Sadly, as all of this happens, the one fundamental that has historically driven stock prices higher—corporate earnings—is missing from the equation.
In these pages, I have often harped on about how companies in key stock indices are buying back their shares at a record pace. I consider this “financial engineering,” because at the very core, what a stock buyback does is make corporate earnings per share look better.
This week, my research team took a look at the Dow Jones Industrial Average companies and how many were buying back their shares. Their findings reveal 28 out of the 30 companies on the index bought back shares over the past 12 months.
From the third quarter of 2012 to the third quarter of 2013, Dow Jones Industrial Average companies collectively bought an outstanding 2.33 billion of their own shares. Effectively, they removed over two billion shares from the market!
What did these stock buybacks do to the companies’ corporate earnings?
Because of the stock buybacks, 70% of all the companies in the Dow Jones Industrial Average were able to show better per-share corporate earnings. For example, for the third quarter of this year, AT&T Inc. (NYSE/T) reported a net income of $0.72 per share, an improvement of 14.3% from the same quarter in 2012. But if AT&T didn’t reduce its share count during that period via its … Read More
Imagine letting a losing trade run, and before you even realize it, the position is down 20%, 30%, or more. Your $10.00 stock declined 30% to $7.00; you decide to hold the position, hoping for a rebound, but deep down you know the stock would need to rally more than 40% just for you to break even. Clearly, it’s not easy when a stock falls to greater depths.
But that’s why you should take the opportunity to dump losers when the stock market rallies, as is the case at this time. Avoiding a loss is just as good as making profits.
As many of you know, I believe the stock market is vulnerable to some selling and a stock market correction, based on my technical analysis of the charts. The S&P 500 is fighting resistance to advance higher, and the Dow Jones Industrial Average, while setting anther record-high on Monday, continues to show the potential of a stock market correction of at least six percent.
Think about how the stock market has moved to these levels. The easy money policy pushed by the Federal Reserve has been a key driving force behind this four-year run-up. But now, with the Fed expected to begin tapering in December or early 2014, the focus will shift to the economy and corporate revenue growth—which aren’t so stellar. In fact, in both cases, they’re flat.
Even the surge in the initial public offering (IPO) market is a red flag in my view. When I see an IPO double on its first day, it reminds me of the euphoria that I witnessed in late 1999, … Read More
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