Financial Review

Wednesday, April 23, 2014 – A Brilliant Future From Cool Ideas

A Brilliant Future From Cool Ideas by Sinclair Noe DOW – 12 = 16,501SPX – 4 = 1875NAS – 34 = 412610 YR YLD – .05 = 2.68%OIL – .2- = 101.55GOLD un 1284.70SILV + .06 = 19.55 It’s earnings season, and this is a chance to compare and contrast. This morning, Facebook posted earnings of $642 million in net income, or 25 cents a share, in the first quarter, versus $219 million, or 9 cents a share in the year ago period. Overall revenue grew 72% year-on-year to $2.5 billion in the first quarter, topping estimates. Facebook now has 1.28 billion active users, and more than 1 billion do their Facebook stuff on a mobile device. Then Facebook announced their Financial Director was resigning. Shares were up about 3%. Nobody puts on a better presentation than Apple, that’s how they grew to be the most valuable company in the world. Steve Jobs would walk out and announce Apple had created a new mp3 player, and also a new way to connect to the internet, and also a new camera. Wow, three new products, nope…, he would hold up the iPhone – just one very cool thing from Apple; tech geeks heads would explode. Today, Apple posted earnings of $10.2 billion or $11.62 a share, on revenue of $45.6 billion. Analysts expected the company to report earnings excluding items of $10.18 a share; Apple reported a 4.6% rise in March-quarter revenue to $45.6 billion; Apple sold 43.7 million iPhones in …

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Financial Review

Tuesday, April 22, 2014 – Helicopter Drops Were Successful, and Other Revisions

Helicopter Drops Were Successful, and Other Revisions by Sinclair Noe DOW + 65 = 16,514SPX + 7 = 1879NAS + 39 = 416110 YR YLD + .01 = 2.73%OIL – 1.77 = 101.88GOLD – 6.60 = 1284.70SILV – .05 = 19.49 Sales of previously owned homes fell in March for a third consecutive month as rising prices and a lack of inventory discouraged would-be buyers. The National Association of Realtors reports closings, which usually take place a month or two after a contract is signed, fell 0.2% to a 4.59 million annual rate, the lowest level since July 2012. It was the seventh drop in the last 8 months pushing sales down 8.5% compared with the same month last year before adjusting for seasonal patterns. The drop in demand might not lead to a flat-line in home prices. That’s because one obstacle to lower sales is the low number of homes on the market. The number of houses for sale at the end of last month rose to 1.99 million compared with 1.93 million a year earlier. At the current pace, it would take 5.2 months to sell houses compared with 5 months at the end of February. There are some positives in the housing market: distressed sales are down; delinquencies are down; negative equity has declined; and even though inventory is up slightly, that is a positive because inventory had been too tight. The median price of an existing home climbed 7.9% from March 2013 to $198,500. The appreciation …

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Financial Review

Monday, April 21, 2014 – Why Stocks Continue Going Higher

Why Stocks Continue Going Higherby Sinclair Noe DOW + 40 = 16,449SPX + 7 = 1871NAS + 26 = 412110 YR YLD un 2.72%OIL – .01 = 103.64GOLD – 4.30 = 1291.30 SILV – .21 = 19.54 The S&P 500 has gained for five straight sessions, marking the longest winning streak since October. This has not been a pretty rally. Volume was light today; that has been part of the trend; light volume on up days and heavy volume on down days. We are smack dab in earnings reporting season, and 87 companies have posted results through this morning with 62% beating earnings expectations; that’s down from 66% beating earnings over the past 4 quarters, and those earnings expectations have been ratcheted lower and lower, so it should be an easy bar to cross. And still the markets have been moving higher. Dozens of S&P 500 components will report earnings this week, including Apple, Biogen, Facebook, McDonald’s, AT&T and Caterpillar. More than 30 companies in the Nasdaq 100 (NDX) are slated to report earnings. After the close of trade Netflix posted a first-quarter profit of $53 million, or 86 cents a share, up from $3 million, or five cents a share, a year ago. The company in January had projected a profit of 78 cents a share. The stock shot up about 7% to $372 in extended-hours trading. After a jump of 300% in 2013, Netflix had slumped recently. As part of the earnings announcement, Netflix announced a price hike, …

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Financial Review

Friday, April 18, 2014 – Yes, We Have No Avocados

Yes, We Have No Avocados by Sinclair Noe The markets are closed today in observance of Good Friday. No economic reports today. Let’s take a look at next week’s economic calendar. On Wednesday, we’ll get reports on new and existing home sales. New home sales are expected to be up slightly, while existing home sales are expected to post a decline for the third consecutive month. Higher mortgage rates and rising prices have pushed some potential buyers out of the market. The average rate on a 30-year fixed mortgage is up almost a full percentage point from its recent low one year ago. The softness in home prices in the first quarter has also hurt homeowners struggling with negative equity. The pool of underwater borrowers peaked at 12.8 million, or 29% of all properties with a mortgage, in the second quarter of 2012. Rising prices have lifted millions back above water. As of the first quarter of this year, some 9.1 million homes (or 17% of homes with mortgages) were “seriously” underwater, owing at least 25% more than property’s estimated market value. Next Friday, we’ll see the Consumer sentiment index, which has been showing a lack of enthusiasm reflecting the weak pace of hiring and meager pay raises for most households, which in turn results in sluggish consumer spending. Thursday, we’ll get a report on durable goods orders. If economic growth is finding traction, you would expect to see businesses spending more on equipment, which should show up in the …

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Financial Review

Thursday, April 17, 2014 – The Growth Industry for the Next 20 Years

The Growth Industry for the Next 20 Years by Sinclair Noe DOW – 16 = 16,408SPX + 2 = 1864NAS + 9 = 409510 YR YLD + .08 = 2.72%OIL + .83 = 104.59GOLD – 7.60 = 1295.60SILV + .02 = 19.75 Stocks ended a holiday-shortened week with mixed results. Stock markets will be closed tomorrow in observance of Good Friday. The S&P 500 had its best week since last July. For the week, the Dow rose 2.4%, the S&P 500 added 2.7% and the Nasdaq advanced 2.4%. With less than one-fifth of S&P 500 companies having reported results so far, about 63% have topped earnings expectations and 52% have topped revenue expectations. Of course that’s part of the dance between corporations and analysts, but it does move stock prices. For example, Goldman Sachs reported an 11% drop in quarterly profit and revenue fell 8%, but the results were better than estimates and share price was higher on the day.  Among the other earnings related movers today, Google, IBM, Mattel, and United Health were down on poor earnings news, while Morgan Stanley, GE and Pepsi moved higher. The number of Americans filing new claims for unemployment benefits rose less than expected in the latest week and came near pre-recession levels. The Labor Department also reports weekly earnings of the typical full-time worker rose 3% in the first quarter compared to a year earlier, the fastest pace since 2008. Median earnings came in at $796, that’s the point where half of …

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Financial Review

Wednesday, April 16, 2014 – What is Really Plausible

What is Really Plausible by Sinclair Noe DOW + 162 = 16,424SPX + 19 = 1862NAS + 52 = 408610 YR YLD + .01 = 2.63%OIL + .05 = 103.81GOLD – .20 = 1303.20SILV + .07 = 19.73 Let’s start with some earnings news and then we’ll move over to economic data. Google posted $3.4 billion in net income, or $5.04 per share, in the three months ended March 31, compared to $3.3 billion, or $4.97 per share, in the year-ago period. Revenue rose 19% to $15.4 billion, but analysts had estimated $15.5 billion, and the shares were getting clobbered in late trades. IBM reported its lowest quarterly revenue in five years; IBM reported revenue of $21.7 billion for the quarter, but that marks the eighth consecutive decline in quarterly revenue. The company has been restructuring its business by cutting jobs and selling its low-end server business. This is not what you would call a growth model. Also, from the faulty business model file: Bank of America posted a $276 million loss for the most recent quarter. The financial results included a pre-tax expense of $6 billion, or approximately 40 cents a share after tax, to cover litigation costs as the bank moved to resolve mortgage-related litigation fallout from the financial crisis that began in 2007 and other issues; far worse than the $3.7 billion investors had braced for. The bank today agreed to a $584 million settlement of litigation over nine residential mortgage-backed securitizations insured by the Financial Guaranty …

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Financial Review

Tuesday, April 15, 2014 – Yellen in the Lions’ Den

Yellen in the Lions’ Denby Sinclair Noe DOW + 89 = 16,262SPX + 12 = 1842NAS + 11 = 403410 YR YLD – .01 = 2.62%OIL – .22 = 103.83GOLD – 24.20 = 1303.40SILV – .41 = 19.66 Stocks were all over the place today. We started with triple digit gains for the Dow Industrials, dipped to triple digit losses, then back into positive territory for the close with the major indices closing just below their morning highs. This kind of volatility does not engender confidence; it does warrant caution. The utilities sector gained 1.3% and finished ahead of the other groups, extending its YTD gain to 11.8%; the biotech ETF added 1%, while the broader healthcare sector advanced 1.1%.Tech stocks have been beaten up quite a bit over the past couple of weeks. The Nasdaq 100 Tech Index (NDXT) is down 7% since April 1st. The Nasdaq Composite has exhibited weakness, but not to the point of meeting the definition of a correction; it would take a slide to 3,922 to mark a 10% fall from the March 5 closing high at 4,357; a 10% pullback from the March 6 intraday high of 4,371 would be achieved at 3,934. The Labor Department’s Consumer Price Index, or CPI, increased 0.2% in March after posting a 0.1% increase in February. Excluding volatile food and energy prices, core prices ticked up 0.2%.Prices rose 1.5% for the 12 months ending in March. That is up from February’s year-over-year reading of 1.1%. Core prices …

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Financial Review

Monday, April 14, 2014 – Blood Moon and More

Blood Moon and More by Sinclair Noe DOW + 146 = 16,173SPX + 14 = 1830NAS + 22 = 402210 YR YLD + .02 = 2.64%OIL – .11 = 103.63GOLD + 8.20 = 1327.60SILV un = 20.07 Here’s what you can expect; the Earth will eclipse the moon tonight about 10:58PM pacific time, adjust according to your time zone. The eclipse will take some time, a few hours. The moon will shift color from orange to blood red to brown, again depending on you locale and the weather. It should be interesting. The stock markets started the day in positive territory and as trading dragged on, the major indices moved lower on the very cusp of turning red, almost as if they were being eclipsed, and then positive again, right at 3:15 PM eastern time, everything just picked up. Now, you might think the markets are rigged. You might. A group of traders has sued CME Group Inc, accusing the operator of the world’s largest derivatives exchange of selling market data to high frequency traders, cheating other investors who lacked such access. The suit says the CME and its Chicago Board of Trade unit have been giving high-frequency traders early access to buy and sell orders.  They said this deprived other investors of the transparent, real-time data on futures and interest rate contracts that they thought they were getting, and were paying for. Volume was down from Friday; that’s a nasty trend, lighter volume on up days, heavier volume on …

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Financial Review

Friday, April 11, 2014 – Corrupt or Incompetent, Take Your Pick

Corrupt or Incompetent, Take Your Pick by Sinclair Noe DOW – 143 = 16,026SPX – 17 = 1815NAS – 54 = 399910 YR YLD – .01 = 2.62%OIL – .07 = 103.33GOLD + .30 = 1319.40SILV – .07 = 20.06 The S&P 500 closed at its lowest level in two months. The gauge slipped 2.7% this week, the biggest loss since 2012. The Dow Industrial are down 2.4% for the week. The Nasdaq Composite Index dropped 1.3% today, capping its biggest two-day retreat since 2011; and down 3.1% for the week; closing at its lowest level in 4 months. The major US indices are all back in the red year to date. Biotechs fell for the 7th week in a row; the worst run since 1998; and now down 21% from recent highs. About 7.4 billion shares changed hands on US exchanges, 5.8% higher than the three-month average. We are entering a period that has historically been very poor for stocks. The idea is called “Sell in May” or the worst six months. According to the Ned Davis (NDR) database, had you invested $10,000 in the S&P 500 every May 1st starting in 1950 and sold October 31 of the same year, your initial position would only be worth $10,026. Put another way, by investing only from May through October, a $10,000 stake invested in 1950 would have only made $26. The Labor Department reports the producer price index, gained 0.5% for March. Excluding the volatile categories of food and …

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Financial Review

Thursday, April 10, 2014 – Mr. Toad’s Wild Ride

Mr. Toad’s Wild Rideby Sinclair Noe DOW – 266 = 16,170SPX – 39 = 1833 (-2.1%)NAS – 129 = 4054 (- 3.1%)10 YR YLD – .06 = 2.62%OIL – .20 = 103.40GOLD + 5.80 = 1319.10SILV + .19 = 20.13 If you want to know why the stock market is up one day and down the next, and not just little moves but triple digit swings – I don’t know. If anybody says they know, they probably don’t. Maybe it’s the Fed, maybe it is earnings reporting season, maybe it’s a strong economy or a weak economy, or maybe the markets are just trying to imitate Mr. Toad’s Wild Ride. The one thing we know is that stock prices fluctuate, and over time a pattern or trend develops; right now things are wobbly. In economic news, the Labor Department said that the number of people applying for unemployment benefits dropped to 300,000, the lowest level in nearly seven years. The Treasury Department says the federal budget deficit for the first half of the 2014 fiscal year totaled $413 billion, down $187 billion from where it stood at this point last year, as tax revenue surged and spending sank.  In March, the Treasury collected $216 billion in taxes, up 16% from a year ago, helping reduce the deficit for March to $37 billion from $107 billion last year.  Meanwhile, spending sank by 14%, or $40 billion; military spending has been cut, federal government jobs have been cut, and Fannie Mae and …

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