Market Update: June 28, 2011

I have to apologize for the lack of posting today but honestly, there’s not much going on.

The good news is that the stock market continues to recover. For now, it looks like the second bounce off the 200-DMA was a good one. The S&P 500 closed today at its highest level since June 3.

Bespoke notes that we’ve just completed our best two-day gain in nearly five months. But I should caution you that the big gainers over the last two days have been cyclical stocks and I’m suspicious that they can lead the market for long.

Remember how Oracle ($ORCL) fell after its “poor” earnings report? Perhaps Wall Street is starting to realize that this was a very good earnings report. The stock has recovered nearly everything it lost. Today Oracle closed at $32.34 which is just 12 cents below Thursday’s close. Imagine that! Patience FTW!

Shares of Nicholas Financial ($NICK) have also stabilized after being knocked around after being added to the Russell 2000.

Reynolds American ($RAI) fell along with the entire tobacco sector after the FDA said it was going to do an independent review of menthol cigarettes. This is a great stock and it carries a nice 5.7% yield.

Bed Bath & Beyond ($BBBY) is still rising after its great earnings report. The stock broke $58 per share today. The stock is an 18% winner on the year for us. I really like it when good companies are rewarded.

The one sector that’s been left behind by this market is the financial sector. It appears that investors are worried about exposure to Greece (or Portugal or Ireland or Iceland or ….). The earnings estimates for the major Wall Street banks are getting slashed in a big way.

Three months ago, the Street saw Goldman ($GS) earning $16.41 per share for this year. Now that’s down to $14.01. Banks like Citigroup ($C) and Bank of America ($BAC) continue to be disaster areas.

The sole exception, and not to my surprise, is JPMorgan Chase ($JPM). The last several earnings reports have come in much better than expectations. The bank is currently going for just eight times this year’s estimate. The stock, however, has suffered along with the rest of the banks.

What I would really like to see is another dividend increase, but that will take permission from the Fed. JPM already increased their quarterly dividend from five cents per share to 25 cents. At the current price, that gives the stock a yield of 2.52%. I wouldn’t mind seeing them double that. That’s probably unrealistic, but JPM could do it if they wanted to and had Fed approval.

Along with other financial stocks, AFLAC ($AFL) is still suffering. Wall Street is just being silly here. The company has made it abundantly clear that they’re not overly exposed to Europe. Plus, they keep delivering solid results. I don’t believe it’s a smart idea to bet against AFLAC.

Posted by on June 28th, 2011 at 8:58 pm

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