Archive for February, 2013

• The 50-DMA Is Closing in Fast
  Eddy Elfenbein, February 26th, 2013 at 9:57 am

  The S&P 500 has been above its 50-day moving average since the start of the year. But due to the recent downturn, the index is getting very close to dipping below the 50-DMA.

  

• JPMorgan Investor Day
  Eddy Elfenbein, February 26th, 2013 at 9:06 am

  JPMorgan Chase ($JPM) has its annual investor day today. You can see a lot of info at their website. The bank said that it’s looking to cut costs by $1 billion, and JPM wants to reduce headcount by 4,000 this year.

• Bernanke to Testify at 10 am
  Eddy Elfenbein, February 26th, 2013 at 8:49 am

  Today looks to be an eventful day. After the market’s worst day in more than three months, investors look to make back some gains today. The biggest news today will be Ben Bernanke’s testimony at 10 am before the Senate Banking Committee.

  Wall Street is still trying to digest the fallout from the elections in Italy. What seems to have happened, and we still don’t exactly know, is that this is the first election in which voters said no to austerity and by austerity, I mean Germany. In other countries like Greece and Ireland, the voters eventually pleased the markets. The Italians, however, did not. There’s no clear-cut winner and Italians may have to head back to the polls soon. In response, the euro dropped very sharply yesterday although it made back some of its losses.

  Look what else we have on tap for this morning: The FAHA House Price Index and Case Shiller Index come out at 9 am. Then at 10 am, New Home Sales, the Richmond Fed Index and Consumer Confidence are released.

  As I’ve talked about before, the key driver of the economy and market is any area where the consumer intersects with finance like cars, homes or travel. We also see that in spillover industries. We saw a good example of that this morning as Home Depot ($HD) reported earnings of 68 cents per share which was four cents better than estimates.

• Morning News: February 26, 2013
  Eddy Elfenbein, February 26th, 2013 at 6:59 am

  Italy Political Vacuum to Extend for Weeks as Bargaining Begins

  Currency Veteran Kuroda Offers BOJ Credibility on Reflation

  How The U.S. Boom Is Dashing Canada’s Energy Super Power Dreams

  Banks Fear Court Ruling in Argentina Bond Debt

  Obama’s Warnings on Automatic Cuts Obscure Bigger Threats Ahead

  Fed Faces Explaining Billion-Dollar Losses in Stress of QE3 Exit

  Yahoo Orders Home Workers Back to the Office

  AMR, US Airways Name Integration Leaders

  Home Depot Profit Tops Analysts’ Estimates on Housing

  Zynga Gains After Nevada Clears Online Gambling

  How Will Magazine Titans Merge? Carefully

  What Barnes & Noble’s Retail Arm Might Be Worth

  Gupta Ordered to Reimburse Goldman Sachs $6.2 Million

  Roger Nusbaum: A Disturbing Parallel

  Jeff Carter: How To Steal a Contract

  Be sure to follow me on Twitter.

• Worst Day Since November
  Eddy Elfenbein, February 25th, 2013 at 7:06 pm

  Ugh! Today was an ugly day for the stock market. The S&P 500 dropped 27.79 points or 1.83%. This was the worst drop since the day following President Obama’s reelection. At one point early today, the index was actually up 0.68%.

  But shortly after 10 am, the stock market started heading downhill and really started to plunge after 3 pm. Interestingly, the S&P 500 has fallen on every single Monday this year.

  

  The talking heads are saying that political confusion in Italy is to blame. The early election results showed that Pier Luigi Bersani’s left-of-center ticket was doing well very well in the lower house. However, as time went on, Silvio Berlusconi appeared to do well in the Senate. The fear is that Italy is in a political stalemate and new elections may have to be called soon.

  The cyclicals felt the brunt of the damage. The Financial Sector lost 2.69%. Energy was down 2.51%, while the Materials stocks were off 2.24%. The big Wall Street banks dominated the bottom part of the S&P 100 today. Our own JPMorgan Chase ($JPM) only lost 2.51% which was much better than its peers. Wells Fargo ($WFC) lost 2.88%. Ford closed at $12.13 which gives the stock a yield of 3.3%.

  Defensive sectors like Telecom, Utilities and Healthcare did the best, meaning they were down the least. The VIX soared 34% today. From last Tuesday’s low to today’s high, it jumped 60%.

  Here’s a short equation: for the last six months, the stock of any company that consumers had to borrow money for (cars, homes, travel) did very well, as did the big banks and credit card companies. The bigger the price tag, the better it probably did. The key was the intersection of the average consumer and finance. Today was a complete reversal of that dynamic.

  Every stock on the Buy List closed lower today, but we didn’t fall as much as the broader market which represents the conservatism of our portfolio. All told, our Buy List lost 1.61% which was 22 basis points better than the S&P 500.

• Best Industries Last Six Months
  Eddy Elfenbein, February 25th, 2013 at 1:49 pm

  I thought this was interesting. Here’s a look at the best industries over the last six months. If there’s one theme that connects them all, it’s the promise of lower interest rates.

  Industry Name	Percent Change
  Dow Jones U.S. Mortgage Finance Index	44.57%
  Dow Jones U.S. Business Training & Employment Agencies Index	36.48%
  Dow Jones U.S. Investment Services Index	35.83%
  Dow Jones U.S. Airlines Index	34.42%
  Dow Jones U.S. Real Estate Services Index	34.25%
  Dow Jones U.S. Furnishings Index	31.25%
  Dow Jones U.S. Auto Manufacturers Index	27.19%
  Dow Jones U.S. Durable Household Products Index	27.03%
  Dow Jones U.S. Marine Transportation Index	25.58%
  Dow Jones U.S. Asset Managers Index	25.30%

• Silvio Killed the Rally!
  Eddy Elfenbein, February 25th, 2013 at 11:48 am

  Silvio killed the rally! Allow me to explain. The rally we had this morning was based on news from the elections in Italy. Now it turns out that Silvio Berlusconi’s party may have carried the Italian Senate. The returns are still coming but investors are clearly uncomfortable with that news.

  Check out the massive swing in the Italian ETF ($EWI):

  

  The market also seemed to be pleased that Japan’s Prime Minister was going to appoint a central bank head who’s all in favor of gunning the money.

  The big concern, however, is the sequester. If nothing happens by March 1st, automatic spending cuts will go into effect.

  I also want to highlight an interest stock story today. Shares of Affymax ($AFFY) are down 85% after its antianemia drug was recalled. That’s gotta hurt.

• The Low-Volatility Low-Quality Rally
  Eddy Elfenbein, February 25th, 2013 at 9:52 am

  What’s starting to concern me, though I don’t think it’s a problem yet, is the low-quality nature of this rally. Simply put: A lot of lousy stocks are doing well. This is what we typically see in the late stages of a bull market when stocks whose business operations consist of little more than a stock puppet surge higher each day.

  The unusual aspect of the current market is that it’s been low quality and low volatility which seem to be contradictory. In this case, I think the low volatility is the result of the market’s satisfaction that the current environment of low interest rates will last for some time.

  It’s hard to see low quality but here’s a chart showing the performance of the High Beta ETF ($SPHB) alongside the S&P 500. Over the last seven months, the High Betas have been ruling.

  

  Obviously, a high-beta rally shouldn’t be a surprise. This is what high beta is all about — they do well when the market does well. This also represents a slant towards small-cap stocks and cyclical stocks. Let me stress that I don’t think this is the omen of a market top. At least, not yet. The time to worry is when the spread between the two ends of the market become a vast chasm. In 1999 and 2000, value stocks weren’t merely trailing the bull market. Those stocks were falling.

• Markets Rise In Early Trading
  Eddy Elfenbein, February 25th, 2013 at 9:35 am

  The stock market looks to open higher today. This will be an interesting week for Wall Street. Ben Bernanke will give us semi-annual Congressional testimony this week. It’s a two-day affair: tomorrow in front of a Senate committee, and again on Wednesday in front of a House committee. The members of Congress do themselves no favor by asking inane questions.

  I’m also curious to see the revision to Q4 GDP. The initial number came in at -0.1%. Thanks to positive trade data, the revision will most likely be positive. GDP could be as high as +1.0%.

  In Italy, the markets seem relieved that Pier Luigi Bersani, a former Communist, seems poised to win the parliamentary elections.

• Morning News: February 25, 2013
  Eddy Elfenbein, February 25th, 2013 at 7:00 am

  New Bank of Japan Head Branded ‘Out of Mainstream’

  China Flash PMI Retreat Shows Not To Get Too Bullish, Too Quickly

  Markets Shrug Off UK Downgrade Ahead of Italian Election Results

  Bernanke’s Stimulus Spurring U.S. Employment in Housing-Autos

  MasterCard Takes Aim at Plastic With Mobile Platform

  Yum’s KFC to Tighten Supplier Reviews After China Sales D

  Why Marissa Mayer Told Remote Employees To Work In An Office … Or Quit

  Major Banks Aid in Payday Loans Banned by States

  GM Bringing 4G Broadband to New Vehicles Next Year With AT&T

  Royalty Pharma Offers to Acquire Elan for $6.5 Billion

  Sinopec to Buy Stake in Chesapeake Assets for $1.02 Billion

  Lowe’s Quarterly Results Top Analysts’ Estimates

  Twitter Hackings Put Focus on Security for Brands

  Howard Lindzon: I Don’t Know…and Long-Term I Still Don’t Know

  Joshua Brown: The Stat I Hate The Most Right Now