• The S&P 500 Hits 1,757
    Posted by on October 22nd, 2013 at 10:28 am

    The market is having a very good reaction to today’s jobs news. The S&P 500 is up to 1,757 which is another all-time high. Shares of Medtronic ($MDT) are up to 56.80 which is the highest in six years.

    AFLAC ($AFL) is at a five-year high, and it’s not far from a new all-time high. Fiserv ($FISV), Ross Stores ($ROST), Harris ($HRS) and Stryker ($SYK) are also at new highs today.

  • September NFP = +148,000
    Posted by on October 22nd, 2013 at 9:55 am

    As a result of the government shutdown, September’s jobs report was delayed until today. This delay is particularly frustrating because these reports are very important in determining the Federal Reserve’s policies.

    The Labor Department reported that the economy created 148,000 jobs last month which was well below Wall Street’s estimate of 180,000. The unemployment rate ticked down to 7.2% which is the lowest in nearly five years.

    How can the unemployment rate fall despite sluggish jobs growth? The answer is that the labor force participation rate is very low. Simply put, fewer Americans are looking for work. For September, only 63.2% of Americans were in the jobs market. That matches the lowest rate in 35 years.

    We’re in an odd situation with the jobs report because bad news from that actually points towards good news for stocks. The market is currently up this morning—the S&P 500 just broke through 1,750. Traders are guessing that the sluggish jobs numbers will cause the Fed to delay any taper ideas until next year. Of course, that’s when Janet Yellen will be at the helm.

    In his press conference from last month, Ben Bernanke was very clear that the Fed isn’t following any calendar time table or some magic number that will trigger a taper. Instead, they’re looking at the broad trends in the economy. The Fed meets again next week.

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  • Morning News: October 22, 2013
    Posted by on October 22nd, 2013 at 6:10 am

    Europe Breakup Forces Mount as Union Relevance Fades

    China September Home Price Growth at Near Three-year High

    Beautiful China Tourism Pitch Misfires Amid Smog

    China Inc. Battles Big Oil for Century’s Biggest Find

    An Odd Alliance in Patagonia

    Efficiency, Natural Gas Keep Pushing U.S. Carbon Emissions Down

    Holder Demand for JPMorgan Plea Signals Hard-Line Shift

    Famous Morgan Stanley Strategist Returns, And He Has A Big Warning To The Investment Community About Inequality

    Netflix Soars as Hastings Seeks to Damp ‘Euphoria’

    McDonald’s Forecasts Tough Fourth Quarter

    Texas Instruments Reports 20% Profit Decline

    Reckitt Benckiser Reviews Pharma Unit, Could Sell It

    J.C. Penney Scales Back Martha Stewart Partnership

    Howard Lindzon: The Year 2014 – MegaDeals…$35 Smartphones….and $35 Sandwiches

    Marc Chandler: The Investment Climate in Six Points

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  • S&P 500’s P/E Ratio Close to 3.5-Year High
    Posted by on October 21st, 2013 at 1:04 pm

    The Price/Earnings Ratio for the S&P 500, based on trailing earnings, recently topped 17. It’s very close to reaching its highest point since May 2010.

    Just over two years ago, on October 3, 2011, the S&P 500’s P/E Ratio bottomed out at 11.61. That was the lowest ratio in 22 years. Going by Friday’s close, the S&P 500 has advanced 58.7%. But 45.6% of that is solely down to multiple expansion. Earnings are up only 9.4%.

    This is a bit misleading because we’re working off a very low P/E Ratio. I think it’s more accurate to say that the P/E Ratio went from being very low back to a more normal range.

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  • Harris Breaks $60
    Posted by on October 21st, 2013 at 12:31 pm

    Shares of Harris have been dancing near $60 per share for the last few weeks, but the stock hasn’t been able to break through. That is, until today. HRS is finally trading in the 60s.

    We first added the stock on our 2012 Buy List at $36.04. We have a nice 66% gain in less than two years. The next earnings report is due one week from tomorrow. Wall Street currently expects earnings of $1.13 per share.

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  • JPMorgan $13 Billion Settlement
    Posted by on October 21st, 2013 at 9:53 am

    It looks as if JPMorgan Chase ($JPM) has reached a $13 billion deal with the Federals to settle all of the investigations into their mortgage loan business before the financial crisis. The deal doesn’t release them from any criminal liability.

    The record settlement could help resolve many of the legal troubles the New York bank is facing. Earlier this month JPMorgan disclosed it had stockpiled $23 billion in reserves for settlements and other legal expenses to help cover the myriad investigations into its conduct before and after the financial crisis.

    The deal is being hammered out by some of the most senior officials at the Department of Justice and the largest U.S. bank. Attorney General Eric Holder and JPMorgan Chief Executive Jamie Dimon spoke on the phone on Friday night to finalize the broad outlines of the broad deal, the first source said.

    The bank’s general counsel Stephen Cutler and Associate Attorney General Tony West are negotiating a statement of facts that will be part of a final agreement, the source said.

    Long considered one of the best-managed banks, JPMorgan has stumbled in recent years, with run-ins with multiple federal regulators as well as authorities in several states and foreign countries over issues ranging from multibillion-dollar trading losses and poor risk controls to probes into whether it manipulated a power market.

    In September, as the Justice Department prepared to sue the bank over mortgage securities that the bank sold in the run-up to the financial crisis, JPMorgan tried to reach a broader settlement with DOJ and other federal and state agencies to resolve claims over its mortgage-related liabilities stemming from the bust in house prices.

    Dimon went to Washington to meet with Holder on September 25, and discussed an $11 billion settlement at that point.

    Some of the problems relate to mortgage bank Washington Mutual and investment bank Bear Stearns, two failing firms that JPMorgan took over in 2008.

    The bank and the Justice Department have been discussing a broad deal that would resolve not only the inquiry into mortgage bonds it sold to investors between 2005 to 2007 that were backed by subprime and other risky residential mortgages, but also similar lawsuits from the Federal Housing Finance Agency, the National Credit Union Administration, the state of New York and others.

    The broader settlement is a product of a government working group created nearly two years ago to investigate misconduct in the residential mortgage-backed securities market that contributed to the financial crisis. Officials from the Justice Department, the New York Attorney General and others helped to lead the group.

    Reuters reported late Friday that JPMorgan and FHFA had reached a tentative $4 billion deal. That agreement is expected to be part of the larger $13 billion settlement.

    Shares of JMP are up 24 cents this morning.

  • Morning News: October 21, 2013
    Posted by on October 21st, 2013 at 6:11 am

    BIITS Replacing BRICs as Emerging Markets No Longer Blanket Buy

    The Man Who’ll Do Triage on Europe’s Banks

    New Data Underscore Challenges for Japan

    There Will Be No $24 Billion Economic Loss From the Government Shutdown

    Bitcoin Has Gone on an Insane Surge

    U.S. Deal With JPMorgan Followed a Crucial Call

    U.K.’s Hinkley Nuclear Power Station Gets Go-Ahead As Coalition Signs Off EDF Deal

    SAP Reducing ByDesign Investment – A Cautionary Tale

    Starbucks Under Media Fire In China For High Prices

    Philips’ Profits Improve Across the Group

    Sharp Japan Export Slowdown Dents ‘Abenomics’, Flags Asia Weakness

    Nokia Record Cash Targets Alcatel Wireless Unit

    Changing Philips Top to Bottom: CEO Van Houten

    Joshua Brown: The Infographic That Ate Wall Street

    Jeff Miller: Weighing the Week Ahead: Will Disappointing Earnings End the Stock Market Rally?

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  • Game 7, 1965 World Series
    Posted by on October 18th, 2013 at 4:04 pm

    On YouTube, I recently stumbled across the complete Game 7 of the 1965 World Series.

    What I found fascinating was the restrained celebration after the final out. Perhaps it shows how much American culture has changed over the past 48 years.

    If you skip ahead to 2:20:16, you can see the final out. SPOILER ALERT – Sandy Koufax strikes him out. But notice how subdued the celebration is. Of course, the game is in Minnesota and not Los Angeles, so that certainly is a factor. Everyone is happy but it’s far from the over-the-top New Year’s-like manic celebrations we see nowadays. No man-pile. No confetti. Just hearty handshakes.

    This was also a remarkable performance for Koufax. He pitched a three-hit shutout just three days after pitching a four-hit shutout. Koufax didn’t pitch in game #1 as it coincided with the Jewish holiday of Yom Kippur.

    I guess people acted with a little more dignity back then. But as much as things change, there’s one constant — Vin Scully.

  • Earnings Season So Far
    Posted by on October 18th, 2013 at 1:24 pm

    Earnings season is still young but Bloomberg has some numbers so far:

    While the rate of profit growth is slowing in the S&P 500, companies in the index have reported record annual earnings for more than two years, holding valuations close to the historical average even as the gauge’s price reached an all-time high in March and kept climbing.

    Profits for companies in the S&P 500 probably increased 1.4 percent during the third quarter as sales rose 2 percent, according to analysts’ estimates compiled by Bloomberg. Among the 87 companies in the index that have reported so far, 72 percent exceeded analysts’ estimates, about the same proportion as the previous quarter.

    S&P 500 companies are projected to earn a record $107.90 a share this year, up from $45.82 a share in 2009, according to data compiled by Bloomberg. Among the 20 biggest companies that released results, the median one-day stock move afterward has been a gain of 1.2 percent.

    Weakening profit growth will limit stock gains, according to Donald Selkin, who helps manage about $3 billion as the New York-based chief market strategist at National Securities Corp. The shutdown has shaved at least 0.6 percent off of fourth-quarter 2013 gross domestic product growth, taking $24 billion out of the economy, S&P Ratings Services said this week.

    They also note that over the last 10 years, the S&P 500 has gained 1.1% during the first four weeks of earnings season, which is about double the growth rate of the index over that time.

  • Stryker CEO Kevin Lobo on CNBC
    Posted by on October 18th, 2013 at 12:32 pm