March 28, 2024

Week in Review

DJIA +149.21 (+1.08%) to 14,009.79; S&P 500 +15.06 (+1.01%) to 1,513.17; NASDAQ +36.97 (+1.18%) to 3,179.10

I have been looking and highlighting a pattern that seemed to be begging for higher prices in the short term and why the stance has been that while ultimately I would like to see a broader pullback/correction to provide the markets a better base to then press higher from again, in the short term it felt that every dip was an opportunity for a long trade.  Friday’s action now for me has brought the S&P 500 into the levels I was looking for and now here I feel as though it would be prudent to start and wait for a more significant correction/consolidation for entry.  There will always be individual stock patterns but I think the rising tide might need to go out for a bit.

157K jobs were added in January and unemployment rose to 7.9%. This compared to expectations for 156K new jobs and for unemployment to hold steady at 7.8%.  To me the bigger deal was the revisions including December payroll additions which were revised up to 196K from 155K and November was raised to 247K from 161K.  As always you can visit the Event’s Calendar for the release of economic data, scheduled meetings and other news that could move the market.  Also in that section are Dividends and Splits.

Besides a slew of Economic Data, we had corporate news including Auto sales which came in slightly above expectations (15.3M vs 15.2M).  Most notably, General Motors (GM), Ford (F), Chrysler (FIATY) and Toyota (TM) all reported double-digit sales increases in January.

Friday also saw many big names announce earnings.  Chevron (CVX) reported Q4 earnings which beat on the bottom line but was on lower than expected revenues and decisively so.  CVX gained just over 1% on the news but I did see a downgrade come through around midday from Societe Generale but still with a price target higher than current trading ($126).  Also reporting earnings was ExxonMobil (XOM) which like CVX beat on the bottom line but missed revue estimates although the miss on revenues for XOM was only slightly (115.17B vs $115.2B).  XOM closed flat on the news but overall the pattern looks constructive for higher prices to be coming.  Last EPS report I will cover was from Merck (MRK) and unfortunately for MRK their earnings was not received well by Wall Street.  MRK closed down over 3% even though they beat on EPS and revenues.  Why the drop?  I saw some comments expressing disappointment that MRK announced it would delay its filing for approval of odanacatib.  Also looking at the 2013 guidance, analysts consensus ($3.68) seems to be near the high end of MRK’s range ($3.60-3.70) which might have left analysts looking for more.  BMO Capital and Credit Suisse came out to defense MRK intraday and even though the decline was strong, MRK does not appear broken to me and may provide an opportunity for long for more than just a quick trade.

Week in Review:

Monday’s action was the first down day after 8 straight days of closing higher.  I was surprised to see Caterpillar (CAT) move higher after reporting earnings that included the comments “uncertainty in the global economy” when discussing the outlook for 2013.  This prompted CAT to provide an outlook range which I would define as wide.  Not only did CAT move higher on Monday but continued for the entire week so for now it looks like Wall Street is not too worried about what was said.  Also moving higher was Hess Corp (HES) which announced it has hired Goldman Sachs to sell its oil storage terminal and also that they would be exiting the oil refining business.  On the flip side Jos. A. Bank (JOSB) closed down 15.11% after pre-announcing that their 2012 net income will be down about 20% from the previous year.

Tuesday morning started with the futures heading lower but they ultimately bounced off the R1 pivot and then moved roughly 14 points higher closing up over 7 points for the day.  The stock of the day was Ford Motor Company (F) which announced earnings pre-market.  Ford beat on both EPS and revenue estimates reporting 31c vs a consensus of 25c on revenue of $36.5B vs consensus estimate of $32.94B.  F moved lower on the news but it seemed more like a technical correction than anything F specifically said.  They did note an expected $2B loss in Europe but I just don’t see that as a huge surprise, Europe being weak, and I think after some backing and filling F will be a good opportunity again.  Some names moving higher on positive earnings reports were Pfizer (PFE), Eli Lilly (LLY) and DR Horton (DHI).  Also moving higher on EPS and comments was Valero Energy (VLO) which smashed estimates announcing Q4 results of $1.82 on revenue of $34.7B vs consensus estimates of $1.18 on $31.01B and that included a 6c per share loss.  The market sent VLO up over 12% on the report and hats off to Jim Cramer for highlighting something else in the report.  Namely that VLO essentially announced they have been able to move away from foreign oil at refineries and replace it with CHEAPER domestic oil.  You can read Jim’s note on CNBC here.  Moving lower on a very downbeat report was VMware (VMW) and they took minority shareholder EMC Corp (EMC) with them.

Wednesday was another down day for the markets but still relatively small.  What was discouraging was to see the small caps lead on the downside along with techs but as I noted Wednesday evening the moved was relatively anemic compared to the the recent trend.  In the news was Chesapeake (CHK) which announced their CEO Aubrey McClendon will be stepping down.  This is news that is seems many on Wall Street have been waiting for.  Also in the news was Research in Motion (RIMM), which closed down over 12% on what seems to be a sell the news style event with the release of BB10 and two new BB10 phones.  The company also announced that they will be changing their name to Blackberry and symbol to “BBRY“.  Rimm ultimately continued lower for the remainder of the week albeit getting some back Friday.  Beoing (BA) was a bright spot for the Dow, reporting earnings and guidance that beat analysts expectations.  Lastly Wednesday we highlighted a situation developing in Amazon (AMZN) which noted some “drama” around their earnings where AMZN missed EPS and guided below expectations which sent the stock lower after the market but then analysts came out upping targets which ultimately sent the stock higher.  AMZN then drifted lower the remainder of the week but I think if we remain in a risk on market, AMZN will be a good trader and one to watch.   As a reminder that you can review the list I compile each day as well as an archive of past days in the Upgrades/Downgrades section.

Thursday was a narrow range trading day.  We had unemployment claims which was slightly higher than expected but considering the previous two weeks were beats and also that we had Non-farm payroll data coming Friday, the market seemed to be more sitting on its hands waiting for Friday’s data.  In the news The Department of Justice announced it was suing to prevent Anheuser-Busch InBev’s (BUD) from buying a controlling stake of Grupo Modelo (GPMCF).  This news sent BUD down 5.88% for the day but losing even more was Constellation Brands (STZ) who was caught up in some “pin action”.  STZ is in talks to purchase the remaining half of Crown Import it owns with Grupo Modelo.  This DoJ action puts that in jeopardy and hence why STZ closed down 17.39%.  Also in the news, Facebook (FB) started down today after reporting earnings that beat analysts estimates on both EPS and revenue but analyst comments were somewhat mixed after the report and Qualcomm (QCOM) which closed below the open but still gained nearly 4% on an earnings report which beat current quarters estimates and raised guidance.  I like QCOM and think this one should provide continued opportunity going forward.

Major averages 5 day results:

Dow Jones Industrial:

S&P 500:

Nasdaq:

As I noted above, as of Friday we really started to press into levels I have been looking for and now that they have been reached I would rather wait for a move significant decline/pullback to then look for opportunities to get long.  Also just looking back at January we saw the S&P 500 gain more than 5% for the month.  I would not expect 2013 to be a up 60+% for the year which means that we will enviably see backing and filling throughout the year.  To me, trading is not about absolutes, it is about playing percentages and for me I think the percentages says to wait for a better entry point.

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