Week in Review
DJIA +8.37 (+0.06%) to 13,981.76; S&P 500 -1.59 (-0.10%) to 1,519.79; NASDAQ -6.63 (-0.21%) to 3,192.03
A pretty lack luster Friday to close off a lack luster week. There wasn’t a shortage of events and things the market could use to drive direction one way or the other but it simply chose not to. The market seems firmly pitted between valuations that may seem somewhat extended and technicals that would like a pullback but the continued accommodating environment from the Fed and also the Government as they continue to run deficits and even if cutting it is slow to not shock the economy. How the market will ultimately resolve itself is yet to be seen but I prefer just leaving it to the charts and not forcing my ideologies onto the markets.
Today we had a fair amount of economic data but not really any of those that grab and shake the headlines. The New York Fed’s February Empire State Manufacturing survey unexpectedly rose to 10.0 from last month’s -7.78 reading and I will want to see what the next reading comes out just to see if this was a one off or a turn. We also had the Michigan Consumer Confidence reading for February which was 76.3, versus the expected 74.6.
In the news was Herbalife (HLF) which was also in focus a few weeks after notable investors Carl Icahn and Bill Ackman squared off against each other on the stock. Ackman believes the company is a ponzi scheme and Icahn is in disagreement. Friday, HLF opened sharply higher following a disclosure by Carl Icahn last night that he has put his money where his mouth is and has taken a 12.98% stake. The interesting thing about this was that Ackman noted he planned to discuss options with HLF management regarding strategic alternatives. I found that weird because Ackman was shorting but also seemed to think there was something worthwhile there or else why bother even talking to the company. I guess that made me look at his negative stance as weak. In the meantime HLF also has a great opportunity for a short squeeze based on reports of there not being shares available to borrow. Icahn is not 100% by any means but I have also learned that he is not one to consistently bet against and he generally only steps in if he sees profit potential.
Wal-Mart (WMT) was probably the news of the day when Bloomberg seems to have gotten their hands on a leaked email from an executive that stated February sales to this point have been a “total disaster”. This sent WMT lower $1.52, or 2.15%, closing at $69.30 and the reason that the Dow was unable to squeak out a gain like the other major indices. This news also sent rival Target (TGT) and step down dollar stores like Dollar General (DG) and Family Dollar (FDO) lower in sympathy.
Moving on earnings today was a name that we have been featuring as a technical trade for a while now, Qlik Technologies (QLIK). QLIK moved up $4.09, or 17.97%, closing at $26.85 which is near the top of our initial target region for the trade. Along with the positive report, QLIK received upgrades which I did have on my early morning list and 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. Also on that list fro Friday was a slew of downgrades for LogMeIn (LOGM) which closed down $7.01, or 29.63% after guiding below Wall Street estimates for Q1 and 2013.
Week in Review:
Many of the trading day’s this week were held in a small range and Monday was no exception with the S&P 500 closing down less than 1 point. Tech stocks were in focus to start the week especially Apple Computers (AAPL) continued its bounce and while there was rumors of an “iWatch” floating around and anticipation of what Tim Cook might say at the upcoming Goldman Sachs Technology and Internet Conference as well as some left over optimism from Einhorn. Also relating to AAPL Home Depot (HD) officially announced that they would replace their staff BlackBerry’s (BBRY) with Apple’s iPhone 4S. The big loser on Monday was Nordisk (NVO) which received an FDA Complete Response Letter indicating that the company’s insulin products will need additional tests before approval. What I love about the market is there is always a trade and moving higher Monday on NVO’s bad news was its competitor Sanofi’s (SNY).
Tuesday had much of a feeling of that buy the rumor sell the news (or fact) for Apple Computers (AAPL) which didn’t say much at the Goldman Sachs Technology and Internet Conference that made investors willing to keep the short term move heading higher. What now has to be shows is can AAPL build off the recent lows that are in place or will they lose ground and continue to work lower. The news of the day for me Tuesday was with Coca-Cola (KO) which reported earnings that beat street EPS but fell slightly short on revenues. While confirming their 2020 vision the company also stated they saw weakness and economic uncertainty in European operations and also noted uncertainty in China which is expected to have an affect in the short term. The U.S. cannot live in a bubble and how Europe and China fair in 2013 will likely chart the course for the broad indices. Barclays (BCS) announced job cuts which Wall Street applauded by sending shares higher and also moving higher but on a stellar EPS report was Avon Products (AVP) up $3.52 or 20.31% on the day. Moving lower on EPS included Valspar (VAL) down 7.46% and Level 3 (LVLT) down 13.58%.
The market’s opened somewhat muted after the State of the Union Address. Wednesday’s headline included Comcast (CMCSA) which reported earnings Tuesday after the closing and beat the street on both top and bottom lines. Along with reporting earnings, CMCSA also announced they will purchase General Electric’s (GE) remaining 49% equity stake in NBC Universal for $16.7B and would acquire $1.4B in real estate assets from GE. GE moved higher on the news which is likely attributable to their comments that they will use the funds to increase the share repurchase plan to $35B and accelerating its 2013 share buybacks to about $10B. Moving lower on the day included Carnival (CCL) which has been facing the Triumph cruise ship debacle and both Cliffs Natural (CLF) and Bankrate (RATE) on earnings reports and comments that disappointed.
Thursday started with Unemployment claims, which came in better than expected (341K vs 361K consensus estimate) which helped the broad market move off early morning lows. Thursday was a pretty big news day looking back with also big names being in the headlines. First and foremost for me it was Heinz (HNZ) which announced they agreed to be purchased by Berkshire Hathaway (BRK.A), along with partner 3G Capital for $72.50 per share. This represented a near 20% increase from the previous day’s closing price. Also announced was an edit to the previous agreement between Anhesuer-Busch InBev (BUD) and Constellation Brands (STZ). Namely, STZ was granted perpetual rights by BUD to distribute Corona and other Modelo brands in the U.S. This move was made in response to STZ being sued by the DoJ and STZ CEO Rob Sands stated he believes that this move should satisfy the DoJ and concerns raised by their lawsuit. Thursday also saw many big names announcing earnings including General Motors Company (GM), PepsiCo (PEP) and Cisco (CSCO). PEP was the only one of the 3 to be up on the day but likely had more to do with comments made that they are raising the annualized dividend 5.6% to $2.27 and a new $10B share repurchase program.
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.
Major averages 5 day results:
Dow Jones Industrial:
S&P 500:
Nasdaq:
I will be traveling this weekend and beginning of next week so if I can come back and add more comments and charts I will. Otherwise the idea remains the same. The trend is your friend and I am not going to worry about calling the top BUT I will continue to decrease the size of new trades as I close out old ones. This shifts my exposure out of the market while allowing me to remain in the market. Yes that means when the top comes I could be stopped out of many names and even have losses but by allocating less capital my previous winners should far outpace and losses and I have seen many technicians already go to the sidelines and miss out on many great trading opportunities because they “feared” a top. Have a great long weekend everyone!