Fed open to scale back causes pullback
Index & Sector performance 11/20/13
The Market:
Initial optimism on better than expected economic data pre-market saw early selling as the S&P pulled off the highs of the day in the first hour of trading and then the market meandered waiting for the Fed minutes to be released. After the 2pm EST announcement the market began selling off as the Fed showed they are prepared to scale back on the rate of asset purchases. The S&P 500 was able to use late trading to close a few points off the lows of the day.
In economic data, Core CPI came in better than expected while headline CPI was slightly worse. Retail Sales came in much better than expected up 0.4% vs 0.1% expectations. Existing home sales slid from the previous month’s reading of 5.29M and even came in below expectations posting a 5.12M number when 5.17M was expected. Tomorrow we get PPI, Flash Manufacturing PMI and Unemployment Claims pre-market and the Philly Fed Manufacturing Index at 10am EST.
Story Stocks:
J.C. Penney (JCP) reported a greater than expected loss on lower than expected revenue evening prompting a Wells Fargo analyst to reiterate their Underperform rating and $4-5 price target. The stock traded higher on the news gaining 8.38%. It appears that traders believe the worst is now behind the company. The first pullback in the name will be telling and it if seems like a consolidation or if sellers show back up sending shares back toward the lows.
Herbalife (HLF) gained 6.47% after Bill Stiritz,, CEO of Post Holdings (POST), reported a 6.38% stake in the company and is interested in becoming more active in the company’s business. There are also reports Stiritz is interested in taking HLF private.
Yahoo (YHOO) gained over 2% closing just off a 52 week high after announcing an increase the share repurchase program by $5B. For a company with a 37B market cap that is a notable program.
Moving on their earnings reports included La-Z-Boy (LZB) beating EPS (31c vs 26c) and revenue (366.4M vs $349.4M) closing up 9.83%, Deere (DE) also beating EPS ($2.11 vs $1.89) and revenue ($9.45B vs $8.68B) closing up 2.06% and J.M. Smucker (SJM) missing EPS ($1.52 vs $1.60) and revenue ($1.56B vs $1.61B) closing down 6.54%.
The following noteworthy companies are scheduled to report earnings before tomorrow’s open: TGT, SHLD, GME, DCI, ANF, PDCO
Analyst Comments:
Upgrades 11/20/13
Downgrades 11/20/13
Initiations 11/20/13
Price Target Changes 11/20/13
The Game Plan:
The recent pullback has strangely coincided with another close outside of the Bollinger Bands going into a Full Moon. Regardless of why or what caused the pullback, if the lows of today ($1777) do not hold the market could be setting up to test the 50 day SMA or $1730-50 range in the S&P 500 cash index for a much broader and longer pullback. While the 20 day SMA resides at $1770 and could be support, it has also been tested twice recently and the slope is starting to flatten making it more fragile.
