Will Earnings Take The S&P To All Time Highs?

Now that earnings reporting season is upon us, will Q1 corporate earnings take the S&P 500 (see chart here) to all time highs? We are about to find out. For the first time in months the S&P 500 (see chart here) closed above the 2900 mark and is now within striking distance of its record close of 2940 set back in September. Once again the markets feel like they are in melt up mode. The Dow Jones Industrial Average (see chart below) closed on Friday at 26412 just 500 points away from its record high, the Nasdaq Composite (see chart here) is approaching the 8000 level a level it hasn’t seen in months, and last but not least the small-cap Russell 2000 (see chart here) is approaching the 1600 level and trading above its 200-day moving average.

The technical shape of the markets also appear to be healthy heading into Q1 earnings reporting season. All of the aforementioned indexes are trading above their 20-day, 100-day and 200-day moving averages. A good sign. Furthermore, none of these averages are in overbought territory this according the the relative strength index. Yet, another good sign.

Back to Q1 earnings reporting season. Although analysts and market pundits expect corporate earnings to have declined this quarter, I will be paying attention to the guidance that companies give. It’s no secret there has bee a global slowdown lately due to a variety of factors. However, if companies give better than expected guidance, then most likely we should indeed see new record highs.

Companies to look out for this week that are reporting are, Citigroup (NYSE: C), Goldman Sachs (NYSE: GS), Bank of America (NYSE: BAC), Johnson & Johnson (NYSE: JNJ), Netflix (NasdaqGS: NFLX), United Continental Holdings (NasdaqGS: UAL), Abbott Labs (NYSE: ABT), Alcoa (NYSE:AA), Las Vegas Sands, Corp. (NYSE: LVS), PepsiCo, Inc. (NasdaqGS: PEP), American Express (NYSE: AXP) and Honeywell International (NYSE: HON) just to name a few. Let’s see if Q1 earnings reporting season becomes the catalyst for new record highs. Good luck to all ūüôā

~George

Dow Jones Industrial Average - Paula Mahfouz

 

 

 

 

Risks Abound!

As we enter into Q1 earnings reporting season there are risks abound! Whether it’s the brewing trade war with China, rising interest rates here at home or geopolitical tensions in the middle east, the risk profile of this market has certainly increased in recent weeks. Money center banks such as JP Morgan Chase (NYSE: JPM), Citigroup (NYSE: C) and Wells Fargo (NYSE: WFC) kicked off earnings reporting season and all reported solid earnings numbers only to see their stocks falter on Friday. So we could be setting up for a better than expected earnings reporting season and the markets won’t care due to the aformentioned risks that are present. We will certainly find out this upcoming week as hundreds of companies are set to report their quarterly results. We kick off the week with earnings from Bank of America (NYSE: BAC), Charles Schwab Corp (NYSE: SCHW), Netflix (NasdaqGS: NFLX) followed by Goldman Sachs (NYSE: GS), Johnson & Johnson (NYSE: JNJ), Intuitive Surgical (NasdaqGS: ISRG), United Continental Holdings (NYSE: UAL), United Healthgroup (NYSE: UNH), Abbot Labs (NYSE: ABT), American Express (NYSE: AXP), Morgan Stanley (NYSE: MS), United Rentals (NYSE: URI), Etrade Financial Corp. (NasdaqGS: ETFC), General Electric (NYSE: GE) Honeywell International (NYSE: HON), Procter & Gamble (NYSE: PG), Schlumberger (NYSE: SLB) and Transunion (NYSE: TRU) just to name a few.

Let’s take a gander at the technical shape of the markets. The Dow Jones Industrial Average (see chart below) has bounced off of its 200-day moving average multiple times over the past couple of weeks and is now hovering at its 20-day, the same can be said for the S&P 500 (chart), the Nasdaq Composite (chart) is right on its 20-day and 100-day moving averages as is the small-cap Russell 2000 (chart). So all of the key indices are at or slightly above key support levels and just maybe between earnings reporting season and key support levels in play, stocks can withstand the risks that are currently present. Good luck to all ūüôā

~George

Dow Jones - George Mahfouz Jr

 

Strong Week For Stocks!

The major averages continue to show strength upon the launch of first quarter earnings reporting season. The Dow Jones Industrial Average (chart) closed the week up 1.8%, the Nasdaq (chart) also closed up 1.8%, the S&P 500 (chart) added 1.6% and the small-cap Russell (chart) 2000 led the charge by closing the week up a whopping 3.1%. The money center banks such as JPMorgan Chase NYSE: JPM (chart), Bank of America NYSE: BAC (chart) and Citigroup NYSE: C (chart) which reported their earnings late in the week did help continue the momentum we have recently seen in the markets.

The question now is can earnings reporting season which begin in earnest next week breakout this market to new highs? Companies that are scheduled to report next week are International Business Machines Corp. NYSE: IBM (chart), Morgan Stanley NYSE: MS (chart), Netflix NasdaqGS: NFLX (chart), Goldman Sachs NYSE: GS (chart), Discover Financial Services NYSE: DFS (chart), Intel Corp. NasdaqGS: INTC (chart), Intuitive Surgical NasdaqGS: ISRG (chart), Johnson & Johnson NYSE: JNJ (chart), TD Ameritrade Holding Corp. NasdaqGS: AMTD (chart), Yahoo! Inc. NasdaqGS: YHOO (chart), American Express NYSE: AXP (chart), Coca-Cola NYSE: KO (chart), Qualcomm NasdaqGS: QCOM (chart), Biogen NasdaqGS: BIIB (chart), E*Trade Financial Corp. NasdaqGS: ETFC (chart), General Motors NYSE: GM (chart), Microsoft Corp. NasdaqGS: MSFT (chart), Southwest Airlines NYSE: LUV (chart), Starbucks NasdaqGS: SBUX (chart), Visa Inc. NYSE: V (chart), American Airlines Group NasdaqGS: AAL (chart), Caterpillar NYSE: CAT (chart) and General Electric NYSE: GE (chart) just to name a few.

Without question the aforementioned earnings reports will play a significant role in whether the key indices will breakout to new highs or struggle at their current resistance levels. One other historic factor that can play into the mix is April tends to be¬†one of the top performing months of the year. Whatever the case is, I think it’s safe to assume a breakout or possibly a breakdown is on the horizon. Good luck to all ūüôā

~George

Finally The Fed Raises Rates!

After 9 years of essentiality zero percent interest rates, the Federal Reserve today raised its benchmark interest rate one quarter of one point. Investor’s¬†embraced the Fed’s action¬†lifting all of the key major averages. The Dow Jones Industrial Average (chart) closed up 224 points, the Nasdaq (chart) up 76 points, the S&P 500 (chart) up 29 points and the small-cap Russell 2000 (chart) closed out the session up 17¬†points. The street gained confidence when Fed officials also provided clarity as to their upcoming intentions regarding further rate hikes. Such hikes would only move up between 0.25% and 0.5% and would be subject to future economic activity and data. Another takeaway¬†today is that the Federal Reserve has enough confidence in the current economy to raise rates¬†and confidence in future growth in the foreseeable future. If you are bullish on the markets it doesn’t get better than this. Which is¬†a tepid Federal Reserve while considering¬†raising rates and an economic backdrop that seemingly is demonstrating growth albeit in a moderate manner.

So which sectors could benefit the most from a rising interest rate environment? One sector I will turn my attention to is the banking sector. Banks tend to earn more when rates move up simply because they can charge more interest on¬†the loans they make.¬†There are individual bank names that one can consider but for me personally I would rather position myself in the largest banking exchange traded fund (ETF) Symbol: XLF. The XLF’s top holdings include the likes of Wells Fargo & Company (NYSE: WFC), JP Morgan Chase (NYSE: JPM), Bank of America (NYSE: BAC) Citigroup (NYSE: C) and Goldman Sachs (NYSE: GS) just to name a few. So you get the diversity of multiple money center banks and other banking related institutions which spreads¬†out some risk. That said, it is best practice to consult with your financial advisor(s) before making any investment decisions.

I do think that investors and traders alike can now breathe a sigh of relief now that the Fed has made its first move and the markets cheered that with enthusiasm. Good luck to all!

Both Paula and I wish everyone a very safe and happy holiday season ūüôā

~George

Tough Day For Stocks…

Stocks took it on the chin today with most of the major averages closing in the red. On the day, the Dow Jones Industrial Average (chart) closed down 279.47 points, the Nasdaq (chart) closed lower by 75.97 points, the S&P 500 (chart) closed the day off by 23.81 points and the small-cap Russell 2000 (chart) lost 21.04 points. Fears from Asia to Europe are spilling over in to U.S. Equities. Securities regulators in China are banning certain types of equities financing which will have an effect on margin trading. Furthermore, across the pond in Europe, investors are becoming more worried about Greece and whether or not that country will be able to make payments on debts that are coming due and whether or not Greece will even stay in the eurozone.

Despite today’s selloff, Q1 earnings have not been too shabby so far, especially out of the banking sector.¬†Earlier this week, JP Morgan (NYSE: JPM) reported a $5.91 billion dollar profit or $1.45 per share surpassing most analysts expectations and Citigroup (NYSE: C) also exceeded analysts expectations by posting a $1.51 per share in earnings compared to the $1.39 per share the street expected. The¬†stock that caught everyones attention this week was Netflix (NasdaqGS: NFLX). Netflix (chart) reported in their earnings release that¬†almost 5 million subscribers came online compared to the 4 million analysts anticipated. This metric alone gave Netflix’s stock a boost of almost $90 dollar a share yesterday.

Fast forward to next week and we will get earnings results out of Morgan Stanley (NYSE: MS), Verizon (NYSE:V), United Technologies Corp (NYSE: UTX), Yahoo (NasdaqGS: YHOO), Boeing (NYSE: BA), eBay (NasdaqGS: EBAY), Facebook (NasdaqGS: FB), Qualcomm (NasdaqGS: QCOM), The Coca-Cola Co (NYSE: KO), Tractor Supply Co. (NasdaqGS: TSCO), 3M Co (NYSE: MMM), Amazon (NasdaqGS: AMZN), Eli Lilly & Co. (NYSE: LLY), General Motors (NYSE: GM), Google (NasdaqGS: GOOGL), Microsoft (NasdaqGS: MSFT), Newmont Mining (NYSE: NEM), Southwest Airlines (NYSE: LUV), Starbucks Corp (NasdaqGS: SBUX) and Biogen (NasdaqGS: BIIB) just to name a few. I think it’s safe to say we will get a very broad look as to how corporate America is faring¬†after all of these earnings results come forward.

Have a great weekend and good luck next week ūüôā

~George

Stocks Go On A Wild Ride!

As the new year begins to unfold, volatility has taken command! Yesterday, the Dow Jones Industrial Average (chart) had a 424 point intraday swing, an intraday move not seen in quite sometime. Volatility continued to surge this morning as stocks opened down sharply by weaker than expected retail sales for the month of December, and JP Morgan (NYSE: JPM) announcing weaker than expected quarterly results. So is this the new norm? Investors and especially traders have been waiting a long time to see volatility come back into the market and they may have just gotten what they have been expecting. For years, stocks have been in a low vol environment thanks in part to the Federal Reserve’s easy monetary policies. Now that those policies have and are winding down, it’s no surprise to me that volatility has picked up. Furthermore, now that we are have entered into¬†Q4 earnings reporting season, I expect that volatility will remain elevated and possibly increase.

Companies that are scheduled to report their earnings results are over the next week are; Citigroup (NYSE: C), Intel (NasdaqGS: INTC), Goldman Sachs (NYSE: GS), Delta Airlines (NYSE: DAL), International Business Machines (NYSE: IBM), Morgan Stanley (NYSE: MS), Netflix (NasdaqGS: NFLX), American Express (NYSE: AXP), eBay Inc. (NasdaqGS: EBAY), Starbucks (NasdaqGS: SBUX), Verizon Communications (NYSE: VZ), General Electric (NYSE: GE), Honeywell International ( NYSE: HON) and McDonald’s Corp (NYSE: MCD) just to name a few.

More now than ever I will be focusing on “top-line” growth of corporate America to see if this most recent sell-off poses a buying opportunity. If the top-line of companies do not begin to grow in a meaningful way, I would expect the selling pressure to continue. Good luck to all ūüôā

~George

Bank Stocks Finally Catch A Bid!

As earnings reporting season kicks into high gear one of the sectors that are surprising investors to the upside are the banks. Citigroup (NYSE: C) started things off yesterday reporting an adjusted earnings per share of $1.24 compared to the $1.05 most analyst’s were anticipating. This earnings beat has lifted Citigroup’s stock over 3% the past two days. This morning Goldman Sachs Group (NYSE: GS) also announced an unexpected profit of $2.04 billion dollars or $4.10 per share while analysts were expecting earnings of $3.05 a share. This beat¬†sent Goldman’s shares up 2% this morning although there could be a short term technical hurdle in the $171.oo range (chart) that GS may face. Back in mid-June, Goldman had a high of $171.08 before losing 5.5%. Goldman’s shares have since¬†rebounded¬†back to the $170 zone. Should GS¬†be able to break through the $170 zone, it could very well test¬†its 52 week high of $181.13. If it cannot break through this short term resistance zone in a¬†meaningful way, then a¬†possible re-test of the mid-June lows could occur (chart). Also reporting this morning before the market opened was JP Morgan Chase (NYSE: JPM). JP Morgan reported an earnings beat of $1.46 compared to¬†$1.29 per share most analysts were expecting. This unexpected earnings beat¬†sent shares of JP Morgan Chase (chart) up more than 2% in early morning trading. Whether or not this is a short term bounce or the beginning of a new trend for the banking sector has¬†yet to be seen. I would suspect that the banking pundits will want to see a widening of yield spreads before they get too bullish.

After the bell, the focus will turn¬†to the tech sector. Both Intel (NasdaqGS: INTC) and Yahoo (NasdaqGS: YHOO) will report their quarterly results. Intel has been on a tear gaining over 20% since mid-May (chart). In my humble opinion, Intel is really going to have to crush their numbers and up forward guidance in order for their stock to keep rising here in the short term. Yahoo on the other hand seems to be trading on what Alibaba’s valuation will come out as when they go public in the near future. Two other¬†bellwether tech stocks¬†Ebay (NasdaqGS: EBAY) and Google (NasdaqGS: GOOGL) will report their quarterly¬†results tomorrow and Thursday respectively. So as you can see there are trading opportunities abound, however, my preference is to wait to see how companies report before making any trading or investment decisions. I do think this earnings reporting season will¬†dictate how the overall markets will fare in the¬†second half of this year. So far so good in this reporting season, but there are hundreds of companies yet to report so let’s not draw any significant conclusions. Also, please remember it is good practice to consult with a certified and trusted financial advisor(s) before making any adjustments to your current portfolio or making any investment decisions for that matter.

Good luck to all ūüôā

~George

First Half Of The Year In The Books, And The Bull Keeps Running…

After gaining 30% or so in 2013, the markets continue to be on one of the most impressive bull runs in modern history. Here is how the four key indices closed out the first half of 2014: The Dow Jones Industrial Average (chart) finished up 1.5%, the Nasdaq (chart) gained 5.5%, the S&P 500 (chart) advanced 6.1% and the small-cap Russell 2000 (chart) closed out the first half of 2014 up 2.6%. Looking back to the market lows of early 2009, these aforementioned indices have tripled or better in price, which is simply stunning.

I think now is as good a time than any to¬†begin to take a look at how the major averages can continue to rise in spite of almost tripling over the past 5 1/2 years. What could¬†be the catalyst(s) going forward? It’s no secret that the Federal Reserve is scaling back¬†its asset purchases and are scheduled to be finished by year-end, so no surprise there. This in fact is where the bear camp is growling that the end of the Fed stimulus¬†program could¬†be the catalyst to end this historic bull run. What about corporate earnings?¬†In my humble opinion, herein lies the single most important catalyst that will either add fuel to this incessant bull run or put the brakes on it. If it’s the latter, this could also create¬†the first real correction in stocks, something that hasn’t occurred in years.

Investors will not have to wait too much longer for Q2 earnings reporting season is upon us. The first key earnings release that has economic implications will be Alcoa (NYSE: AA) which is due to report next Tuesday after the close. I will be very interested to see the top-line growth of Alcoa which will certainly shed some light as to the health of the global economy. Investors have been bidding up Alcoa most of the year in anticipation of an expanding global backdrop. Another economically sensitive stock at least as it pertains to the consumer is Family Dollar Stores (NSYE: FDO). Family Dollar is scheduled to report their quarterly results next Thursday before the market opens. Then by mid-July we will be in high gear to hear how corporate america fared in Q2. The week of July 14th, earnings are scheduled to come out of American Airlines (NYSE: AAL), American Express (NYSE: AXP), Blackrock ( NYSE: BLK), Citigroup (NYSE: C), Whirlpool Corp (NYSE: WHR), JPMorgan Chase (NYSE: JPM) Goldman Sachs (NYSE: GS), Johnson & Johnson (NYSE: JNJ), Intel (NasdaqGS: INTC), Yahoo (NasdaqGS: YHOO), Bank of America Corp (NYSE: BAC), Ebay (NasdaqGS: EBAY), U.S. Bancorp (NYSE: USB), Yum Brands (NYSE: YUM), Baker Hughes Inc (NYSE: BHI), UnitedHealth Group (NYSE: UNH),  Blackstone Group LP (NYSE: BX), International Business Machine (NYSE: IBM), Google (NasdaqGS: GOOGL), Bank of New York Mellon Corp (NYSE: BK) and General Electric (NYSE: GE) just to name a few. As you can see, I think it is safe to say that by the middle of July or so we will have a pretty good idea of how corporate America is faring.

Please note that in recognition of¬†the 4th of July holiday, the markets will be closing at 1pm E.S.T.¬†on Thursday and is closed on¬†Friday the 4th. Both Paula and I wish everyone a very safe and happy 4th of July ūüôā

~George

 

Q1 Earnings Reporting Season Saves The Day, So Far…

Last week the Dow Jones Industrial Average (chart), the Nasdaq (chart), the S&P 500 (chart) and the small-cap Russell 2000 (chart) all went into a tailspin closing lower by 2.4%, 3.1%, 2.6% and 3.6% respectively. Fast forward to this week as earnings reporting season shifted in to high gear and we have a different story. For this holiday shortened week, the Dow Jones Industrial Average (chart) finished up 2.38%, the Nasdaq (chart) closed up 2.395%, the S&P 500 (chart) gained 2.7% and the small-cap Russell 2000 (chart) closed the week up 2.38%.

So why the reversal? Simply put and for the most part, corporate earnings are coming in better than expected. At the beginning of the week Citigroup (NYSE: C) posted better than expected results on net income of $3.94 billion up from $3.81 billion in Q1 2013. This was after Wells Fargo (NYSE: WFC) posted a sharp rise in its net income in comparison to last year’s quarterly results. Also this week, Johnson and Johnson (NYSE: JNJ) reported a net income of $4.4 billion an almost 8% increase over the same period last year. The Coca-Cola Co. (NYSE: KO) reported their Q1 earnings booking 44 cents share which is what the street expected as global sales volume rose 2%. Furthermore, Intel (NasdaqGS: INTC) reported 38 cents a share in earnings which came in 1 cent above what analysts expected, this was enough to send Intel to fresh 52-week highs. ¬†Yet another impressive earnings report came out of flash based data storage firm SanDisk (NasdaqGS: SNDK) which surprised the street and reported record Q1 results of $1.44 per share leapfrogging street estimates of $1.25 per share. This was enough to send the shares of the company up over 7% in today’s trading session.

As previously mentioned, earnings reporting season kicked into high gear this week and next week we go into overdrive. At the beginning of this upcoming week, we will here from Halliburton (NYSE: HAL), Wynn Resorts (NasdaqGS: WYNN), AK Steel (NYSE: AKS), Amgen (NasdaqGS: AMGN), Bank of New York Mellon (NYSE: BK), Cree Inc. (NasdaqGS: CREE), Discover Financial Services (NYSE: DFS), Gilead Sciences (NYSE: GILD), Juniper Networks (Nasdaq: JNPR), Intuitive Surgical (NasdaqGS: ISRG) and United Technologies Corp (NYSE: UTX). Mid-week earnings will come out of tech behemoth Apple (NasdaqGS: AAPL), Biogen Idec (NasdaqGS: BIIB), Delta Airlines (NYSE: DAL), Dow Chemical (NYSE: DOW), F5 Networks (NasdaqGS: FFIV), Facebook (NasdaqGS: FB) and Qualcomm (NasdaqGS: QCOM). Closing out the week we will hear from 3M Company (NYSE: MMM), Amazon (NasdaqGS: AMZN), American Airlines (NYSE: AAL), Chinese search engine Baudi (NasdaqGS: BIDU), Cabot Oil & Gas (NYSE: COG), Celgene Corp (NasdaqGS: CELG), Eli Lilly and Company (NYSE: LLY), General Motors (NYSE: GM), KLA-Tencor (NasdaqGS: KLAC), Microsoft (NasdaqGS: MSFT), United Parcel Service (NYSE: UPS) and Ford Motor Company (NYSE: F). Of course there are hundreds of others reporting their earnings next week so we will see if the market continues to rebound from its mini sell-off earlier in the month. Good luck to all.

The markets will be closed tomorrow in recognition of Good Friday and both Paula and I wish everyone a very safe and healthy holiday weekend ūüôā

~George

 

Q4 Earnings Reporting Season Is Here…

And so far, it’s a mixed bag. As this earnings reporting season kicks into high gear, most of the banks that have reported so far have come in above consensus estimates with Citigroup (NYSE: C) being one notable exception. Citigroup did report a $2.69 billion dollar profit, however, this was below consensus estimates and the bank did cite weakness in their mortgage and fixed income divisions. The stock closed lower by over 4% on the day. Another sector that is being challenged so far this year is the retail sector, at least certain companies within the sector such as Best Buy (NYSE: BBY). Although Best Buy did not report their earnings, they did come out with their holiday same store sales today which were significantly below analysts’ expectations and the company lowered their guidance due to disappointing holiday sales. On that news, the street hammered Best Buy’s stock today sending its shares lower by $10.74 per share or almost 30% on over 85 million shares in volume. This type of massive volume compared to a typical volume day of around 6 million, could be considered a washout or¬†capitulation type trading day, hence a potentially sharp bounce back and potential recovery in its share price? Let’s see how the next couple of trading sessions play out on Best Buy before we draw any conclusions on a potential snap back rally.

Now let’s take a look on how the key indices are faring so far this year starting with the Dow Jones Industrial Average (chart)¬†which is down 1%, the Nasdaq (chart) is up 1%, the S&P 500 (chart) is essentially flat, and the small-cap Russell 2000 (chart)¬†has gained about 1% since the beginning of the year. So as you can see, a mixed bag here as well with the benchmark indexes.

Looking ahead to tomorrow’s key earnings reports, we will hear from the likes of General Electric (NYSE: GE), Morgan Stanley (NYSE: MS), Bank of New York Mellon Corp (NYSE: BK), and Schlumberger (NYSE: SLB) just to name of few. Next week we will hear from powerhouses International Business Machine (NYSE: IBM), Johnson & Johnson (NYSE: JNJ), Halliburton (NYSE: HAL), Abbot Labs (NYSE: ABT), Freeport-McMoRan Copper & Gold (NYSE: FCX), U.S. Bancorp (NYSE: USB), and Honeywell (NYSE: HON). Of course there are hundreds of other companies reporting next week as well, but I will be paying closer attention to the aforementioned companies due to their reach in the economy here and abroad.

I think this earnings reporting season will be scrutinized more than any other in recent years. Everyone wants to see top-line growth out of corporate America to confirm what the most recent economic data has revealed. With that said, and with what we have seen come out of certain slices of the retail sector, I am expecting a bumpy ride between now and the end of Q4 earnings reporting season. Good luck to all and make sure to consider having protective stops in your portfolios. The markets will be closed on Monday due to the MLK holiday.

Have a great holiday weekend ūüôā

~George