earnings

Bank Stocks Finally Catch A Bid!

Posted on by George Mahfouz

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 🙂

~George

Despite a modest pullback in June, the major averages continue to post double digit gains on the year…

Posted on by George Mahfouz

In month of June, the key indices witnessed a spike in volatility and their first monthly drop in 2013, however, stocks in the second quarter once again posted impressive gains. In Q2, the Dow Jones Industrial Average (chart) finished up 2.27%, the Nasdaq (chart) +4.15%, the S&P 500 (chart) +2.36% and the small-cap Russell 2000 (chart) closed the quarter up 2.73%. So far this year these averages are up an eye-popping 13.78%, 12.71%, 12.63% and 15.09% respectively.

As I look back over the past month or so volatility kicked into high gear as the Fed continued to signal that its bond purchases would relent as early as the fourth quarter of this year. Couple that with Japan’s Nikkei index dramatically declining over 20% in less than a month from its recent high, and the gold market (chart) getting taken out to the woodshed with gold having its worst quarter on record, losing over 24% on the quarter. It’s no wonder the key indices retraced in June. In fact, I am surprised that our averages did not decline any further considering all of the facts.

So what now you may ask? How does the second half of the year portend to be? Here is the catch-22. As economic numbers continue to improve, this will give the Fed more reason to begin to lighten up on their bond purchases, hence more market volatility. However, if the economy continue to grow anemically, this will give the Fed the green light to keep stimulating. What’s wrong with this picture though? In my opinion, at some point in time our economy will have to stand on its own two feet and the top line of corporate America will have to show meaningful growth in order for this bull market to continue. We won’t have to wait very long to understand the health and growth prospects of corporate America as Q2 earnings reporting season kicks into gear here in July. That said, as a trader you relish in the opportunities that earnings season provides both on the long and short side. However, make sure to abide by your trading plans, disciplines and always consider using protective stops as part of your plan. Earnings reporting season typically adds to volatility and larger than expected price movements. I bid you good luck.

All the best 🙂

~George

Unconditional support continues…

Posted on by George Mahfouz

The Federal Reserve’s incessant support of asset prices continues to propel stocks to all time highs. The S&P 500 (chart) closed out the month of April at a record high of 1597.57. For the month, the Dow Jones Industrial Average (chart) closed up 1.79%, the Nasdaq (chart) +1.88% and the small-cap Russell 2000 (chart) finished the month gaining about 1%. Records are being broken despite the lackluster job growth in our country, a weaker than expected GDP report issued last Friday, and a mixed bag of Q1 corporate earnings reports.

Not to sound like a broken record, but as long as the economy stays stuck in neutral, QE3 should remain in full effect, which is what I expect to hear when the Federal Reserve concludes their two day meeting this afternoon. This mantra should also continue to be bullish for stocks and act as a catalyst for support should we get the pullback or market correction that the bears have been chatting up all year long. To add even more fuel to the fire, you now have central banks from around the world opening up their balance sheets in further support of their own economies. I am not so sure that the old adage of “sell in May and go away” will apply this year just from the mere power and seemingly collaborative efforts of the world wide central bankers. Logically, this cannot continue to be the case, but for now it is super charging the markets.

Technically speaking and from a relative strength perspective, the four key indices are below the 70 value level of the RSI which is considered overbought territory, and therefore could very well be consolidating for the next leg up. Of course, the market is way overdue for some type of pullback. I have been expecting this for months now and whenever there is any type of selling pressure, it has been met with undeniable support. Best of luck in the month of May and remember it is typically a good idea to use protective stops in any position you enter into especially with the amazing double digit run stocks have had so far this year.

Have a great May 🙂

~George

 

 

5 year high!

Posted on by George Mahfouz

Stocks continue to advance in the new year as the S&P 500 (chart) closed the week at a five year high. The Dow Jones Industrial Average (chart) finished the week up 0.40%, the Nasdaq (chart) +0.77% and the small-cap Russell 2000 (chart) added 0.19%. Furthermore, with the S&P 500 (chart) closing at 1472.05, all eyes will be watching next week to see if this key index can break and remain above the 1475 level which has been a key resistance level. However, next week a slew of companies are schedule to report their Q4 earnings results which most likely will be the catalyst to either break these markets out, or once again serve as a key resistance level.

Here are some of the companies that are scheduled to report next week: Goldman Sachs (NYSE: GS), JPMorgan (NYSE: JPM), Ebay (NasdaqGS: EBAY), Bank of America (NYSE: BAC), Citigroup (NYSE: C) American Express (NYSE: AXP) UnitedHealth (NYSE: UNH) Intel (NasdaqGS: INTC) General Electric: NYSE: GE) and Morgan Stanley (NYSE: MS). So as you can see the markets will have plenty to digest after these bellwether companies report their results. Most pundits believe that this indeed will provide what is needed for the markets to breakout and march towards new highs. Good luck to all.

Have a great weekend 🙂

~George  

Tough week for stocks…

Posted on by George Mahfouz

Earnings reporting season is in high gear and the markets are not liking what they are seeing. For the week, the Dow Jones Industrial Average (chart) fell 1.77%, the Nasdaq (chart) -0.59%, the S&P 500 (chart) -1.99% and the small-cap Russell 2000 index (chart) declined 2.89%.

For the most part, corporate America continues to show a slowdown in their businesses and companies are also providing tepid outlooks in the near term citing the uncertainty of the pending fiscal cliff, and the expiration of the Bush era tax cuts. Even tech-titan Apple (NasdaqGS: AAPL) guided with an outlook that caught the street off guard. Despite the disappointing earnings reporting season so far, the key indices have managed to remain above their respective 200-day moving averages. The 200-day is one of the most closely watched key technical support indicator that market technicians and institutional investors respect.

Next week, Q3 results will continue to pour in so I expect that the 200-day will once again be tested. If this is the case, and this key technical level can hold, we just may make a run into the end of the year? Good luck to all.

Have a great weekend 🙂

~George

Weak earnings spook stocks…

Posted on by George Mahfouz

Although Halloween is not quite here yet, the markets got spooked on Friday with weaker than expected corporate profits being reported. High profile companies such International Business Machines (NYSE: IBM), Google (NasdaqGS: GOOG), Microsoft (NasdaqGS: MSFT) and McDonald’s (NYSE: MCD) all disappointed investors, just to name a few.  On Friday the Dow Jones Industrial Average (chart) closed down 205.43 points, the Nasdaq (chart) -67.25, the S&P 500 (chart) -24.15 and the Russell 2000 (chart) lost 16.12 points.

The street should not be too surprised with the softer earnings numbers that are coming in, for most analysts have been lowering their estimates for some time now. This upcoming week over 700 companies will report their Q3 results with all eyes on Apple Computer (NasdaqGS: AAPL). Apple is schedule to issue their earnings results on Thursday. Let’s see how this week plays out before we draw any definitive conclusions as to where these markets may be headed. Have a great week and good luck to all.

~George

A positive week for stocks, next up Q3 earnings…

Posted on by George Mahfouz

The market posted its first weekly gain in almost a month, this right before earnings reporting season begins. For the week the Dow Jones Industrial Average (chart) finished up 1.29%, the Nasdaq (chart) +0.64%, the S&P 500 (chart) +1.41%, and the small-cap Russell 2000 (chart) closed the week up 0.65%.

Third quarter earnings reporting season will be the highlight next week with earnings reports coming out of Alcoa (NYSE: AA) Yum Brands (NYSE: YUM) and JPMorgan Chase & Co (NYSE: JPM), just to name a few. Most analysts have ratcheted down their earnings forecasts due to the tepid pace of global growth and the number of companies that have pre-announced to the downside. The big question now is, are these adjustments already priced into equities and indexes? My feelings are that if there are any big surprises to the downside and stocks sell-off, that fund managers and institutional buyers are sitting on the sidelines ready to act. We cannot forget the position of the Fed which essentially gives this class of investors the green light to deploy capital into the markets. Of course there are no guarantees that this will be the mandate, however, odds are that any significant sell-off due to earnings reporting season would be met with support. Good luck to all.

Have a great weekend 🙂

~George  

Just like August, September produces unlikely gains…

Posted on by George Mahfouz

Although stocks were mostly lower on the week, the month of September produced rare gains for the benchmark indexes. For the month of September, the Dow Jones Industrial Average (chart) gained 2.65%, the Nasdaq (chart) +1.61%, the S&P 500 (chart) +2.42% and the small-cap Russell 2000 (chart) closed the month up 2.12%. This capped a very impressive third quarter for equities with all of these key indices advancing sharply higher.

So now the encore! What promises to be an event driven final stretch of the year, investors can look forward to Q3 earnings reporting season in October and of course the Presidential and congressional elections in November. Not to mention the ongoing saga in Europe, the seemingly everlasting middle east crisis, and whether or not our country will face the “fiscal cliff” outcome which could spin our economy into a recession?

So as you can see stocks and bonds are certainly exposed to an enormous amount of uncertainty in the final quarter of the year. Typically when markets are in such a quandary, much higher volatility usually ensues. In any market environment and  especially the one we are heading into, it is always best to use protective stops and or protection in the form of puts if you have a long portfolio. Furthermore, it is always a good idea to consult with a professional investment advisor before implementing any type of strategy. Good luck to all.

Have a great weekend 🙂

~George

What a difference a year makes…

Posted on by George Mahfouz

Last year at this time stocks were in a free-fall. At one point in August of 2011, the top four indicies were all down well over 10% on the month. Fast forward to this year and so far in August the Dow Jones Industrial Average (chart) is up 1.53%, the Nasdaq (chart) +2.77%, the S&P 500 (chart) +1.92% and the Russell 2000 (chart) +1.85%. It is very unusual for the markets to be posting gains in the dog days of summer. This is especially true when earnings reporting season has been less than stellar. Add into the mix a continuing flow of disappointing economic reports from around the world, and one would think we would be down 10% on the month!

So what gives? Call it an election year, call it the global flow of liquidity, call it what you want, but I am going to refer to the old adage on Wall street and that is “you can’t fight the tape!” This means when markets are trending lower or higher in this case, it’s best to go with the flow rather than try to pick the top to sell or sell short. However, it doesn’t make a lot of sense that we are at multi-month highs considering the global-macro picture. One thing is for sure, and that is stocks or indexes can remain overbought for extended periods of time regardless of the circumstances. Next week we will take a look at how the technicals are playing out in the markets to see if there is anything from a technical perspective that we should be paying attention to. Good luck to all.

Have a great weekend 🙂

~George

Next week promises to be a doozy…

Posted on by George Mahfouz

Stocks closed the week with a bang, but that’s nothing compared to what’s in store next week. Between dozens of companies reporting their Q2 results, and Ben Bernanke speaking before Congress on Tuesday and Wednesday, I am looking for a spike in volatility that may last all week long. Yesterday, the Dow Jones Industrial Average (chart) closed up 203.82 points, the Nasdaq (chart) +42.28, the S&P 500 (chart) +22.02 and the Russell 2000 (chart) +11.37. With all that’s in store next week, I am also looking at the technicals to see if these key indices can breakout of their respective trading zones. What was impressive to me yesterday is that all four indices either held, or moved and closed above their 50-day moving averages.

With earnings reporting season kicking into high gear, I would expect that this will be the catalyst to whether the markets breakout or breakdown. On Monday all eyes will be on Citigroup (NYSE: C), followed by reports out of Goldman Sachs (NYSE: GS), Intel (NasdaqGS: INTC) and Yahoo (NasdaqGS: YHOO) on Tuesday. Wednesday we will hear from Bank of America (NYSE: BAC), U.S. Bancorp (NYSE: USB), American Express (NYSE: AXP) and eBay (NasdaqGS: EBAY), just to name a few. Closing out the week, Q2 earnings reports will be issued from Morgan Stanley (NYSE: MS), Phillip Morris (NYSE: PM), Google (NasdaqGS: GOOG), Microsoft (NasdaqGS: MSFT) and General Electric (NYSE: GE).

So as you can see, next week should indeed be a doozy! Good luck to all and happy trading 🙂

~George