International Business Machines

Q4 Earnings Reporting Season Is Here…

Posted on by George Mahfouz

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 🙂

~George

 

 

Finally Congress Gets a Deal Done!

Posted on by George Mahfouz

After 16 days of a partial government shutdown, Congress finally came to terms to reopen the government and raise the debt ceiling. Talk about waiting until the last minute! Needless to say, stocks over the past couple of weeks have experienced an increase in volatility with triple digit gains and losses during the shutdown. Despite the turmoil in Washington, the Dow Jones Industrial Average (chart) on Wednesday closed up over 200 points, the Nasdaq (chart) managed to close at a 13 year high, the S&P 500 (chart) is nearing its all time high and the small-cap Russell 2000 (chart) finished the trading day at an all time record. Now the street can focus on Q3 earnings reporting season and so far, not so good.

After the close yesterday, bellwether International Business Machines (NYSE: IBM) shocked the street by missing revenues by almost $1 billion dollars and is down nearly seven percent in pre-market trading. Also after the close yesterday, Ebay (NasdaqGS: EBAY) reported in-line revenues, however guided lower for the upcoming holiday season. With Q3 earnings reporting season kicking into to high gear, I am questioning whether or not this will become the trend for the quarter? Most analysts do not expect this to be a robust quarter for corporate America, so now the question becomes does the imminent pullback in stocks become a buying opportunity before year end? Quite frankly with the headline risk out of Washington seemingly over for now, I beleive that the trend of pullbacks being bought will continue between now and year-end. I will look at key technical support levels for possible entries, and on the S&P 500 (chart) the 1680 zone appears to be the first level of support, which also happens to be its 50-day moving average, followed by the 1620 area. What gives me this vote of confidence of a continuing bull market into year-end is not necessarily how corporate earnings will fair, but the fact that the Federal Reserve continues to promise that it will do whatever it takes to support the economy, hence the bull market should continue. That said, when the Federal Reserve begins to taper, this will be the time that corporate America will truly need demonstrate top-line growth. In closing, no matter how your portfolio is positioned, it is usually the best practice to implement some type of protective stop initiative and of course always consult with a certified financial professional(s) while considering any investment strategy. Good luck to all. 🙂

~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

Chalk one up for the bears…

Posted on by George Mahfouz

Stocks notched their worst performing week since the beginning of the summer. For the week, the Dow Jones Industrial Average (chart) closed down 2.07%, the Nasdaq (chart) -2.94%, the S&P 500 (chart) -2.21% and the small-cap Russell 2000 (chart) closed out the week down 2.35%.

This upcoming week promises to be a doozy with Q3 earnings reporting season kicking into high gear. The following is a list of some of the high profile companies that are scheduled to report; Citigroup (NYSE: C), Goldman Sachs (NYSE: GS) Coca-Cola ( NYSE: KO), International Business Machines (NYSE: IBM) , Intel (NasdaqGS: INTC), CSX Corp. (NYSE: CSX), Bank of America (NYSE: BAC), US Bancorp (NYSE: USB), American Express (NYSE: AXP) and tech titans Ebay (NasdaqGS: EBAY) and Google (NasdaqGS: GOOG).

With last week’s market performance and lack thereof, the question I am now pondering is whether or not this earnings reporting season will be the catalyst to take the markets down further? Even with last week’s 2% pullback, the bellwether indexes are still up double digits on the year. There indeed could still be more room to the downside, however, I would expect that key technical levels would support any meaningful pullback. Let’s take a look at the S&P 500 (chart). The first level of support appears to be in the 1400 zone and then the 1370 area which happens to be the 200-day moving day average for the S&P. By no means am I suggesting that these levels will be reached, all I am saying is if Q3 earnings reporting season comes in weaker than expected, we could see a continuation of last week’s pullback.

Good luck to all.

Have a great week 🙂

~George