No June Swoon This Year…

No June swoon this year, these markets are simply not having it. June historically can be either a slow month or a month of selling pressure. Neither really happened this year. Despite a brief dip in the major averages a couple of weeks back due to inflation concerns, stocks and indexes held their own last month. The Dow Jones Industrial Average (see chart here) closed out the month at 34502, the S&P 500 (see chart here) finished the month just shy of 4400, the Nasdaq Composite (see chart here) closed out the month in record territory at 14503 and the small-cap Russell 2000 (see chart below) finished the month and first half of the year at 2310.

I remain in awe of the resiliency of stocks and most every other asset class out there. I read the other day that Facebook (NasdaqGS: FB) has become the fifth company in the United States to surpass the $1 trillion value mark. We now have in our country five companies that are valued at over $1 trillion dollars. Apple (NasdaqGS: AAPL), Amazon (NasdaqGS: AMZN), Microsoft (NasdaqGS: MSFT) and Alphabet aka Google (NasdaqGS: GOOGL) round out the top five trillion-dollar companies. When I see this type of action it makes me wonder how much earnings power do these companies need to continue to exhibit in order to keep their eye-popping valuations going? One other obvious similarity is the companies are all tech stocks and that is where the real growth has been. If you go back 20 years, I don’t think anyone would of expected five companies in our markets all reaching and boasting trillion dollar plus valuations. Heck, Microsoft’s market cap just surpassed $2 trillion dollars to join Apple as the only companies with more than a $2 trillion dollar valuation. Folks I am not a forensic analyst, but my goodness how is the law of large numbers playing a role here?

As I look at the technical shape of the major averages nothing really stands out to me with the exception of the Nasdaq Composite (see chart here). The Nasdaq has just entered overbought territory according to the relative strength index aka the RSI. The Nasdaq also just hit an all-time high so I think some sort of pullback could potentially be in the offing.

Have a safe and happy 4th of July weekend 🙂

~George

No June Swoon This Year - Paula Mahfouz

 

Big Tech Blowout!

Big tech absolutely blew out their earnings in their most recent quarter. Let’s start with Apple; Apple (NasdaqGS:AAPL) experienced growth in each of its product categories. What’s truly unbelievable is Apple generated about a $billion dollars a day in revenue. Yes, no typo folks, a billion a day in revs in their most recent quarter. Facebook (NasdaqGS: FB) also crushed their quarter generating over $26 billion in revenues easily beating analysts expectations of $23 billion and Facebook’s earnings per share exceeded analysts’ expectations by 40%. Alphabet’s (NasdaqGS: GOOGL) quarter was also quite stellar posting revenues of $55 billion which is up over 30% from the same period a year ago and last but not least Microsoft (NasdaqGS: MSFT) posted revenue of over $41 Billion up almost 20% over for the same period last year. To me this is breathtaking on how these mega-cap companies continue to grow at such a high clip completely ignoring the “law of large numbers” .

So off to the races for the aforementioned stocks right? Not so fast. Despite popping after releasing their earnings, these stocks have started to trade lower. This could be a sign that these earnings reports were already baked into the price already. Of course, it is not uncommon for stocks to become a bit exhausted especially after the tear that the markets have been on so far this year. Let’s see how next week fares in whether or not the lack of follow through to the upside now that earnings are out.

As I look at the overall technical shape of the markets the Nasdaq Composite (see chart here), the Dow Jones Industrial Average (see chart here), the S&P 500 (see chart here) and the small-cap Russell 2000 (see chart here) are not currently overbought according to the relative strength index. What’s more is these indexes also remain comfortably above their respective 100 and 200 day moving averages and are finding current support at their 20-day MA.

Good luck to all 🙂

~George

 

Big Time For Big Tech!

Large cap tech stocks have taken center stage this earnings reporting season big time! Absolute blowout earnings reports came in from Amazon (NasdaqGS: AMZN), the parent company of Google, Alphabet (NasdaqGS: GOOGL) and the elders of the group Intel Corp (NasdaqGS: INTC) and Microsoft (NasdaqGS: MSFT). These tech titans are the latest reason for the Nasdaq (chart) and S&P 500 (chart) to reach and close at record highs yet again. The Dow Jones Industrial Average (chart) and the small-cap Russell 2000 (chart) are also within striking distance of their all times highs. Market observers have attributed the strength in stocks this year to a continuing low interest rate environment and the upcoming new tax policy from the Trump administration. This I get, however, no one can deny the growth that is happening in the tech world as well as other sectors of the economy.

The one note of caution I have here is the exuberant environment we find ourselves in with record highs happening weekly and in some instances daily. Yes earnings reporting season so far has been stellar but let’s not forget that we have not seen price to earnings ratios this elevated in quite some time. The question that now comes to mind are the markets and the aforementioned stocks finally at fair value? Especially as the p/e’s increase and as we approach a much higher interest rate environment over the next two years. We have been in such an accommodative monetary state for almost a decade which without a doubt has been the catalyst for equities and indexes and now the federal reserve here in the U.S. is reversing course. One of the groups that get the most affected in a higher interest rate environment are growths stocks like the aforementioned tech titans.

I am not suggesting that these stocks will not continue their upward trajectory, but I am making note and will be paying closer attention to the overall price to earnings ratios of the indexes and of high growth stocks in general as p/e’s continue to elevate. Good luck to all 🙂

~George

A Spooky Time For Stocks?

As Halloween fast approaches is this also a spooky time for stocks? Without question volatility has picked back up which to me is no surprise at all. Factor in all of the headlines out of Europe, earnings reporting season here at home and last but not least, the daily Hillary Clinton and Donald Trump show. It’s no wonder stocks are bouncing around all over the place. For the week, the Dow Jones Industrial Average (chart) closed lower by one half of one percent, the Nasdaq (chart) closed off by 1.5%, the S&P 500 (chart) -1.0% and the small-cap Russell 2000 (chart) lead the pack and finished the week lower by 2%. With all of the headlines and headwinds for that matter, I still remain quite impressed by the resiliency of stocks despite facing a multitude of uncertainties.

This upcoming week should also be a doozy as earnings reporting season kicks into high gear. Starting off the week, Bank of America (NYSE: BAC) will release their quarterly results followed by International Business Machine (NYSE: IBM), Goldman Sachs (NYSE: GS), Intel Corp (NasdaqGS: INTC), Johnson & Johnson (NYSE: JNJ), American Express (NYSE: AXP), Ebay (NasdaqGS: EBAY), Morgan Stanley (NYSE: MS), American Airlines (NasdaqGS: AAL), Microsoft Corp (NasdaqGS: MSFT), Paypal Holdings (NasdaqGS: PYPL), Verizon Communications (NYSE: VZ), General Electric (NYSE: GE), Honeywell (NYSE: HON) and McDonald’s Corp just to name a few. Expectations for this earnings reporting season is subdued and any upside surprise could bode well for sentiment during these volatile times.

Let’s take a quick look at the technical shape of the aforementioned indices and all but the small-cap Russell 2000 appear to be finding support either at their 50-day or 20-day moving averages.  The small-cap Russell 2000 (chart) does appear to be breaking down at an accelerated rate however, it does appear that the 1200 level of the Russell 2000 should be met with a bit of support.

Both Paula and I wish everyone a very safe and Happy Halloween and good luck to all. 🙂

~George

 

 

Staying True To Form…

In late September stocks appeared to be heading to new 52 week and multi-year lows. But as this market has demonstrated its resilience during this six year bull run, the four major averages found support near its previous lows in late August and have bounced nearly 10%. This most recent market action have yet again muzzled the bear pundits and revived the bulls hopes for a possible year-end rally. For the week the Dow Jones Industrial Average (chart) closed modestly higher up 131.48 points, the Nasdaq (chart) had a weekly gain of 56.22 points, the S&P 500 (chart) finished up 18.22 points and the small-cap Russell 2000 (chart) bucked the uptrend falling slightly by 3.05 points.

So could there be a year-end rally in the cards? I think the answer to that question will come forward as we are now kicking into high gear with Q3 earnings reporting season. Already this past week we heard from the likes of JPMorgan Chase (NYSE: JPM), Citigroup (NYSE: C), Goldman Sachs (NYSE: GS) and international conglomerate General Electric (NYSE: GE) who all provided results investors could cheer about. Each one of these companies notched impressive gains on the week not only helping the key indices, but also instilling confidence with investors. However, and as we all know, earnings reporting season can be volatile and we are at just at the starting gate.

Next week we will get quarterly results from technology giant Broadcom (NasdaqGS:BRCM), oil and gas equipment services behemoth Halliburton (NYSE: HAL), Bank of New York Mellon (NYSE: BK), Chipotle Mexican Grill (NYSE: CMG), Yahoo (NasdaqGS: YHOO), biotech giant Biogen (NasdaqGS: BIIB), Coca-Cola Co. (NYSE: KO), General Motors (NYSE: GM), Las Vegas Sands Corp. (NYSE: LVS), Amazon.com Inc. (NasdaqGS: AMZN), E*Trade Financial Corp. (NasdaqGS: ETFC), basic materials giant Freeport-McMoRan Inc. (NYSE: FCX), Microsoft (NasdaqGS: MSFT) and American Airlines Group Inc. (NasdaqGS: AAL) just to name a few.

These are only a handful of companies scheduled to report next week with hundreds more to follow in the coming weeks. That said, both Paula and I will continue to remain patient and wait until after earnings reporting season before we consider any new market strategies.

Good luck to all 🙂

~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 🙂

~George

 

Back on track…

Despite some market jitters and a pullback in June, stocks are right back in bull mode with the Dow and S&P closing at new highs. For the week, the Dow Jones Industrial Average (chart) closed up 2.17%, the S&P 500 (chart) +2.96%, the Nasdaq (chart) +3.47% and the small-cap Russell 2000 (chart) closed the week out up 3.10% also closing at an all time high. These impressive weekly gains were spurred on by Ben Bernanke’s reassurance that the fed’s easy monetary policies will continue for the foreseeable future.

Once again the mettle of the market will be tested this week with Q2 earnings reporting season kicking into high gear. Here are some of the companies that will report their second quarter results: Citigroup (NYSE: C), Coca-Cola (NYSE: KO), Goldman Sachs (NYSE: GS), Johnson & Johnson (NYSE: JNJ), The Charles Schwab Corporation (NYSE: SCHW), Yahoo (NasdaqGS: YHOO), Bank of America (NYSE: BAC), American Express (NYSE: AXP) and Ebay (NasdaqGS: EBAY), International Business Machines, (NYSE: IBM), Intel (NasdaqGS: INTC), United Health (NYSE: UNH), Google (NasdaqGS: GOOG) Blackrock (NYSE: BLK), Microsoft (NasdaqGS: MSFT) and Morgan Stanley (NYSE: MS).

So as you can see, next week’s earnings reports will take center stage and should guide our markets as we continue to go through the summer months. I look for volatility to increase which is typical with earnings reporting season. Good luck to all.

Have a great week 🙂

~George