Websim Focus sui Mercati finanziari 30/09/2014 – WS

Wall Street ha chiuso in leggero ribasso, mentre a Kong Kong la situazione è rimasta relativamente tranquilla dopo gli scontri di ieri nelle strade del distretto finanziario. Dow Jones e S&P500 -0,25%, Nasdaq -0,1%.

Leung Chun-ying, il governatore di Hong Kong che i dimostranti vorrebbero cacciare, ha chiesto la fine delle manifestazioni ed ha negato che l’esercito cinese sia pronto a intervenire per disperdere la folla e riprendere il controllo del centro della città.

Gli investitori restano comunque nervosi. L’indice Hang Seng perde l’1,2%, Shanghai piatta, Seul -0,5%,Mumbay -0,1%.
Tokio -1,1%. La produzione industriale del Giappone, in agosto, ha registrato una contrazione dell’1,5% rispetto a luglio: il consensus si aspettava un incremento dello 0,2%.

I future sulle borse europee anticipano un avvio in rialzo dello 0,2%.

Stamattina attesi i dati delicati sull’inflazione nella zona euro. Il consensus si aspetta un rialzo dei prezzi al consumo dello 0,3%, in ulteriore peggioramento dal +0,4% di agosto.

Italia. Non pensiamo che la riforma del mercato del lavoro proposta da Renzi sarà da sola in grado di rivoluzionare il nostro Paese. Sarebbe pur sempre un altro passo avanti importante sulla strada delle riforme.

Analisi tecnica borse. Oggi si chiude un trimestre piuttosto nervoso per i principali listini. Wall Street si avvia ad incamerare una performance leggermente positiva (ad oggi +1%), irrobustita per noi europei solo dal poderoso rafforzamento del dollaro (circa il 7,5%). Piazza Affari ad oggi perde il 3% circa e paga, insieme al resto della zona euro, i dati deludenti sulla crescita. Il quadro di fondo generale resta comunque ancora rialzista.

FtseMib (20.526, -1,3%). Molta volatilità di breve con continui cambi di tendenza che rendono rischioso e spesso poco proficuo il trading di brevissimo. I paletti da monitorare rimangono l’ostacolo in area 21.500 punti e il supporto a 20.200 punti.

Brasile (Bovespa 54.625, -4,5%). Seduta burrascosa quella di ieri per la Borsa brasiliana, arrivata a perdere oltre il 6% a seguito della diffusione degli ultimi sondaggi che danno in rimonta la presidente della Repubblica Dilma Rousseff, non troppo apprezzata dai mercati. Anche il real è scivolato sui minimi da aprile contro euro (3,10). Si può sfruttare la volatilità per acquisti. Eventuale stop a protezione della posizione in caso di chiusura sotto 52mila punti.

Variabili macro.

Petrolio. Modesta reazione dopo la prolungata flessione. Brent a 97,2 usd da 96,6 usd di ieri. siamo poco sopra i minimi degli ultimi due anni. Il quadro di fondo rimane negativo. Monitoriamo i supporti strategici a 90 usd.

Oro. Oggi 1.216 usd. Continua a oscillare intorno ai minimi da gennaio 2013. Stiamo pronti ad approfittare di un eventuale approdo verso i supporti strategici a 1.200/1.180 usd per attivare acquisti di trading.

Forex. Euro/Dollaro (1,269). Il dollaro sta per chiudere un trimestre d’oro su attese di un ritocco dei tassi che, si badi bene, al momento non c’è ancora stato. E’ stata pienamente raggiunta la nostra area target verso 1,29/1,27 che dovrebbe quanto meno avviare un consolidamento perchè rappresenta un’importante fascia di sostegno di lungo periodo. Prendiamo profitto, ricordiamo per la cronaca che i primi acquisti di dollari suggeriti da Websim sono scattati a quota 1,40. Per aprire posizioni più strategiche attendiamo rimbalzi verso 1,31/1,33.

Bond periferici. Qualche tensione in Grecia ha risospinto il rendimento del decennale ellenico fino al 6,4% dal minimo dell’anno di inizio settembre al 5,47%. C’è attesa dell’incontro che il governo di Atene avrà con i rappresentati del FMI. La Grecia potrebbe ritrovarsi di nuovo nei guai a seguito della decisione, per ora solo annunciata, di voler rinunciare al sostegno finanziario erogato al momento del salvataggio. In questo modo il Paese risparmia sui pesanti interessi che deve pagare, dall’altra parte però, c’è il timore che senza la liquidità in arrivo dal piano di aiuto finanziario, Atene si avvii di nuovo verso il default. Per ora il movimento rientra nella normale logica delle prese di profitto. Qualche allarme sorgerebbe in caso di ritorno del rendimento decennale oltre il 7%.

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CWS Market Review – September 19, 2014

September 19, 2014

“The market is fond of making mountains out of molehills and exaggerating
ordinary vicissitudes into major setbacks.” – Benjamin Graham

Is it ever! We all know how the market likes to be a major drama queen, and frankly, that’s what makes investing so much fun. This week, for example, was an exciting week for Wall Street. On Wednesday, Janet Yellen and her buddies on the Federal Open Market Committee decided to taper the Fed’s bond purchases by another $10 billion. Starting in October, the central bank will buy $10 billion in Treasuries and $5 million in mortgage-backed securities. What this means is that the Fed will almost certainly wrap up Quantitative Easing once and for all at their next meeting in late October.In addition to their regular policy statement, the Fed threw another statement our way —
A Declaration of Normalization Principles, which describes how the Fed will depart from (as they prefer to phrase it) “monetary accommodation.” I’ll explain what it all means in bit, but skipping all the econo-jargon, it means that we can expect low interest rates to stick around a while longer.

That’s good news for investors, and the stock market approved of the Fed’s move. On Thursday, the S&P 500 galloped to 2,011.36, which is the index’s 34th record close of the year. There also some relief that the “no” side appears to have won in Scotland’s independence referendum.

Later on in this issue, we’ll look at the recent earnings report from Oracle (ORCL). The enterprise-software king missed earnings yet again, but the really big news is that Larry Ellison is stepping down as CEO! I’ll tell you what it all means. We also got an 11% dividend increase from Microsoft (MSFT), which is exactly what I predicted in last week’s CWS Market Review. I’ll also preview the upcoming earnings report from Bed Bath & Beyond (BBBY). But first, let’s look at why the Fed isn’t going to raise rates anytime soon.

Expect Rates to Stay Low for a Long Time

On Wednesday, the investing world came to a halt to hear what the Federal Open Market Committee had decided. Since there has been some noticeable improvement in the economy, some investors were speculating that the Fed might ditch its key phrase “considerable time” as it pertains to the period between the end of Quantitative Easing and I-Day, the date of the first interest-rate increase. Previously, Janet Yellen described that period as lasting “around six months,” which was a big-time rookie mistake.

As it turns out, the Fed decided to keep its “considerable time” proviso. They also kept the affirmation that “there remains significant underutilization of labor resources,” which is a fancy way of saying there’s still a lot of folks out of work. And that’s certainly true.

As I mentioned before, the Fed decided to taper its bond purchases, and the next meeting should be the final taper. So that leads us to wonder: How much longer do we have to wait for rates to rise? We got a hint of that as the Fed also released its projections for the economy and interest rates. The Fed includes a scatter plot of blue dots for each of the 17 FOMC members (not all of whom vote). The most important chart shows where the 17 members of the FOMC see interest rates at year’s end for the next few years, as well as the forecast for the long run.

What I found truly surprising is how hawkish the projections are. Most Committee members see interest rates hitting 1% before the end of next year, and 2.5% before the end of 2016. That’s well ahead of the futures market. I’m surprised to see such a divergence between the Fed and the markets. In fact, it’s a divergence between the Fed and what the Fed has previously said. What’s going on? I noticed that there were two dissenters on the Committee this time, so we may see a growing divide at the Fed. The projections could be an indication that the inflation hawks are growing.

My view is that there’s no need to raise rates anytime soon. I think mid-2015 would be the earliest possible date. As the policy statement made clear, there’s still a lot of slack in the labor market, and inflation is dead as a doornail. This week, we got more evidence of how tame inflation has been. We actually had deflation last month. The government said that consumer prices fell 0.2% in August. Wall Street had been expecting no change.

Don’t think the low inflation was solely due to lower energy prices, however. The “core rate,” which excludes goods and energy price, was flat last month. Economists had been expecting an increase of 0.2%. This was the lowest core inflation report in more than four years. Remember that with 0% interest rates and deflation, real rates are positive!

There are also plenty of signs that the economy isn’t completely well. Last Friday, the government reported that Industrial Production fell 0.1% last month. This was the first decrease since January. This data series can be a bit bumpy, so it’s too early to say that this could be a sign of trouble. Interestingly, in the Fed’s economic projections this week, the central bank lowered its growth forecasts for next year.

I should also point out an important fact that’s often overlooked. The debate on Wall Street concerns when the Fed will start raising rates. But even when it does, real rates will still be negative, and they’ll probably stay that way for two more years, give or take. Consider that the yield on the five-year TIPs only recently crossed into positive territory.

On Thursday, we got some good news for the labor market. First-time jobless claims dropped to 280,000. That’s one of the lowest reports in the last 40 years. This report, however, can be very noisy, so economists prefer to focus on the four-week moving average. The last jobs report wasn’t very good, so this may be an omen of more strength down the road. As always, it’s important to look at the trend, not just one or two data points. (Naturally we don’t want to exaggerate any ordinary vicissitudes.)

What Does This Mean for Investors?

The market has had an interesting reaction to the Fed this week. In short, what’s been happening has continued to happen, only more so. But I think the market read too much into the Fed’s hawkish projections and assumes higher rates are on the way. Much of the action this week has been the strong-dollar trade (lower gold, lower bonds, higher stocks, large-caps beating small-caps).

The overall stock market responded to the Fed by rallying, but it’s an uneven rally, as we would expect. The spread between large- and small-caps has grown even larger, which is a natural reaction to a stronger dollar. The big boys are leading this rally by a good margin, and the Russell 2000 is actually down for the year. Here’s a remarkable stat: Nearly half of the stocks on the Nasdaq are down by 20% or more. In other words, there’s a stealth bear market going on, even as the broader rally continues.

As I mentioned last week, the U.S. dollar is strong, and it’s getting stronger. The dollar rallied to a six-year high against the Japanese yen. That helped push shares of AFLAC (AFL) to a new 52-week low on Wednesday. The euro fell to a 14-month low against the dollar.

The same forces are at work in the gold pits. On Thursday, gold fell below $1,220 an ounce for the first time since January. Gold looks ugly, and I think it will get uglier. The Fed’s most important audience, the bond market, responded by selling off. On Thursday, the two-, three- and five-year Treasuries all closed at the highest yield in over three years. But any maturity less than that barely moved. While long-term yields fell for much of this year, they’ve started to rise over the past three weeks. One of the best economic indicators is the spread between the two- and ten-year Treasuries, and that’s increased a bit recently.

What to do now: Investors should continue to focus on high-quality stocks like those on our Buy List. I would pay particular attention to stocks with above-average dividend yields like Ford (F), Wells Fargo (WFC) and Microsoft (MSFT). Now let’s look at one of my favorite tech stocks.

Larry Ellison Steps Down as Oracle’s CEO

After the closing bell on Thursday, Larry Ellison shocked Wall Street by announcing that he’s stepping down as CEO of Oracle (ORCL). In his place, Mark Hurd and Safra Catz will both become CEO. Interestingly, Oracle’s statement has never referred to them as co-CEOs, which is a concept with a troubled history. Ellison will become Executive Chairman and Chief Technology Officer.

Honestly, I’m not a fan of the dual-CEO concept, and it rarely works. On top of that, no one is truly CEO as long as Larry Ellison is Chairman of the Board. I don’t mean that disrespectfully; I’m a big Larry fan. I like anybody who owns their own MIG-29 or Hawaiian island, but let’s remember that he owns 25% of the shares. I doubt this two-CEO configuration will last more than two years, but I’ll give it a fair shake.

Now on to earnings. For fiscal Q1, Oracle earned 62 cents per share, which was two cents below Wall Street’s estimate. In June, Oracle had given us an earnings range for Q1 of 62 to 66 cents per share. This is the third quarter in a row where Oracle has missed consensus. Quarterly revenues rose 3% to $8.6 billion, which was below the Street’s consensus of $8.78 billion. Oracle had been expecting growth of 4% to 6%.

Hardware continues to be a trouble spot for Oracle. For Q1, hardware sales dropped 8% to $1.2 billion. But there are some bright spots as well. Oracle’s cloud revenue rose more than 30% to $475 million. The company’s cash flow rose 7% to $6.7 billion, which is an all-time record. Oracle also said that it will repurchase $13 billion in shares.

On to guidance. For Q2, which ends in November, Oracle expects earnings to range between 66 and 70 cents per share. Wall Street had been expecting 74 cents per share. Oracle expects top-line growth between 0% and 4%. Frankly, this is a so-so earnings report. It’s not terrible, but it tells me Oracle is still having trouble in key markets. However, I’m not about to abandon them. Oracle remains a buy up to $44 per share.

Bed Bath & Beyond’s Earnings Preview

Bed Bath & Beyond (BBBY) is due to report fiscal Q2 earnings on Tuesday, September 23. This certainly has a lot of shareholders nervous because the shares have been slammed by the market for the last three earnings reports. It’s clear that the market went overboard last time (down to $55?), and shares of BBBY have slowly inched their way back.

In June, the home-furnishings store told us to expect Q2 earnings to range between $1.08 and $1.16 per share. My numbers say that earnings will come in on the high-end of that range. For all the trouble BBBY has gotten from the market, the company has been consistent with its full-year earnings estimate. It expects earnings growth in the “mid single digits.” If we take that to mean 4% to 6% and apply it to last year’s earnings of $4.79 per share, it gives us a range of $4.98 to $5.08 per share for this year. That means the stock is going for less than 13 times earnings, which is quite reasonable. The company also floated its first bond deal in 20 years to fund $1.1 billion in share buybacks. I can’t say I’m a big fan of that move, but I understand the company’s impatience with the market. Bed Bath & Beyond remains a buy up to $70 per share.

Microsoft Raises Its Dividend By 11%

In last week’s CWS Market Review, I wrote:

Be on the lookout for a dividend increase soon from Microsoft (MSFT). The software giant isn’t normally thought of as a dividend stock, but they’ve been working to change that. In the last four years, Microsoft has increased its dividend by 115%. The quarterly payout is currently 28 cents per share. I think MSFT will raise it to 31 cents per share.

I was right! After the closing bell on Tuesday, Microsoft (MSFT) raised its quarterly dividend to 31 cents per share. That’s an increase of 11%. Over the last five years, MSFT has raised its dividend by 138%. The new dividend works out to $1.24 for the year. Going by Thursday’s close and the new dividend, Microsoft now yields 2.66%. Fiscal Q1 earnings are due out in another month. Last Friday, the shares broke above $47 for the first time since Bill Clinton was president. Microsoft remains a very good buy up to $48 per share.

That’s all for now. Next week is the last full week of trading before the end of the third quarter. We’ll get key reports and new and existing home sales. On Thursday, we’ll get the latest report on Durable Goods. Last month’s report was very strong thanks to a surge in aircraft orders. On Friday, the government will update the numbers for Q2 GDP growth. Goldman Sachs said it will be 4.7%, which would make Q2 the best quarter in more than eight years. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy

Named by CNN/Money as the best buy-and-hold blogger, Eddy Elfenbein is the editor of Crossing Wall Street. His free Buy List has beaten the S&P 500 for the last seven years in a row. This email was sent by Eddy Elfenbein through Crossing Wall Street.
2223 Ontario Road NW, Washington, DC 20009, USA

CWS Market Review – September 12, 2014

September 12, 2014

“Fate laughs at probabilities.” – Edward Bulwer-Lytton

The stock market is continuing with its subdued ways. This past Tuesday, the S&P 500 dropped 0.65%, for its worst day in five weeks. But the arresting part of that stat isn’t the drop; rather, it’s that the worst day in five weeks was a measly 0.65% loss. By historic standards, that’s barely a ripple, and going by what we saw a few years ago, it’s next to nothing. Tuesday’s plunge snapped the S&P 500’s streak of closing up or down by less than 0.5%. That was the longest such streak in 45 years. As I described it last week, this summer has been the Big Chill for Wall Street.As I expected, the stock market has been a little weak lately. The S&P 500 is down from its all-time high from last Friday. But the interesting action hasn’t been in the stock market. Instead, the currency markets have suddenly become very interesting. Over the past few weeks, the U.S. dollar has gotten a lot stronger against many currencies around the world. If you’re a traveler, you’ve probably noticed the effects. Investors need to understand that a strong currency has a large impact on the economy and on our Buy List stocks. In this week’s CWS Market Review, I’ll review what it all means.

I’ll also take a look at the upcoming earnings report from Oracle (ORCL). Their last report was a dud, but I’m expecting better news this time around. I also want to look at the recent weakness in eBay (EBAY), which is normally a solid stock. But first, let’s take a look at last week’s sluggish jobs report and what it means for the Federal Reserve’s interest-rate plans.

Expect Higher Rates Next Year

Last Friday, shortly after I sent out last week’s CWS Market Review, the government reported that the U.S. economy created only 142,000 jobs in August. This was well below Wall Street’s forecast, and it snapped the economy’s six-month streak of creating more than 200,000 jobs.

The weak jobs report put a wrench into the plans of folks who have been expecting the Fed to raise rates this coming spring. As I’ve said, I continue to like the stock market as long as interest rates are near the floor (although I expect some minor sluggishness this month). But once the Fed starts to raise interest rates, the game changes.

Think of it this way: It’s one thing to like Microsoft (MSFT) when it’s yielding 2.4% and short-term rates are 0% (the one-month Treasury even went negative a few times this week), but it will be quite another if they’re both yielding 2%. As always, the game is about risk and reward.

Lately we’ve been seeing some signs of dissension within the Fed, but that’s to be expected as I-Day approaches. (That’s my term for the date of the Fed’s first rate increase.) Janet Yellen has tried to make it clear that the Fed isn’t on a pre-set course, and that they’ll change as events change. The Fed meets again next week, and all of Wall Street will be watching. In addition to another $10 billion taper announcement, we’ll hear updated interest-rate projections. (I’ll warn you, the Fed’s track record on predicting the economy is terrible.)

But rather than trying to parse various Fed statements for clues, I think it’s better to look at the Fed’s arch enemy, which is the bond market. Here I like to follow the one-year Treasury yield as it compares with the two- and three-year yield. Think of this as the “Yellen Chart” because it’s mainly focused on the first rate increase. This is an interesting chart to follow because the one-year yield has been remarkably flat, but the two and three-year yields have climbed steadily higher. In fact, the yield on the three-year has tripled since April. Not only that, but the gap between the two- and three-years has widened as well. It’s as if the bond market were saying, “higher rates are on the way, but not just yet.”

There are also futures contracts that trade on the Fed funds rate. The latest prices indicate that the market expects the Fed funds rate to be at 0.25% by May 2015 and at 0.50% by September. That strikes me as a bit too soon. Right now, I’d place I-Day around the middle of next year.

What’s also interesting is that at the same time that the middle part of the yield curve has seen higher interest rates, the long yield of the yield curve has seen lower rates. The yield on the 30-year Treasury is down 69 basis points since the start of the year. Lately, however, long-term rates have started to edge higher, which is what I predicted four weeks ago.

What the Strong Dollar Means for Investors

In last week’s issue, I mentioned how the European Central Bank had decided to jump on the bond-buying bandwagon. The economy in Europe has been dreadful, and many euro bonds pay next-to-nothing yields. To quote myself, Mario Draghi is sending a loud message to currency traders: “Please, please, pleeezze bring the euro down!” They’re not alone. Japan has embarked on a similar strategy.

As a result, the U.S. dollar has soared. It’s not that the greenback is strong in an absolute sense. It’s that the dollar is the cleanest of the dirty shirts. Since July, the dollar has rallied from 101 yen to 107 yen today. Meanwhile, the euro has dropped from $1.37 to $1.29.

What’s the impact of the strong dollar? This can be confusing, since it seems normal to assume that the conjunction of the words “strong” and “dollar” can only yield positive results, but that’s not necessarily the case. Like many things economic, it involves tradeoffs. For example, a strong dollar tends to help imports but hurt our export market. Those of you who do a lot of international travel may have noticed that the stronger dollar helps your purchasing power abroad. The same forces are in play for companies. European stocks look cheaper for American companies, so we can expect to see more international buyouts (like Medtronic/Covidien).

A stronger dollar also takes some of the pressure off the Fed to raise rates so quickly. That’s part of the reason I’m skeptical of the futures market on interest rates. People want to invest in the dollar because they see better growth ahead. Goldman Sachs just said that the U.S. economy grew by 4.7% last quarter. If the dollar were weaker, the Fed would have to raise rates to entice people to hold dollars. The dollar rally has taken that potential problem off the table.

Now let’s consider the bad effects of the stronger dollar. The dollar’s rally against the yen has stung AFLAC (AFL), which is one of my favorite Buy List stocks. The problem is that AFLAC does about 75% of its business in Japan. As a result, it has to convert that profit from yen into dollars. So a strong yen is good for AFL’s bottom line, but a weak one is bad. This is unfortunate, because as far as its business goes, AFLAC is doing quite well. Sadly, a lot of those gains are lost due to currency effects. It’s annoying, but to quote Hyman Roth, “this is the business we chosen.”

In July, AFLAC said they expect full-year operating earnings to range between $6.16 and $6.30 per share, but that forecast assumes a yen/dollar exchange rate between 100 and 105. Now it’s up to 107, which explains why shares of AFLAC recently slipped below $60.

My view is that currency effects are mostly transitory. Sometimes it helps you, sometimes it hurts. But if a company is well run, it will most likely stay that way. Unfortunately, AFLAC is getting the short end of this stick lately. I still like the stock a lot, and it’s an especially good buy below $60 per share.

A strong dollar also helps keep the lid on inflation, and you can see that in the commodities market. The last few inflation reports have been quite subdued. Last week, I talked about the weakness in gold. This is a direct outcome of the dollar’s surge. Commodity prices are staying well behaved. AAA recently said that the average price for gasoline fell to a seven-month low. In turn, that has helped U.S. consumers (remember the strong earnings report from Ross Stores). A lot of energy stocks have not joined in the rally this year. Stocks like Apple, Microsoft and Facebook are all up over 25% this year, but ExxonMobil, one of the largest companies in the world, is down for the year.

I think some of the dollar’s strength is due to Russia. In one sense, investors flock to a strong currency in times of stress. But also, any sanctions on Russia will probably hurt Europe as well. A strong dollar tends to correlate with large-cap stocks outperforming small-caps, but it’s not a very strong relationship.

The odd part of a rising dollar is that it’s usually the result of good news. People are more optimistic about the domestic economy. The problem is that the good news can lead to bad news like weaker imports. Investors should continue to focus on high-quality companies with strong positions in their markets. Don’t try to second-guess the forex market. That’s a sucker’s game. The best companies how to plan for their markets and they act accordingly. As always, time is on the side of the disciplined investor. Now let’s look at Oracle’s upcoming earnings report.

Oracle Is a Buy up to $44 per Share

Now that we’re in September, we have two Buy List stocks that have quarters ending in August. Bed Bath & Beyond (BBBY) is due to report its earnings on September 23. Next Thursday, September 18, Oracle (ORCL) is due to report their fiscal Q1 earnings.

Three months ago, Oracle bombed their last earnings report. For Q4, the House of Ellison earned 92 cents per share, which was three cents below Wall Street’s consensus. The company had told us to expect earnings to range between 92 and 99 cents per share. It’s unusual to see Oracle hit the low part of their range.

Looking at the numbers, Q4 was surprisingly weak. Quarterly revenue rose only 3.4%, to $11.32 billion, which was $160 million below expectations. One of the keys for Oracle’s business is sales of new software licenses. For Q4, that came in at $3.77 billion, which was flat. Their hardware revenue, now finally growing, rose only 2%, to $1.5 billion. One bright spot was that Oracle’s cloud revenue jumped 23% to $327 million.

Oracle has said they see Q1 earnings ranging between 62 and 66 cents per share. That’s not so bad. Wall Street had been expecting 64 cents per share. Oracle sees quarterly revenue growth between 4% and 6%. Breaking that down, they expect new software-license revenue to be up by 6% to 8%. Hardware will be between -1% and 3%, but cloud revenue is expected to be up by 25% to 35%. If their guidance is accurate, that tells us that last quarter’s weakness was temporary. Oracle remains a solid buy up to $44 per share.

Updates on Other Buy List Stocks

Be on the lookout for a dividend increase soon from Microsoft (MSFT). The software giant isn’t normally thought of as a dividend stock, but they’ve been working to change that. In the last four years, Microsoft has increased its dividend by 115%. The quarterly payout is currently 28 cents per share. I think MSFT will raise it to 31 cents per share. The stock recently broke out to another 14-year high. Microsoft remains a buy up to $48 per share.

In last week’s CWS Market Review, I highlighted McDonald’s (MCD) as an especially good buy. Not good timing on my part. This past week, MCD announced their worst monthly sales in ten years. Same-store sales fell 3.7% in August. When it rains, it pours. The company also said that problems with supplies in China will knock 15 to 20 cents off this quarter’s bottom line. The burger joint is also getting bullied in Russia by Colonel Putin’s government. A number of McDonald’s have been shut down in Russia due to “sanitary” concerns. (Yeah, right.) The stock briefly dropped below $91 per share, which is a very good price. I’m keeping my Buy Below at $101, but if you can pick up shares under $93, that’s a good longer-term investment.

Shares of eBay (EBAY) got beat up this week after Apple announced plans for Apple Pay, which will compete against eBay’s PayPal. PayPal is a big money-maker for eBay, and there’s been a lot of pressure on the company to sell the division. As I noted a few weeks ago, just a rumor of that news sent shares of eBay higher. Even though eBay has said they’re not interested in selling PayPal, I think the market’s evident interest will prevail. It usually does. I can’t say whether Apple Pay will crush PayPal, but I think it will add more pressure on eBay to move. The board also has “cover” to make an about-face. I’m lowering my Buy Below on eBay to $55 per share.

That’s all for now. The Federal Reserve meets again next week, on Tuesday and Wednesday. The Fed will update its economic projections (the blue dots), and Chairwoman Yellen will hold a post-meeting press conference. I expect to hear another $10 billion taper announcement. That will bring their monthly bond purchases down to $15 billion starting in October. Next week, we’ll also get the Industrial Production report on Monday and the CPI report on Wednesday. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy

Named by CNN/Money as the best buy-and-hold blogger, Eddy Elfenbein is the editor of Crossing Wall Street. His free Buy List has beaten the S&P 500 for the last seven years in a row. This email was sent by Eddy Elfenbein through Crossing Wall Street.
2223 Ontario Road NW, Washington, DC 20009, USA

CWS Market Review – September 5, 2014

CWS Market Review

September 5, 2014

“The expectation of an event creates a much deeper impression
on the exchange than the event itself.” – Jose de la Vega, 1688

We’re now past Labor Day, and the stock market keeps on rolling. There are times when it seems like all the news is bad news for the market; then it suddenly switches, and everything is good for stocks! On Thursday, the S&P 500 got as high as 2,011.17, which is yet another new all-time intra-day record high. But in the course of the day, the bears showed up and pushed the index back below 2,000. Still, the bulls have been the rulers of Wall Street for the past month.As impressive as this rally has been, we have to bear in mind some important facts — the market’s volume and volatility have been low. Very low. Daily trading is the lightest it’s been in years. And look at the S&P 500’s recent price action. The index has now gone 11 days in a row of closing up or down by less than 0.5%. Seven of those days were less than 0.2%. Dear Lord, that’s barely a blip, and it’s especially small compared with the hyper-volatility of just a few years ago. The hot summer has been the Big Chill for Wall Street.

I’m also pleased to see that many of our Buy List stocks are joining in on the rally. Fiserv (FISV) continues to push to new highs. Bed Bath & Beyond (BBBY) finally broke above $65 per share. Even CA Technologies (CA) has perked up recently.

The big news this week didn’t come out of the U.S. market. Instead, it came from Europe. Mario Draghi, the head of the ECB, said that the central bank will start buying asset-backed securities. In other words, they’re doing QE too. The ECB also cut interest rates. Just like us, their rates are on the floor, so they need a little experimenting to go negative. The ECB also cut their GDP forecasts for this year and next year.

My take: Draghi is sending a message: “please, please, pleeezze bring the euro down!” If that works — and I can’t say it will — that would take a lot of heat off the ECB, and it would help the Eurozone get back on its feet.

I do want to caution investors that the U. S. market may be in store for a rough few weeks. Nothing dire, mind you. But I think some bears will soon be bold enough to launch assaults on some high-profile stocks (even Apple felt the sting this week), and the market as a whole may take a dip. You may have noticed that I’ve kept a leash on many of our Buy Below prices. Please understand that I only mean a few weeks, and nothing protracted. As always, investors should protect themselves by owning a diversified list of our Buy List stocks.

In this issue, I’ll cover some of the recent economic news impacting our portfolios. I also want to focus on the goings-on in the gold market. The Midas Metal has been getting squeezed lately, and I think this will go on for some time. I’ll also highlight a few especially good bargains on our Buy List. But first, let’s take a look at the best ISM report in more than three years.

August ISM Index = 59.0

On Tuesday morning, the ISM Index for August came in at 59.0. That’s a very good number, and it tells us that the manufacturing sector is thriving. Let me explain why the ISM report is so important. It’s a survey of manufacturers, and they’re asked whether business is better or worse compared with last month. What’s interesting is that it doesn’t tell us the overall result, just where we are compared with one month ago. The ISM is also a “diffusion” index, which is a fancy way of saying it measures how broad the changes are.

I like to keep a close eye on the ISM report for several reasons. One is that it’s reported on the first business day of each month. Other reports, like trade or GDP, take weeks or months before we know what’s truly happening. Also, the ISM isn’t subjected to countless revisions. What you see is what you get.

With the ISM, any number above 50 means that the manufacturing sector of the economy is expanding. Below 50 means it’s contracting. The ISM has been 50 or better for 60 of the last 61 months. I’ve spliced the data carefully and found that we usually don’t hit recession territory until the ISM gets down to 45 or so. In other words, we’re well within the safe zone.

The August ISM was at its highest level since March 2011. It came very close to matching the highest ISM in the last ten years (59.2 for February 2011). The ISM has now risen for six of the last seven months. The only downer was a small 0.1 drop in June. The ISM is important because if the manufacturing sector is doing well, it’s likely to spill over into other areas of the economy.

The trouble spot continues to be the labor market. I’m writing to you on Friday morning ahead of the big August jobs report. All of Wall Street will be waiting to see how many jobs were created in August. Nonfarm payrolls have grown by more than 200,000 for the last six months, and August may make it seven. We got a sneak preview of the jobs report when ADP, the private-payroll firm, released its report showing a gain of 204,000 private-sector jobs last month. The weekly initial-unemployment claims have also been well behaved.

I think The Wall Street Journal captured it well when they described the economy’s “solid-if-unremarkable growth.” The economy is indeed growing, but at a subdued pace. The good news is that it can keep this up for several more quarters.

This past week, the Federal Reserve released its Beige Book report. If you want to get a good report on how well the economy is doing, the Beige Book is a good place to start. I’ll warn you, though, it’s fairly wonky. The most recent Beige Book confirmed a lot of what we already know: the economy continues to expand at a slow-to-moderate pace.

On our Buy List, we saw more evidence of this trend in the surprisingly good sales report from Ford Motor. Wall Street has been expecting a sales drop for August. Instead, it was a small increase. Ford had its best August is eight years.

Next week we’ll get more info on how consumers are behaving, but it looks as if the lower gas prices have lured more consumers to open their wallets. Remember the recent strong earnings report from Ross Stores (ROST), and the higher guidance. In my book, watching business at a deep discounter like Ross is a lot more useful than a roomful of well-regarded government econ reports.

What does this mean for us? The fundamentals of the economy are better than they were a year ago. All the signs point to a moderate expansion. Nothing great, but the arrows are finally pointing in the right direction. I expect to see more strength in consumer-related areas like eBay (EBAY), McDonald’s (MCD), Wells Fargo (WFC) and others.

What Does the Recent Weakness in Gold Mean?

While the stock market has been quietly bullish lately, the gold market’s been in rougher shape. On Wednesday, the yellow metal dropped more than $20 an ounce. On Thursday, gold closed at its lowest level since June 11.

Interestingly, this Saturday will mark the three-year anniversary of gold’s all-time intra-day high of $1923.70. (Dear Lord, was it really that high?) Needless to say, this has been a rough bear market for the gold bugs. Gold is currently off by more than one-third from its peak price.

Gold closed Thursday at $1,261.70 today, and I think there’s a chance it could soon test its closing low of $1,187.10 from last December. Here’s the important thing: Gold tends to move in long multi-year trends. Once the trend is in place, it’s darn hard to stop. At least, that’s been the historical behavior.

So why has gold been heading down? I suspect that it’s in anticipation of the Fed’s raising interest rates sometime next year. There’s still some debate as to when that will happen, but I think more investors have reconciled themselves to the fact that it will be an event in calendar year 2015.

Once real interest rates start to rise, gold will come under more and more pressure. I think a lot of gold investors got used to easy times. Gold had an amazing run for more than a decade. That’s over. For right now, I’m staying away from gold.

Three Buy List Stocks That Are Especially Attractive Right Now

I wanted to highlight a few Buy List names that look particularly good right now. I’m surprised by the recent weakness of McDonald’s (MCD). I realize the company faces a number of hurdles, but I think this price is quite reasonable. The shares recently came very close to breaking below their low from February. The stock currently yields nearly 3.5%, which is quite good in this market. This is also the time of year when MCD traditionally raises its dividend. Since this year’s earnings will probably be about the same as last year’s, the company may forego a dividend increase. But it won’t lower it either. This one may take some time, but MCD is at a bargain price here.

I also like Cognizant Technology Solutions (CTSH). The shares took a big hit a few weeks ago, and I think the selling pressure has past. Bear in mind that Cognizant didn’t plunge on lower earnings guidance; the stock fell due to the lower sales guidance. The company was very clear that its earnings forecast for this year ($2.54 per share) was the same. Also, CTSH’s lower sales guidance works out to a lowering of its growth rate from 16.5% to 14%. That’s still quite impressive. I’m keeping my Buy Below at $48 per share, but if you can snag these shares below $46, you got a very good deal.

Shares of Ford Motor (F) pulled back a bit on Wednesday and Thursday. The automaker reported another good month for sales. Last month was their best August in eight years. Ford’s sales rose 0.4%, while the Street had been expecting a decrease of 1.9%. The Ford Fusion did especially well. Some of Ford’s sales numbers are impacted by consumers’ waiting for the rollout of the aluminum-body trucks late this year. This could be a game changer.

That’s all for now. The big August jobs report will come out later this morning. Next week we’ll get important reports on Consumer Credit and Retail Sales. It will be interesting to see how strong consumers were this summer. I suspect that shopping has been aided by the recent drop in gasoline prices. We’ll also get a clue when Bed Bath & Beyond reports later this month. Be sure to keep checking the blog for daily updates. I’ll have more market analysis for you in the next issue of CWS Market Review!

– Eddy

Named by CNN/Money as the best buy-and-hold blogger, Eddy Elfenbein is the editor of Crossing Wall Street. His free Buy List has beaten the S&P 500 for the last seven years in a row. This email was sent by Eddy Elfenbein through Crossing Wall Street.
2223 Ontario Road NW, Washington, DC 20009, USA

Websim Focus sui Mercati Finanziari 05/09/2014 – WS

Wall Street ha chiuso in leggero calo ieri sera dopo che Dow Jones (-0,05%) e S&P500 (-0,15%) hanno segnato nuovi record storici intraday: Nasdaq -0,22%.

Occhi puntati oggi sui dati relativi al mercato del lavoro. Il consensus si aspetta per agosto 220.000 nuovi posti di lavoro creati ed un tasso di disoccupazione del 6,1%, in calo dal 6,2%.

Asia. stamattina Borse ondivaghe: Tokyo -0,1%, Hong Kong -0,2%, Shanghai +0,3%, Taipei -0,6%, Seoul -0,4%, Mumbai +0,1%.

Le borse europee anticipano un avvio in calo dello 0,3% dopo essere state le protagoniste assolute di ieri, grazie alla decisione presa a sorpresa da Mario Draghi di tagliare i tassi e di lanciare un facsimile del QE della Fed.

Pigliate farina, acqua, lievito, impastate il tutto. Condite con pomodoro, mozzarella, basilico fresco, sale ed olio. Cuocete nel forno a legna ed ecco servita una bella pizza margherita ? poi potete chiamarla come volete.

Questo è stato il miracolo di Draghi!

La nuova mossa di Draghi aumenta la liquidità e indebolisce l’euro ponendo solide premesse per rilanciare le nostre economie. La palla passa (e Super Mario lo ha detto chiaramente) ai singoli governi che devono accelerare sulle riforme.

Analisi tecnica borse. La debolezza di ieri a Wall Street e di stamattina in Asia (ma anche il Brasile ha perso l’1,68%) si spiega con il ritorno dell’ottimismo sulle borse europee. Si sono visti i primi segnali di forza sulle borse periferiche, per esempio ieri Madrid (Ibex 11.100, +2%) ha sfondato quota 11mila punti, mentre Francoforte (Dax 9.724, +1,02%) si è riavvicinata ai top assoluti. Probabile qualche presa di profitto sulle borse emergenti e un ritorno di interesse sull’Eurozona.

Brasile (Bovespa 60.800, -1,68%). Prevalgono le prese di profitto dopo i recenti massimi di periodo segnati a 62.279 punti. Ribadiamo che è giunta l’ora di prendere profitto e sfruttiamo ogni allungo verso area 63/64mila per chiudere gli acquisti fatti in area 58mila.

FtseMib (21.420, +2,8%). Ieri ha violato con decisione anche l’ultimo ostacolo (21.200) che lo divide da un ritorno versi i top dell’anno a 22.500 punti. Probabile un po’ di consolidamento prima di tentare un nuovo allungo. Allerta sotto 20.200 punti. Restiamo ottimisti, malgrado lo scenario macro depresso.

Variabili macro.

Petrolio. Nulla di nuovo sotto il sole se non che la forza del dollaro aiuta a tenere i prezzi sotto controllo. Brent 101,8 usd, Wti 94,5 usd.

Oro. Si muove sui minimi degli ultimi due mesi a 1.263 usd. Anche qui la forza del dollaro contribuisce a far passare in secondo piano la sua natura di “bene rifugio”.

Forex. Euro/Dollaro (1,2937). Il cross euro dollaro accelera la discesa dopo Draghi e si porta su nuovi minimi da luglio 2013. Siamo arrivati nell’area target 1,30/1,27 che consente (a chi ha seguito Websim) di cominciare a prendere profitto sugli acquisti fatti in area 1,39/1,40. Il trend è naturalmente ancora nettamente a favore del dollaro e non c’è fretta.

Bond periferici. Nuova caduta record dei rendimenti dei titoli di Stato periferici. La decisione di raddoppiare (a -0,2%) la penalità per le banche che mantengono liquidità presso la Bce porterà inevitabilmente a nuovi acquisti anche se i rendimenti tendono ormai allo zero. E Draghi ha detto chiaramente che non ci saranno altri tagli. Il rendimento del Btp a 10 anni apre al 2,31%, nuovo minimo storico, e lo spread apre a 135 punti base, minimo da giugno. Attenzione perché una discesa sotto 130 provocherebbe un’accelerazione verso il basso. Ormai siamo in vista del nostro duplice target di spread (100 punti base) e di rendimento del BTP 10 anni (tra il 2,3/2,2%).

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Websim Focus sui Mercati Finanziari 29/08/2014 – WS

Le evidenze sull’invasione dell’Ucraina da parte di contingenti russi hanno spaventato Wall Street che ha chiuso in moderato ribasso: Dow Jones -0,25%, S&P500 -0,17%, Nasdaq -0,26%.

Stamattina le Borse asiatiche arretrano e l’indice di riferimento per l’area Asia-Pacifico, perde lo 0,2%. Su questi livelli, chiuderebbe agosto con un calo dello 0,6%, primo calo dopo tre mesi consecutivi di rialzo. Le Borse della Cina sono contrastate: Hong Kong -0,2%, Shanghai +0,3%, Taiwan -0,2%.

Tokio -0,2%, dopo la diffusione di una serie di dati che sembrano mostrare l’inefficacia dei provvedimenti presi dal governo di Shinzo Abe e dal governatore della Bank of Japan, Haruhiko Kuroda (foto), nella promozione della crescita economica.

I future sulle borse europee si apprestano ad aprire in rialzo dello 0,3%.
Occhi puntati sui dati relativi all’inflazione di agosto nell’area euro e al tasso di disoccupazione di luglio alle 11:00, cruciali per anticipare le future mosse della Bce e il destino dell’euro, almeno nel breve.

Analisi tecnica borse. Seduta nervosa ieri per le piazze europee che risentono delle tensioni in Ucraina. Per il resto, registriamo i nuovi record di Brasile e India e l’ottima tenuta di Wall Street e Tokio. Quadro solido.
S&P500 (1.996, -0,17%). Come previsto, l’indice “sente” la presenza dell’importante ostacolo psicologico a 2mila punti. Aspettiamo il suo pieno sfondamento, confermato “con convinzione” in chiusura di seduta, prima di rientrare con acquisti in tendenza.

Brasile (Bovespa 60290, -1,08%). Si prende una pausa dopo nove rialzi in dieci sedute, +28,6% da inizio anno. Il completamento di un modello di doppio minimo grazie al superamento di area 58mila ha fatto scattare nuovi segnali di forza che hanno un primo target a 63/64mila, ormai prossimo.

FtseMib (20.341, -2,03%). Il cedimento di area 20.500 punti ha provocato ieri qualche vendita “cattiva”. Al momento restano confermati i primi segnali di distensione visti con lo sfondamento di area 20mila. Semmai, sarebbe un brutto segnale il ritorno anche sotto questa soglia perché vanificherebbe la recente reazione. Restiamo ottimisti per target verso i top dell’anno a 22.500 punti.

Variabili macro.

Petrolio. Le crescenti tensioni geopolitiche risvegliano i prezzi, ma pesano anche le indicazioni macro: più debole il Brent (Europa) a 102,7 dollari, più vivace il Wti (USA) 94,8 usd. Trend piuttosto caotico.

Oro. Non sembra reagire alle sollecitazioni esterne, anche perché stavolta è il dollaro a garantire la protezione dalle turbolenze. Oggi 1.288 dollari l’oncia.

Forex. I robusti dati macro Usa e di riflesso quelli deprimenti dell’eurozona non fanno altro che spingere gli acquisti di dollari. Oggi cambio euro dollaro a 1,317, a poca distanza dal livello più basso dal 30 agosto 2013. Sfondato l’importante supporto a quota 1,33, si proietta verso il successivo obiettivo tra 1,30/1,27. Confermiamo il suggerimento di acquistare dollari in ottica di diversificazione, possibilmente sfruttando i rari rimbalzi.

Bond periferici. La Germania, rispettando il ben noto ruolo delle parti, ha detto che le recenti parole di Draghi sono state “fraintese”, provocando qualche presa di profitto. L’Ucraina ha fatto il resto. Il rendimento del Btp a 10 anni apre al 2,43%, lo spread a 154 punti base. Il differenziale contro la Spagna staziona intorno a 22 punti base. Manteniamo la visione positiva. Per nuovi acquisti è preferibile attendere che qualche grosso investitore decida di realizzare gli enormi profitti accumulati: puntiamo a un target finale di spread a 100 punti base e a un rendimento tra il 2,3/2,2%.

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Websim Focus sui Mercati Finanziari 26/08/2014 – WS

L’incessante attività di aggregazione e fusione tra società e le aspettative di un maggiore dinamismo economico in Europa hanno permesso a Wall Street di chiudere in rialzo e all’indice S&P 500 di archiviare il ventinovesimo record dell’anno: +0,48% a 1.997,92 punti. Per qualche istante l’indice ha anche superato la barriera psicologica dei 2mila punti. Dow Jones +0,44%, Nasdaq +0,41%.

Stamattina le Borse asiatiche fluttuano tra modesti rialzi e lievi perdite, Tokio -0,55%, Hong Kong -0,1%, Shanghai-Shenzen -0,3%, Mumbai +0,1%, Singapore +0,1%, Seoul +0,4%.

I future sulle borse europee anticipano un avvio in calo dello 0,3% dopo il rally di ieri. Il future della Borsa di Londra, ieri chiusa per festività, sale invece dello 0,5%.

Francia. I listini potrebbero essere condizionati dallo scontro all’interno del governo. Il premier Manuel Valls ha estromesso due ministri ribellatisi alla linea economica di rigore sui conti pubblici fissata dal Presidente della Repubblica Francois Hollande.

Analisi tecnica borse. La settimana è partita con ulteriori segnali di forza. Nuovo record storico a Wall Street, nuovo massimo di periodo in Brasile, che si aggiunge al record storico dell’India di ieri, allungo dei listini del vecchio continente: Francoforte (Dax +1,8%, 9.519) prende le distanze dal delicato supporto a 9mila punti, Madrid (Ibex +1,81%, 10.690) si allontana dal supporto a 10mila punti, Milano (FtseMib 20.375, +2,3%) sfonda la soglia dei 20mila punti. Emerge ancora un quadro decisamente solido e soprattutto geograficamente ben distribuito.

S&P500 (1.997, +0,48%). Come previsto, la vista del “2” davanti al valore dell’indice ha provocato qualche shock psicologico. Aspettiamo il pieno sfondamento di area 2mila, confermato in chiusura di seduta, prima di rientrare in tendenza.

Brasile (Bovespa 59.735, +2,27%). Ieri sera si è spinto sui massimi dal febbraio 2013 confermando l’ottimo momento e soprattutto la nostra idea rialzista. Completato un modello di doppio minimo. Il superamento di area 58mila ha fatto scattare nuovi segnali di forza che consentono di rientrare in tendenza. Primo target 63/64mila.

FtseMib (20.375, +2,3%). Grazie al balzo di ieri e al pieno sfondamento di area 20mila punti si sono avuti i primi veri segnali di distensione che troverebbero definitiva conferma con lo stabile recupero di area 20.500 punti. Restiamo ottimisti per target verso i top dell’anno a 22.500 punti.

Variabili macro.

Petrolio. Niente di nuovo salvo qualche rimbalzo dopo una caduta piuttosto brusca. Il Wti da giugno in poi ha perso 15 dollari al barile. Oggi Brent a 102,7 dollari al barile, poco sopra i minimi dal giugno 2013, Wti americano 93,6 usd.

Oro. Resta molto fragile a 1.278 dollari l’oncia, dopo aver chiuso la scorsa settimana con un calo del 2% circa. Pessimo “momentum”.

Forex. Stamattina il cambio euro dollaro (1,3212) apre poco sopra area 1,320, ieri era sceso fino a un minimo di 1,3179, il livello più basso dal 9 settembre 2013. Si tenga presente che il biglietto verde è in rialzo contro la moneta unica da ben sei settimane consecutive e un assestamento è doveroso. Sfondato l’importante supporto a quota 1,33, il cambio euro/dollaro si proietta come previsto verso il successivo obiettivo tra 1,30/1,27. Confermiamo il suggerimento di acquistare dollari in ottica di diversificazione, possibilmente sfruttando i rari rimbalzi.

Bond periferici. L’attesa crescente di mosse “non convenzionali” da parte della Bce (il pensiero va al QE della Fed) accelera il ribasso dei rendimenti della zona euro. Il rendimento del bund decennale tedesco è sceso allo 0,934%. Il rendimento del Btp a 10 anni è sceso al 2,44%, nuovo minimo storico. Lo spread è intorno ai 159 punti base. Superato il momento di crisi seguito alla decisione di Goldman Sachs di abbassare il rating sul mondo della periferia, i bond hanno ripreso la corsa dando ragione alla nostra visione ancora positiva: puntiamo a un target di spread a 100 punti base e a un rendimento tra il 2,3/2,2%.

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