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Top 5 Copper Stocks for 2017

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Top 5 Copper Stocks for 2017

By Kevin Johnston | Updated October 13, 2017 — 8:55 PM EDT

Copper prices have been rising, and this bodes well for copper stocks. In fact, copper has risen to over $3 per pound. This means that there is incentive for copper companies to increase production to take advantage of the better prices.

Copper stocks have been beaten down for a long time, but 2017 has given them some relief. That is no reason to pick just any copper stock – it is a reason to perform due diligence and make some choices that will have the most reasonable prospects for success. (For a primer on investing in this metal, check out: Commodities: Copper.)

We have chosen five copper stocks that should do well for the remainder of 2017 based on their resilience through the down times. All figures are current as of Oct. 13, 2017. Here is how the five stocks break down.

Southern Copper Corporation (SCCO​)

The stock of Southern Copper broke sharply higher in November 2016 and formed a new base to consolidate its gains. It broke out of that base in August 2017 and is moving upward. Its 1.34% dividend could grow if the company continues to prosper from rising copper prices. Furthermore, Southern Copper’s quarterly income and total revenues have been climbing. (See also: Copper Enters First Bull Market in 4 Years.)

Freeport-McMoRan Inc. (FCX)

As the world’s largest copper miner, Freeport-McMoRan suffered greatly during the copper price decline, but it stands to prosper as copper rises. The company is simply in the best position worldwide to increase production and take advantage of profitable copper prices. Freeport-McMoRan could move into a position where it can resume its dividend. The stock has been moving sideways in 2017 and has formed a cup and handle pattern. (For more, see: Freeport to Divest Majority Stake in Indonesia Unit.)

  • Average Volume: 19,117,049
  • Market Cap: $21.35 billion
  • P/E Ratio (TTM): 20.80
  • EPS (TTM): $0.71
  • Dividend and Yield: 0.00 (0.00%)

BHP Billiton Limited (BHP)

BHP Billiton has a widely diversified mining operation, but it makes the list of copper stocks to watch because it owns BH Copper. The stock climbed steadily starting in mid-June 2017, although it gave back some of those gains in September. The 4.16% dividend is attractive. (See also: Beyond Gold: Top Picks in Industrial Metals.)

  • Average Volume: 2,394,72
  • Market Cap: $114.47 billion
  • P/E Ratio (TTM): 19.11
  • EPS (TTM): $2.21
  • Dividend and Yield: $1.72 (4.16%)

Anglo American plc (AAUKF/AAL.L)

This company mines for a variety of metals, including copper. The chart on Anglo American shows a steady and orderly rise throughout most of 2016, but the stock was in a base through the first part of 2017. It broke out of that base in June and has been climbing, despite a slight downturn in September. The company has been in business since 1917, so this is a reliable pick for those who want exposure to miners in general and copper in particular. (For more, see: Billionaire’s Anglo American Bet Excites Investors.)

  • Average Volume (AAL.L): 6,119,063
  • Market Cap: GBp 1.879 trillion
  • P/E Ratio (TTM): 5.01
  • EPS (TTM): GBp 293.3
  • Dividend and Yield: GBp 0.48 (2.59%)

Rio Tinto plc (RIO)

Rio Tinto pays a 4.56% dividend. Production levels have been rising, and the stock has been in an uptrend for more than a year. The company mines other metals besides copper, which helps stabilize the stock price because Rio Tinto is not dependent on the price of any single metal for profitability. (See also: Is Rio Tinto a Great Stock for Value Investors?)

  • Average Volume: 2,988,561
  • Market Cap: $85.36 billion
  • P/E Ratio (TTM): 14.58
  • EPS (TTM): $3.43
  • Dividend and Yield: $2.20 (4.56%)

The Bottom Line

It should be noted that Codelco, a very large Chilean copper miner, did not make this list because it is state owned and therefore is subject to non-market influences that could affect its value. The five copper stocks on our list are all miners, so they are likely to directly profit from rising copper prices and do not depend on secondary income sources such as futures contracts. All five are large enough that they have assets they could sell should a sudden downturn in copper hit.

All five also have extensive copper reserves in place that they can put on the market any time they choose. This will help them take advantage of any sudden spikes in the price of copper. The reserves can also be sold if any of the companies want to raise cash for a new opportunity. Investors in copper must watch two indicators at once: 1) the financial health of the company; and 2) the trend in copper prices worldwide. Going long on any of these stocks will require a regular reading of reports on supply and demand for copper. (See also: What Factors Affect the Price of Copper?)

 

Published at Sat, 14 Oct 2017 00:55:00 +0000

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Asia shares at 10-year high ahead of U.S. data, China Congress

 

Asia shares at 10-year high ahead of U.S. data, China Congress

TOKYO (Reuters) – Asian stocks edged to a 10-year high on Friday thanks to expectations of brisk global growth, although investors held off chasing shares higher ahead of U.S. economic data and next week’s Chinese Communist Party Congress.

MSCI’s broadest index of Asia-Pacific shares outside Japan was up 0.15 percent, having gained 3.6 percent so far this month. Japan’s Nikkei edged up 0.2 percent to another 21-year high.

Wall Street shares dipped slightly on Thursday, pulled down by a fall in AT&T after the telecoms company reported subscriber losses in its cable TV business.

But MSCI’s broadest gauge of the world stock exchanges covering 47 markets also stood at record levels, extending its gains so far this year to 17 percent.

China’s trade data showed both growth in exports and imports accelerated in September, with imports beating expectations, adding to the evidence of recent resilience in China’s economy.

“It is hard to think the current ‘goldilocks economy’ will suddenly change,” said Nobuyuki Kashihara, head of research group at Asset Management One, referring to an economy that is neither too hot, or too cold, but just right.

“Stock prices will continue to rise in line with growth in corporate earnings globally.”

On top of a broad consensus that the global economy is in its best shape in recent years, expectations that U.S. President Donald Trump would push through a tax cut also encouraged investors.

“While we don’t know the details of the tax reforms, the announcement of a plan to make the biggest tax overhaul in three decades triggered a fresh wave of reflation trade,” said Mutsumi Kagawa, chief global strategist at Rakuten Securities.

In currencies, the dollar lost some steam in recent days as U.S. bond yields appeared to have peaked for now, with minutes from the last U.S. Federal Reserve meeting showing policymakers remained divided on U.S. inflation prospects.

The next big test for the dollar is U.S. consumer inflation figures due later in the day.

“The data will likely be disrupted by the hurricanes. But if inflation is picking up, that is still positive for the dollar,” said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

On top of the near-term inflation readings, investors are also looking to who Trump will nominate as successor to Fed Chair Janet Yellen, whose term expires next February.

White House Chief of Staff John Kelly said on Thursday that Trump was “some time away” from making a decision, while another official said Trump had met with Stanford University economist John Taylor to discuss the job.

Another main focus is China’s 19th Communist Party Congress that begins on Oct 18, where President Xi Jinping is expected to lay out new policy initiatives and consolidate his power for a second five-year term.

”Specific economic policies won’t be laid out at this

meeting, but official statements and who ascends to

power will set the tone for the third Plenary Session … in March 2018, which will give more specifics about China’s economic agenda for the next five years,” said analysts at RBC Capital Markets.

The euro traded at $1.1849, slipping from Thursday’s high of $1.1880 but has kept weekly gain of almost 1 percent, though the currency remains dogged by the crisis around the Catalonian independence movement’s campaign to split from Spain.

The yen was little moved at 112.10 yen per dollar, though at that level, it is on course for a slight gain on the week, which would be its first in five weeks.

Bitcoin soared more than 4 percent after Thursday’s 13 percent gain to hit a record high of $5,846, a gain of 450 percent on the year.

The Chief Financial Officer of JPMorgan Chase & Co said the firm is open minded on the potential use cases in future for digital currencies, appearing to dial back comments last month from his boss, Chief Executive Officer Jamie Dimon, that bitcoin was a “fraud”.

Copper prices held firm after hitting a one-month high on Thursday as optimism over the demand outlook from major consumer China fueled buying.

London copper futures were at $6,862 a tonne early on Friday.

Oil prices edged up on Friday as both U.S. crude production and inventories declined. U.S. crude ticked up 0.5 percent to $50.87 a barrel. Brent crude rose 0.4 percent to $56.49 per barrel.

Reporting by Hideyuki Sano; Editing by Simon Cameron-Moore

 

Published at Fri, 13 Oct 2017 03:42:47 +0000

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Top 4 Alternative Energy Stocks as of October 2017

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Top 4 Alternative Energy Stocks as of October 2017

By Kevin Johnston | Updated October 12, 2017 — 6:45 PM EDT

With concerns about climate change and the state of the environment continuing to draw headlines, there is no doubt that the markets are also paying attention to clean and renewable energy resources. As oil prices rise from their recent lows, traditional energy companies will no doubt dominate the energy sector, but alternative energy is here to stay. The alternative energy companies on this list have the potential to make investors some money in 2017.

The stock charts on each of these companies show positive developments that could create upward momentum for the remainder of the year. All figures are current as of Oct. 12, 2017. (See also: Why You Should Invest in Green Energy Right Now.)

NRG Yield, Inc. (NYLD)

NRG Yield is not a pure alternative energy play, but it does own and operate renewable energy assets. The company was founded in 2012. This stock has been forming an upward price channel since February 2017. The shares are up over 20% year to date, and the company has consistently beat earnings estimates in recent quarters. Based in Princeton, New Jersey, NRG Yield is a subsidiary of NRG Energy, Inc. (NRG).

Pattern Energy Group Inc. (PEGI)

This San Francisco-based company owns wind energy projects. It makes its living selling energy to local utility companies. Projects are in the United States, Canada and Chile. The stock was rising throughout most of 2017, but it saw declines in August and again in late September. At current levels, the stock offers an attractive dividend yield of 6.82%. (For more, see: Clean or Green Technology Investing.)

  • Average Volume: 670,260
  • Market Cap: $2.15 billion
  • P/E Ratio (TTM): 71.22
  • EPS (TTM): $0.34
  • Dividend and Yield: $1.68 (6.82%)

Atlantica Yield PLC (ABY)

Atlantica owns renewable energy generation assets. It generates power through solar and wind technology. Revenues have shown solid gains for four straight years, and operating income has grown dramatically during that period. Buyers stepped in during early 2017 and bought shares, giving the stock a high-volume breakout. At the same time, the 50-day moving average crossed above the 200-day moving average. This is called a “golden cross” and is considered bullish by investors. While the price action has been volatile throughout the year, the stock has consistently found support at around $19, and its dividend yield of over 5% could be appealing to income investors. (See also: Atlantica Yield Posts Narrower-than-Expected Q1 Loss.)

  • Average Volume: 461,716
  • Market Cap: $2.08 billion
  • P/E Ratio (TTM): 67.10
  • EPS (TTM): $0.31
  • Dividend and Yield: $1.04 (5.05%)

Covanta Holding Corporation (CVA)

Covanta Holding provides waste services to cities in the United States and Canada. The company has developed assets that convert waste to energy. CVA owns 45 plants that are involved in converting waste, and the company sells metal that is a byproduct of the waste-conversion process. Daily volatility for this stock can be high, so this is one to buy only for those who are willing to ride out some dramatic moves in the stock price. Similar to several other stocks on this list, Covanta may be enticing to those investors seeking dividend yield.

  • Average Volume: 1,115,878
  • Market Cap: $2.01 billion
  • P/E Ratio (TTM): -73.33
  • EPS (TTM): -$0.21
  • Dividend and Yield: $1.00 (6.60%)

The Bottom Line

Alternative energy is mainstream enough now that investors can find companies that are extremely viable. Our list has one penny stock, but all the companies have a track record of securing contracts for their products and services. Nevertheless, the companies are relatively small compared with the giants of the energy sector, so they are subject to being nudged out of the competition. Owning alternative energy stocks means staying abreast of news in the field. (For more on alternative energy, check out: Top 5 Alternative Energy ETFs.)

 

Published at Thu, 12 Oct 2017 22:45:00 +0000

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Bull market is 103 months old. Trump owns 11 of them

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Is it too late to buy stocks?
Is it too late to buy stocks?

President Trump’s victory last November set off a massive party on Wall Street that is still going strong today.

The Dow has spiked an incredible 4,500 points since the election. As CNNMoney has reported frequently, that 25% surge is based in part on Trump’s promises to slash taxes and regulation.

Trump, who warned of a “big, fat, ugly bubble” before he took office, brags about the red-hot market now that he’s in charge. He did it again on Wednesday, cheering the “virtually unprecedented Stock Market growth since the election.”

The market’s cheerleader-in-chief never mentions that he inherited a bull market — one that began long before “Make America Great Again” hats started showing up on the campaign trail.

The bull market in stocks started in March 2009, near the end of the Great Recession. This market upswing is now 103 months old, making it the second-longest on record.

Trump can claim credit for 11 months at most, if you start counting after the election. The other 92 months of upward trajectory took place under President Obama.

bull market sp 500 1011

Taken as a whole, the Obama-Trump bull market is historic as well. The S&P 500 has soared 277% since bottoming in March 2009 thanks to the improving economy andextremely-low interest rates. That’s good for No. 2 among all bull markets, according to Bespoke Investment Group.

Of course, the vast majority of those gains occurred under Obama. The stock market more than tripled during Obama’s eight years in office as the U.S. economy recovered from the recession.

Nonetheless, Trump often points to record highs on Wall Street as a barometer of his success. “Stock Market hit an ALL-TIME high!” Trump tweeted on October 5.

He’s right that the Dow has never been higher. In fact, the Dow has notched 65 records since Trump’s election. The S&P 500 isn’t far behind with 52 records. Both have benefited from Trump’s promises of tax cuts as well as strength in corporate profits and the domestic and global economies.

dow trump election stocks 1011

No matter the cause, record highs were a regular occurrence during Obama’s second term — even as Trump was bashing the economic track record of the 44th U.S. president. In fact, the S&P 500 hit 127 all-time highs under Obama, according to Ryan Detrick of LPL Financial.

All-time highs were even more frequent during the economic booms of the 1980s and 1990s. The S&P 500 hit record highs 268 times under President Clinton and 154 times under President Reagan, according to LPL. (Trump has easily surpassed the nine S&P 500 records under President George W. Bush.)

None of those presidents talked up the day-to-day movements of the stock market like Trump has. That’s not just because Twitter didn’t exist during most of those presidencies.

The risk is that taking too much credit for the notoriously-fickle stock market will make it more difficult to avoid criticism when stocks eventually retreat.

 

Published at Wed, 11 Oct 2017 20:20:46 +0000

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Chase Stock Could Hit Triple Digits After Earnings

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Chase Stock Could Hit Triple Digits After Earnings

By Alan Farley | October 11, 2017 — 11:37 AM EDT

JPMorgan Chase & Co. (JPM) fires the opening shot of third quarter earnings season on Thursday morning, with the commercial banking giant expected to report earnings per share of $1.66 on revenue of $24.9 billion. CEO Jamie Dimon is likely to offer an optimistic fiscal year outlook, driven by expectations for corporate taxcuts and a December interest rate hike that would increase sector profitability.

Commercial banks are attracting steady interest following a September slide that shook out many 2016 breakout buyers. Trading at an all-time high and just a few points below the psychological $100 level, JPMorgan Chase now shares its long-term leadership role with a newly resurgent Citigroup Inc. (Citigroup Inc). A solid quarterly report could lift JPMorgan Chase stock above that magic $100 number, setting off a long-term test that might not end until 2018. (For a refresher, check out: The Industry Handbook: The Banking Industry.)

JPM Long-Term Chart (1991 – 2017)

 Full Screen  Make It Live

The stock hit an all-time low at $3.21 in 1990 and turned higher in an uptrend that stalled in the mid-teens in 1993. It cleared that resistance level two years later and took off in a powerful trend advance that topped out at $67.20 at the height of the internet bubble in the first quarter of 2000. The subsequent decline generated severe technical damage, knocking the price down to mid-1990s support in the teens.

A bounce into the $40s stalled in 2004, generating a broad sideways pattern ahead of a 2006 breakout that lifted the stock within 14 points of the 2000 high in July 2007. That marked the bull market top, ahead of a historic plunge that ended at a 13-year low in March 2009. Even so, the company fared better than its banking rivals, maintaining a strong balance sheet that underpinned a recovery into the upper $40s in the fourth quarter of 2009. (See also: JPMorgan Chase & Co.: The Big Bank.)

That resistance level stalled progress for the next three years, giving way to a 2013 breakout that reached the 2000 high in 2015. The stock then sold off, entering an intermediate correction that completed the last leg of a multi-decade breakout pattern that was set into motion after the November 2016 election. The stock has rallied nearly 30 points since that time and could add substantially to gains in the coming years.

JPM Short-Term Chart (2015 – 2017)

 Full Screen  Make It Live

The 2015 correction carved the outline of an ascending triangle, while the late 2016 breakout stalled at $94 on March 1, 2017, easing into a cup and handle pattern that broke to the upside on Oct. 2. The stock is now trading just two points above new support, exposing a failed breakout if traders sell Thursday’s news. However, it is more likely that sidelined players jump on board after the release because corporate tax cuts could super-charge an already strong U.S. economy. (For more, see: Trump Tax Plan ‘As Good as It Gets’ for US Banks.)

The bullish tone will remain intact as long as a decline holds the trendline​ of rising lows since June. That support is now situated near $90, in between the 50- and 200-day exponential moving averages(EMAs). The June and September pullbacks ended between those moving averages, generating fractal behavior that could come into play once again. That decline may also offer a low-risk buying opportunity.

On-balance volume (OBV) posted three rally peaks in two years and entered a 2015 distribution wave that ended in the second quarter of 2016. The indicator surged to a six-year high in March 2017 and turned lower, while the most recent uptick has failed to reach the prior high, generating a notable bearish divergence that signals inadequate institutional sponsorship. This deficit may need a correction before it can be worked out of the system. (To learn more, see: Uncover Market Sentiment With On-Balance Volume .)

The Bottom Line

JPMorgan Chase shares could hit the triple digits after a strong earnings report this week, but immediate upside appears limited because that level often generates months of sideway action. Meanwhile, a bearish reaction could test recent gains, with the stock needing to hold the $90 level to avoid a deeper slide into late 2016 breakout support. (For additional reading, check out: Why BofA May Outperform JPMorgan, Citigroup.)

 

Published at Wed, 11 Oct 2017 15:37:00 +0000

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Asian shares hit decade highs, Catalan fears ease

 

Asian shares hit decade highs, Catalan fears ease

SYDNEY (Reuters) – Asian shares jumped to the highest in a decade on Wednesday as Wall Street scaled all-time highs, while the dollar loitered around two-week lows on worries President Donald Trump’s tax plan could stall.

The euro traded around a 10-day peak after Catalonia’s leader suspended plans to leave Spain, easing near-term concerns about euro zone stability.

The MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.5 percent to 546.38, a level not seen since December 2007.

Australian stocks jumped to 1-1/2 month highs while South Korea’s KOSPI added 0.6 percent to within a whisker of record peaks.

Japan’s Nikkei edged closer to a 21-month top, even as scandal-hit Kobe Steel extended losses.

Sentiment was boosted after the International Monetary Fund upgraded its global economic growth forecast for 2017 and 2018, driven by a pickup in trade, investment, and consumer confidence.

“A risk-on mood has set in and money is flowing out of bond funds into equities funds,” said Hugh Dive, chief investment officer at Atlas Funds Management.

“One of the biggest drivers of global equities is the United States and some of the macro data coming out from there has been quite positive. There is also this view that China is traveling much better than many people had expected.”

The three major Wall Street indices set record highs again, with Dow up 0.3 percent, the S&P 500 adding 0.2 percent and the Nasdaq inching 0.1 percent higher.

In currency markets, the dollar held around a two-week trough as U.S. President Donald Trump’s escalating war of words with Senator Bob Corker raised concerns about the administration’s ability to pass promised reforms.

The dollar index steadied at 93.314 against a basket of currencies, around the lowest level since Sept.29.

FED MINUTES

The greenback was also under pressure amid ongoing uncertainty over the next Federal Reserve Chairman, with the predictions market site, PredictIt, favoring Fed governor Jerome Powell as the most likely candidate.

While Powell is regarded as more hawkish than incumbent Janet Yellen, whose term expires in February, analysts say he might be less aggressive in winding back stimulus than Kevin Warsh, another possible candidate for the role.

Investors will keep an eye on the minutes of the Fed’s September meeting due later in the day, which might help bolster views of a December rate hike.

The euro held around $1.1803, not far from Tuesday’s high of $1.1825, after Catalonian President Carles Puigdemont called for talks with Madrid to discuss the region’s future.

The gesture tempered fears of immediate unrest in a major euro zone economy and cheered investors. Madrid’s IBEX 35 Index futures added 1.1 percent, after the cash IBEX stock index closed down 0.9 percent on Tuesday.

“Markets were on edge, and no doubt so was he,” said David Plank, head of Australian economics at ANZ Banking Group, referring to Puigdemont’s address at Catalonia’s parliament.

“But the declaration for independence did not come, at least not explicitly,” Plank said. “This issue remains extremely fluid. But one thing is clear – this is not going to go away quickly or quietly.”

In commodities, U.S. crude rose 12 cents to $51.04 per barrel and Brent added 7 cents to $56.68 on signs of tighter near-term supply.

Gold prices came off their highest in two weeks, with spot gold at $1,287.61 an ounce.

Reporting by Swati Pandey; Editing by Sam Holmes

 

Published at Wed, 11 Oct 2017 03:58:55 +0000

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S&P 500 breaks record run on jobs data, drug chain drop

 

S&P 500 breaks record run on jobs data, drug chain drop

NEW YORK (Reuters) – The S&P 500 eased on Friday, ending a six-day run of record highs as the first monthly decline in U.S. nonfarm jobs in seven years dampened sentiment and pharmacy shares fell on Amazon competition fears.

The Nasdaq ended up for a ninth straight day, however, and set its sixth straight record high close, its longest such streak since seven records in February.

Walgreens Boots Alliance (WBA.O) and CVS Health (CVS.N) fell and were among the biggest drags on the S&P 500 after a CNBC report that Amazon (AMZN.O) was close to a decision on selling prescription drugs. Walgreens shares dropped 4.9 percent and CVS was down 4.9 percent, while Amazon shares rose 0.9 percent.

The Labor Department’s closely watched jobs report showed nonfarm payrolls fell by 33,000 in September as hurricanes Harvey and Irma left displaced workers temporarily unemployed and delayed hiring. A bright spot was a better-than-expected rise in average wages.

“It’s been amazing how resilient our U.S. stock market has been, going up on no news or bad news, so there’s no surprise on a day where most people feel it was a mixed jobs report at best that the market actually is reacting in a way that makes sense,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma.

“It’s a logical move for this illogical stock market.”

The Dow Jones Industrial Average .DJI fell 1.72 points, or 0.01 percent, to end at 22,773.67, the S&P 500 .SPX lost 2.74 points, or 0.11 percent, to 2,549.33 and the Nasdaq Composite .IXIC added 4.82 points, or 0.07 percent, to 6,590.18.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., October 3, 2017. REUTERS/Brendan McDermid

The benchmark’s slight decline follow a six-day run of record closing highs, its longest since 1997.

The CBOE Volatility index .VIX, Wall Street’s fear gauge, bounced sharply after setting a record low close in the previous session.

For the week, the S&P 500 rose 1.2 percent, the Dow added 1.6 percent and the Nasdaq gained 1.5 percent.

Adding to the day’s worries was a report that North Korea is preparing to test a long-range missile.

S&P energy index .SPNY declined 0.8 percent as oil prices CLc1 LCOc1 fell amid a bout of profit taking and the return of oversupply worries.

Shares of Costco (COST.O) dropped 6 percent after the warehouse club retailer reported a fall in gross margins. The stock was the biggest drag on the S&P 500 and the Nasdaq.

Declining issues outnumbered advancing ones on the NYSE by a 1.74-to-1 ratio; on Nasdaq, a 1.11-to-1 ratio favored decliners.

About 5.7 billion shares changed hands on U.S. exchanges. That compares with the 6.2 billion daily average for the past 20 trading days, according to Thomson Reuters data.

Additional reporting by Yashaswini Swamynathan and Gayathree Ganesan in Bengaluru; Editing by Nick Zieminski and James Dalgleish

 

Published at Fri, 06 Oct 2017 21:25:57 +0000

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How to Trade Emerging Markets After This ETF Set a Multiyear High

 

How to Trade Emerging Markets After This ETF Set a Multiyear High

By Richard Suttmeier | October 6, 2017 — 3:47 PM EDT

The iShares MSCI Emerging Market ETF (EEM) represents 850 overseas investments heavily-weighted to China, South Korea and Taiwan. The exchange-traded fund includes popular ADRs for Chinese companies Alibaba and Baidu.

The ETF is recovering from two major bear markets. The ETF declined 40% from a high of $45.85 set during the week of Sept. 5, 2014 and a low of $27.61 set during the week of Jan. 22, 2016. This decline has been fully recovered with the ETF setting a slightly higher high of $45.98 on Oct. 5.

Investors need to be aware that this decline and recovery is within a larger bear market decline of 67% from its all-time intraday high of $55.82 set during the week of Nov. 2, 2007 to its multiyear intraday low of $18.22 set during the week of Nov. 21, 2008.

Let’s put this into prospective. The emerging markets ETF will have to rally 22% from Thursday’s close of $45.85 to the 2007 high.

Compare this to the S&P 500, which set its all-time intraday high of 2,552.51 on Thursday and is 62% above its Oct. 2007 high of 1,576.

The Weekly Chart for EEM

Courtesy of MetaStock Xenith

The weekly chart for the emerging markets ETF is positive but overbought with the ETF above its five-week modified moving average (in red) at $44.81. The stock is well above its 200-week simple moving average (in green) at $38.58.

The horizontal lines are two sets of Fibonacci retracement levels. Those at the right of the chart represent the inner decline from the Sept. 2014 high to the Jan. 2016 low. The 61.8% retracement at $38.88 lines up with the 2-week SMA.

The horizontal lines across the entire chart are the Fibonacci retracement levels of the decline from the Nov. 2007 high to the Nov. 2008 low. The 61.8% retracement of this decline is $41.46. This level has been a magnet since the week of Sept. 18, 2009.

The 12x3x3 weekly slow stochastic reading is projected to end the week at 89.17 well above the overbought threshold of 80.00.

Given this chart, my trading Strategy is to buy weakness to my quarterly and semiannual value levels of $43.59 and $38.40, respectively, and reduce holdings on strength to my monthly and annual risky levels of $46.72 and $53.86, respectively.

 

Published at Fri, 06 Oct 2017 19:47:00 +0000

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Stocks Continue to Hit Highs Amid Positive Economic Data

Stocks Continue to Hit Highs Amid Positive Economic Data

By Justin Kuepper | October 6, 2017 — 5:59 PM EDT

The major U.S. indexes moved higher over the past week. While nonfarm payrolls unexpectedly fell by 33,000, which is presumably due to the hurricanes, the big surprise was a decline in the unemployment rate by two-tenths of a point and an increase in average hourly earnings by 0.5%. The news followed an unexpectedly bullish ISM Manufacturing Index reading of 60.8 and an equally impressive ISM Non-Manufacturing Index reading of 59.8.

International markets followed U.S. markets higher over the past week. Japan’s Nikkei 225 rose 1.69%; Germany’s DAX 30 rose 0.99%; and Britain’s FTSE 100 rose 2.03%. In Europe, the IHS Markit survey hit a four-month high in a sign that the Eurozone economy is picking up steam. In Asia, Japan’s economy is likely to match its second best stretch of uninterrupted growth since World War II, despite an ongoing lack of inflation. (See also: Why Is Deflation Bad for the Economy?)

The SPDR S&P 500 ETF (ARCA: SPY) rose 1.25% over the past week, making it the worst performing major index. Since the beginning of the month, the index has posted a string of gains that have led it past trendline​ and R1 resistance at $253.79. Traders should watch for an extended breakout to R2 resistance at $256.34, or if a false breakout occurs, a move back into its price channel below trendline support. Looking at technical indicators, the relative strength index (RSI) has reached significantly overbought levels at 77.61, but the moving average convergence divergence (MACD) remains in a bullish uptrend.

Technical chart showing the performance of the SPDR S&P 500 ETF (SPY)

The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) rose 1.67% over the past week, making it the best performing major index. After breaking out from R1 resistance at $226.28, the index moved closer to R2 and trendline resistance at $228.74. Traders should watch for a breakout from these upper resistance levels or a move lower back into its price channel. Looking at technical indicators, the RSI appears very overbought at 80.45, but the MACD remains in a bullish uptrend following a near crossover in late September.

Technical chart showing the performance of the SPDR Dow Jones Industrial Average ETF (DIA)

The PowerShares QQQ Trust (NASDAQ: QQQ) rose 1.52% over the past week. After forming an ascending triangle over the past few months, the index broke out to fresh highs just above R1 resistance at $147.18. Traders should watch for a breakout to R2 resistance at $148.91 or, if there’s a false breakout, a move back below trendline support. Looking at technical indicators, the RSI appears lofty at 65.97, but the MACD experienced a bullish crossover. (See also: 5 Big Tech Stocks’ Largest Threat May Be Uncle Sam.)

Technical chart showing the performance of the PowerShares QQQ Trust (QQQ)

The iShares Russell 2000 Index ETF (ARCA: IWM) rose 1.26% over the past week. After breaking out from trendline resistance last month, the index moved close to R1 resistance at $151.66 before moving sideways. Traders should watch for a resumed move higher to R2 resistance at $155.14 or a move lower to trendline support at $147.00. Looking at technical indicators, the RSI appears very overbought at 81.18, but the MACD remains in a bullish uptrend. (For more, see: Could Small-Cap Rally Be Coming to a Close?)

Technical chart showing the performance of the iShares Russell 2000 Index ETF (IWM)

The Bottom Line

The major indexes moved higher over the past week, but many remain overbought from a technical standpoint. Next week, traders will be watching several key economic indicators, including the FOMC minutes on Oct. 11 and retail sales data on Oct. 13. (For additional reading, check out: How Rising Wages Will Fire Up U.S. Stocks.)

Note: Charts courtesy of StockCharts.com. As of the time of writing, the author had no holdings in the securities mentioned.

 

Published at Fri, 06 Oct 2017 21:59:00 +0000

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Costco Stock Gets Pummeled Despite Upbeat Quarter

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Costco Stock Gets Pummeled Despite Upbeat Quarter

By Alan Farley | October 6, 2017 — 11:33 AM EDT

Costco Wholesale Corporation (COST) shares are getting pummeled in the aftermath of Thursday evening’s fiscal fourth quarter earnings report, dropping more than nine points to a four-week low despite beating EPS and revenue estimates. Weak gross margins have been cited for the decline, while fears of growing competition from Amazon.com, Inc.’s (AMZN) Whole Foods acquisition have also weighed on sentiment.

RBC, Stifel and Telsey analysts retained positive ratings after the news, insisting that investor fears are overblown and that the stock will prosper despite growing headwinds. Rapid e-commerce growth and solid traffic numbers have underpinned those optimistic outlooks, which may limit the downside in coming days. However, Morgan Stanley issued a downgrade ahead of the open, and others may follow, adding selling pressure that drops the price into critical support near $153. (See also: 7 Retail Stocks Hammered by Amazon May Be Good Buys.)

COST Long-Term Chart (1995 – 2017)

The stock tested the 1987 low near $5.50 at the end of 1994 and took off in a strong uptrend that cleared the top of a multi-year trading range near $15 in 1997. Rally momentum increased after the breakout, contributing to a powerful thrust that quadrupled the stock’s price into the 2000 high at $60.50. It plunged off that peak a few weeks later, dumping into the mid-$40s, with that price level holding support throughout the dotcom bear market.

Costco stock tested the bear market low in the first quarter of 2003 and turned higher, taking four years for the advancing price to reach the 2000 high. It broke out in the summer of 2007 and ticked higher into May 2008, when it topped out at $75.23, ahead of a steep decline during the economic collapse. That selling impulse settled at a four-year low at $38.17 in March 2009, giving way to a stair-step recovery that reached the prior high in the first quarter of 2011. (For more, see: Behind Costco’s 180% Rise in 10 Years.)

It broke out immediately, entering a powerful trend advance that posted the strongest gains so far this century. Buying pressure finally eased in February 2015 near $150, yielding a shallow rising channel that remains in force more than two years later. The relatively weak uptrend added more than 30 points into the May 2017 all-time high at $183.18, with price action since that time carving a triple top breakdown.

COST Short-Term Chart (2014 – 2017)

A base near $110 in the first half of 2014 gave way to strong rally into the February 2015 high at $156, printing the first peak in the rising channel. A decline into August undercut new support, leaving behind a candlestick shadow, ahead of less volatile price action that added three highs at resistance and two lows at support. The final high above $183 in May 2017 posted the middle peak of a triple top pattern that broke down in June when it undercut range support near $165. (See also: Costco’s Business Model Is Smarter Than You Think.)

Selling pressure ended in July at channel support near $150, generating a small-scale double bottom reversal, followed by a bounce into new resistance ahead of this week’s earnings report. The violently bearish reaction confirms the triple top breakdown, dropping the stock to $157 in the first hour of Friday’s session. In turn, this exposes a trip into channel support, which has now lifted to $153.

On-balance volume (OBV) topped out in March 2015 and entered an aggressive distribution wave that ended in August 2015, while an upturn into August 2016 fell short of the prior high. Bulls took control once again in the fourth quarter, lifting the indicator to an all-time high, while the June 2017 breakdown triggered violent downside that hit a three-year low. This bearish sequence raises the odds that the stock will eventually break support and enter a secular downtrend. (To learn more, see: Uncover Market Sentiment With On-Balance Volume.)

The Bottom Line

Costco stock fell nearly 10 points and 6% in the first hour of Friday’s session after a highly bearish reaction to fiscal fourth quarter earnings. Major technical damage in the second and third quarters could now generate a bearish feedback loop, breaking multi-year channel support and dropping the retailer’s shares into a bear market. (For additional reading, check out: Can Costco Recover From Amazon-Driven Decline?)

 

Published at Fri, 06 Oct 2017 15:33:00 +0000

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Top And Bottom Performing Stocks For Week #40

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Top And Bottom Performing Stocks For Week #40

by THE MOLE

It is Sunday afternoon and that means we get to review the performance of last week’s historical top and bottom stock symbols in the S&P 500. As you may recall these symbols are the result of parsing a database containing over 50 years worth of statistical performance data. The idea is to extract the prospective top ten winners and losers of the coming week purely based on historical statistics. The result is then sorted by liquidity and any symbol that is scheduled to report earnings or pass ex-dividend is being excluded.

How To Trade Along

Although being no guarantor of success, the long and short candidates posted here each week are intended to perform along their respective historical bias. One way of trading along would be to simply create a small one-week portfolio by buying the long candidates and selling the short candidates on Monday morning shortly after the open. There are no official stops or targets and all transactions are reversed Friday afternoon right before the bell.

Results For Week # 39

The way we keep track is to record the respective relative performance of each week’s long and short portfolio in percentage points. So here are the results for week #39 ending 10/01/2017:

Long Profits: PAYX=0.35, WEC=-1.3

Long Profits Total: -0.95

Short Profits: AMD=4.14, AAPL=-1.47, INTC=-2.42, CSCO=-0.78, ARNC=5.07, JPM=-0.72, KO=1.06, AMAT=-9.04, BMY=-0.6, HAL=-4.02

Short Profits Total: -8.78

Combined Profits Total: -9.73

Clearly this was supposed to be a bearish week for stocks and it turned out to be everything but. So we’re logging a solid loss here, no if or buts.

 

Published at Sun, 01 Oct 2017 21:38:45 +0000

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The stocks set to win under Trump’s tax plan

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Inside the GOP's tax blueprint
Inside the GOP’s tax blueprint

 The stocks set to win under Trump’s tax plan

  @mattmegan5

Get ready for a party on Wall Street if President Trump and Congress successfully rewrite the corporate tax code.

Corporate America’s bottom line would grow dramatically under the proposed slashing of the corporate tax rate from 35% from 20%.

Many critical questions about the GOP’s tax framework remain unanswered — including how to pay for it without blowing up deficits and whether it’ll ever become a reality.

If it does, it’s clear that the tax overhaul would leave some corners of the stock market cheering louder than others. Here are some of the biggest potential winners under the GOP framework:

Tech titans sitting on tons of cash:

Wall Street is drooling over the part of the GOP plan that calls for repatriating cash that is being kept offshore.

American companies have hoarded about $1.3 trillion of cash overseas, where it’s not subject to U.S. taxes, according to Moody’s.

The top 5 U.S. cash hoarders — Apple(AAPL, Tech30), Microsoft(MSFT, Tech30), Alphabet(GOOGL, Tech30), Cisco and Oracle(ORCL, Tech30) — hold 88% of their money overseas. It’s not just Silicon Valley though. Other cash-rich companies include Johnson & Johnson(JNJ), Amgen, Gilead Sciences, Ford(F), Merck and Pfizer(PFE). Each of them were sitting on at least $25 billion in cash at the end of last year, according to Moody’s.

The tax plan seeks to encourage U.S. multinationals to bring those profits back to the U.S. by offering a one-time, low tax rate under “deemed” repatriation, meaning they have to pay the tax whether they bring the money back or not.

The goal is to get companies to deploy that cash to create jobs by building new factories and investing in the business. In reality, much of that money will likely go to investors in the form of dividends and share buybacks.

Banks

Banks have a higher tax burden, making them big winners if rates go lower. Financials account for 25% of the tax expenses of the broad S&P 1500, according to KBW Research.

JPMorgan Chase(JPM), Wells Fargo(WFC) and Bank of America(BAC) would all enjoy a 20% or more jump in profits if the corporate tax rate is lowered to 20%, KBW estimates.

Banks also stand to gain in other ways, too. The repatriation of hundreds of billions of dollars in cash could find a home in banks. All of that cash may lead to an uptick in M&A deals that Wall Street firms get paid to advise on. A faster economy, which is the goal of the tax plan, could boost demand for loans.

More good news for banks: Tax reform may cause interest rates to rise. Higher rates make it easier for banks to profit on the difference between what they charge borrowers and what they pay on interest.

“Banks touch all the bases,” said Art Hogan, chief market strategist at Wunderlich Securities.

High-payers

Companies that tend to pay more to Uncle Sam each year will obviously benefit more than those who pay very little.

The sectors of the S&P 500 that paid the highest tax rates last year were telecom (33.4%), consumer staples (29.1%) and consumer discretionary (28.5%), according to Howard Silverblatt of S&P Dow Jones Indices.

Ninety-nine companies in the S&P 500 paid more than 35% in taxes last year, Silverblatt said. By contrast, he said that 115 companies paid less than 15%, including 42 that got money back.

Tiny stocks

Small-cap stocks are on fire right now thanks to all the Trump tax cut talk. The Russell 2000, home to mostly smaller and U.S.-based companies, has hit a record five days in a row. The index has almost quadrupled the September gains of the more international-focused S&P 500.

The reasoning is that smaller companies tend to pay more in taxes than their larger cousins, which tend to have more sophisticated tax strategies. Due to their size, even just subtle improvements to the cash flows of smaller companies can have a big impact.

Potential losers

Trump’s tax plan may also create some losers, depending on how the details on deductions shake out.

For instance, some fear the GOP’s plan to eliminate state and local tax deductions could hurt the real estate market in high-tax states like New Jersey and Illinois. That would be bad news for homebuilder stocks.

Private-equity firms could also end up losing. The framework did not call for eliminating the carried interest deduction that benefits private-equity firms and hedge funds. However, Gary Cohn, Trump’s top economic official, told CNBC that the president “remains committed” to ending this loophole.

Of course, more negotiations are needed on the tax plan. The deal may ultimately collapse in a cloud of Republican infighting, like the Obamacare repeal plan did.

But Hogan is betting it gets done, eventually.

“Tax reform seems a lot more possible than any other pillar of the administration’s platform. They desperately want a victory,” he said.

–CNNMoney’s Jeanne Sahadi contributed to this report.

 

Published at Fri, 29 Sep 2017 15:30:06 +0000

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Dow notches longest quarterly win streak in 20 years

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Trump's shifting views on stock market highs
Trump’s shifting views on stock market highs

Dow notches longest quarterly win streak in 20 years

  @mattmegan5

The stock market, undaunted by monster hurricanes, political tension and North Korea threats, keeps climbing to new heights.

The Dow soared another 5% during the third quarter, which ends for Wall Street on Friday.

The strong gains extend the Dow’s streak of winning quarters to eight. It’s the longest since an 11-quarter boom that ended in September 1997, according to FactSet stats. Back then, the U.S. economy was going gangbusters under President Bill Clinton at the start of the dotcom boom.

The current streak began during the final three months of 2015 and accelerated after last fall’s election. For those scoring at home, that’s five winning quarters on President Barack Obama’s watch and three under President Trump, who took office in January.

Trump, who claimed as a candidate that the market was in a “big, fat, ugly bubble,”brags about it now that he’s in charge. He did that again on Friday, cheering the “RECORD HIGH” for the S&P 500.

It’s true that the stock market soared after Trump’s victory. Wall Street cheered his promises to revamp the tax code, slash regulation and ramp up infrastructure spending. (The market largely ignored the administration’s less business-friendly trade and immigration policies.)

Stocks have continued climbing even though none of Trump’s economic policies have gotten through Congress. That’s because economic strength in the United States and overseas has kept corporate profits growing.

“The market is primarily up because earnings have been good. The tax reform proposal has been icing on the cake — but that’s not the ultimate reason,” said JJ Kinahan, chief market strategist at TD Ameritrade.

dow trump election stocks 4000

Wall Street has been largely unfazed by the turbulence of the past few weeks and months. The GOP’s repeated failure to repeal and replace Obamacare didn’t dent the market. Nor did the hurricanes that ravaged the Gulf Coast and Caribbean. And escalating tension between Trump and North Korean leader Kim Jong Un caused just fleeting concern among investors.

If anything, September was a bore for the stock market despite its history as a rocky month. The S&P 500 had its least volatile September going back at least to 1970, according to Ryan Detrick at LPL Financial. That’s based on how much the market moves from its high to its low each day.

The calendar ahead looks favorable for the stock market. Over the past 20 years, the Dow climbed 70% of the time during October, according to Bespoke Investment Group. The final three months of the year have historically been the best for the stock market.

That could change this year if Corporate America lets Wall Street down. Investors are hoping third-quarter results, set to begin streaming in later this month, will continue to show healthy profits.

Wall Street may also have to withstand bickering over the GOP’s plans to overhaul the tax system. Tax reform is complex, and many major questions remain unanswered.

“The bill’s announcement, and its eventual passing, are and will be bullish for stocks. But what comes in between is not bullish, and that starts right now,” Michael Block, chief market strategist at Rhino Trading Partners, wrote in a report.

Eventually, investors may grow impatient with Washington if it looks like the tax overhaul is being further delayed or watered down by politics.

“The markets are not going to ignore politics in 2018,” said TD Ameritrade’s Kinahan. “Washington has to get something done.”

 

Published at Fri, 29 Sep 2017 16:16:54 +0000

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Russell Breakout Lifts Small Caps Into Leadership

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Russell Breakout Lifts Small Caps Into Leadership

By Alan Farley | September 28, 2017 — 12:04 PM EDT

The Russell 2000 index has lifted to a bull market and all-time high this week, signaling the next stage of a powerful small-cap rotation that could continue into year end and beyond. At the same time, this emerging leadership may force funds and institutions to exit overheated tech stocks to free up speculative capital, dropping the Nasdaq 100​ into a long period of relative underperformance.

Look no further than the currency markets to find the reason for this bullish development, with the U.S. Dollar Index (DXI) bouncing off two-year range support following a brutal decline in response to the Trump presidency. Domestic issues, including small caps, tend to strengthen and outperform during periods of U.S. dollar strength because multinational corporations become less profitable due to exchange rate headwinds. (For a refresher, check out: An Introduction to Small-Cap Stocks.)

There are dozens of ways to play this breakout, led by the venerable iShares Russell 2000 ETF (IWM), which currently trades more than 22 million shares per day on average. The Vanguard Small Cap Value ETF (VBR) offers an interesting second choice, holding the second highest asset total among active funds while trading fewer than 300,000 shares per day. Market players seeking higher exposure may consider Direxion Daily Small Cap Bull 3X Shares (TNA) or ProShares UltraPro Russell 2000 ETF (URTY), which offers 2X leverage. (See also: Top 3 Small-Cap ETFs for 2017.)

IWM Long-Term Chart (2000 – 2017)

The iShares Russell 2000 ETF came public in May 2000 in the mid-$40s and rallied quickly to $54.60. That peak marked the highest high for more than three years, ahead of a volatile decline that posted an all-time low at $32.30 in the fourth quarter of 2002. It finally broke out to a new high in 2004, entering a rising channel that contained price action into the 2007 bull market high at $85.20.

The fund plunged during the 2008 economic collapse but held above the 2002 low, ahead of a V-shaped recovery wave that completed a 100% round trip into the 2007 high in April 2011. It spent the next two years grinding out a cup and handle pattern at that level, ahead of a 2013 breakout that generated the most prolific gains so far in this bull market cycle. The rally’s trajectory eased above $120 in March 2014, giving way to a shallow uptrend that topped out at $129 in June 2015. (For more, see: IWM: iShares Russell 2000 Index ETF.)

It then entered a severe correction, losing ground in a multi-wave decline that came to rest at a two-year low in the mid-$90s in February 2016. A recovery wave into September stalled four points below 2015 resistance, generating a pullback into November, followed by a November breakout that stalled in the low $140s just one month later. The fund carved a narrow consolidation at that level for more than nine months and broke out this week.

IWM Short-Term Chart (2015 – 2017)

IWM fell more than 35 points after topping out in June 2017, coming to rest well above new support at the 2013 breakout in the mid-$80s. The subsequent bounce followed 2007 to 2011 fractal behavior, gaining ground at the same pace as the prior decline. However, it spent little or no time testing resistance in this instance, breaking out within one day of reaching the 2015 high. (See also: Small Caps: Rising Rates Not All Bad News.)

The consolidation into September 2017 carved a shallow rising channel that generated a long series of bull traps. This week’s rally finally cleared channel resistance, opening the door to a much stronger price rate of change that could generate upside into $170, or 1,700 on the underlying index. Pullbacks to $142 should be buyable in this scenario, while declines need to hold the 50-day exponential moving average (EMA), currently rising from $140.

The Bottom Line

The Russell 2000 small-cap index has broken out above a nine-month rising channel, confirming last December’s breakout while setting the stage for healthy fourth quarter gains. (For additional reading, check out: A Big Battle Among Small-Cap ETFs.)

 

Published at Thu, 28 Sep 2017 16:04:00 +0000

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Tax Reform Should Bode Well for Charles Schwab

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Tax Reform Should Bode Well for Charles Schwab

By Donna Fuscaldo | September 28, 2017 — 1:09 PM EDT

Charles Schwab Corp. (SCHW), the discount brokerage firm, has been bouncing along near its 52-week high so far this week, but that doesn’t mean it won’t go higher, particularly if President Donald Trump gets tax reform pushed through.

That’s according to Seeking Alpha, which laid out a bevy of reasons why investors may want to buy shares of Charles Schwab, one of the leaders in the online brokerage world. Even at $44.01, close to its 52-week high of $44.35, shares could start to gain more, particularly in the first quarter of next year.

Charles Schwab (SCHW) Upsides and Downsides

Take tax reform for starters. While all eyes have been on technology stocks that have a lot of cash overseas and are hoping for a reduced tax rate to bring it back to the U.S., Charles Schwab is the opposite, with little business outside the U.S. That means that if tax reform does get passed and the corporate tax rate is reduced, Schwab stands to benefit the most. On top of that, because it doesn’t have big exposure overseas, it won’t suffer as much as rivals from a weakening U.S. dollar. If the U.S. dollar stays weak next year it could increase interest in stocks like Schwab.

Use Investopedia’s broker reviews to find a broker to match your investing goals.

But it’s not just tax reform that could draw more interest to the San Francisco-based discount broker. On the sector front, with ongoing consolidation, Schwab could become an attractive takeover target for a big financial firm that is betting the financial markets will be huge during the next 10 years. While Schwab has been a player in the consolidation, it could become a target, which should send the stock higher.

Back in 2011, the company spent $1 billion to acquire OptionsXpress as way to get in on the options trading market. Rival E*Trade has also been on a buying spree in recent years, spending $725 million last July for OptionsHouse. If Charles Schwab doesn’t get bought out, its not a bad thing either for the stock. That’s because consolidation in a sector may not bode well for consumers, but it does mean less competition, which in turn could result in higher commissions for the likes of Schwab. That would be a welcome reversal from the years of declines.

 

Published at Thu, 28 Sep 2017 17:09:00 +0000

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Wall St. edges up on modest tech rebound

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., June 2, 2017. REUTERS/Brendan McDermid

 

Wall St. edges up on modest tech rebound

NEW YORK (Reuters) – U.S. stocks advanced modestly on Tuesday as technology shares bounced from sharp losses in the prior session and comments from Fed Chair Janet Yellen boosted expectations of a December rate hike.

Yellen said the Fed needs to continue gradual rate hikes and it would be imprudent to leave rates on hold until inflation reached the Fed’s 2-percent target.

Earlier in the session, Atlanta Fed Chief Raphael Bostic, a non-voting member this year, said he would want “clear evidence” that prices were firming before committing to another rate increase, but did not rule out another hike in 2017.

Chances of a rate hike in December rose to 78 percent from about 40 percent a month ago, according to CME Group’s FedWatch tool.

“Until either (she) or her cohorts say something that is not expected, the market is going to roll over pretty much everything they say,” said David Schiegoleit, managing director of investments, U.S. Bank Private Wealth Management in Newport Beach, California.

Economic data showed U.S consumer confidence fell in September while home sales dropped to an eight-month low in August due to the impact of Hurricanes Harvey and Irma.

The Dow Jones Industrial Average .DJI rose 11.5 points, or 0.05 percent, to 22,307.59, the S&P 500 .SPX gained 2.69 points, or 0.11 percent, to 2,499.35 and the Nasdaq Composite .IXIC added 20.25 points, or 0.32 percent, to 6,390.84.

Technology .SPLRCT, up 0.56 percent, was the best performing major sector, recovering somewhat from losses in the prior session. Tech shares suffered their worst one-day drop in five weeks on Monday as concerns over tensions with North Korea prompted investors to book profits in what has been the best performing sector this year.

Apple (AAPL.O) rose 2.11 percent after four straight sessions of losses to help prop up the three major indexes, after Raymond James boosted its price target on the iPhone maker to $180 from $170.

“When we woke up today and the lights still came on everybody may have said there are some opportunity in those tech shares. It is simply just a little bit duller, mirror image of what we saw yesterday,” said Schiegoleit.

Marine Corps General Joseph Dunford said the U.S. regards North Korea as the world’s greatest threat but despite an escalation in tensions over its ballistic missile and nuclear program, Pyongyang has not changed its military posture.

Darden Restaurants (DRI.N) slumped 5.60 percent after the Olive Garden parent said it expected the negative effects on sales and earnings from Hurricane Irma to be about double that from Hurricane Harvey.

Red Hat (RHT.N) rose climbed 4.09 percent after the Linux distributor’s quarterly profit came in above estimates and the company raised its full-year forecast.

Advancing issues outnumbered declining ones on the NYSE by a 1.53-to-1 ratio; on Nasdaq, a 1.59-to-1 ratio favored advancers.

Reporting by Chuck Mikolajczak; Editing by Nick Zieminski

 

Published at Tue, 26 Sep 2017 18:46:54 +0000

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Duy: “Has The Fed Abandoned Its Reaction Function?”

 

Duy: “Has The Fed Abandoned Its Reaction Function?”

by Bill McBride on 9/25/2017 01:44:00 PM

From economist Tim Duy at FedWatch:

The immediate policy outcomes of the FOMC meeting were largely as expected. Central bankers left interest rates unchanged while announcing that the reduction of the balance sheet will begin in October as earlier outlined in June. The real action was in the Summary of Economic Projections. Policymakers continue to anticipate one more rate hike this year and three next. This policy stance looks inconsistent with the downward revisions to projections of inflation and the neutral rate; under the Fed’s earlier reaction function, the combination of the two would drive down rate projections. Arguably, policy is thus no longer as data dependent as the Fed would like us to believe. That or the reaction function has changed.

The economic forecasts were somewhat confounding. Policymakers edged up their growth forecasts, but still anticipate that unemployment will end the year at 4.3%.

The unemployment forecast for the next two years edged down 0.1 percentage point, but this relative stability is somewhat confusing given that growth is expected to exceed potential growth until 2020 (remember, the Fed believes that labor force participation is more likely to fall than rise, so strong growth should induce downward pressure on unemployment).

Bottom line: the Fed is strongly committed to rate hikes. The[y] don’t appear to be following their earlier reaction function; policy feels path dependent at the moment. Indeed, given the Fed’s expectation of low inflation and volatile and possibly weak data due to the hurricanes, it is difficult to see what stops the Fed from hiking in December.

Read more at http://www.calculatedriskblog.com/2017/09/duy-has-fed-abandoned-its-reaction.html#33uVIFRbuzErAkEy.99

 

Published at Mon, 25 Sep 2017 17:44:00 +0000

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Microsoft Stock Is Record Breaking But Overvalued

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Microsoft Stock Is Record Breaking But Overvalued

By Donna Fuscaldo | September 25, 2017 — 10:32 PM EDT

Microsoft Corp.’s (MSFT) stock has been setting record highs in 2017 as the company benefits from growth in its cloud computing business and its prospects in advanced technologies such as artificial intelligence and augmented reality.

But while investors are bidding up share prices of the software giant so far this year, it could be creating a scenario in which the stock is overvalued, and that means less of a chance of upside for investors. Consider this analysis from InvestorPlace, which looks at stocks from a technical perspective. Shares are more than 15.5 times trailingEBITDA, marking a 10-year high. Microsoft stock is also close to a decade high from a trailing sales, trailing operating cash flow and trailing free cash flow perspective, setting the stage for concerns about its valuation.

High, or Too High?

The cloud computing growth the company has enjoyed in 2017 has resulted in shares surging this year, but InvestorPlace doesn’t see how it can push the stock and thus the valuation higher. “The cloud giants trading at more than 20-times next year’s earnings estimates (like MSFT) all have much larger growth prospects than MSFT. This group includes Alphabet’s (GOOG) Google, Amazon.com (AMZN), salesforce.com (CRM), Alibaba Group (BABA), and others,” wrote InvestorPlace. It’s also worrisome given some of the software company’s other businesses are seeing revenue that is slowing. (See also: Microsoft Could Surpass Amazon in Cloud Computing This Year.)

For its fourth quarter, for example, the software giant reported adjusted revenue of $24.7 billion, which surpassed Wall Street views. Adjusted earnings per share also topped analyst expectations coming in at $0.98 a share. Growth was driven by the company’s services business, with revenue increasing 44% to $9.548 billion compared to a year ago. Revenue in the productivity and business unit jumped 21% to $8.4 billion while its cloud business had 11% increase in revenue to $7.4 billion. Its Azure cloud business saw a 97% increase in revenue. Personal computers were a drag on the company in the fourth quarter, coming in down 2%. (See also: 10 Stocks For The Next Tech Boom.)

Microsoft also rattled investors last week when it failed to raise its quarterly dividend as much as Wall Street was expecting. It announced a 7.6% increase in its dividend to $0.42 per share each quarter. IHS Markit had expected the dividend to go to $0.43 a share from $0.39 a share, increasing the yield to 2.3%. Meanwhile, Stifel analyst Brad Redback said in a note to clients that while he expected the dividend hike to be in the 10% to 15% range.

 

Published at Tue, 26 Sep 2017 02:32:00 +0000

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Top And Bottom Performing Stocks For Week #39

 

Top And Bottom Performing Stocks For Week #39

by THE MOLE

It is Sunday afternoon and that means we get to review the performance of last week’s historical top and bottom stock symbols in the S&P 500. As you may recall these symbols are the result of parsing a database containing over 50 years worth of statistical performance data. The idea is to extract the prospective top ten winners and losers of the coming week purely based on historical statistics. The result is then sorted by liquidity and any symbol that is scheduled to report earnings or pass ex-dividend is being excluded.

How To Trade Along

Although being no guarantor of success, the long and short candidates posted here each week are intended to perform along their respective historical bias. One way of trading along would be to simply create a small one-week portfolio by buying the long candidates and selling the short candidates on Monday morning shortly after the open. There are no official stops or targets and all transactions are reversed Friday afternoon right before the bell.

Results For Week # 38

The way we keep track is to record the respective relative performance of each week’s long and short portfolio in percentage points. So here are the results for week #38 ending 9/24/2017:

Long Profits: T=4.02, PFE=1.7, LLY=1.78, PAYX=3.28

Long Profits Total: 10.78

Short Profits: AMD=-6.23, MU=-4.1, INTC=-0.49, CSCO=-2.87, ARNC=-3.43, AMAT=-1.34, C=-3.42, XOM=0.19, HST=-0.44, BSX=0.28

Short Profits Total: -21.85

Combined Profits Total: -11.07

Obviously the shorts almost all ended up closing higher last week and thus produced a loss for the week. It may make sense to take on more positions on the truncated side, e.g. in this case take on 2.5 x the number of shares of T, PFE, LLY, and PAYX. This would have produced a total of 26.95% for the total long profits and thus eke out a combined total profit of 5.1%.

Top 2 performing stocks for week #39

It’s going to be another bearish week apparently and we’ve got only 2 top performing symbols on the long side. So going by the multiplier concept we’d have to buy 5x the amount of shares of both to even the exposure on the long and short side:

 

Published at Sun, 24 Sep 2017 21:02:06 +0000

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Shorting volatility: Rising risks mean itchier trigger fingers

 

Shorting volatility: Rising risks mean itchier trigger fingers

NEW YORK (Reuters) – A long stretch of low volatility for U.S. stocks has made betting on continued calm a popular and lucrative trade, but traders and strategists warn that risks to the trade have mounted, while the potential for profits has shrunk.

U.S. equity market volatility – the daily fluctuations in stock prices – has hovered near record lows for much of this year.

The CBOE Volatility Index .VIX, a gauge of the degree to which investors expect share prices to fluctuate, has averaged 11.4 this year. That is lower than for any comparable period over its nearly three-decade history.

Robust corporate earnings, encouraging economic growth and a view that world central banks are available to rescue markets if trouble strikes, have helped mute stock market gyrations and spell success for those betting on calm.

The VelocityShares Daily Inverse VIX Short-Term ETN (XIV.P), which makes money as long as the volatility drops or holds in place, is up about 100 percent this year.

Some traders, however, have grown more wary of increased risks to the trade.

“I think a lot of folks have gotten lulled into a false sense of security because the short trade has gone so well for so long,” said Matt Thompson co-head of Volatility Group at Typhon Capital LLC, in Chicago.

“We are still shorting volatility but we have an itchier trigger finger.”

VOLATILITY-LINKED ETPs

While there are many ways to short volatility – bet on lower stock gyrations – investors’ hunger for this trade is particularly apparent in the growth in volatility-linked exchange traded products (ETPs).

Assets under management for the top two short volatility products is at $2.8 billion and their exposure to volatility is at an all-time high, according to Barclays Capital.

But the very popularity of the trade has cranked up the risk.

These products hold first and second month volatility futures, buying and selling these contracts daily to keep their volatility exposure in line with the level of stock swings in the market.

Managers of these leveraged and inverse products are required to buy volatility futures as they go up and sell when they decline.

Strategists fear that this rebalancing – which needs be even more pronounced if a shock follows a period of unusually muted volatility, such as now – may be akin to adding fuel to fire.

“There could be a feedback effect and maybe selling begets more selling,” said Salil Aggarwal, equity derivatives strategist at Deutsche Bank in New York.

“Risk/reward considerations would imply cutting positions to more manageable levels,” he said.

RISK VS REWARD

Meanwhile, investors are not reaping as much for taking on risk as they did in the past, said Anand Omprakash, director of equity and derivative strategy at BNP Paribas, in New York.

What traders are being paid to take on the short volatility risk currently, is slightly below their average historical take since January 2013, and roughly 6 percent lower than what they were paid monthly in mid-2016, Omprakash estimates.

“You were being paid much better for much of 2016 than for much of 2017,” he said. “I don’t know if I would necessarily say the trade has run out of steam, but I don’t think it offers the kind of risk adjusted return that it offered last year.”

And the stakes are high. Strategists warn that one or two big shocks could wipe away months of profits.

The inverse volatility product XIV, while having doubled in price this year, logged an 11.4 percent decline in August as stock gyrations picked up briefly amid escalating worries about the ability of the administration of President Donald Trump to push through its economic agenda.

“The risk/reward of the trade as a buy and hold proposition is not the same as it was before the U.S. election or in the middle of the oil crisis in 2015 and early 2016,” said Stephen Aniston, president of investment adviser Black Peak Capital, in Connecticut.

Positioning in these products, primarily driven by retail players, may be more skewed to the short side than the broader market where institutional investors hold sway.

“I don’t think the risk is necessarily as big on the institutional side as it is on the retail side,” said Omprakash.

To be sure, not everyone is rushing to bet on a spike in volatility, but experts do warn that investors should tread carefully when shorting volatility from here.

Additional reporting by Terence Gabriel; Editing by Bernadette Baum

 

Published at Sat, 23 Sep 2017 01:00:07 +0000

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