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Wall Street recovers after historic falls

Wall Street recovers after historic falls

(Reuters) – U.S. stock markets bounced after a torrid opening on Tuesday, bargain-hunters and gains for Apple pushing the tech-heavy Nasdaq and the Dow Jones Industrial Average into positive territory after two days of heavy losses.

Both the S&P 500 and the Dow sank more than 4 percent on Monday, their biggest falls since August 2011, as concerns over rising U.S. interest rates and government bond yields hit record-high valuations of stocks.

New York’s three main indexes sank as much as 2 percent on the opening bell but they quickly moved back into positive territory.

Slideshow (2 Images)

An almost 2 percent gain for Apple was at the heart of an almost half percent gain for the Nasdaq Composite .IXIC.

“Daily drops of 3 percent or more have been buying opportunities for the S&P 500 post financial crisis,” said Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets.

At 9:49 a.m. ET (1449 GMT), the Dow Jones Industrial Average .DJI gained 0.25 percent to 24,406.14. The S&P 500 .SPX rose 0.2 percent to 2,654.25 and the Nasdaq 0.4 percent to 6,993.47.

Reporting by Tanya Agrawal; Editing by Arun Koyyur and Patrick Graham

Published at Tue, 06 Feb 2018 15:04:50 +0000

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What Monday’s Stock Sell-off Had You Searching for

What Monday’s Stock Sell-off Had You Searching for

By Caleb Silver | Updated February 6, 2018 — 4:17 AM EST

By recent historical standards, Monday’s sell-off was rather extreme. The DJIA and S&P 500 suffered their largest daily declines since August 2011, as fears about, well….just about everything, prompted investors to sell just about everything. That’s not true, of course. Apple (AAPL) did manage to eke out a gain after officially falling into a correction last week. However, the Dow did see its biggest intraday point drop in history, as 1600 points were wiped off the big board after 3 p.m. Wall Street time. Some of that came back by the closing bell, but the damage was done. So much for January’s jump start as we are now 0.9% lower in 2018 than the good old days of 2017. By now, you know all this.

What we find fascinating is what our readers and those who find us through Google and other search engines seek in times of intense market volatility. The human need for knowledge, especially in times of fear, is primal and fierce. We know this by looking at our own Investopedia Anxiety Index, which measures search volume against fear-based terms like short selling and volatility. As I wrote last week, the markets-based terms that make up the index finally woke up after a very long nap and started screaming like a hungry infant on Thursday and into Friday. By Monday afternoon, it was in full tantrum, throwing toys, bottles, dirty diapers and shluffys out of the crib and threatening war. Indeed, it was the intense search traffic to key terms and articles that tipped the Index into the “Extreme Anxiety” zone.

Here are the top terms that were spiking on Investopedia as the market was selling off:

  • VIX – CBOE Volatility Index: Experienced investors know what is often referred to as “The Fear Index” quite well, but many others may have heard about it for the first time in recent days since it has been extremely quiet for nearly a year. Anyone trading the VIX, or ETFs like VXX, SVYX, which is the inverse of the VIX, has been on a wild ride since last week, and betting against volatility has been a crowded and painful experience of late.
  • Circuit Breaker: Kind of like the breaker box in your basement, except this one can shut off the juice at the major securities exchanges. As the DJIA was free-falling into its biggest daily point decline ever, investors were waiting to see if the exchange was going to flip the switch and halt trading to let humans catch up with the computer-driven sell orders. That didn’t happen today, but many people thought it might.
  • Bond Yield: Don’t blame the rising long-term bond yields for the sell-off, although many people might. They’ve arguably been artificially low since the financial crisis, but the Fed’s steady increases in the overnight lending rate and whispers of inflation are pushing the 10-year bond yield higher. It’s finally providing investors a reasonable alternative to stocks. Readers were trying to understand this dynamic and came to us for answers.
  • Correction: We are not there yet, but we’ll see what the rest of this week brings. A 10% decline from a security or index’s high represents a correction, which is halfway to a crash. Corrections are fairly common, albeit not lately. They present good opportunities to re-position and potentially reload. Crashes are not nearly as gentle.
  • Short Selling: The bearish bet on future declines has been parading around in full fur lately. It’s a very risky maneuver for those new to the markets, but highly tempting given the potential payoffs. We recommend you study up before going short, and that’s likely what our visitors to this term were doing.

We write a lot of articles and FAQs as well, and those give an even more nuanced look at our readers’ curiosity. Here are five of the most popular articles on our site from Monday:

As they used to say on Wall Street, the market rises like a staircase and falls like an elevator. Extreme sell-offs can be rattling, especially when it’s hard to find a distinct catalyst for them. There have been many that had the potential to do so over the past year and throughout this long bull market, but nothing or nobody can take exclusive credit for this one. We are not here to make predictions about what might happen and when. You don’t come to us for that, thankfully. You and millions of others come to our site to try to demystify the financial and investing world in good times and bad. We do our best to give you what you need and more, and that’s our great honor and responsibility. No matter what happens Tuesday or for the next 10,000 Tuesdays, we’ll be here for you.

Caleb Silver – Editor in Chief

Published at Tue, 06 Feb 2018 09:17:00 +0000

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Wall Street plunges, S&P 500 erases 2018’s gains

Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., November 22, 2016. REUTERS/Brendan McDermid

Wall Street plunges, S&P 500 erases 2018’s gains

(Reuters) – U.S. stocks plunged in highly volatile trading on Monday, with both the S&P 500 and Dow Industrials indices slumping more than 4.0 percent, as the Dow notched its biggest intraday decline in history with a nearly 1,600-point drop and Wall Street erased its gains for the year.

The declines for the benchmark S&P 500 index and the Dow Jones Industrial Average were the biggest single-day percentage drops since August 2011, a period of stock-market volatility marked by the downgrade of the United States’ credit rating and the euro zone debt crisis.

The question now for investors, who have ridden a nearly nine-year bull run, is whether this is the long-awaited pullback that paves the way for stocks to again keep rising after finding some value, or the start of a decline that leads to a bear market.

”A lot of people who have been in this market for the past three or four years have never seen this before,” said Dennis Dick, a proprietary trader at Bright Trading LLC in Las Vegas. “The psychology of the market changed today. It’ll take a while to get that psychology back.”

After regular trading hours on Monday, S&P 500 E-mini stock futures rose 0.73 percent, suggesting some traders expect Wall Street to open with a gain on Tuesday.

Bulls argue that strong U.S. corporate earnings, including a boost from the Trump administration’s tax cuts, will ultimately support market valuations. Bears, including short sellers that bet on the market decline, say that the market is over-stretched in the context of rising bond yields as central banks withdraw their easy money policies of recent years.

The U.S. stock market has climbed to record peaks since President Donald Trump’s election, on the prospect of tax cuts, corporate deregulation and infrastructure spending, and it remains up 23.8 percent since his victory. Trump has frequently taken credit for the rise of the stock market during his presidency, though the rally and economic recovery was well underway during the Obama administration.

As the stock market fell on Monday, the White House said the fundamentals of the U.S. economy are strong. U.S. economic growth was running at a 2.6 annualized rate in the fourth quarter last year and the unemployment rate is at a 17-year low of 4.1 percent.

On Monday, the financial, healthcare and industrial sectors fell the most, but declines were spread broadly as all major 11 S&P sectors dropped at least 1.7 percent. All 30 of the blue-chip Dow industrial components finished negative.

With Monday’s declines, the S&P 500 erased its gains for 2018 and is now down 0.9 percent in 2018. The Dow is down 1.5 percent for the year.

The market’s pullback comes amid concerns about rising bond yields and higher inflation which were reinforced by Friday’s January U.S. jobs report that prompted worries the Federal Reserve will raise rates at a faster pace than expected this year.

“The market has had an incredible run,” said Michael O’Rourke, chief market strategist At JonesTrading In Greenwich, Connecticut.

“We have an environment where interest rates are rising. We have a stronger economy so the Fed should continue to tighten … You’re seeing real changes occur and different investments are adjusting to that,” O‘Rourke said.

The Dow Jones Industrial Average fell 1,175.21 points, or 4.6 percent, to 24,345.75, the S&P 500 lost 113.19 points, or 4.10 percent, to 2,648.94 and the Nasdaq Composite dropped 273.42 points, or 3.78 percent, to 6,967.53.

On Monday, the S&P 500 ended 7.8 percent down from its record high on Jan. 26, with the Dow down 8.5 percent over that time. The declines come after the Dow and S&P posted their biggest weekly percentage drops since January 2016 last week, and the Nasdaq posted its biggest weekly drop since February 2016.

At one point, the Dow fell 6.3 percent or 1,597 points, the biggest one-day points loss ever. Even with the sharp declines, stocks finished above their lows touched during the session.

“It doesn’t look like people are working their orders – the programs are trading this,” Dan Ryan, who works on the New York Stock Exchange floor for E&J Securities, said as he was leaving work for the day.

Investors also unloaded riskier corporate bonds during the Wall Street stock market rout. Exchange-traded funds that focus on junk bonds suffered a third day of losses. BlackRock’s iShares iBoxx High Yield Corporate Bond ETF, which has about $16 billion in assets, fell 0.6 percent to its lowest share price since December 2016.

The CBOE Volatility index, the closely followed measure of expected near-term stock market volatility, jumped 20 points to 30.71, its highest level since August 2015.

“One thing is that going into the last week or so, investor bullishness was in the top decile of its historical range, which suggests that investors were pretty optimistic, with high expectations and largely complacent,“ said Jack Ablin, chief investment officer with Cresset Wealth Advisors in Chicago. ”There’s kind of an emotional reversal that’s going on.”

About 11.5 billion shares changed hands in U.S. exchanges on Monday, well above the 7.6 billion daily average over the last 20 sessions.

Declining issues outnumbered advancing ones on the NYSE by a 8.64-to-1 ratio; on Nasdaq, a 6.92-to-1 ratio favored decliners.

The S&P 500 posted 1 new 52-week highs and 38 new lows; the Nasdaq Composite recorded 17 new highs and 164 new lows.

Additional reporting by Michael Erman, Richard Leong, Kate Duguid, Megan Davies, Sinead Carew, Caroline Valetkevitch, and Chuck Mikolajczak in New York, Noel Randewich in San Francisco and Tanya Agrawal in Bengaluru; Editing by Arun Koyyur, Nick Zieminski and Clive McKeef

Published at Tue, 06 Feb 2018 00:06:22 +0000

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Strong Crude Oil No Help for Chevron, Exxon Mobil

Strong Crude Oil No Help for Chevron, Exxon Mobil

By Richard Suttmeier | February 5, 2018 — 11:29 AM EST

Nymex crude oil ended last week at $65.45 per barrel, up 8.9% year to date, outperforming the gain of 3.2% for the Dow Jones Industrial Average. Chevron Corporation (CVX) and Exxon Mobil Corporation (XOM) are two “Dogs of the Dow” for 2018, and they ended last week with Chevron shares down 5.3% and Exxon Mobil shares up just 1.1% year to date.

Chevron and Exxon Mobil both reported quarterly earnings on Friday, and both companies missed analysts’ expectations. As “Dogs of the Dow,” what’s more important than earnings is the strategy to buy weakness on brand-name dividend stocks. Chevron has a dividend yield of 3.78%, and Exxon Mobil has a dividend yield of 3.71%, which make these stocks too cheap to ignore based on dividends. However, the oil giants are not cheap looking at their P/E ratios. Chevron’s P/E is 34.52, and Exxon Mobil’s is 27.60. The P/E for the Dow 30 is 26.85. (See also: How the Oil and Gas Industry Works.)

The Weekly Chart for Crude Oil

Weekly technical chart showing the performance of crude oilCourtesy of MetaStock Xenith

The weekly chart for crude oil is positive but overbought, with oil above its five-week modified moving average of $62.67. Oil is also above its 200-week simple moving average at $56.28 and has been above this “reversion to the mean” since the week of Dec. 29, when the average was $57.34. The 12 x 3 x 3 weekly slow stochastic reading ended last week at 91.97, above the overbought threshold of 80.00 and above 90.00 as an “inflating parabolic bubble.”

Given this chart and analysis, my strategy is to buy oil on weakness to my monthly value level of $61.69 and to reduce holdings on strength to my weekly risky level of $67.60. I show annual and quarterly pivots of $63.81 and $64.53, respectively. (For more, see: How Can I Buy Oil as an Investment?)

The Weekly Chart for Chevron

Weekly technical chart showing the performance of Chevron Corporation (CVX) stockCourtesy of MetaStock Xenith

The weekly chart for Chevron is negative, with the stock below its five-week modified moving average of $123.50 and above its 200-week simple moving average of $106.95, which is the “reversion to the mean,” last tested during the week of Aug. 25, when the average was $107.13. The 12 x 3 x 3 weekly slow stochastic reading is projected to slide to 68.49 this week, falling below the overbought threshold of 80.00.

Given this chart and analysis, I recommend buying Chevron shares on weakness to my semiannual value level of $98.73 and reducing holdings on strength to my monthly risky level of $129.72. (See also: Chevron Shares Continue Slump After Poor Earnings.)

The weekly chart for Exxon Mobil

Weekly technical chart showing the performance of Exxon Mobil Corporation (XOM) stockCourtesy of MetaStock Xenith

The weekly chart for Exxon Mobil is projected to be negative at the end of this week if the stock closes the week below its five-week modified moving average of $84.90 and below its 200-week simple moving average of $86.35, which is the “reversion to the mean.” The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week at 76.40, falling below the overbought threshold of 80.00.

Given this chart and analysis, my strategy is to buy Exxon Mobil shares on weakness to my semiannual value level of $73.53 and to reduce holdings on strength to my quarterly and annual risky levels of $92.47 and $103.71, respectively. My monthly pivot is $84.82. (For additional reading, check out: Exxon, Chevron Shares Plunge After Weak Results Spook Street.)

Published at Mon, 05 Feb 2018 16:29:00 +0000

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Markets are off to an ugly start this week

The Dow had its worst week in two years. Why?
The Dow had its worst week in two years. Why?

Markets are off to an ugly start this week

  @CNNMoneyInvest

Global stock markets have picked up where Wall Street left off, plunging into negative territory.

Major indexes in Asia and Europe were in the red on Monday. The losses follow the 2.5% drop in the Dow on Friday, its biggest percentage decline since the Brexit turmoil in June 2016.

“Panic sentiment is spreading globally,” said Margaret Yang Yan, an analyst at CMC Markets in Singapore.

The sell-off hit Japanese stocks hard: the Nikkei fell 2.6%.

Other major markets in retreat included Hong Kong’s Hang Seng index, which sank 1.1%. European markets, which posted significant losses on Friday, were off by over 1% in early trading.

U.S. stock futures were also pointing lower, with the Dow expected to open down about 0.6%.

Wall Street’s plunge Friday came after U.S. jobs data showed wage growth is finally beginning to strengthen. That’s a sign of a health American economy, but investors freaked out because it suggests inflation, which has stayed puzzlingly low for a long time, may be starting to pick up.

Higher inflation brings a host of worries for markets because it means the Fed could raise interest rates faster than previously expected. That could dent corporate profits and cause chaos in bond markets.

Former Fed Chairman Alan Greenspan said last week that both stocks and bonds were in a “bubble.”

But experts point out that the latest declines are still modest compared with the hefty gains of recent months. Many stock markets around the world have been trading near record highs.

Traders are now wondering if “last week’s reversal in U.S. stocks and the ugly close Friday … is likely the start of something bigger,” said Greg McKenna, chief market strategist at currency trading platform AxiTrader.

He noted that some assets that investors typically turn to during periods of market panic — such as gold and the Japanese yen — haven’t seen big gains so far.

“Markets haven’t really kicked off yet,” McKenna said. “Not in the way they might.”

— Charles Riley contributed reporting.

Published at Mon, 05 Feb 2018 06:55:10 +0000

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Apple Breakout at Risk After Earnings

Apple Breakout at Risk After Earnings

By Alan Farley | February 2, 2018 — 8:55 AM EST

Apple Inc. (AAPL) beat fiscal first quarter profit estimates by four cents on Thursday evening while meeting revenue expectations and lowering second quarter guidance, triggering a buy-the-news reaction that evaporated ahead of Friday’s opening bell. The company reported year-over-year stagnation in quarterly iPhone, iPad and Mac shipments, raising questions about the icon’s long-term growth trajectory. Even so, results eased shareholder anxiety following multiple reports that the company had cut iPhone X production due to poor sales.

The company’s vast supply chain reacted positively to the news, with Skyworks Solutions, Inc .(SWKS), Universal Display Corporation (OLED) and other component makers posting modest gains. However, many of those issues had lost considerable ground in January due to the incessantly bearish news flow and need significant upside to recoup those losses. That recovery may not happen, given weak shipment metrics likely to dominate Wall Street analyst reporting in coming months. (See also: Why Apple’s Suppliers Are Plunging as Mega Tech Thrives.)

Apple shares ended a three-year uptrend near $100 in September 2012, yielding a reversal and decline that found support at the 200-week exponential moving average (EMA) in the mid-$50s. An April 2015 high and May 2016 low completed the outline of a broad rising channel pattern, with moving average support once again ending the downside. The stock then took off in a strong rally impulse, returning to channel resistance in May 2017.

The stock spent five months testing that level, breaking out after October earnings and lifting to an all-time high at $180.10 on Jan. 18. Reports of iPhone X production cuts then triggered a persistent decline, with a series of analyst downgrades adding to selling pressure. The downtick reached new support at the top of the broken channel earlier this week, generating a minor bounce into the earnings release.

The stock rallied to $174.25 after the news and drifted lower, dropping to $168 overnight. This is a dangerous price level to open Friday’s session because it will take little downside to trigger a failed channel breakout that sets off major sell signals. Specifically, a closing print into the $162 to $164 price zone will reinstate channel resistance in place since 2012, exposing the stock to significant downside that could reach the 200-week EMA, now rising from $120. (For more, see: Global Smartphone Shipments Suffered Biggest Ever Fall Last Quarter.)

Universal Display stock has benefited greatly from Apple’s adoption of OLED technology, breaking out above 2011 resistance in the mid-$60s in the first quarter of 2017 and more than tripling in price into January 2018’s all-time high at $209. The stock has fallen from grace in the past two weeks, dropping more than 50 points in sympathy with its benefactor’s troubles. Universal Display shares closed at a three-month low near $155 ahead of the earnings news and bounced to $160 overnight.

The decline into February undercut the December swing low at $158, raising the odds for a range breakdown that could generate additional selling pressure. The bounce back to $160 reinstates that broken support level, but the stock needs to survive the regular session and add to gains to lock in a bullish technical shift. If so, a stronger buying impulse may set into motion, lifting the stock into new resistance at the 50-day EMA in the mid-$170s.

Informed market players will be taking aggressive profits into that price level because the longer-term technical outlook has now shifted into the bears’ favor, exposing further downside that may reach the 200-day EMA at $140. Bulls will need a Herculean effort to avoid that outcome because first quarter price action could easily fill out a head and shoulders top that generates a large-scale downtrend. (See also: Analyzing Porter’s Five Forces on Apple.)

The Bottom Line

Apple stock has settled below $170 ahead of Friday’s opening bell, just a few points above new support generated by October’s five-year channel breakout. Bulls must defend that line at all costs or risk a much steeper slide that could reach the $120s. (For additional reading, check out: Apple May Lose Crown as World’s Most Valuable Company.)

Published at Fri, 02 Feb 2018 13:55:00 +0000

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Strong iPhone prices, cash plans buoy Apple shares after muted revenue forecast

Strong iPhone prices, cash plans buoy Apple shares after muted revenue forecast

(Reuters) – Apple Inc on Thursday gave a disappointing revenue forecast for the first three months of 2018 and its sales of iPhones over the holiday quarter missed Wall Street’s expectations, deepening concerns that enthusiasm for the iPhone has permanently waned since its 2015 peak.

But the company’s disclosure that it plans to draw down at least $163 billion in net cash, potentially returning the cash to shareholders, helped boost shares 3.3 percent to $173.48 in after-the-bell trading while the market seemed to also greet the revenue outlook without alarm.

“Over time, we are trying to target a capital structure that is approximately net neutral. We will have approximately the same level of cash and debt on the balance sheet,” Apple’s chief financial officer, Luca Maestri, told Reuters in an interview.

“We’re going to take that balance down from $163 billion to zero,” Maestri said, referring to Apple’s current level of cash net of debt.

He did not say whether the reduction in net cash would come in the form of returning capital to shareholders, capital expenditures or acquisitions.

The cash plans are a “pleasant surprise,” Brian Colello, an analyst at Morningstar Inc, said. “This goes a bit against Apple’s historically conservative capital structure.”

Trip Miller, managing partner at Gullane Capital Partners and an Apple investor, said the move to a level balance sheet was good news. “Let’s face it, this cash has been doing nothing for us over the last six years,” he said.

Apple forecast revenue of $60 billion to $62 billion and gross margins of between 38 percent and 38.5 percent for its fiscal first quarter ending in March. Analysts were expecting $65.7 billion in sales and a gross margin of 38.9 percent for the March quarter, according to Thomson Reuters I/B/E/S, though some had forecast sales as low as $60 billion. The stock had declined to its lowest point since November in recent weeks.

Thrivent Financial analyst Peter Karazeris said the low revenue forecast had been expected by many analysts and investors following a string of “credible reports” that Apple had cut parts orders.

“I’m happy we’ve gotten the bad news that I was expecting guided into the stock. It was probably a little overbaked,” he said. “Now we’re focusing on metrics that really matter like free-cash generation and shareholder returns.” Thrivent holds Apple shares.

Bright spots in the fiscal first quarter ended Dec. 30 included average selling prices for the iPhone that topped Wall Street expectations, driven by demand for newer models like the iPhone X.

The weak expectations for the March quarter could signal that while Apple’s diehard fans are willing to pay the iPhone X’s steep price, the new phone remains too expensive to tempt mainstream shoppers, especially in countries like China.

The holiday quarter is typically Apple’s largest, accounting for more than a third of its revenue as fans line up for its newest offerings, but Wall Street often looks to the March quarter for clues about how well products launched during the holidays will carry over to mainstream buyers.

However, average selling prices for iPhones were stronger than Wall Street expected during the holiday – $796 versus expectations of $756.

“It was really driven by the success of the iPhone X and also the iPhone 8 and iPhone 8 Plus,” Maestri told Reuters. “The new lineup has done incredibly well.”

Analysts are counting on increased selling prices for iPhones as one factor that will help Apple increase revenue even as unit sales flatten out.

Apple met its prediction for its strongest-ever holiday shopping quarter on the strength of the iPhone X and iPhone 8. The company posted revenue of $88.3 billion and profit of $3.89 per share, from $78.4 billion and $3.36 per share a year earlier. The results beat analyst expectations of revenue of $87.3 billion and profits of $3.86 per share.

Apple’s services business, which includes Apple Music, the App Store and iCloud, grew 18 percent to $8.4 billion, missing analyst expectations of $8.6 billion. Maestri said the lower services revenue was because the holiday quarter was only 13 weeks rather than 14 weeks.

The services revenue was down slightly from $8.5 billion the quarter before.

“That’s something to watch as we roll further into 2018,” said Miller of Gullane Capital. “Does that continue to stagnate, or was that a one-time bump in the road?”

Maestri also said Apple’s installed base of active devices reached 1.3 billion, 30 percent higher than two years ago and representing an expansion of potential customers for the services business.

Apple said it expected its tax rate for the March quarter to be 15 percent following changes in U.S. tax law. The company said last month it plans to make a one-time tax payment of $38 billion on its overseas cash and has a five-year, $30 billion U.S. capital expenditure plan.

The company did not say how much of its overseas cash it would bring back to the United States in the short term and gave no new information about its capital return program, which it typically updates each April.

Reporting by Pushkala Aripaka in Bengaluru and Stephen Nellis in San Francisco; Editing by Leslie Adler

Published at Thu, 01 Feb 2018 23:32:46 +0000

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Qualcomm Stock Moves Lower Despite Earnings Beat

by Magnascan from Pixabay

Qualcomm Stock Moves Lower Despite Earnings Beat

By Justin Kuepper | February 1, 2018 — 1:26 PM EST

Qualcomm Incorporated (QCOM) shares fell nearly 2% in early trading on Thursday even though the company reported strong first quarter financial results. Revenue rose 0.2% to $6 billion – beating consensus estimates by $70 million – and net income of $0.98 per share beat consensus estimates by seven cents per share. The stock appears unlikely to break out from trendline resistance levels following the earnings report.

Qualcomm’s financial results continue to be affected by ongoing disputes with Apple Inc. (AAPL) and its contract manufacturers. At the same time, CNBC reports that Broadcom Limited (AVGO) sees the earnings report as concerning, but not concerning enough to call off its acquisition bid. Broadcom would have to take a massive break-up fee to combat antitrust concerns. Investors will be closely watching the March 6 annual meeting for developments regarding a hostile takeover. (See also: Qualcomm: Increased Chance of Higher Broadcom Bid.)

Technical chart showing the performance of Qualcomm Incorporated (QCOM) stock

From a technical standpoint, the stock has been range bound since November of last year after experiencing a breakout following Broadcom’s hostile takeover bid. The relative strength index  (RSI) has moved to neutral conditions at 50.81, but the moving average convergence divergence (MACD) has experienced a bearish crossover. The positive news is that the stock has near-term support near the 50-day moving average at $66.10.

Traders should watch for a breakout from upper trendline resistance at around $69.00 if Broadcom feels that it must increase its offer. With the “concerning” earnings report, there is also potential for a move below the stock’s previous range to around $64.00. Traders are speculating that the acquisition could take place for between $70.00 and $80.00 per share, although the expectation is now closer to the low end. (For more, see: Qualcomm’s Time to Decide Its Fate Has Come.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

Published at Thu, 01 Feb 2018 18:26:00 +0000

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U.S. pensions seen adding bonds, paring stocks: Wells Fargo

U.S. pensions seen adding bonds, paring stocks: Wells Fargo

NEW YORK (Reuters) – U.S. pensions are expected to shift more money into bonds and out of equities to rebalance their holdings at month-end in the wake of strong gains in the stock market in January, Wells Fargo strategists said on Monday.

The possible increased allocation into bonds comes as global bond yields have been rising on strengthening business activities across the world and expectations of reduced stimulus from major central banks.

On Monday, the benchmark 10-year Treasury yield touched 2.727 percent, the highest since April 2014, Reuters data showed.

Higher yields would help provide pensions with a stable source of income to meet payouts to retirees.

“Rising long-term yields can bring a considerable relief to private pensions,” the Wells Fargo strategists wrote based their estimates on month-end allocation changes.

Corporate pensions have struggled from historic low yields which have made their existing pension obligations expensive. Their average pension funding gap, future obligations versus current investments, has remained wide despite the run-up in stock prices.

Retirement plans may need to add $16 billion in fixed income and to reduce up to $20 billion in equities for their month-end asset-allocation rebalancing, they wrote in a research note.

Corporate pensions could pocket some gains from Wall Street’s blistering start to 2018 with the S&P 500 gaining 7 percent in January. They could put the money in less risky Treasuries.

“The $15-20 billion asset allocation shift is quite sizable in the context of recent experience,” the Wells Fargo strategists wrote. “The size of the January shift is a testament to the large gap in performance between equities and Treasuries at the start of 2018.”

Reporting by Richard Leong; Editing by David Gregorio

 

Published at Mon, 29 Jan 2018 21:41:07 +0000

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Restaurant Stocks Sell Off After McDonald’s Earnings

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Restaurant Stocks Sell Off After McDonald’s Earnings

By Alan Farley | January 30, 2018 — 9:36 AM EST

Dow component McDonald’s Corporation (MCD) led a slate of restaurant earnings and analyst calls on Tuesday morning, triggering modest sell-the-news reactions. The group has shaken off 2017 worries that higher commodity prices would affect margins, riding the wave of strong U.S. economic growth and overseas opportunities. Even so, performance has now bifurcated into winners and losers, with giant chains prospering while mid-size and smaller franchises, including Jack in the Box Inc. (JACK) and Sonic Corp. (SONC), have been sold aggressively.

Mickey D’s beat fourth quarter EPS and revenue estimates by a wide margin, also reporting that quarterly comps increased by a healthy 5.5%. The stock fell more than a point after the news, suggesting a vanishing pool of available capital on the sidelines following months of higher prices. However, the State of the Union address and Federal Reserve rate decision may be distorting order flow, and it could take several sessions to gauge the market’s true reaction. (See also: McDonald’s Earnings: Same-Store Sales Will Be Key.)

McDonald’s stock has been on a tear since breaking out above May 2016 resistance at $132 in April 2017, posting a high-volume breakaway gap and adding more than 45 points in a powerful uptrend that has held above the 50-day exponential moving average (EMA) for the past four months. It posted an all-time high near $180 just one day before the earnings release, indicating that complacent shareholders were confident that quarterly metrics would not stall or reverse the rally.

Ironically, this superior performance sets the stage for an intermediate correction because price action has generated extremely overbought technical readings that need to be worked off through price and time. The stock has been trading above the 200-day EMA since November 2016, while a single eight-point pullback characterized the sum total of 2017 bear power. This type of upside is unsustainable, raising the odds for a decline as low as $150 some time in 2018. (For more, see: Why Is McDonald’s Valued Like a Big Tech Stock?)

Yum! Brands, Inc. (YUM) has matched McDonald’s rapid ascent in the past year, lifting to an all-time high. Nomura Securities downgraded the holding company for Pizza Hut, KFC and Taco Bell from “Buy” to “Neutral” just an hour before its rival reported earnings, generating a knee-jerk decline that is testing weekly support in the mid-$80s. Yum! Brands reports earnings on Feb. 8, with mixed action likely between now and then.

The stock topped out in the upper $60s in May 2015 following a multi-year uptrend and sold off to a two-year low in the mid-$40s in the first quarter of 2016. The company spun off China operations through Yum China Holdings, Inc. (YUMC) in November 2016, generating healthy uptrends in both parent and child. Yum! Brands stock broke out above the 2015 high in May 2017 and has gained nearly 30 points since that time. Like McDonald’s, the stock looks overbought following its dramatic run, raising the odds that earnings will trigger a sell-the-news reaction. (See also: McDonald’s, Yum Are the Best Chains: Bernstein.)

Chili’s parent Brinker International, Inc. (EAT) broke out above the 2007 high in the mid-$30s in 2013 and ended the rally at an all-time high in the mid-$60s in 2015. It then turned sharply lower, entering a multi-legged downtrend that cut through breakout support, dropping to a four-year low in September 2017. A bounce into December reinstated the breakout before pausing in the upper $30s, building a holding pattern through the first month of 2018.

The company beat fiscal second quarter EPS estimates by a wide margin in Tuesday’s pre-market release but missed revenues by a small margin. A healthy increase in fiscal year 2018 guidance may keep sellers at bay, supporting a bounce that faces stiff resistance in the mid-$40s. A breakout above that barrier could take months, but strong accumulation since September should allow bulls to complete that task. (For more, see: Here’s How Brinker Plans to Turn Chili’s Around.)

The Bottom Line

McDonald’s reported strong fourth quarter earnings but sold off after the news, suggesting that overbought technical conditions are starting to exert their influence. However, it will take a decline through the 50-day EMA near $172 to overcome the strong fundamentals and signal an intermediate correction. (For additional reading, check out: How to Analyze Restaurant Stocks.)

Published at Tue, 30 Jan 2018 14:36:00 +0000

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VIX Hits 5-month High As Bonds, Stocks Wobble

VIX Hits 5-month High As Bonds, Stocks Wobble

By Aaron Hankin | January 30, 2018 — 9:23 AM EST

The volatility index (VIX) hit a 5-month high Tuesday trading above 14 for the first time since August 2017, as global equities and bond markets continued their rocky start to the week.

After finishing at record highs Friday, all three major U.S. indices fell more than 0.5% Monday, and have extended losses in pre-market trading Tuesday, with the Dow Jones Industrial Average (DJIA) leading the sell-off, down over 200 points at the time of writing. For bondholders, the slide began January 9, when the benchmark 10-year Treasury yield traded through 2.5% for the first time since March 2017 and has since added 20 basis points to trade above 2.7% for the first time in nearly four years (bond prices move inversely with yields).

The spike in volatility comes as investors are getting set for a busy week on the economic calendar headlined by Wednesday’s Federal Reserve meeting, where officials are set to leave the fed funds rate unchanged, but with the bond market sell-off gaining pace, pundits will be eyeing forward guidance from the committee.

Stacked either side of the Fed meeting is President Donald Trump’s State of The Union speech, manufacturing and confidence data, and Fridays’s all-important nonfarm payrolls report.

The Investopedia Anxiety Index (IAI) that is typically in line with the movement in the VIX, also currently reveals high levels of investor apprehension with an ‘extreme anxiety’ reading on the market indicators. The IAI is constructed by analyzing which topics generate the most reader interest at a given time and comparing that with actual events in the financial markets. It breaks down investor anxiety into three distinct categories – 1) macroeconomic; 2) market; and 3) debit and credit.

The pickup in volatility has flown through to other markets with most major cryptocurrencies beginning the week on the back foot. Bitcoin prices are back below $11,000, down over 8% since Monday’s open, and have lost close of half their value since December’s spike above $19,000. While Ethereum has moved back below $1,150. (See also: Fraudulent Trading Drove Bitcoin’s $150-to-$1000 Rise in 2013: Paper)

For safe haven investors the news is a little brighter with Gold prices continuing to climb, trading back above $1,350 an ounce, up more than $50 since the beginning of 2018, while oil prices continue to surge, making a three-year high Monday, trading above $65 a barrel. (See also: The Bond Market is Trying to Warn Us of Trouble)

Published at Tue, 30 Jan 2018 14:23:00 +0000

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Twitter Stock Higher Amid Takeover Chatter, Citron Praise

A screen displays the stock price of Twitter above the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, U.S., January 31, 2017. REUTERS/Lucas Jackson

Twitter Stock Higher Amid Takeover Chatter, Citron Praise

By Justin Kuepper | January 29, 2018 — 4:40 PM EST

Twitter, Inc. (TWTR) shares have risen nearly 15% over the past two sessions amid deal rumors and positive comments from Citron Research. Rumors of a takeover from Salesforce.com, Inc. (CRM) caused higher-than-average call option volume during Friday’s session. At the same time, Citron Research – a noted short seller – said that “2018 is the year for $TWTR” in a tweet posted during Friday’s session.

While Twitter surpassed analyst expectations last quarter, the company reported revenues that fell 4.2% to $590 million, and earnings per share came in at just 10 cents. This was the third straight quarterly decline in top-line revenue, while earnings per share were about three cents lower than the same period last year. The positive news is that the company’s turnaround has been picking up steam and could pay dividends this year. (See also: Prominent Short Seller Bullish on Twitter.)

Technical chart showing the performance of Twitter, Inc. (TWTR) stock

From a technical standpoint, the stock rebounded from lower trendline support last week at around $22.00 toward the middle of its price channel. The relative strength index (RSI) appears relatively neutral at 58.58, but the moving average convergence divergence (MACD) could see a bullish crossover in the near term if the uptrend continues. The overall price trend has also been higher since late October, when Twitter reported better-than-expected financial results.

Traders should watch for a breakout to R1 resistance at $26.34 or upper trendline and R2 resistance at $28.67 on the upside. If the stock loses momentum in the middle of its price channel, traders should watch for a move lower to the pivot point and 50-day moving average at around $23.00 before a potential move higher. A breakdown from lower trendline support could lead to a move to S1 support at $20.90. (For more, see: Tech Outperformance Won’t End Soon: Goldman Sachs.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

Published at Mon, 29 Jan 2018 21:40:00 +0000

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State of the Union more likely to raise eyebrows than stocks

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State of the Union more likely to raise eyebrows than stocks

(Reuters) – Anybody hoping for a replay of the stock market advance that followed U.S. President Donald Trump’s first address to Congress may be disappointed. This time around, shares could suffer if Trump does not tread carefully on hot-button issues.

The S&P 500 jumped 1.4 percent the day after Trump’s speech last February, as an unexpectedly measured tone from the notoriously abrasive president boosted investor optimism that he would be able to deliver on pro-business campaign promises.

But with a new tax law under his belt, Trump is expected to use his late-night State of the Union speech on Tuesday to applaud that victory and broach topics including trade agreements, immigration reform and infrastructure spending.

That may not be enough to inspire investors further, after enthusiasm about corporate tax cuts helped push the S&P 500 up more than 19 percent in 2017 and close to 7 percent so far this year.

“Nothing is going to trump tax reform,” said Michael O’Rourke, chief market strategist at JonesTrading in Greenwich, Connecticut. “Since I expect the president to do a victory lap, the typical market reaction would be a sell-the-news reaction in contrast to last year.”

The S&P 500 has had only 4 daily declines so far this year, and the chances of a Jan. 31 selloff are higher if the market does not take a breather before then, O‘Rourke said.

Investors could be rattled by tough talk from Trump on issues including U.S. immigration policy, which has already divided lawmakers in a Republican-controlled Congress and led to a three-day government shutdown.

“He’s got to tread carefully on the hot-button items,” said Phil Blancato, chief executive of Ladenburg Thalmann Asset Management in New York, citing immigration and trade talks.

He noted that a “pro-immigration agenda” could be the easiest way to expand the U.S. workforce to boost an economy with a tight labor market.

Congress agreed to extend funding to Feb. 8 and the White House is expected to unveil an immigration legislation framework a day before the speech.

Strategists also are wary about how Trump will approach international trade, including the North American Free Trade Agreement (NAFTA) in his speech due to his tendency for “America First” rhetoric.

“We know historically protectionism is bad for the economy. It’s bad for markets. You open a great deal of uncertainty if you hone in on that,” said JonesTrading’s O‘Rourke.

U.S. officials on Thursday probed Canadian proposals for unblocking talks on NAFTA but there were few signs of progress, raising questions about whether any real movement is happening at the penultimate round of negotiations on the treaty.

Any trade comments would also come on the heels of Trump approving a steep tariff on solar panels and washing machines, moves those industries have warned could raise prices and endanger jobs.

To be sure, Trump could boost sentiment with details on a plan to rebuild U.S. infrastructure. On Wednesday he promised $1.7 trillion in investments over the next 10 years. But any related gains may be limited to sectors like industrials and materials.

And in general, big moves like the one seen last year are relatively rare.

The market moved more than 1 percent in either direction just 15 times the day after the annual U.S. presidential address since 1965, when it was first televised at night. By comparison, it had a 1 percent or more move 13 times in the session before the speech.

Retail investors may be more likely than professional fund managers to let policy comments influence their trading, said Blancato, who is not planning to make any asset allocation changes based on the speech.

Investors may also be less sensitive to the speech’s message this time around. Many now say they largely ignore politics after a tumultuous year with a divided Republican party, heated exchanges with nuclear-armed North Korea, a probe of possible collusion between Trump’s election campaign and Russia and the government shutdown.

Traders have instead focused on economic data and earnings, which continue to look strong. Analysts expect the S&P 500’s fourth-quarter earnings per share to rise by 12.7 percent from a year earlier, according to Thomson Reuters data.

“Short of something truly stupid like a trade war with China or a withdrawal from NAFTA, or something horrific like a nuclear conflict with North Korea, we don’t see a scenario where investors are likely to elevate politics to the same level of importance as the global recovery and improving earnings,” said Robert Phipps, a director at Per Stirling Capital Management in Austin, Texas.

Additional reporting by Lewis Krauskopf; Editing by Alden Bentley and Meredith Mazzilli

Published at Sat, 27 Jan 2018 00:36:38 +0000

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Starbucks Stock: Uptrend at Risk After Earnings

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Starbucks Stock: Uptrend at Risk After Earnings

By Alan Farley | Updated January 26, 2018 — 9:35 AM EST

Starbucks Corporation (SBUX) stock is trading sharply lower on Friday after the company beat fiscal first quarter EPS estimates by a penny while missing revenue expectations by more than $100 million. Global comparable sales increased just 2%, while operating margin contracted, igniting fears that the company will have trouble meeting growth objectives in the coming year. The initial decline brought the stock to a five-week low, cutting through intermediate support at the 50-day exponential moving average (EMA) for the first time since November.

The stock has gained significant ground in the past five months, lifting into a test of 2015 and 2017 resistance in the mid-$60s. The sell-off marks the third rejection at those levels, raising the odds that the stock is carving a long-term topping pattern that will eventually generate a major downturn. Exceptionally weak accumulation during this period adds weight to a bearish scenario, with many institutions choosing to risk their capital elsewhere. (See also: Starbucks Disappoints After Holiday Drink Sales Lose Steam.)

SBUX Long-Term Chart (1992 – 2018)

The stock came public at a split-adjusted 36 cents in June 1992 and rallied just above a buck two years later. A higher 1995 low at 69 cents provided a springboard for a powerful trend advance into the new millennium, generating three stock splits while baffling conservative analysts with its rapid growth trajectory. In fact, many so-called experts of that era pleaded with investors to avoid the stock, which they believed was quickly running out of growth options.

Starbucks stock topped out just above $6.00 in November 2000, built a small double top into 2001 and broke down, dropping to $3.37 after the Sept. 11 attacks. That low marked a buying opportunity, ahead of an uptrend that posted impressive gains during the mid-decade bull market, stalling near $20 in 2006. It broke down once again in the fourth quarter of 2007, entering a major downtrend that reached the single digits during the 2008 economic collapse.

The subsequent recovery wave mounted the 2006 high in 2012, generating a trend advance that posted multiple buying waves into the October 2015 high at $64. Price action since that time has devolved into a choppy trading range, bounded by support near $50 and resistance in the mid-$60s. The stock briefly mounted the 2015 high in June 2017, but the rally reversed just 87 cents above that level, reinforcing a barrier that may be impenetrable into the next decade. (For more, see: If You Had Invested Right After Starbucks’ IPO.)

SBUX Short-Term Chart (2015 – 2018)

A Fibonacci grid stretched across the trading range that started during the August 2015 mini flash crash organizes chaotic price action. Four downswings during this period have held the .382 retracement, while the sell-off into November 2016 found support at the 50% level. A secondary resistance line has organized near $60, with breakdowns generating quick downside into the low $50s. That scenario may be unfolding once again, predicting that the post-earnings decline will last for several weeks at a minimum.

On-balance volume (OBV) topped out with price in the fourth quarter of 2015, entering an aggressive distribution wave that posted a series of lower highs and lower lows into August 2017. The uptick into 2018 brought willing buyers off the sidelines, but the indicator failed to reach the June 2017 peak, carving another lower high. In turn, aggressive sell signals will now erupt if OBV drops through the December swing low.

The initial decline has dumped the stock into the 200-day EMA, which could generate a short-term bounce. The $60 level now stands as major resistance, with short sale positions taken near that level generating advantageous reward:risk. Conversely, a breakdown through the December low at $57.05 would also violate 200-day EMA support, raising the odds for downside that tests last year’s deep lows. (See also: How Starbucks Makes Money.)

The Bottom Line

Starbucks fell more than 5% after earnings and is now testing support near $57. A breakdown may complete the next stage in a long-term topping pattern that generates significant downside in the coming years. (For additional reading, check out: Starbucks as an Example of the Value Chain Model.)

Published at Fri, 26 Jan 2018 14:35:00 +0000

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Is Caterpillar Stock Topping Out, or Will the Uptrend Resume?

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by Ricobino from Pixabay

Is Caterpillar Stock Topping Out, or Will the Uptrend Resume?

By Justin Kuepper | January 25, 2018 — 4:18 PM EST

Caterpillar Inc. (CAT) shares are trading roughly even after the company reported fourth quarter financial results. Revenue rose 34.8% to $12.9 billion – beating consensus estimates by $920 million – and earnings per share of $2.16 beat consensus estimates by $0.37 per share. The stock moved sharply higher in pre-market trading before falling sharply lower at the open. After the conference call began, these losses were pared to neutral levels later in the day.

While the company reported strong financial results, the market may see limited upside potential given the firm’s lofty price-to-earnings multiple. Management was also unable to comment on a U.S. tax probe of its Swiss unit other than to say that the company is cooperating and hoping for an expeditious resolution. The bright side is that tax reform and the new infrastructure bill are expected to be net positives for the upcoming years. (See also: Caterpillar Beats Estimates on Buoyant Global Demand.)

Technical chart showing the performance of Caterpillar Inc. (CAT) stock

From a technical standpoint, the stock appears top heavy after reaching R2 resistance levels at $171.02. The relative strength index (RSI) remains at overbought levels of 72.93, while the moving average convergence divergence (MACD) experienced a bearish crossover that could signal downside ahead. Thursday’s candlestick also suggests a lot of indecision in the market, with long shadows following Caterpillar’s quarterly financial results.

Traders should watch for a breakout from upper trendline resistance at around $176.00 on the upside or a breakdown from R1 support at $163.93 on the downside. Given the lofty RSI and bearish MACD, traders should maintain a bearish bias on the stock and watch for some consolidation over the short term. A long-term breakout could lead to a retest of major support at the pivot point, lower trendline and 50-day moving average at $151.11. (For more, see: Caterpillar Could Top Records in 2018: JPMorgan.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

Published at Thu, 25 Jan 2018 21:18:00 +0000

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GE is under SEC investigation

A general exterior view of the U.S. Securities and Exchange Commission (SEC) headquarters in Washington, June 24, 2011. REUTERS/Jonathan Ernst

GE is under SEC investigation

General Electric is under investigation by the Securities and Exchange Commission.

GE (GE) said on Wednesday that regulators are investigating a $6.2 billion insurance loss that the company revealed last week. The disclosure is a new and potentially much more serious problem for a company already reeling from missteps and questionable management decisions.

The SEC is also investigating the company’s accounting, chief financial officer Jamie Miller told analysts during a conference call. Specifically, she said the agency is looking into “revenue recognition and controls” for the company’s long-term service agreements.

“We are cooperating fully with the investigation, which is in very early stages,” Miller said.

GE said it will restate its 2016 and 2017 quarterly numbers to reflect new accounting standards.

The SEC declined to comment.

Over the years, GE has gotten rid of most of GE Capital, its lending arm. GE sold most of its insurance business by 2006, but the company held on to a portfolio of policies. It’s been a decade since GE took on any more long-term care insurance, which protect against nursing home and assisted living costs.

That’s why Wall Street was so surprised last week when GE announced that a “comprehensive review” led by outside experts found that the insurance portfolio needs cash — a lot of it. Most of the money is going to shore up the long-term care policies.

Around the insurance industry, long-term care policies have been hurt by soaring healthcare costs and longer life expectancies. Other insurance companies have been forced to book losses in recent years.

But it wasn’t until last week that GE announced a $6.2 billion hit and warned it will devote $15 billion to boost insurance reserves.

GE said the SEC is probing “the process leading to the insurance reserve increase” as well as the fourth-quarter loss.

Lynn Turner, former chief accountant at the SEC, said the insurance problems raise questions about GE’s controls and bookkeeping.

“GE seems to be way behind the 8-ball on this. Others have been boosting reserves and GE hasn’t,” Turner said.

GE is facing a cash crisis that analysts blame on years of terrible deal-making, murky accounting and needless complexity.

Most of those decisions were made under former CEO Jeff Immelt, who was replaced last year by GE veteran John Flannery. Immelt certified GE’s most recent annual report, which covered 2016. A spokesman for Immelt declined to comment on the SEC investigation.

The surprise exit of longtime chief financial officer Jeffrey Bornstein spooked Wall Street last fall. Unexpected CFO departures often make investors nervous about potential accounting problems.

Miller, who was promoted to CFO last year, said an ongoing “very deep review” of GE’s books has thus far uncovered “nothing here that I’m overly concerned about.”

Scott Davis, lead analyst at Melius Research, pointed the finger at Immelt for the accounting issues. “We can’t be certain that prior management misled investors,” Davis wrote in a report on Wednesday, “but we certainly believe there were ethical lapses that deserve attention.”

GE’s accounting is currently overseen by the board’s audit committee. Former SEC chairman Mary Schapiro has chaired GE’s audit committee since April 2016.

In 2009, the SEC charged GE with accounting fraud, alleging the company used “overly aggressive accounting” to make false and misleading statements to investors. GE paid $50 million to settle the charges. It neither admitted nor denied wrongdoing.

“GE has a reputation for questionable and nontransparent financial reports that play too close to the line when it comes to accounting,” said Turner, the former SEC official.

Beyond the new SEC investigation, GE faces other legal troubles in its lending unit. GE Capital’s discontinued subprime mortgage business, known as WMC, is under investigation from the Justice Department. The government is probing WMC’s pre-crisis sale of subprime loans.

GE, which sold WMC in late 2007, has set aside $400 million to cover the subprime mortgage problems. Miller said GE has not yet had “substantive discussions” with the Justice Department.

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Alibaba Stock Looks to Break Out From Key Support

Alibaba Stock Looks to Break Out From Key Support

By Justin Kuepper | January 24, 2018 — 9:55 AM EST

Alibaba Group Holding Limited (BABA) shares rose more than 4.5% on Tuesday and appear set to continue their rise during Wednesday’s session. After downgrading Baidu, Inc. (BIDU) shares to Hold and lowering its price target to $285.00, Jefferies analyst Karen Chan listed Alibaba as a top pick in China’s internet sector alongside Tencent Holdings Limited (TCEHY), Weibo Corporation (WB) and Momo Inc. (MOMO), which helped boost shares throughout the day.

Earlier this week, Alibaba announced that its deep neural network and artificial intelligence software, developed in conjunction with Microsoft Corporation (MSFT), have outscored humans on a Stanford University reading comprehension test that included more than 100,000 questions. These technologies could eventually learn to replace customer service jobs that have relied on call center employees to handle customer inquiries. (See also: AI Could Start Third World War: Alibaba’s Jack Ma.)

Technical chart showing the performance of Alibaba Group Holding Limited (BABA) stock

From a technical standpoint, the stock rebounded from lower trendline, 50-day moving average and R1 support levels at around $181.50 to retest prior reaction highs at around $192.50. The relative strength index  (RSI) appears lofty at 65.14 but remains below overbought levels of 70.00, while the moving average convergence divergence (MACD) could experience a near-term bullish crossover suggestive of further upside ahead.

Traders should watch for a high-volume breakout from these key resistance levels to fresh 52-week highs. If the stock closes above these levels, they could become key support levels for a further move higher over the intermediate to long term. If the stock fails to break out, traders should watch for a move lower to retest the trendline, 50-day moving average and R1 support levels before potentially making another breakout attempt. (For more, see: Alibaba Launches Cryptocurrency Mining Platform.)

Chart courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.

Published at Wed, 24 Jan 2018 14:55:00 +0000

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Stock-focused hedge funds post biggest gains among top performers

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A Wall Street sign is pictured outside the New York Stock Exchange in New York, October 28, 2013. REUTERS/Carlo Allegri/File Photo

Stock-focused hedge funds post biggest gains among top performers

BOSTON (Reuters) – Hedge funds managers who bet on stocks scored some of the industry’s biggest gains in 2017, when equity markets galloped past a series of critical milestones, according to a new list of the top 20 all-time performers.

The annual list, released on Sunday, shows Steve Mandel’s Lone Pine Capital, John Armitage’s Egerton Capital, Andreas Halvorsen’s Viking Global Investors and Chris Hohn’s TCI Fund Management as last year’s best performers.

Each of the four stock-focused funds earned between $3.5 billion and $5.0 billion, according to list compiler LCH Investments, the world’s oldest fund of hedge funds.

Two of 2017’s strongest funds were newcomers to the list. Egerton ranked 18th, having earned $14.7 billion since its inception in 1995, while TCI came in at No. 20 with $14.2 billion in gains since 2004.

“The greatest investment opportunities in 2017 were in the rising equity markets, and the best managers seized on that,” said LCH Chairman Rick Sopher.

Two Sigma Investments dropped off after making the list for the first time in 2016, when funds using computer programs to trade posted strong returns. Paul Tudor Jones’ Tudor Investment Corp, which recently announced a reorganization and focuses mostly on macro investments, including bets on currencies, bonds and commodities, also fell from the chart.

There was little change at the very top of the list. Ray Dalio’s Bridgewater Associates, the world’s biggest hedge fund, retained its No. 1 spot, and George Soros’ Soros Fund Management stayed in second place. Both firms bet on stocks, bonds and currencies.

Bridgewater posted only small gains last year, raising the total to $49.7 billion since its 1975 introduction. Soros gained $43.9 billion since it began in 1973, with $2.1 billion generated in 2017.

Ken Griffin’s Citadel, which joined the list in 2016, rose to No. 3 from No. 5, having earned $28.6 billion since it began in 1990.

The biggest loss came at Caxton, founded by Bruce Kovner and now run by Andrew Law. The macro-oriented firm lost $1.1 billion in 2017 and dropped to No. 19 from 17.

After years of sluggish returns and high fees put many investors off hedge funds, some came back in 2017, adding a total of $9.8 billion in new money after taking out $70 billion in 2016, data from Hedge Fund Research shows.

Reporting by Svea Herbst-Bayliss; Editing by Lisa Von Ahn

Published at Sun, 21 Jan 2018 22:04:09 +0000

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The Macro View: Amigos Ride On

 

The Macro View: Amigos Ride On

By: Gary Tanashian | Fri, Jan 19, 2018


As symbolized by the 3 Amigos, the macro backdrop is riding on to its destiny. That forward destiny is a top in stocks vs. gold (Amigo 1), a rise in long-term interest rates to potential if not probable limits (Amigo 2) and an end to the yield curve’s flattening trend (Amigo 3).

When our zany friends complete the journey, big changes are likely in the macro markets.

Let’s take a checkup on each Amigo and consider some implications as well.

Amigo 1: Stocks vs. Gold

Using the S&P 500 as an example, stocks/gold ratios are still trending up on the daily time frame.

spx/gold

The big picture allows for higher levels before this Amigo stops riding and the party crashes. Stocks vs. gold is a confidence indicator and confidence is intact and growing. In this case, confidence = mania. This is consistent with our ‘inflation trade’ theme since it is the US stock market that benefited first and most intensely from the Fed’s years of non-stop monetary fire hoses (ZIRP & QEs 1-3 with a side of Op/Twist).

spx/gold

Amigo 2: Long-term Interest Rates

Again sticking with the US for the example, 10yr and now even 30yr yields are gaining more attention out there among market analysts and media. This is 100% on track with our theme that by the time the 10yr hits 2.9% and the 30yr 3.3%, the sound of “BOND BEAR MARKET!!!!” will be deafening.

Here is the bullish 10yr yield. The daily pattern targets 2.9% and…

We have a handy cross reference by the long-term monthly chart. TNX is creeping through potential limiter #1, which is the EMA 110 (solid red line) with the EMA 140 out ahead around 2.9%. I like the target confluence by these two different time frames and views. If the 10yr is to move higher, that would come with ever increasing media noise about the new age of rising yields (and inflation).

Even the 30yr, which as been lagging, has been making a move of late and is in a bottoming pattern similar to the one that the 10yr has broken out of.

tyx

But the pattern above has not yet broken out like the 10yr and so, this is either a negative divergence or the 30 is going to play some catch up if it is going to go for its limiter at the monthly EMA 100. The question is, has Bill Gross already made a serious contrary indicator signal or is he going to be anointed the “Bond King” as the 30yr rises to the limiter? See: A Gross Signal Upcoming. His media-bellowed call was incredibly unfortunate in early 2011. Maybe this time he gets to look like a genius temporarily.

tyx

Amigo 3: The Yield Curve

The daily view of the 10yr-2yr is in a downtrend and flattening.

yield curve

The flattening goes with the macro boom that is taking place. The curve is far from inversion, but contrary to popular belief, it is under no obligation to invert before the macro turns. Then again, a downtrend is a downtrend as long as it is in force… and in force it certainly is.

yield curve

Bottom Line

Amigo 1 (Stocks vs. Gold): Stocks continue to trend upward vs. gold and this implies ongoing confidence in the boom. The last thing on players’ minds right now is playing defense. Insofar as gold has been strong, which we’d anticipated for this time frame for all the reasons (seasonal, CoT, ‘inflation trade’, etc.) belabored to this point, it’s real bull market will feature an end to the party in the risk ‘on’ stuff. Right now, it’s still party on Garth.

Amigo 2 (Long-Term Interest Rates): The rising interest rates story is gaining traction in the wider media. We have expected long-term yields to rise with the dynamic ending phase of the boom. The noise could become intense and set up a great contrary play as the 10yr and 30yr yields come to their long-term limits (if decades of uninterrupted history as a good guide) and Bill Gross – the Bond King – reclaims his throne.

Amigo 3 (10yr-2yr Yield Curve): It’s simple, it declines with a boom and it rises with a bust. We are in a boom. Risk is high and rising every week, but the trend is the trend for now.

How to play it? I am sticking to a regimen of deploying capital on opportunity, making sure to take ample profits, staying balanced (for example, currently balancing gold sector vs. broad market and favored commodity areas) and always being aware of cash levels.

By Gary Tanashian


Gary Tanashian

Gary Tanashian
http://www.nftrh.com

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Published at Fri, 19 Jan 2018 14:48:33 +0000

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Wall Street ends higher despite government shutdown threat

Wall Street ends higher despite government shutdown threat

NEW YORK (Reuters) – Wall Street rose on Friday, led by gains in consumer stocks, even as a possible government shutdown loomed.

The S&P 500 and the Nasdaq hit record closing highs, while the Dow ended the day higher after trading in a narrow range.

Nike Inc (NKE.N), Philip Morris International Inc (PM.N) and Home Depot Inc (HD.N) rose between 1.5 percent and 4.8 percent on upbeat analyst expectations, helping to boost the S&P 500. Conversely, losses in International Business Machines Corp (IBM.N) and American Express (AXP.N) capped gains on the Dow.

The Dow Jones Industrial Average .DJI rose 53.91 points, or 0.21 percent, to close at 26,071.72, the S&P 500 .SPX gained 12.27 points, or 0.44 percent, to 2,810.3 and the Nasdaq Composite .IXIC added 40.33 points, or 0.55 percent, to 7,336.38.

For the week, the Dow rose 1.04 percent, the S&P 500 added 0.86 percent and the Nasdaq gained 1.04 percent.

Nine of the 11 major S&P sectors were higher, led by a 1.1 percent gain in the consumer staples index .SPLRCS and a 0.9 percent rise in consumer discretionary stocks .SPLRCD.

FILE PHOTO: Traders work on the floor of the New York Stock Exchange, (NYSE) in New York, U.S., January 8, 2018. REUTERS/Brendan McDermid

A disappointing full-year profit forecast from IBM pushed its shares down 4.0 percent, the biggest single-day loss since July.

American Express slipped 1.8 percent after posting its first quarterly loss in 26 years and suspending share buybacks for the next six months.

“The market has a few jitters as the result of a potential shutdown,” said Kevin Miller, chief executive of E-Valuator Funds in Bloomington, Minnesota. “From a longer-term perspective, corporate earnings are still strong, and we’re about to engage in the benefits of tax reform.”

The U.S. Senate was racing to avert a shutdown ahead of a midnight deadline on the spending measure amid lingering disagreements between Democrats and Republicans. Negotiations continued on Friday after Senate Democratic leader Chuck Schumer met with President Donald Trump at the White House to address the impasse.

Advancing issues outnumbered declining ones on the NYSE by a 1.98-to-1 ratio; on Nasdaq, a 2.51-to-1 ratio favored advancers.

The S&P 500 posted 105 new 52-week highs and nine new lows; the Nasdaq Composite recorded 171 new highs and 30 new lows.

Volume on U.S. exchanges was 6.82 billion shares, compared to the 6.32 billion average over the last 20 trading days.

Additional reporting by Sruthi Shankar in Bengaluru; Editing by Leslie Adler and James Dalgleish

Published at Fri, 19 Jan 2018 22:30:33 +0000

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