Monday Morning Musings

Markets in the US are a bit lower this morning, while overseas markets were higher overnight. 

The Nasdaq is underperforming after reports from the WSJ that indicate that AAPL is cutting production for iPhone 5 parts due to sluggish demand.  AAPL stock is down 3% and other tech stocks along the supply chain are also down in sympathy.

Asian markets were up across the board overnight, although Japan was closed for a holiday.  China surged +3.1% after Beijing announced that it will allow foreign direct investment to increase by 10 times.  In 2012, China said the country allowed $16 billion in foreign investment.  The Bank of Japan said it agreed on a 2% inflation target.

European markets are also higher.  The EC said it is considering less stringent measures for Spain and France. 

There is no economic data scheduled for release today.  Fed Chairman Bernanke is going to speak at the Univ. of Michigan, where he may comment on the Wolverines losing to Ohio State yesterday.  But that's just a rumor.

The dollar is lower this morning, and commodities are mixed.  Oil prices are weaker near $93 while gold prices are rising to $1667.

The 10-year yield is lower to 1.84% and the VIX is up slightly near 13.80, still a low absolute level.

Trading comment: The market held up last week when it could have given back some of the previous week's outsized gains.  I expect more backing and filling this week and the market consolidates its recent gains and works off its current overbought condition.  I still think the markets will make another push higher before we get the usual first quarter pullback, the timing of which is always difficult.  Investor sentiment continues to grow more bullish, but is not at extreme levels yet.  And earnings season is still ahead of us, which could also set the tone for the short-term. 

KAM Advisors has long positions in AAPL

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Japan Launches Larger Than Expected Stimulus Program

The markets are slightly lower in early trading, though not by much.  The action this week has been pretty constructive this week with the S&P 500 closing at multi-year closing highs yesterday.

Overnight markets were mixed in Asia, with Japan rallying +1.4% after the govt. launched a 10.3 trillion Yen stimulus package that they hope will boost GDP by 2.0%.  China closed on the flip side with a large -1.8% decline on the heels of a hotter than expected CPI reading.  China's CPI rose 2.5%, which suggests higher inflation and could make further stimulus measures more difficult.

European markets are also mixed after some weak economic data.  Spain's industrial production fell -7.2%.  And in the UK industrial production declined -2.4%.  JPMorgan lowered Germany's Q4 GDP forecast and now expects a -2.0% contraction.  That would drag down overall GDP for the Eurozone as well.

In earnings news, INFY surprised the Street with a rare earnings beat and also raised guidance.  That is causing the stock to spike +18% higher so far, and is also boosting one of our portfolio companies CTSH (+4%).

Wells Fargo (WFC) topped earnings estimates, but lower net interest margins is leading to some profit taking and the stock is 1% lower this today.

And Chevron (CVX) raised its guidance saying earnings will be above consensus forecasts.

The euro is bouncing again and pushing the dollar index lower.  This usually boost commodities, but they are still lower today.  Oil prices are lower to $93 and gold prices are falling back to $1659.  I suspect commodities would be down more were it not for the weakness in the dollar.  Some of this might have to do with the concerns today about China, as materials stocks are trading lower as well.

The 10-year yield is firm at 1.90%.  And the VIX is only fractionally higher still lingering near the $13.55 level.  Portfolio insurance is on sale, and it might not be a bad time now or in the near future to buy some put protection on portfolios for those that trade options.

Trading comment: The market did a good job this week not giving back any of last week's outsized gains.  But the S&P 500 is also running into resistance around the 1470 level.  We still expect some backing and filling as the market consolidates around these levels.  Ultimately we are looking for another push higher in the markets before see a more pronounced pullback, and we pretty much always get a Q1 correction at some point.  Additionally, more growth stocks are breaking to new highs so that is where we want to focus.  One caveat is to tread carefully ahead of earnings, but those stocks that show positive reactions to solid earnings and guidance should continue to do well.

KAM has long positions in CTSH and WFC

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ECB Holds Rates Steady, Euro Rallies

The markets are higher in early trade after gains in overseas markets as well.

Asian markets were mostly higher after China reported positive export data.  Export growth increased to 14.1% year/year, well above estimates for 5.0% growth.  This helped China post a wider than expected trade surplus.  Japan was also higher after the Bank of Japan reiterated that it may purchase assets on an "unlimited basis".  I guess that's what they call QE-infinity.

European markets were mixed this morning after the ECB held interest rates steady at 0.75%.  Some folks were looking for the ECB to cut rates, so when they didn't it caused a big spike higher in the euro.  The Bank of England also held rates steady at 0.5% and kept its asset purchase program unchanged.

The latest Euro country to seek a bailout is Cyprus.  It is estimated that the country needs 17 billion euros.  Germany said Cyprus must agree to economic reforms before the EU approves anything.  And Russia said it does not intend to grant Cyprus an interstate loan.

A couple of companies issued downside guidance this morning, and their stocks are trading lower.  The two companies, ARO and TIF, are both retail related though one is apparel and the other is more jewelry.  It's odd that TIF had to guide down when SIG recently guided higher. 

AAPL is still trying to break away from that $520 level its building building support around.  CEO Tim Cook is in China talking to China Mobile about "matters of cooperation".  China Mobile has 700 million subscribers but does not offer the iPhone.

Commodities are mostly higher at the dollar is weak today.  Oil prices are up near $94 while gold has bounced $25 to $1675.

The 10-year yield is higher today near 1.90%.  And to volatility index remains in low territory near the 13.75 level.

Trading comment: The market still appears like it wants to work its way higher.  We said toward the end of last year that any sort of deal on the fiscal cliff would likely unleash some pent up demand to put money to work in equities.  For the short-term, the worries are off the table.  But they remain in the not to distant horizon, and we expect similar volatility this year like we saw last year.  The spending cuts part of the fiscal talks will come, the debt ceiling, as well as whether Spain will look for a bailout this year.  We are still looking for a solid year overall in the market, but similar to recent years there may be times when it looks far from certain that stocks will produce those solid gains.

KAM Advisors has long positions in AAPL

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Will Earnings Season Boost Stocks?

The market is higher in early trading as earnings season officially kicked off last night.  There were only a small handful of companies reporting, but so far the reactions in stocks has been mostly positive.  It will be important to see how stocks continue to react to earnings reports going forward as well as what management's have to say about the business environment and any impact they see from the fiscal cliff issues.

The few stocks trading higher after reporting include AA, STZ, and WDFC.  One stock that disappointed and is trading down is APOL.

AAPL is also trading lower despite news that it may launch a lower-end iPhone during the second half of the year.  AAPL is trying to build a base near the $520 price support.  If they report a solid Q4 earnings figure, I think having this base building could help propel the stock back above its 50-day average which it first broke below on October 5th. 

Asian markets were mixed overnight.  Japan was higher after the Bank of Japan plans to adopt a 2% inflation target and double the size of its asset purchase program.  China closed flat last night.

Europe is also mixed today.  Final Eurozone GDP for Q3 remained at -0.1%.  Germany's industrial production came in below expectations at 0.2%.  And Poland cut its key interest rate by 25 basis points to 4.00%.

The 10-year yield is flat near 1.87%.  And the volatility index is lower again down to the 13.50 level.  Hard to believe a little over a week ago it was spiking to 23. 

Trading comment: If you look at the chart of the S&P 500, you'll see that after that big spike higher on Jan. 2 the market really hasn't given much back.  We had a chance the last couple of days to selloff more, but the market usually found its footing and closed off of its intraday lows.  Today is basically the 5th day that the SPX has hovered around that 1460 level, and the sideways consolidation has allowed the market to work off its overbought condition.  It now appears that this brief rest could be enough to give the market a chance to work higher again.  With the fiscal cliff at least partially behind us, folks seem more inclined to continue to put money to work in the market.  For now the price/volume appears constructive.

KAM Advisors has long positions in AAPL

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IDC's CMO Predictions for 2013: The CMO Becomes Master of Data

Here are our Top Ten calls for 2013.

Please feel free to contact me in 365 days and we can tally up our success rate!

1. The C-suite (CEO, CFO, and COO) will demand that the CMO produce both a strategy and a plan for how market-driven data will significantly contribute to corporate objectives.

2. The CMO and the CIO will begin the year as functional peers and end the year as either friends or frenemies, and per the CEO, the CIO will become more actively involved with the CMO in all marketing automation decisions that have cross-functional implications.

3. The automation outlay could approach 10% of marketing's discretionary budget in 2013, with two-thirds of the total outlay coming from marketing and one-third coming from IT; for "best practice" organizations, this will shift to 50:50 by 2014.

4. Even with their new partnership with the CIO, many CMOs will find that their positions are in jeopardy as they failed to produce a robust data analytics function — or even a game plan to get there.

5. Starting in 2013, after the CMO realizes that he/she does not have the skill sets in place for data analytics proficiency, 50% of new marketing hires will have technical backgrounds.

6. Eight out of ten companies will report that most social media initiative growth is taking place outside of marketing.

7. By the end of 2013, 5% of CMOs will shift to a "mobile first" strategy.

8. Content isn't king — it's a wild beast; In 2013, CMOs will be pragmatic, shifting focus less on big platform projects and more on linking access to audience needs.

9. The demand for greater insight into the revenue impact of marketing and sales will require that older CRM systems be replaced, creating infrastructure disruption.

10. High-tech pipeline conversion metrics will continue to improve; expect a 20% improvement in target-to-deal ratios and a 10% reduction in time to create a customer, with both due to better automation and analytics-driven process improvement.

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No Catalysts To Keep Stocks Up

The markets are lower in early trading.  Yesterday the indexes recouped some of their losses into the close, but this morning the SPX is breaking below its 3-day support levels.  I think this is mostly profit taking after a big run in the market as opposed to news driven selling.

We are getting into preannouncement time for any companies that don't think they are going to make their quarterly numbers this time around.  GameStop (GME) is down -10% after reporting disappointing holiday sales.  YUM is also down -4% after the company lowered its sales forecast for its China division.

Telecom stocks are weak this morning also.  Rumors are that Verizon may purchase Vodafone's stake in Verizon Wireless.

Asian markets were mostly lower overnight.  Japan's finance minister said the country would use its fx reserves to purchase European Stability Mechanism bonds in an effort to weaken the Yen.

European markets are mixed.  Eurozone unemployment came in at 11.8%.  And Eurozone consumer confidence was in line at -27.0, a low figure.

Commodities are mixed this morning as the dollar is rallying.  Oil is a bit lower near $92.90, but gold is bucking the trend and trading higher to $1654.

The 10-year yield is easing back more to 1.87% following last week's spike higher.  And the volatility index is up 3.5% again but still hovering at very low absolute levels of 14.25.

Trading comment: Investor sentiment remains a bit complacent at this juncture.  I have been looking for some consolidation in stocks which should also work off the short-term overbought condition.  While it is true that the number of stocks breaking out to new highs has been growing, be wary of stocks that disappointed last quarter and could be set to disappoint again.

KAM Advisors has long positions in YUM, VZ

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Crowdsourced Ethnography.

This minor #ikeascenes meme just appeared on my Twitter timeline.

I'm guessing it started as the sort of online reportage that used to make Twitter great. But, it also strikes me that it would be a smart way to do initiate some quick and dirty crowd-sourced ethnography.

While Google et al have learned to crowd-source translation and other data-gathering via online games and captchas, this ikeascenes meme is appealing to our love of spreading humour. And there's much more truth in humour than you'll find in focus-groups.

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