Reports surfaced that Spain could seek aid from the European Union as early as Saturday. A spokeswoman for the Spanish government quickly refuted that, but a euro-zone official said leaders would discuss potential support for the country’s banks Saturday morning. Spain’s IBEX 35 rallied 1.8%.
Despite gains in Spain, European markets were mostly lower as data showed German exports declined for the first time this year in April. The Stoxx Europe 600 fell 0.3%, its first drop in four days. Asian markets also fell, with Japan’s Nikkei Stock Average shedding 2.1%, and China’s Shanghai Composite losing 0.5%.
Thomas Doherty is a student at Villanova University majoring in Finance and Economics. All questions and comments can be sent to Thomas@KeeneOnTheMarket.com
In addition to the update on the the MacBook Pro, Apple is rumored to be improving upon all of their Mac computer lines with a potential exception to either the Power Mac or the Mac Mini. Finally, they are expected to improve on their line of accessories, including their keyboard, mouse, and airport products.
While the iPhone 5 is rumored to not come out until October, an updated iOS will be improved with an iOS 6. The new iOS will allow for more photo and link sharing, as well as a potential marriage between Facebook and Apple. Additionally, Siri software should be updated and expanded to the iPad. The Siri software came out to great fanfare but was a critical flop among consumers who cite its lack of capability and slow speed as major concerns.
Now, the question of the day is what will happen to Apple’s stock post WWDC. Looking at previous announcements of the same products, Apple’s stock has improved consistenly near 2% from the week before each announcment to the week after it. However, as over 42% of Apple’s business comes from the iPhone and less than 6% comes from their Mac computer business, the impact of an improved product on Apple’s bottom line will be less than a new iPhone. Moreover, the Mac growth has been incredibly slow, yet steady, over the course of its product lines. So will Apple (AAPL) improve next week? Possibly, but unless Tim Cook wows the crowd, don’t expect a major market movement.
UPDATE 6.11.2012: Well everyone, the WWDC went exactly according to plan. As predicted, Apple announced an updated MacBook Pro, iOS 6, and a new operating system for their mac computers. While Apple has improved their product line, it comes as no surprise to KOTM that their stock fell after the annoucement through current after market trading. Without a major iPhone annoucement, the conference lacks substantial “wows.” As such, I’ll chalk Apple’s stock to the classic, “Buy on the rumors, sell on the news” strategy.
Thomas Doherty is a student at Villanova University majoring in Finance and Economics. All questions and comments can be sent to Thomas@KeeneOnTheMarket.com
The Hang Seng dropped just under 1% with the Industrial and Com bank and the Bank of Communications being their biggest losers at 4.91 and 4.69 respectively.
Europe has also snapped their gains this week with the FTSEurofirst 300 down 1.3% with mining shares down 3.2% and banks down 2.5% due to concerns of the economic environment.
The ugly numbers from Asian have hit the commodity market with crude slammed to 82.31 an almost 3% loss, natural gas, gold and silver also taking the hit.
Contributer Chris Rygh is currently pursuing his MBA in Wisconsin and has a passion for the Market. Comments can be directed to ryghcw19@uww.edu
The Nasdaq and S&P 500 both finished lower as the Nasdaq fell 14 points, -.48%, to $2,831.02 and the S&P barely skidded below zero at -.01% to $1,314.99.
Thursday’s market action pivoted around central banks, said John Canally, an economic strategist at LPL Financial. “It’s not off to the races because we didn’t get more details,” Mr. Canally said, noting the Fed appears to “still be on a path to do more.”
The European markets were broadly higher after finishing strong. The Stoxx Europe rose 1.1%, gaining for the third session in a row. In Asia, Japan’s Nikkei increased 1.2% while Hong Kong’s Hang Seng gained 0.9%.
Crude-oil futures fell 0.2% to $84.82 a barrel, while gold futures slipped 2.8% to $1586.60 a troy ounce. The U.S. dollar fell against the euro but gained ground against the yen. The yield on the benchmark 10-year Treasury note rose to 1.654%.
Medicaid insurer Molina Healthcare (MOH) tumbled -31.02% after suspending full-year earnings guidance while it sorts out problems in new Texas markets. Navistar International dropped 14% after the commercial-truck maker swung to a surprise fiscal second-quarter loss, pegged in part to restructuring charges and slower-than-expected revenue growth. Finally, Men’s Warehouse (MW) sank as high overhead costs weighed down its quarterly earnings and the retailer announced a downbeat view for the current quarter.
Thomas Doherty is a student at Villanova University majoring in Finance and Economics. All questions and comments can be sent to Thomas@KeeneOnTheMarket.com
There’s absolutely no doubt that when it came to the financial sector, JP Morgan was considered the head of the class. They knew how to manage risk and didn’t make all the same mistakes the other large financials did before the last crisis. Even Warren Buffett sang the praises of Jamie Dimon saying that is shareholder letters were must reads.
Boom!
Everything was chugging along fine and then: Boom, along comes JP Morgan with the announcement of what is being described as a poorly managed hedge had lost the company at least two billion dollars and could be more.
When there are still risks in the financial and economic system and the company who is believed to be above the fray comes along and can be surprised with a loss of this magnitude it makes you step back and really think about what is considered safe anymore.
Can It Happen Again?
The financial meltdown in 2008 brought us to the brink of collapse. However most feel that safeguards and changes have been put in place so this doesn’t happen again. Just to be safe you invest in the best in breed like JP Morgan and Wells Fargo. But what happens when the best in breed falter or succumb to an unexpected event?
If JP Morgan can lose two to five billion on a hedging strategy, what does that mean for the weaker players? We’ve seen MF Global collapse on a bad bet on European bonds and now the JP Morgan loss. What’s the next shoe to drop?
There are MANY factors out there that can give us cause for concern:
1. European Debt Crisis 2. Burgeoning US Deficit 3. Possible Chinese Slowdown 4. Shaky US Economy
Throw these things into the mix along with a financial system that is highly leveraged and you have the recipe for a problem. The derivatives exposure to banks is unknown. JP Morgan apparently didn’t even know about a two billion dollar problem less than a month before they announced it.
What to Do?
The best course of action is to stay nimble and don’t let a bad trade turn into an even worse investment. You couldn’t get me to invest in the financial sector. There are just too many unknowns within the highly leveraged system. If I could give someone one piece of advice it would be to avoid financial stocks like the plague.
Unprofitable: I lose money on this trade if AAPL closes above $601.55 July 15, 2012. The most I can lose on this trade is the amount the Spread can be worth $5 minus the price I sold it for $1.55 for a total of $3.45.
Reason I Like This Trade: I like this trade, because I can make money if AAPL sells-off, is flat, or goes up by less than 5.5%. I think that AAPL will not have too much exciting news next week at their Conference on San Fran and I want to take advantage of this.
UPDATE 6.8.2012 With AAPL rallying a little higher, this Spread is currently $1.55, bc the premium has come in. I think AAPL will sell-off after the WWDC.
UPDATE 6.9.2012 With AAPL rallying higher, but time is on my side, This Spread is now worth $1.90. I might add if the stock moves higher from here.
UPDATE 6.13.2012 With AAPL selling back off after the WWDC this Spread is back to being worth $1.55. I will leave this on until further notice.
UPDATE 6.27.2012 With lack of conviction in AAPL this Spread is worth $.90, but I am leaving it on for more future profits.
UPDATE 7.2.2012 This is why I am a premium seller, because this stock is moving higher, but the Spread is decaying away. This Spread is still only worth $1.70.
The Spanish 10 year benchmark bond auction led the day with a higher than expected bid to cover ratio and an average yield of 6.044%. The Spanish auction, coupled with China’s first cut in benchmark interest rates since 2008 helped spark the bullish move in US stocks.
WTI crude oil is up 2 cents and 0.02% at $85.04, while gold and silver futures have been exceptionally bearish. Gold is trading at $1593.50 and down $40.70 or 2.49%, and Silver at $28.56, down 93 cents or 3.15%.
Tempur-Pedic International Inc. (TPX) continued its drop that started yesterday due to its gloomy outlook and is trading at $21.40, down 4.42%, or 99 cents on the day. TPX reached a high of 43.88 on Tuesday before the release of it’s’ earnings report.
Lululemon (LULU) released stronger than expected quarterly earnings, however their projected outlook brought bearish sentiment. Lulu was down 12% in afterhours trading and is trading at $63.88, down $6.14 or 8.77%.
David Cornes holds a degree in Economics from The University of Montana.
The yoga apparel company topped Wall Street analyst’s projections by beating last quarter’s earnings by 40%. They posted a profit of $46.6 million, or 32 cents a share up from the previous quarter’s $33.4 million profit, or 23 cents a share. Revenue beat expectations at $285.7 million, up from $186.8 million a year earlier after bolstering inventory to boost sales. Although earnings estimates reached new highs, Lululemon had a weaker than expected outlook for the next quarter with an expected net revenue of $273 million, compared to analysts’ estimates of $290 million. Lululemon expects its previous sales growth rate of 25% to slow to low double digits. Chief Executive Christine Day said, “Our strategy to increase inventory levels led to strong revenue growth and earnings performance in the first quarter as our guests responded well to our spring styles and colors,” contrary to low inventory levels in the past, leaving some stores unable to meet customer’s demand.
The Hang Seng added close to 1% with Wharf Holdings being the index’s biggest gainer jumping 4.87%. China made a surprise 25 basis point cut in interest rates today, helping stocks and in hopes of bolstering the struggling economy.
Euro stocks are gaining this morning in hopes of upcoming policy action, helped out by Spain selling 2.1b worth of medium and long term bonds. Eyes are now looking to the US and Bernanke who will be addressing the state of the economy later today.
Smucker’s (SJM) gains 2% in pre-trading after their EPS beat expectations by $.12.
FEI approved a quarterly cash dividend and declared the company’s first of $.08/share.
Crude is back in a downswing, as is natural gas and gold with silver posting up in green close to 3%.
Down is the Euro this morning, compared to the dollar, while the pound gained.
Contributer Chris Rygh is currently pursuing his MBA in Wisconsin and has a passion for the Market. Comments can be directed to ryghcw19@uww.edu
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