Buzz Bits: Dow, Nasdaq Gain Again
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Earnings Report - MV News
- Microsoft (MSFT) reported EPS of $0.32 vs $0.33 cons on revs of $10.9 bln vs $11.04 bln cons.
- KLA Tencor (KLAC) reported EPS of $0.48 vs $0.42 cons on revs of $518 mln vs $509.8 mln cons. Ex-option expense, EPS was $0.63 vs $0.56 cons.
- MetLife (MET) reported EPS of $1.33, which may not be comparable to $1.09 cons, on revs of $11.59 bln vs $12.19 bln cons.
- Altera (ALTR) reported Q1 GAAP EPS of $0.16 (in-line) on revs of $292.8 mln vs $297.7 mln cons. Non-GAAP EPS was $0.20 (also in-line).
- McAfee (MFE) reported Q1 EPS of $0.37 vs $0.30 cons on revs of $272 mln vs $261.9 mln cons.
Some notable notes: - Jason Roney - 3:06 PM
This will be only the 15th time the S&P 500 started the year with four consecutive monthly gains (provided we are above 1294.82 at tomorrow's close). The last occurrence was 1998.
The month of May closed higher 71% of the time with an average high (+2.93%) greater than the average low (-1.53%). The first five days of May were higher 72% of time as well.
In all 14 occurrences, the S&P 500 finished positive for the year and only one time did the S&P 500 decline from April month-end to December year-end (1971).
Maybe we'll see the same thing again today... - Jason Goepfert - 2:59 PM
Yesterday, I show that the S&P 500 closed within 0.5% of its yearly high, but more than 4% of issues traded on the NYSE closed at a new yearly low on the same day.
This kind of divergence is highly, highly unusual. Going back 40 years, I can only find three other instances. Those were April 1972 (the S&P was -3.2% sixty days later), Feb 1980 (-9.9% sixty days later), Nov 1999 (-1.6% sixty days later) and Nov 2005 (+3.0% sixty days later).
It's even more unusual that more than 4% of stocks also made a new high at the same time. This kind of extreme polarity has been written about for years, by such folks as Norman Fosback and Lowry's Reports. There are "market crash" signals based off of these kinds of things, going by such ominous-sounding names such as the Hindenburg Omen, Titanic Syndrome and Chernobyl Prophesy (that last one I coined somewhat tongue-in-cheek).
I don't put much faith in the "market crash" aspect of these, but the evidence is pretty strong that when so many stocks are making new lows at the same time broader averages are at or very close to new highs, the averages tend to suffer going forward. One could argue that there are a large number of bond funds on the NYSE that skew this number, and to this I would respond: 1) I don't think many of the new lows are bond funds, and 2) even if they are, isn't that itself an important tell?
Hugs and Drugs - David Miller - 2:54 PM
AstraZeneca (AZN) sent $200M to Abraxis (ABBI) for 5 years of marketing rights for Abraxane, plus the right for Abraxis to buy AZN's anesthetic and analgesic product line for $350M. I'm guessing that Abraxane purchase won't work out. Criticisms of the drug are the price (too high), the ocular side effects, and the pharmacy time necessary to put the drug together. Price is a double-edged sword, though, since higher price means higher reimbursement so some private-practice docs will actually favor the drug for its economics. If Sonus Pharma's (SNUS) Phase III trial of TOCOSOL paclitaxel (TOCp) shows positive data, we believe their drug will make a serious dent in Abraxane. We don't see Cell Therapeutics' (CTIC) Xyotax as a factor any longer. The TOCp trial is unique in that it combines a non-inferiority and a superiority trial plus weekly administration. If they reach just the non-inferiority threshold it will be a marketing battle (Bayer (BAY) vs. AZN) that TOCp will eventually win. If TOCp reaches the superiority threshold, it's game over as long as the side effect profile remains similar to prior trials.
Position in SNUS
The power of cheap volatility... - John Succo - 1:27 PM
Believe me, my expectations of market movements continue to be wrong. That is why I don't make big bets on them, as I have stated before.
I have also said that I have made money because of exactly the opposite of what I expect to happen. This is because I concentrate on option prices first and fundamentals and other things a far second.
Bank of America (BAC) illustrates this concept. Everyday without fail, we have accumulated cheap volatility as "income" funds have sold options as a pseudo income generator. The cheaper the option, the larger the gamma or potential move in a stock.
This sleepy stock (we can say the same for all bank stocks) has awoken today as fundamental traders kicked off the buying thinking that Mr. Ben's comments would steepen the yield curve and make it easier for banks to make money (we disagree, but so what). The buying has now forced the call sellers to re-evaluate their positions. They are obviously buying some stock to hedge the over amount of calls they are short, thus increasing the magnitude of the move.
What's for Lunch? Noodles, Naturally. - Todd Harrison - 12:32 PM
I often opine that the greatest lessons are learned from mistakes rather than rehashing what we've done right. It's not a habit I like to repeat too often as I, like you, wanna put some jingle in my jeans. Sometimes it's inevitable, however, and it's in that vein that I wanna share some thoughts
After paring both sides of my book yesterday, I entered today with alotta dry powder and a rather clear head. As I digested the morning flava, the notion of a "pin prick" started to crystallize in my crowded keppe. I walked through the vibes in real-time (scroll down) but, as it stands, I've been as wrong as rain in the house of pain.
As I sit and scribe, the BKX is galloping to all-time highs and the brokers (XBD) are trying to find a similar steed. While my "first round" of exposure was early (again, I should have known that Gentle Ben would talk the talk), I methodically faded the sharp, short-covering Snapper and made some nice sales. Alas, as we edge through the Thursday fray--and while I've 'traded around' some of that exposure--we're back at session highs.
I've always said that good traders know how to make money and great traders know how to take a loss. While I've never claimed to be a great trader, I will offer that a chunk of my exposure is "held for sale" by the end of the session. I wanna keep some downside gamma but discipline must trump conviction as we tread these choppy waters. I share these thoughts with hopes that they add value at some level and apologize for the chilly feel. It happens to the best of us.
Appreciate your time.
Position in financials
We haven't closed, yet. - Rod David - 11:38 AM
This morning's recovery has come from the simultaneous tests of several prior lows and lower prior highs. S&Ps are now 17 points off the low, and at new highs for the week. So, the question is whether the post-open success has already been rewarded sufficiently, or if the new relative high has triggered a reversal to new highs.
As for this new relative high, the "breakout" has yet to be maintained on a closing basis. And it's still relatively early in the day - the fat lady hasn't even begun clearing her throat. If the breakout does hold, then its rally would target SPX 1317.75 (ESm 1322.75) or 7 points higher than that.
But any rally would be brief, and the past week's decline hasn't formed a base that can sustain a new rally leg. This morning's opening gap will need to be filled eventually. And this morning's peak has filled the gap back to Friday's close, so closing today under this week's highs would not be bullish. Just slipping back into negative territory this afternoon would put new session lows into play.
How can you be a dove and a hawk at the same time? You would look weird, no? - Bennet Sedacca - 11:39 AM
So, we have the same strong data that Bernanke says we had, but he might stop raising rates anyway? OK. Can I be 10000% honest? He confused me(not surprised - nothing Boom Boom will say can SURPRISE me) with these comments.
Basically, the way I see this testimony is that the economy is strong but we may not raise rates, but on the other hand, we may raise 'em. Does he see a slowdown and want to re-inflate? Does he want higher stock prices at the expense of lower bonds? I think so -hyperinflation.
Well, bonds are rallying at first glance, but I have my suspicions that they won't hold their bid for long as this testimony is viewed as inflationary. Period. There, I said it. EVENTUALLY, it won't matter and the imbalances will take over, IMHO. For now, today, tomorrow, maybe the rest of the week, could be a slight rally in bonds. But, by being dovish today, I think it will make the final leg down nastier. Not advice, just my opinion.
As for full disclosure, my firm has NOT changed positions based on his testimony for clients. Not at all. Not yet.
A 5% correction would be perfect - Brian Gilmartin - 9:50 AM
Since the general equity market bottomed in March, 2003, we have had two corrections for the S&P 500 that put a little fear in the market:
1) The first started in late March, 2004, and took the S&P 500 from +4% to -3% between late March and the mid-August '04 bottom, with the catalyst being the Fed starting to raise rates in the summer, 2004.
2) The next decent correction started on Jan 1, '05, and ended in mid-April '05, with the S&P 500 falling approximately 5% peak to trough, with the likely catalyst being the spike in oil prices that we saw in q1 '05;
I'd actually love to see a 5% correction in here, but one accompanied by a drop in advisor sentiment into the low 30% range for "bullish" advisors, and one accompanied by a VIX spike into the mid teens. The correction that ended on April 20th, 2005 was accompanied by multi-year lows in advisor bullishness and a nice spike in the VIX.
It has been over a year since my firm has seen the S&P 500 drop to any degree that puts a little fear in investors' guts, absent the London bombings spike low last July, which was essentially a one-day correction.
My own opinion is that we need a correction to continue to work higher.
Position in S&P 500
Beazer lowlights - Fil Zucchi - 7:52 AM
Beazer Homes (BZH) is out with Q2 numbers. The lowlights are:
- Overall orders down 19.4%, including a whopping 46% plunge in the West region.
- EPS of $2.35 was ahead of $2.28 consensus after the company repurchased 1.01 million shares; ex the repurchase, EPS was $2.26. I point this out because on the last conference call BZH stated that all share repurchases were not modeled in their guidance and therefore would be incrementally accretive.
- Total debt was up 10% q/q.
- Guidance taken down to $10-10.50 from "at least $10.50", and new guidance assumes no further deterioration in orders." Keep in mind that the new guidance also already includes the approx. $.20/sh benefit from the Q1 and Q2 share repurchases, the impact of which was not in the original guidance.
Out and about for the rest of the day. Have a great one Minyans!!
Position in BZH
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