Before The Bell: Looming Recession, Semiconductor Growth
Corporate profits are already in a recession with some believing an economic one is not far behind.
Bloomberg reports U.S. corporate profits are in a recession with some predicting an economic recession is not far behind. Corporate profits as measured by the Commerce Department fell at an annual rate of $19.3 bln in 3Q from 2Q. Further, earnings from companies in the S&P 500 fell almost 25% (the largest annual decline in over five years) as companies reduce spending and hiring due to slower sales and higher energy and labor costs. Professor Mike Shedlock spoke of this story in Lenders Rapidly Tighten Credit.
From the Bull Pen: With a recession looming, Professor Cody Tafel mentioned a play in Healthcare iShares (IYH) noting the index was "close to breaking new highs." Those in agreement may set sell-stops below the 50-DMA ($71.06).
From the Bear Cave: Those bearish on the economy may look for downside plays in cyclical stocks. Caterpillar (CAT) may be an option with buy-stops on the other side of $75.
The WSJ reports semiconductor sales rose 5% world-wide in October on an annual basis according to the Semiconductor Industry Association (SIA). Despite the robust growth, however, consumers are reaping the benefits of strong price attrition. The SIA noted a 55% YTD increase in DRAM shipments with only a 4% increase in revenues. Further, sales of microprocessors up 15%, but revenue increases are only up 4% due to price cutting. Professor Adam Katz spoke of the semiconductor space in his Minyan Mailbag.
From the Bull Pen: Professor Katz said as energy prices increase, so does the pricing environment for MEMC Electronic Materials (WFR). Those bullish may set sell-stops below recent lows ($73.20).
From the Bear Cave: Professor Kevin Depew recently noted the headwinds facing Applied Materials (AMAT) with the company essentially being a commodities company. Those bearish may play the downside with buy-stops above $20.
Click on Minyanville's Stocks To Watch more company-specific ideas.
Quick Check Around the World
Asian trading closed with the Hang Seng +0.05%, Nikkei -0.33%, Sensex +1.24%, Taiwan -0.03% and Shanghai -0.07%.
A quick check towards Europe finds the CAC -0.11%, DAX +0.06%, FTSE -0.39%, ATX +0.63%, Swiss Mkt. -0.43% and Stockholm +0.42%.
A Look At Commodities
Commodities are lower with crude oil down -1.03 to 87.68. Gold is down -2.50 to 786.60, silver is down -0.16 to 14.00, and copper is lower by -8.20 to 310.25.
As of 8:30 AM EST, S&P futures are up by +1.40 points and Nasdaq futures are higher by 0.25 points.
On the Radar
10:00 ISM Index: 50.5 cons
5:00 Auto Sales: 5.2 mln cons
5:00 Truck Sales: 7.1 mln cons
Click here for Minyanville's full Trading Radar.
Happy Monday everyone! Good luck and have a great day!
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