Home

S&P 500

Market Update 03-09-10

The major stock market averages have been climbing back toward their 52-week highs. For the S&P 500, for instance, we’re only about 1 percent below the January highs around the 1050 area. Depending on how the S&P (and Dow Industrials) act in the near term it should set the tone of the market for the next several months.

For instance, we’re coming up on the S&P’s 200-week exponential moving average. If the powerful rally we’ve experienced in the last year is nothing more than bull trap in the context of an on-going secular bear market, and there’s still a strong argument to be made that it is, then that level is a logical place for the market to stall again.

Failure to close above the 1050 market for several days running will likely shake investors’ confidence and lead to at least a modest pullback in share prices, probably resulting in another retreat back to around 1050.

If, on the other hand, the S&P does hold above 1050 for several days, the technical breakout will bring in more buyers who are likely to drive share prices even higher. Looking at the index’s long-term chart, the next leg up would probably carry us to around 1220, last seen back in September 2008. That area represents formidable overhead resistance that stretches all the way back to 1999.Read more...

Mid-Week Update 02-10-10

Earnings season is well underway with two thirds of S&P 500 companies already having reported. It appears that fourth quarter numbers are even better than what most analysts had anticipated, with roughly three quarters of those reporting having exceeded analysts’ expectations.
 
However, even with estimate-beating numbers, the market has not cheered results like we saw during 2009’s historic rally. This is likely due to the continued stagnant sales in developed countries where consumers are still in a state of shock following the recession (and continued high unemployment). However, those companies that have a strong presence outside of the developed world, or aren’t exposed to the consumer market, are now in the best position to take advantage of the continued global recovery.
 
Take Coca Cola (KO), for example, which is part of our Growth Portfolio. Yesterday the company announced that its net income had risen 55 percent to $1.54 billion, or 66 cents a share, from $995 million a year earlier. We see signs of the recovery, not so much in the increased net income, but in improvements in its top-line sales. Coke’s net revenues were up 5.4 percent year-over-year to $7.51 billion.
Read more...

Mid-Week Update 11-18-09

As we head into holiday shopping time, third-quarter earnings season is coming to a close with 95 percent of S&P 500 companies having reported. There have been many upside surprises (80 percent), but as consumer spending and the underlying economy have remained weak – most have been due to maneuvering by management, including inventory controls and cost cutting, as well as lowered analyst expectations. 
 
The market has cheered estimate-beating results, but we’re hardly convinced that the US economy is in the clear.
 
Wal-Mart (WMT), a Growth Portfolio resident and consumer bellwether has been no exception, as evidenced by the company’s recent earnings report. The retail giant saw U.S. same-store sales fall 0.4 percent versus the same period last year, short of the management’s expectations of flat to a 2 percent increase in sales. Earnings were up to $3.24 billion (84 cents a share) from $3.14 billion (80 cents a share) a year earlier as. Like so many others recently, the company beat profit expectations of EPS of 81 cents as CEO Mike Duke cut inventory by 4.1 percent and accelerated other expense-cutting mechanisms.
 
Looking towards the fourth quarter, management sees comparable sales flat (plus or minus 1 percent), but thinks even with the recession officially behind us, shoppers will continue to flock to Wal-Mart for value. We agree.
Read more...

Mid-Week Update 11-11-09

Earnings season marches on, with over 90 percent of S&P 500 companies having reported. Over 80 percent of those reported have had positive earnings surprises, but we can attribute much of that to the same cost-cutting measures we’ve seen over the last few quarters. What has been somewhat surprising is that almost half those reporting have also beat estimates with their top-line or revenue numbers, while only 30 percent have fallen short of estimates. 
 
Two of our health care picks recently also reported earnings, however, their stocks displayed distinctly different trading after their releases. 
 
Teva Pharmaceutical Industries (TEVA), the Israel-based generic drug company, saw its profits rise 28 percent in the 3rd quarter versus the year-earlier period. Excluding one-time items, net income rose to $806 million, or 89 cents a share, from $630 million or 77 cents, in the year-earlier period. Revenue, which increased 25 percent to $3.55 billion, actually fell slightly short of analysts’ expectations, but the earnings per share did beat those expectations by a penny.
 
The company’s third quarter operations were helped by sales of the company’s most important name-brand drug, Copaxone, which is used to treat multiple sclerosis. In addition, savings relating to last year’s $7.4 billion acquisition of Barr Pharmaceuticals were also a factor.
Read more...

Market Update 11-02-09

Short-Term Key: Negative Long-Term Key: -30 (Neutral)
 
This morning in our office, someone jokingly quipped that with gold over $1,000 an ounce we might have to stop using gold bars as doorstops. I said, “Don't worry, they're insured.”
 
Of course, we don’t actually have gold doorstops, but if we did, the only thing to worry about would be theft. Gold has the unique advantage of being virtually immune to the physical risks that plague other assets.
 
For instance, unlike other commodities, gold will not degrade over time. Its beauty endures in a way that makes ageing film stars and fashion models green with envy. It does not oxidize and corrode like other metals do, nor is it fragile in any way.
 
True, gold's chemical properties can be replicated somewhat using silver or platinum, but neither of these comes as close to gold in attaining the Platonic ideal of timeless beauty.
 
Moreover, the gold supply has remained fairly constant throughout history.
Read more...

Mid-Week Update 10-28-09

Earnings season rolls on. Despite still less-than-compelling economic readings, earnings reports have largely been good. With exactly half of the S&P 500 companies already having reported, we’ve seen 75 percent of them meet or beat expectations. Granted, many of these upbeat results stem from cost-cutting rather than strong top-line results, but we’ll take whatever we can get.
 
The earnings reported by some TCI portfolio holdings this week weren’t off the charts, but they left a positive long-term picture for these companies intact. Let’s take FPL Group (FPL), a member of both our Growth and Income portfolios. Before the market opened yesterday, FPL reported earnings and forward-looking guidance that underwhelmed investors. Excluding one time items, the U.S.’s largest producer of wind and solar power reported earnings per share of $1.38, four cents below consensus estimates.
 
The reasons for the miss were two-fold. First, the company’s Florida utility business was punished by the recession, as the state has been one of the hardest hit. Florida’s unemployment rate has reached 11 percent – its highest since records began in 1976. The company has expanded its wind farms and solar projects to compensate for lost Florida business, but earnings during the quarter were hurt by poor wind resources in Texas.
Read more...

Market Update 10-27-09

During the past week the stock market has shown numerous signs that the seven-month rally, which has carried shares to not only deeply overbought territory but to their highest valuations in years as well, is getting tired.
 
Heading into trading this week, the S&P 500 was 20 percent above its 200-day moving average. This is a rather rare occurrence. For instance, even at the height of the tech bubble in 2000 we didn’t reach such an overextended point. In fact, during the Post War period the only occasions we moved up so far, so fast was briefly in 1975, 1982 and again in 1983.
 
Stocks promptly fell sharply after reaching that lofty level in 1975, by 1982 and 1983 shares traded sideways for a time, consolidating their gains. But what was striking about these past occurrences was that valuations were so much lower than they are today, with trailing P/Es in the in 10 to 13 region, as compared to an off the scale reading of more than 140 for the S&P today!
 
Even using the S&P Industrials as a benchmark (thereby excluding the troubled financials) the P/E right now is 32.5. Likewise, even using the most optimistic estimate of forward earnings stocks are quite dear.
Read more...

Mid-Week Update 10-21-09

Earnings season is well underway with about a quarter of S&P 500 companies having already reported. The results, helped by favorable year-on-year comparisons, have been largely impressive so far, with over three quarters of announcements coming above expectations and less than 15 percent falling short.
 
We have only had a few of our holdings report thus far – but we haven’t suffered from any disappointments. As we discussed last week, Intel (INTC) had a blowout quarter – beating its own revised expectations, as well as consensus estimates. The semiconductor giant’s quarter was helped by strong back-to-school revenues – the same type of sales that helped push consumer technology powerhouse, Apple Inc. (AAPL), to another record-setting quarter.
 
In its earnings announcement after the market’s close on Monday, Apple reported its most profitable quarter ever with net income totaling $1.67 billion – a 47 percent increase over last year. The record profit translated to $1.82 earnings per share, obliterating the company’s own guidance of $1.20 a share (which is admittedly always conservative), and easily beating consensus estimates of $1.43 (the highest estimate, at $1.66 was actually well short too).
Read more...

Market Update 10-06-09

For every piece of data that comes out offering a glimmer of hope for the expansion, such as yesterday’s ISM non-manufacturing index, investors are being bombarded with a slew of data of late that points to the recovery being quite weak. The latest piece to fit this bill was the employment report out last Friday, which not only was worse than expected, the numbers were worse than the previous month’s figures.
 
While unemployment is often viewed as a lagging indictor (which is perhaps why the stock market shrugged off the latest reading), in the case of credit driven contractions such as we’ve experienced) it’s much more of a leading indicator. And the numbers behind the headline 9.8 percent jobless rate suggest we’re in for more pain in the months ahead.
 
As of last count, 5.4 million people have officially been out of work for more than half a year now. We say officially because if you include those who have simply given up looking for work, the unemployment rate would stand at 10.3 percent. The official rate is also skewed by the Bureau of Labor Statistics birth/death adjustment, which is essentially just a wild guess (not actual survey data) of the number of people who have joined newly formed businesses. Excluding this guess the unemployment rate jumps to 10.5 percent.
Read more...

Weekly Update 09-28-09

Short-Term Key: Negative Long-Term Key: +2 (Neutral) 

A couple of economic statistics released last week suggest the economy may be growing more slowly than expected/hoped/prayed. These included a slowdown in housing and weaker durable goods orders (now that the cash for clunkers program has ended).Read more...

Free
Dr. Stephen Leeb's
Market Forecast Newsletter

Email address:
(optional) Your name:

Latest Video

Navigation

Poll

Where do you think the U.S. Dollar Index is headed in the next six months?:

Most Viewed

Long Term Growth

more

Aggressive Moves

more

Inflation Survival

more

Income Performance

more

ETF Movement

more