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Need to Know
MAY 02, 2013
7 gut checks before the stock market's
opening bell
By Shawn Langlois
Good
morning.
Those "sell in May" evangelists have a spring in their step this
morning thanks to yesterday's nasty little turn to the south. Speaking of
turn, the sour start to the month had Jeffrey Hirsch quoting Ecclesiastes and humming The Byrds
.
Then again, one day does not a seasonal market cliché make. We're
seeing signs of life from the major indexes early, with some help from the
social media scene, where Facebook and Yelp are both poised to open higher,
and LinkedIn is getting ready to release its quarterly numbers
.
If the "sell in May" mantra has you questioning your long bent
(here's why Scott Rothbort says it definitely shouldn't
), check out our lunar "call of the day" gut check.
That may be too astrological for most of you, fair enough, so let's hear
from the more traditional school of market-top calling. Ari Wald, a
technical analyst at Prince Ridge Group, told clients in a note after yesterday's
drop that it's likely "the April 30 high marked the highpoint for the
S&P 500 over the next few months."
Key market gauges: U.S. stocks are set to claw back some of Wednesday's
losses by the looks of the buying on the Dow and S&P
futures. It was a different story in Asia , where stocks took a hit on weak economic data. Europe
is somewhere in the middle early, with Spain's IBEX 35 leading
the upside and Italy's FTSE MIB the downside. The ECB's decision to lower its benchmark interest rate didn't
shake up the trading action in any meaningful way, at least initially.
The economy: Ahead of tomorrow's showstopping main event from
the jobs front, we got a trio of tasters in the form of weekly jobless
claims, U.S. productivity and the nation's trade gap . Taking the
spotlight, the number of people who applied last week for new unemployment
benefits touched the lowest level since January 2008, falling by 18,000 to
324,000. Economists had expected claims to rise to a seasonally adjusted
345,000 from a revised 342,000 in the prior week. The Pope, judging
from his tweet this morning, was tuning
in.
My thoughts turn to all who are unemployed, often as a result of a
self-centred mindset bent on profit at any cost.
— Pope Francis (@Pontifex) May 2, 2013
Positive economic news is good, but bad data is better, according to Nick
Colas, chief market strategist at ConvergEx Group. "The latter stems
from the hope for continued liquidity injections by the Federal Reserve,
and market psychology is closely tied to continued Quantitative Easing by
the U.S. central bank," he wrote in a note titled, of course,
"Tequila makes her clothes fall off." The Pope would not approve.
The most important question facing investors these days: "How and when
the Fed extricates itself from this policy," Colas warned.
Earnings: LinkedIn will follow the report from social
peer Facebook with some numbers of its own later today. If LinkedIn's
premarket action is any indication -- the shares are up 1.4% -- good
things are expected. In fact, Sterne Agee is looking for the results to
"significantly exceed guidance and consensus."
But before that, investors will be parsing through numbers from General
Motors , Kraft and Kellog . Traders are welcoming GM's results
with open arms as the stock is up more than 3% premarket. The car maker
posted a drop in first-quarter profit that wasn't
as bad as analysts had expected.
The buzz: Facebook shares are up 1% before the bell, and
where they go from here will be a hot topic much of the day. The mobile
business has been a major focus for Zuck and the gang, and it's starting to
pay off with a bump in ad revenue. But that's come at a cost. Read why Facebook will likely be in investment mode
for awhile and check out some of the highlights from the
conference call.
Yelp is faring even better, with its stock up almost 12%. The online
consumer review site is still losing money, but less than it used to. And
revenue, a source of angst for several companies this earnings season, was
higher than analysts had expected. Read: Yelp trims loss and sales rise on mobile gains
.
Royal Dutch Shell and the planned departure of its CEO is the top
story on Google's business pages right now, joined by BMW and General
Motors , both of which are opening the books on their quarterly performances.
J.C. Penney is also on the hot list after the company tugged at some
retro heartstrings with its latest commercial .
The chart of the day: This chart from John Del Vecchio
via the Mebane Faber Research blog is a real beauty and doesn't need much
explaining. Essentially, it's tough being on top. Everybody's always
gunning for you. The multicolored line on the bottom shows how the
highest-cap S&P 500 stock has performed vs. the S&P 500 dating back
to 1972. The broad market has enjoyed a five-fold domination over the
cumulative 800-pound gorilla, whether it be Apple (green), Cisco
(yellow) or Wal-Mart (beige).
The
call of the day: Beware, the new moon cometh.
Hey, why not? This ominous chart seems about as scientific as some of the
calls we see from the "professionals" on any given market day.
"Strange that two previous long-term tops occurred one day after New
Moons, both on Aug 29 2000 and Oct 11th 2007," says the author of this post on the "Patterns in the charts"
blog . The writer points out that May 10 is also the
anniversary of the 1837 stock market crash. Everybody panic!
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