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Need to Know
JULY 24, 2013
7 gut checks before the stock
market's opening bell
By Shawn Langlois
Good
morning.
Hey, you in the sweat-stained button-down with the drool puddles, wake up.
It's about to get interesting. Well, more interesting, anyway. At this
point, it almost has to, considering the lullaby the market's singing to us
lately.
It's been nearly three years since a five-day stretch of trading sessions
has been this rangebound, according to JonesTrading's Chief Market
Strategist Michael O'Rourke. And that was during the Christmas slowdown
(see below).
Apple, second only to Exxon Mobil in terms of its S&P impact,
could go a long way toward changing that today. Following the flood of
big-name earnings in the morning, it'll be Facebook's turn as the tech sector's lightning rod .
Don't confuse the summer tedium with lackluster performance, though. The
S&P has quietly logged gains in 12 of the past 14 days, delivering a
5.4% return so far this month. That puts it on pace to be the best month since
back in October 2011.
Key market gauges: Asian stocks kept with the
rangebound trend, with no notable swings taking place in any of the major
indexes after China's manufacturing-sector gauge dropped to an 11-month low . Same in
Europe , though markets are moving higher across the board. After an
especially ho-hum day in the U.S., futures on the Dow and the S&P
are setting up for a positive start to the regular session.
The economy:New-home sales in the U.S. are expected to have
risen a bit in June, despite higher mortgage rates. Pent-up demand and a
recovering economy could lead to an annual rate of 483,000, up from
476,000, economists predict. The report hits at 10 a.m. Eastern. Before
that, Markit reports its flash manufacturing purchasing managers index
for July. Read: Spotlight on economy .
Earnings:
Ford , Boeing and Caterpillar are just a few of the big names
that will set the trading tone in the early going. As a tasty starter, Ford
shares are up more than 3% premarket after the
company crushed targets. Similar action with Boeing . Caterpillar, however, is
heading lower following its unsettling results .
Later, Facebook and Visa will be the stars of the late show. Read about
Facebook's "gigantic missed opportunity."
Before earnings season, we talked a lot about how a low bar should make for
some relatively strong reports. And that's what we're seeing so far, as 71%
have managed to beat, according to Bespoke . In a typical
quarter, only 63% top targets.
The buzz:Apple shares are up premarket. So is investor
curiosity. The company posted better-than-expected results, but, as is
often the case with Apple, many of Wall Street's pressing questions were left
unanswered.
Cytokinetics and Sarepta Therapeutics are jockeying with Apple
for the spotlight, as both are seeing a surge in attention on StockTwits.
Sarepta shares are up 3% premarket on its plans to submit a new drug application for
the treatment of muscular dystrophy. Earlier, the stock was up some 25%,
though.
AT&T's results aren't being received as well as Apple's. The
stock is off after the telecom giant posted a second-quarter profit
decline. Read: Stocks to watch .
Cisco's move to snap up Sourcefire is the top story on Google's
business pages, staying busy overnight after at least one lawyer said the
29% premium might not be in the best interest of
shareholders.
The chart of the day:If you ignore the light trading of
Christmas week 2010, the last five days have marked the tightest trading
range since February of 2007. This after we grew accustomed to big
taper-induced swings in the previous weeks. "One might interpret the
action as a sign there is distribution occurring, but we would prefer to
see heavier volume," said Mike O'Rourke, in his Closing Print note for
JonesTrading.
The
call of the day: Ian Wyatt has learned that
"it's best to just buy a great company like McDonald's , rather than
trying to find the next McDonald's." After the stock fell 6% on
disappointing earnings Monday, Wyatt says it's time to take a nibble . "The most
important thing to consider is the valuation. Shares are up considerably
(over the past 18 months), but remain reasonably priced at 17x
earnings," he said.
Some smaller restaurants can trade upwards of 100x earnings, as investors
gamble on discovering the next Big Mac peddler. But it's the original that
keeps delivering steady results: its stock has risen 29% since early 2011,
and the company has paid out nearly $8 in dividends. "McDonald's may
not have the same growth story as (…) other richly priced restaurant
stocks. But the company's commitment to shareholders, consistent dividend
growth and reasonable valuation still make this stock a great long-term investment,"
Wyatt said.
Random reads: A great Vine on the Daily
Mail's critique of over-the-top BBC royal baby coverage.
Apparently, there's a line to be drawn at 19 or so pages.
Perpetrating fraud? Bitcoin seems like a good place to start .
Is there such thing as sexual addiction ? The line just got
blurrier. Speaking of sex and blurry, those crazy kids in Japan are up to some weird stuff .
It's a bird! It's a plane! No, it's a birthday cake being delivered by a Chinese drone . Hey, it's
better than the subway in Beijing during rush hour .
@Nick_Kostov
contributed to this blog.
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