Good morning, and welcome to the stock market live blog. We’re back in the green on Friday, paring back some of the share losses from the previous session. Here’s a quick rundown of where we’re trading:
Dow: +58 at 17,035
Nasdaq: +18 at 4,381
S&P: +7 at 1,965
After yesterday’s sharp slide on geopolitical worries, it would be easy to imagine further selling today.
But that’s not what we’re getting in the early going. Why?
Even after Thursday’s events in Ukraine, it isn’t easy to decide to sell U.S. stocks, writes Nicholas Colas, chief market strategist at ConvergEx Group in a note.
More has to go wrong, such as earnings quality for companies deteriorating and oil prices trending higher to threaten the “fragile economic recoveries in the U.S. and Europe,” he said.
Google /quotes/zigman/30194416/delayed /quotes/nls/goog GOOG /quotes/zigman/93888/delayed /quotes/nls/googl GOOGL was up about 3% at last check, and the tech giant is boosting sentiment with its upbeat earnings report that came out late Thursday.
Read more about today’s jumpiest stocks in the Movers & Shakers column.
Photo credit: Getty Images
The Dow is the only index that’s set to post weekly gains. On Friday it’s being led by Visa Inc. /quotes/zigman/502306/delayed /quotes/nls/v V , Nike Inc. /quotes/zigman/235840/delayed /quotes/nls/nke NKE , and American Express Co. /quotes/zigman/217470/delayed /quotes/nls/axp AXP .
Here’s how the performance for the week is looking:
Dow +0.5%
S&P 500 -0.1%
Nasdaq -0.6%
Russell 2000 -1.8%
And here’s some data hitting the wires now. Consumer sentiment fell to 81.3 in July from 82.5 in June, according to reports. The forecasts were for an 83.0 reading in July. Stocks seem to be shrugging it off so far.
And here is some more data. The leading economic indicators index is up 0.3% in June. From a 0.5% rise in May. Again, stocks aren’t doing much with the data, though the indexes have come off their highs of the session.
As things quiet down on Friday, here’s a look ahead at next week, which should be a massive one for earnings season, including a number of blue-chip companies.
Peter Garnry, head of equity strategy at Saxo Bank thinks that the next week will define earnings season, which analysts so far seem to be fairly positive on. He writes in a note:
“A total of 232 companies out of 1,200 in the S&P 1200 Global Index will report earnings. The most important one will undoubtedly be Apple whose fiscal year Q3 earnings are expected to rise 15 percent from a year ago.
“Apple shares have outperformed the market this year, having risen 18 percent (see chart) as the company has exceeded expectations (it surprised analysts in April by beating earnings estimates by 14 percent) and hype has been building ahead of the iPhone 6 release.”
One of Friday’s big stories: Amazon.com on Friday launched an e-book and audiobook subscription service, “Kindle Unlimited,” that could make it the Netflix of e-books. MarketWatch’s Quentin Fottrell reports:
“Publishing experts say more companies are finding ways to allow readers to swap e-books, read them for a monthly subscription, or rent them from an e-library. Kindle owners who are also Amazon Prime members can already choose from over 300,000 books to borrow for free with no due dates, but they may only choose one book a month. Services such as eBookFling.com and Lendle.me give Kindle and Barnes and Noble’s Nook customers access to tens of thousands of other potential e-book lenders for a 14-day period.”
While U.S. stocks are back in the green, Friday provided no respite for Russian stocks which are marking their fifth day of losses after a Malaysia Airlines passenger jet was allegedly shot down. Russia’s blue-chip MICEX index was down 1.9%. Read more coverage of the stock market action here.
We’ve got a couple of initial public offerings on tap Friday. The first one, TubeMogul Inc. /quotes/zigman/36103757/delayed /quotes/nls/tube TUBE , just began trading, and it’s marking a 22% bump. It priced at $7 and is now changing hands at $8.51. TubeMogul is an enterprise software platform for digital branding.
On the bubble-watch beat, Bloomberg News is out a with a new poll showing 60% of respondents believe stocks are either on the verge, or already in one. From the story by Lu Wang and Joseph Ciolli, published Wednesday:
“Forty-seven percent of those surveyed said the equity market is close to unsustainable levels while 14 percent already saw a bubble, according to a quarterly poll of 562 investors, analysts and traders who are Bloomberg subscribers. Almost a third of respondents called the market for lower-rated corporate debt overheated and most said stock swings will increase within six months, the July 15-16 poll showed.”
Let’s check in on the other U.S. market, where the “safe-haven retreat” trade isn’t quite uniform.
Gold is losing a bit of steam as its safety bid wanes. It’s now down $10 on the day at $1,307
The dollar edged up against some of its rivals as the yen weakened.
Treasurys, on the other hand, are still a bit higher on the day as geopolitical turmoil continues, pushing the long-bond yield to a 13-month low.
And the second IPO of the day has debuted. It’s getting a similar bump to the one we saw with TubeMogul.
TerraForm Power Inc. /quotes/zigman/34377877/delayed /quotes/nls/terp TERP is up 34% at at $33.50, from its IPO price of $25. The company is a spinoff of solar developer SunEdison Inc.
Read more here.
By the way, TerraForm Power is what’s known as a yieldco, which you could be forgiven for not having heard of before, since it’s a fairly new type of public company. A Goldman Sachs report from last month had a good explanation of what it is. Analysts, led by Robert D. Boroujerdi, write:
“In its simplest form to date, a YieldCo is a highly contracted independent power producer (IPP) that pays out a dividend with its distributable or free cash flow. The YieldCo, as with NRG Yield, typically represents a spin-off from a parent company, which believes that the market undervalues its contracted assets. In the first wave of YieldCo’s, the parent has owned a majority of the YieldCo, while public stockholders own a minority stake.”
Why buy? They explain:
“YeldCo’s, through drop downs similar to MLPs, can deliver above average dividend growth, with below average risk given the contracted nature of their portfolios. The outperformance of the initial wave of YieldCo’s,
in our view, provides evidence that the YieldCo model can create value for investors. Relative to the IPO pricing in July and August 2013 respectively, NYLD outperformed the S&P by 116% and PEGI by 23%.”
MarketWatch’s Claudia Assis has an in-depth look here.
Joshua Brown, an investment advisor and author of the Reformed Broker blog, has a very coherent post on How Geopolitical Threats Affect the Stock Market - we highly recommend it.
The notion that there is more uncertainty now than there was last month because of a plane being shot down in the Ukraine or an Israeli incursion into Gaza is both childish and ahistorical. Just because we choose not to be concerned with uncertainty at a given moment – like on September 10th, 2001 for example – that doesn’t mean an outbreak of violence or hostility is any less likely to occur.
So what we’re discussing here now is not a rise in uncertainty itself – but a rise in the awareness of that uncertainty and its subsequent effect on stock prices.
Terry Sandven, chief equity strategist at U.S. Bank Wealth Management:
“Geo-political headlines dampen consumer sentiment, but this market has been remarkably resilient. Ultimately, this is an earnings-driven market and earnings so far have been encouraging, especially among large banks.”
Three companies debuted on the stock market on Friday to an enthusiastic welcome.
Sage Therapeutics /quotes/zigman/35220849/delayed /quotes/nls/sage SAGE soared 60% to $28.82 vs IPO price of $18.
TerraForm Power /quotes/zigman/34377877/delayed /quotes/nls/terp TERP jumped 34% to $33.54 vs IPO price of $25.
TubeMogul /quotes/zigman/36103757/delayed /quotes/nls/tube TUBE rallied 44% to $10.08 from IPO price of $7.
FactSet
Of the 74 companies in the S&P 500 that released earnings this quarter, 73% have reported sales above estimates, according to John Butters, senior earnings analyst at FactSet.
If the trend continues to hold, this will be the highest percentage of companies reporting better-than-expected sales since FactSet started tracking the data in the third quarter of 2008. Until now, the record was 71.5% above estimates in the second quarter of 2011.
The profit versus outlook ratio is similar with 72% turning in earnings per share above average consensus and 28% falling short, according to Butters.
Merger news and upbeat earnings reports are helping stocks bounce back today, says Omar Aguilar, chief investment officer of equities at Charles Schwab Investment Management.
“A lot of the reasons why the market seems to be stable at the moment has to do with the fact that we continue to see M&A activity and corporate profits being strong,” he said during a call with reporters. “People are trying to go back and focus on the fundamentals.”
But he added that stocks sold off into Thursday’s close, mostly because traders didn’t want exposure overnight, and he thinks that type of action could be seen again in the coming weeks.
It’s peak earnings season so corporate financial results are the main drivers behind share moves.
That’s good news for Google /quotes/zigman/93888/delayed /quotes/nls/googl GOOGL investors with the Internet giant reporting a robust growth in sales.
On the other hand, Advanced Micro Devices /quotes/zigman/216580/delayed /quotes/nls/amd AMD sank to a fourth-month low after earnings came in worse than expected.
Check out Movers & Shakers for Friday’s notable stocks.
Stocks make partial recovery from Thursday losses, AbbVie makes a tax move out of the U.S. Adrienne Mitchell reports.
Marketwatch’s Chuck Jaffe says brokerages should have their customers’ best interests in mind, but they often don’t. Photo: Getty Images.
Via Sue Chang:
Gold futures fell on Friday as investors focused more on the possibility of a U.S. interest rate hike than geopolitical tensions in Ukraine and the Gaza strip.
August gold dropped $7.50, or 0.6%, for the session to settle at $1,309.40 an ounce on the Comex division of the New York Mercantile Exchange. The precious metal fell 2% for the week.
Did you get punked by Thursday’s spike in the VIX?
The CBOE VIX index, aka Wall Street’s “fear gauge,” fell back Friday, a day after it jumped more than 32% in the wake of the plane crash in the Ukraine and Israel’s ground assault in Gaza. The index was down 2.19 points, or more than 15%, at 12.35 in recent action. Safe-haven assets, like gold and Treasurys, gave back some of the previous day’s gains, while stocks rebounded.
Andrew Wilkinson, chief market analyst at Interactive Brokers, says it’s all a case of investors acting more like the honey badger of YouTube fame:
The cobra-scoffing, honeycomb-raiding Honey Badger, famous for snacking no matter whether its prey bites, injects venom or stings the heck out of its attacker, just eats what it wants, when it wants, and pays little attention to the risk. The day’s [VIX decline] appears to be a victory for couldn’t-give-a damn-what-you throw-at-me risk managers who react less to spikes in option premiums resulting from the latest geopolitical event.
The Dow Jones Industrial Average is on track to lock in very modest weekly gains.
In light of recent records (last one was on Wednesday) we wanted to revisit the Dow Theory: when the Industrials and Transportation averages rally to record highs in tandem, it is a ‘buy’ signal.
The Dow Transportation Averages gained 13% since the start of the year. Investors in transportation stocks are clearly betting on the economy to keep improving.
But that’s not the only reason behind those gains.
“Airline companies have consolidated and improved their earning power and investors rewarded that. So, micro-fundamentals are part of the reason why transportation stocks are doing well,” says Nicholas Colas, chief market strategist at ConvergEx Group.
“Though, if we start seeing oil prices go up sharply, the U.S. consumer is not fully recovered to withstand such a shock. That could easily disrupt the recovery.”
Biotech and Internet stocks, that sold off heavily on Thursday are rallying today. It’s possible that yesterday’s action was overdone.
But, as Josh Brown wrote in his blog post:
Geopolitical events have a bizarrely just and equitable way of meting out punishment precisely where it’s most deserved in the stock market. No one knows why this is.
iShares Nasdaq Biotechnology ETF /quotes/zigman/85342/delayed /quotes/nls/ibb IBB +2.9%
Global X Social Media Index ETF /quotes/zigman/7289836/delayed /quotes/nls/socl SOCL +2.1%
With about 40 minutes of trading left, the three main indexes are showing further strength, hitting fresh session highs.
S&P 500 +1.1%
Dow +0.8%
Nasdaq +1.6%
All three main indexes are set to show decent weekly gains at this point.
Dow +1% for week
S&P 500 +0.6%
Nasdaq +0.4%
The small-cap Russell 2000 is still negative for the week — showing a loss of 0.7%.
“The market seems to be saying: What global crisis?” writes MarketWatch columnist David Weidner.
He has a column out today with the headline “Stocks are ignoring realitiy of MH17,” referring to the Malaysian Airlines jet that was shot down.
Weidner has been frustrated with the market’s advance lately. He recently wrote another column with the headline “Dow 17,000 is on the wrong side of history.”
The blue-chip index was at 17,105 at last check.
Photo credit: Reuters
Stocks have pulled back from their session highs, but they’re still in the upper end of their rading ranges for the session.
Will stocks finish strong?
Schwab’s Omar Aguilar has sounded a cautionary note about the end of the trading day, as noted in the post in this live blog at 12:17 p.m. Eastern.
He pointed out that stocks sold off into Thursday’s close, mostly because traders didn’t want exposure overnight, and he thinks that type of action could be seen again in the coming weeks.
In case you missed it, Schwab’s Aguilar and Nick Colas of ConvergEx were quoted here earlier, explaining today’s gains after yesterday’s dive on geopolitical fears.
Merger news and upbeat earnings reports are helping stocks bounce back today, said Omar Aguilar, chief investment officer of equities at Charles Schwab Investment Management.
“A lot of the reasons why the market seems to be stable at the moment has to do with the fact that we continue to see M&A activity and corporate profits being strong,” he said during a call with reporters. “People are trying to go back and focus on the fundamentals.”
Meanwhile, Colas said even after Thursday’s events in Ukraine, it isn’t easy to decide to sell U.S. stocks.
More has to go wrong, such as earnings quality for companies deteriorating and oil prices trending higher to threaten the “fragile economic recoveries in the U.S. and Europe,” he wrote in a note.
Weekly performance? Solid gains, except for the small-cap Russell 2000.
S&P 500 +0.5% for the week
Dow +0.7%
Nasdaq +0.4%
Russell 2000 -0.7%
The Dow ended at 17,100 — within striking distance of Wednesday’s record close at 17,138.
The S&P 500 finished at 1978 — not far from July 3′s record finish just above 1985.
So those geopolitical worries appeared to recede for today.
That’s a wrap for today’s live blog. Thanks for checking it out.
Ukraine still has everyone attention, so keep in mind our live stream of Ukraine coverage is right here.
Photo credit: Reuters