The Prepared Mind 10.14.2012

“Chance favors the prepared mind.” Louis Pasteur

Equities and equity indexes posted losses of over 2% last week.  The market prognosticators point to a rotation out of technology into equities with high dividend yields.  Others placed the blame on profit taking after strong third quarter market performance. A number of factors contributed to the downward move.  On Tuesday, the IMF reduced forecasted global growth from 3.5% to 3.2%.  A combination of fears about Apple’s (AAPL) market share and reduced global command for higher margin PC’s and laptops negatively impacted the tech arena.   Earnings announcements started last week.  Lackluster expectations were confirmed by lackluster reports and conference calls.  On the positive side, JPMorgan Chase (JPM) announced record profits with Chairman Jamie Dimon stating that U.S. Housing had “turned the corner.”  Consumer confidence, as measured by the bellwether University of Michigan survey,  reached the highest levels since 2007.

The Dow Jones Industrial Average (DJIA) lost 281 points to close at 13,328 – a loss of 2.07%.   The S&P 500 closed at 1,428.60  –  down 32.33 points or 2.21%.   The tech heavy reflected the heavy weighting of Apple in the index.  The NDX closed at 2,720.14, a loss of 91.80 points or -3.26%%.  The relative weakness of the NDX compared to other indexes reflected the heavy weighting of Apple (AAPL) in the NDX.  Apple comprises approximately 18% of the NDX and 5% of the SPX.  The Russell 2000 (RUT)  closed at 821.94  – a loss of 20.92  points or down 2.48%.  The S&P 100 (OEX) lost 2.33% , or 15.68 points ,  to close at 656.89. The VIX and other volatility indexes reflected market weakness by being up for the week.   The VIX closed last week at 16.14 – a gain of 12.63%.  Volatility measurements for the other indexes showed similar gains.

Here is a capsule view of last week’s market numbers:

Index

Close

Weekly Change

% Weekly

% YTD

Volatility of  Index

Dow Jones Industrials (DJIA)

13,328.85

-281.30

-2.07%

9.10%

14.71% (VXD)

S&P 500 (SPX)

1,428.60

-32.33

-2.21%

13.60%

16.14% (VIX)

NASDAQ 100 (NDX)

2,720.14

-91.80

-3.26%

19.42%

17.84% (VXN)

Russell 2000 (RUT)

821.94

-20.92

-2.48%

10.94%

19.78% (RVX)

S&P 100 (OEX)

656.89

-15.68

-2.33%

15.08%

15.74.%(VXO)

CBOE Volatility Index (VIX)

16.14

1.81

12.63%

NA

 

Earnings, earnings, earnings.  The focus for the next three weeks will be on Q3 earnings announcements.  These announcements will impact the individual stocks and the market as a whole.  Domestic and international economic announcements, when viewed in conjunction with earnings, have the ability to temper or accelerate market movement and momentum.  Companies announcing earnings include market stalwarts Goldman Sachs, Citigroup, Coca-Cola , Bank of America, Black Rock, IBM, Google, American Express, Microsoft, Morgan Stanley , Halliburton, McDonald’s and General Electric.  An earnings disappointment from any of these corporations can negatively impact the markets.  The announcements should not be considered the end of the story.  The post-announcement conference calls are every bit as important, if not more important,  as the earnings announcement.  Companies will provide a perspective on their projected business environment during the calls.  The earnings season calls for a heightened attention to detail.

Domestic non-earnings news will focus on CPI (inflation), housing and manufacturing.  The international focus will be on announcements this Thursday.  These include China GDP and European Union announcements on growth and a report on economic and monetary union.  The Chinese numbers will be announced before Thursday’s market open.  The European announcement will occur during the trading day.

Do not allow yourself to be caught by surprise.  Be disciplined.  Always trade with a short term and long term plan.    Be nimble. Understand what you are trading.   Know where and how you will take profits and losses.

Remember:

  “Chance favors the Prepared Mind.” – Louis Pasteur

This week’s economic news (All times are Eastern Daylight Time.) Dates and times are subject to change:

Monday October 15:

Economic:   September Retail Sales – 8:30, Empire State Manufacturing Survey – 8:30, August Business Inventories – 10:00.

Earnings:   BMO:  Citigroup (C), Gannet Co. (GCI), Charles Schwab (SCHW);  AMC:  Brown & Brown – (BRO), ICU medical (ICUI), Packaging Corp. of America (PKG), WS-40 (WDFC).
Other:  New York Federal Reserve Bank President William Dudley speaks to the 54th Annual NABE meeting on the “Intersection Between Finance and Real Activity – 8:45.  Richmond Federal Reserve Bank President Jeffrey Lacker speaks to business and government leaders in Roanoke, Va., on the topic of “Economic Outlook, October 2012” – 12:45, St. Louis Federal Reserve Bank President James Bullard speaks to the 3rd Annual Economic Forum of the Missouri Council on Economic Education on the topic of the “U.S. Economy and Monetary Policy” – 1:10.

Tuesday October 16:

Economic:    ISCS-Goldman Sachs Retail Sales – 7:45, September Consumer Price Index(CPI) –  8:30, Redbook – 8:55, Treasury Industrial Capital – 9:00, September Industrial Production  – 9:15, Housing Market Index – 10:00.

Earnings:  BMO:  Dominos Pizza (DPZ), Forest Laboratories (FRX), Goldman Sachs (GS), WW Grainger (GWW), Johnson & Johnson (JNJ), Coca-Cola (KO), Mattel (MAT), Omnicom (OMC), PNC Financial Services (PNC), UnitedHealth (UNH), Wolverine World Wide (WWW);  AMC:  Apollo Group (APOL), Cree (CREE), CSX (CSX), Fortinet (FTNT),  International Business Machines (IBM), Intel (INTC), Intuitive Surgical (ISRG),  Linear Technology (LLTC), United Rentals (URI),

Other:   Presidential debates. San Francisco Federal Reserve Bank Pres. John Williams speaks to the Financial Women’s Association on “A Perspective on the Economy” – 8:30PM.

Wednesday October 17:

Economic:  MBA Purchase Applications – 7:00, September Housing Starts -10:00, EIA Petroleum Status Report – 10:30.

Earnings:  BMO:  Abbott Labs (ABT), AO Smith (AOS), Amphenol (APH), ASML Holding (ASML), Bank of America (BAC), BlackRock (BLK), Check Point Software (CHKP), Comerica (CMA), Quest Diagnostics (DGX), Dover Corp. (DOV), First Republic Bank (FRC), Halliburton (HAL), Lindsay Corp (LNN), K!@ (LRN), McMoRan Exploration (MMR), Northern Trust (NTRS), Pepsico (PEP), Stanley Black & Decker (SWK), Textron (TXT), UniFirst (UNF), US Bancorp (USB);  AMC:  Albemarle (ALB), American Express (AXP0, eBay (EBAY), Ethan Allen Interiors (ETH), Gulfmark Offshore (GLF), Kinder Morgan (KMI), Mellanox (MLNX), RLI (RLI), Select Comfort (SCSS), Stryker (SYK), Universal Forest Products (UFPI), Wynn Resorts (WYNN), Xilinx(XLNX).

Other:

Thursday October 18:

Economic:  Jobless Claims – 8:30, Bloomberg Consumer Comfort Index – 9:45, October Philadelphia Fed Survey – 10:00, September Leading Indicators – 10:00, EIA Natural Gas Status Report – 10:30.

Earnings:  BMO: Alliance Data Systems (ADS), Alexion Pharmaceuticals (ALXN), Baxter International (BAX), Briggs & Stratton (BGG), Danaher Corp (DHR), Diamond Offshore Drilling (DO), GATX (GMT), Genuine Parts (GPC), Hubbell (HUB>B), Southwest Airlines (LUV), Morgan Stanley (MS), Nucor (NUE), Polaris Industries (PII), Philip Morris Internal (PM), PPG (PPG), Snap-on (SNA), Sonoco (SON), Travelers Companies (TRV), Union Pacific (UNP), USG (USG), Verizon (VZ), WESCO (WCC), ;  AMC:  Athenahealth (ATHN), Cubist Pharmaceuticals (CBST), Chipotle Mexican Grill (CMG), Capital One Financial (COF), City National (CYN), Google (GGOG), Microsoft (MSFT), NCR (NCR), Robert Half (RHI), SanDisk (SNDK), Valmont Industries (VMI).

Other:  China announces Q3 GDP.  European Union leaders meet.

Friday October 19:

Economic:   Existing Home Sales – 10:00.

Earnings:  BMO:  Electric Power (AEP), Air Products (APD). Baker Hughes (BHI), Cooper Industries (CBE), Federal-Mogul (FDML), General Electric (GE), Honeywell International (HON), IDEXX Laboratories (IDXX), Ingersoll-Rand (IR), Kansas City Southern (KSU), Manpower (MAN), McDonald’s (MCD), Parker-Hannifin (PH), Robbins & Myers (RBN), Schlumberger (SLB), Sensient Technologies (SXT).

Other:

Monday October 22:

Economic:   None scheduled.

Earnings:   BMO:  Peabody Energy (BTU), Caterpillar (CAT), Cubic Corp (CUB), Freeport-McMoRan Copper & Gold (FCX), Hasbro )HAS), Lennox International (LII), Nielsen Holdings (NLSN), Potlatch (PCH), PetMed (PETS), VF Corp (VFC);  AMC:  American Campus communities (ACC)< Celanese (CE), Canadian National Railway (CNI), Crane (CR), Healthstream (HSTM), Hub Group (HUBG), IDEX (IEX), Interactive INtelligenc3e (ININ), Rent-A-Center (RCII), Southern Copper (SCCO), Texas Instruments (TXN),United Stationers (USTR), Western Digital (WDC), Yahoo! (YHOO),  Zions Bancorp (ZION).

 

 

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