STTG Market Recap February 4, 2014

Stocks bounced Tuesday as near term oversold conditions prevailed.  Many short term traders were hoping for an “easy” trade which would have happened if there was a nasty open to begin the day but the market is rarely easy.   The S&P 500 added 0.76% and the NASDAQ 0.86%.  We do have the key employment data for January coming out Friday; for Tuesday’s economic data:

New orders for U.S. factory goods fell in December, but rose for a third straight month when the volatile transportation sector was excluded, which could ease concerns of an abrupt slowdown in manufacturing activity.  The Commerce Department said new orders for manufactured goods dropped 1.5 percent, the largest fall since July, weighed down by a plunge in bookings for transportation equipment.  November’s orders were revised to show a 1.5 percent increase instead of the previously reported 1.8 percent gain.

With the indexes we captured about 1/3rd of yesterday’s losses back, but with the S&P 500 for example the index is still not even back into the bear flag it fell out of yesterday.  There is still a lot of work to do here to heal.


The few times the NASDAQ broke this year long channel for 1-2-3 days it immediately snapped back.  Today could be day 1 of that snapback, but as we said last week eventually this pattern will break.  What should happen when it fails is the index rallies back to the low end of this range, and then rolls over rather than continues upward.  Expecting that to happen has been a loser’s bet for well over a year but one of these times that will be the outcome.


We often say selloffs are great for stock picking as they show you which names are truly strong rather than those being lifted by a rising tide.  To that end look at these names which have held up quite well during the selloff.  Of course, if this correction is not over and there is another 5% downside to go, even these names will succumb but for now they have held up very nicely.






Retail has been a very tough area thus far in 2014 as many stores sacrificed profits to create sales during the holidays but Michael Kors (KORS) looks to be an exception; this high end retailer reported today and much like Under Armour (UA) last week reacted very well.  KORS has been a very impressive company since coming public and is shielded from the middle class struggles as it caters to the upper end:

Michael Kors said that net income in the holiday quarter jumped 77 percent as demand for its luxury clothing and accessories surged.  Michael Kors, which went public in 2011, has been growing fast, with 31 straight quarters of revenue growth in established stores. Its market share gains are likely coming from Coach, says Jeffries analyst Randal Konik.  In the latest quarter, its fiscal third, Michael Kors said sales at stores open at least a year rose nearly 28 percent. Many retailers, including Coach and companies that target a broader swath of consumers, like Macy’s, reporting a disappointing holiday sales season. Michael Kors’ sales come mostly from Europe and the U.S.   For the three months that ended on Dec. 28, Michael Kors earned $229.6 million, or $1.11 per share. That’s up from $130 million, or 64 cents per share, a year earlier. Analysts polled by FactSet expected earnings of 86 cents per share.  Revenue jumped to $1.01 billion from $636.8 million. Wall Street expected $859.5 million.


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