Wednesday brought some much needed calm to a market gone berserk the past few weeks as the action slowed down quite a bit. Stocks opened down sharply to open the day but by noon had regained most of those losses and then treaded water the remaining 4 hours. The S&P 500 fell 0.20% and the NASDAQ 0.50%. There was a decent ISM Non manufacturing figure today, helping to offset Monday’s bad manufacturing figure:
The vast U.S. services sector rebounded in January after two months of slower growth and firms added workers at the fastest clip in more than three years, according to an industry report released on Wednesday. The Institute for Supply Management said its services index rose to 54 last month from 53 in December. The reading narrowly beat expectations of 53.7, according to a Reuters survey of economists. January marked the 49th straight month the index was above 50, the level that separates expansion from contraction, though the pace of growth has slowed from a more than seven-year high of 57.9 hit in August.
Here is the longer term chart of the NASDAQ and this pattern we have been highlighting. Note the last 3 times the bottom end of this channel was broken we had a “V shaped” rally immediately after that turned the bears head so fast they didn’t know what hit them. If this is going to happen again it should happen soon, maybe Friday with the jobs report. If we fail to do so, we might be setting up for the first real correction in a long time.
The S&P 500 has broken an accelerated uptrend it had been in since latter 2013. Bulls will want to hold the September highs, which is the area we are basing above right now on this index. If that breaks the highs of late July come in as next support.
After the close we had one of the high flier, Twitter (TWTR) report. The valuation on this name has been very extreme since it came public and with today’s results the stock is giving some of that back, down some 17% in after hours to under $55. When a stock is priced for perfection you really can’t have many warts in an earnings report. This will affect other social networking names tomorrow.
Twitter reported quarterly results that exceeded Wall Street expectations Wednesday, but shares still slumped sharply as the company reported weak user growth. The microblogging company posted earnings of 2 cents a share, excluding one-time items, on sales of $243 million, easily topping expectations for loss of 2 cents a share on revenue of $218 million, according to a consensus estimate from Thomson Reuters. In addition, the company handed in current-quarter revenue of between $230 million and $240 million, versus expectations for $215 million.
But the company said it averaged 241 million monthly users, up just 3.8 percent from the previous quarter—the lowest rate since Twitter began disclosing its user figures. Twitter’s user numbers grew at 10 percent, 7 percent, and 6 percent during the first three quarters of the year, respectively. And timeline views dropped sharply from 159 billion to 148 billion in the quarter, signaling that users were refreshing their Twitter accounts less often.
Congrats to anyone owning shares of Green Mountain Coffee Roasters (GMCR) as the shares are up nearly 50% in after hours after Coca Cola took a 10% stake.
The companies have signed a 10-year agreement to collaborate on the development and introduction of Coca-Cola’s global brand portfolio for use in Green Mountain’s forthcoming Keurig Cold at-home beverage system. Under the agreement, Coca-Cola will acquire 16.68 million newly issued shares in GMCR for approximately $1.25 billion, or about 10 percent of Green Mountain.
Here are some charts and thoughts on them courtesy of Dan Zanger and his newsletters service at chartpattern.com