STTG Market Recap May 1, 2014

Thursday was a bit of a whipsaw day but in a narrow range as investors await tomorrow’s employment report.  The S&P 500 fell by a whopping 0.01% while the NASDAQ gained 0.31%.   There was some positive economic news on the day:   A report from the Commerce Department had consumer spending jumping the most in nearly five years in March, up 0.9 percent, while the Institute for Supply Management’s factory index rose to 54.9 in April from 53.7 the month before.

spx

nasdaq

LinkedIn (LNKD) was helped some today by Yelp’s nice quarter yesterday (stock was up 5% today, not sure why stockcharts.com chart says 1.94%), but is down a few % in after hours on its earnings forecast.  Could be a bit of sandbagging as his quarter’s results were very good – but a bad chart:

LinkedIn Corp forecast 2014 revenue below Wall Street’s expectations, underscoring concerns about its ability to sustain its rapid growth.  The social networking company, which is geared toward connecting professionals with prospective employers, foresees revenue of $500 million to $505 million this quarter, compared with an average Wall Street forecast of $505.1 million.  For all of 2014, it expects sales of $2.06 billion to $2.08 billion – up from a previous forecast, but still lagging analysts’ $2.11 billion target.

LinkedIn’s tepid outlook overshadowed a higher-than-expected 46 percent increase in first-quarter revenue to $473.2 million, versus the $466.6 million expected by analysts on average.  And it posted non-GAAP earnings of 38 cents a share, better than the 34 cents expected.

lnkd

Avon Products (AVP) fell sharply after the beauty products company reported lower-than-expected revenue and earnings for the first quarter, and disclosed it will pay the government $135 million to settle a bribery probe into its overseas practices.  Obviously a poor chart coming into today’s data.

avp

We saw some bounce today in “growth” type names but by and large we continue to see money flowing to safety stocks – healthcare company Merck (MRK) is yet another example.

mrk

There has been a nice move out of coal stocks here lately – perhaps related to the Ukranian struggle which might hamper natural gas delivery in Europe (and maybe some coal would be a substitute).  Consol Energy (CNX) is a name that stands out not just due to chart but had nice earnings Tuesday.

Consol reported a profit of 50 cents a share, easily topping analyst forecasts for 19 cents, on sales of $969.2 million, again well ahead of the Street consensus for $890 million.

cnx

Via SentimenTrader we have this comment about the divergence we have been pointing out between “safety stocks” (large cap conservative kind) and the growth/momentum ones (mostly found in small cap indexes) – in the short term this is usually a negative:

Investors have clearly had a preference for larger-cap stocks over smaller-cap ones for the past two months, and that was brought into stark relief on Wednesday.   The large-cap Dow Jones Industrial Average managed to close at a new 52-week high, yet the small-cap Russell 2000 is languishing more than 6.5% below its own 52-week high.   This is the first time in nearly 8 years we’ve seen this kind of divergence in investor preferences.

…in the short- to intermediate-term, this lack of coordination among investors has been market-negative. Over the next several weeks, both indexes showed positive returns less than 40% of the time. A week later, both indexes had gained more than +1% only once out of thirteen chances.   Only after six months did both indexes manage to consistently show positive returns, though the Russell’s averages were still worse than random during the study period.

SentimenTrader

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