It looks like we may have a decent day today, but with Asia higher and Europe marginally higher at the time of writing it is hard to say with any conviction. Today marks the first day of the week where we have a handful of economic news out to trade on, and as readers know we like data to draw conclusions from. We had an email yesterday asking us if we still thought that this was a stock picker's market, and the answer to that is a resounding yes. Until the fiscal cliff is averted it shall remain so, readers should focus on those companies delivering on earnings and revenues and look to those names for leadership at this point. After the fiscal cliff we shall see investors as a whole benefit as the general market rebounds.
We have economic news due out today and it is as follows:
MBA Mortgage Index - N/A
Retail Sales - -0.2%
Retail Sales - Ex Autos - 0.1%
PPI - 0.1%
Core PPI - 0.1%
Business Inventories - 0.6%
FOMC Minutes - N/A
Asian markets finished higher:
All Ordinaries - up 0.15%
Shanghai Composite - up 0.37%
Nikkei 225 - up 0.04%
NZSE 50 - CLOSED
Seoul Composite - up 0.23%
In Europe markets are slightly higher this morning:
CAC 40 - up 0.09%
DAX - up 0.02%
FTSE 100 - down 0.40%
OSE - up 0.18%
Another one of our favorite retailers, the Home Depot (HD), reported strong earnings yesterday which were better than expected. The company also raised its outlook as management stated that the company saw sales increase almost across the board in their largest markets and continued improvement in some of the hardest hit areas of the housing downturn. Shares in the company continued their steady rise on the news, hitting a new 52-week high in the process. The trend is your friend here and as housing continues to recover so too shall the shares.
American International Group (AIG) has seen shares come under pressure lately and yesterday shares fell another $0.63 (1.97%) to close at $31.35/share on volume of 26.8 million shares. The stock showed some signs of life after bouncing off of $31/share, which was the low for the day, as shares rallied somewhat into the close. All the way up investors have done well buying on pullbacks caused by general market action and the various secondaries and one should continue to do what is working, so we would recommend investors take a serious look at AIG now that shares have backed off recent gains.
One of the weirder stories investors will see is the high stakes match both MBIA (MBI) and Bank of America are playing with each other over MBIA's attempt to restructure some debt instruments. It looks as if Bank of America will block the company's attempt to restructure some of their bonds in an attempt to protect their own interests. It looks like a smart move on BofA's part, but we still dislike seeing a company essentially bully another and force them into financial hardship in order to protect their own financial interests. Based on their cost analysis it appears that it is the prudent move for BofA, but does it make sense for the system as a whole? Shares in MBIA fell $1.60 (19.02%) on the news to close at $6.81/share with volume surging to 18 million shares. This will be an interesting story to follow and see how it all plays out.
Star Scientific (STSI) has seen shares rally recently with shares finishing yesterday up $0.19 (10.22%) to close at $2.05/share on volume which was once again well above the three month daily average. In our opinion this is just a day trader bump and we would caution readers from rushing into it and establishing positions as we think the company will have difficulty raising cash via debt instruments and will probably have to issue new shares to increase their cash position. This is not a situation we really like with the quarterly losses, low cash levels and a business transition occurring at the same time.
Investors had a rude awakening with shares of Weatherford International (WFT) as the company disclosed that they had a material weakness in their tax reporting and actually had to report earnings without taxes factored in as the company goes through past quarters to find taxes still owed. Analysts downgraded shares and the company hit a new 52-week low on the news as volume hit 63.4 million shares in the session. The company also stated that they see weakness going forward and believe that next quarter will come in below Wall Street's consensus. Shares closed at $9.15/share after falling $1.73 (15.90%) and although shares have backed off and investors now know what the issues are, there is no way to quantify the past errors or if in fact there are other material issues with the company's financials. That is always a scary thought.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.