Australia lowered key interest rates to 3.00% early this morning and it has done little to help them as many economists had predicted the move. So it was a move which met expectations and was not a surprise for investors. Yesterday was a down day for US markets, but we want to draw investors' attention to the fact that although we had overwhelming down volume the new highs to new lows ratio was overwhelmingly in favor of the new highs - a trend the market can most certainly build off of once the fiscal cliff is averted.
We have no economic news due out today but tomorrow will resume a busy week of news.
Asian markets finished lower today:
All Ordinaries - down 0.62%
Shanghai Composite - up 0.78%
Nikkei 225 - down 0.27%
NZSE 50 - down 0.82%
Seoul Composite - down 0.25%
In Europe markets are mostly higher this morning:
CAC 40 - up 0.82%
DAX - up 0.18%
FTSE 100 - up 0.20%
OSE - down 0.27%
Investors have been pushing up shares of Advanced Micro Devices (AMD) over the past few sessions as the thinking is that their cash issues could be solved by their largest shareholder, Mubadala Development which is already a 19% owner. Yes the company is a deep pocketed investment arm from the Gulf and already has a tangled business web with AMD, but they can only throw so much money at this hole. We would not be betting on an AMD comeback, but rather an industry comeback and with the risks here we would much rather invest at the top of the food chain rather than at the bottom. So long as AMD has to compete with an 800 pound gorilla with superior products and pricing power there is not a whole lot to get excited about in our opinion.
Speaking of technology stocks investors need to step away from, look no further than Zynga (ZNGA) which saw shares fall $0.23 (9.35%) yesterday to close at $2.23/share. We have been asked whether we liked the company as a spec play and the answer is a resounding no. This is not a speculation trade we want readers involved in as there are much better ways to speculate in the current market. It all boils down to the risk/reward ratio and we see much more favorable plays elsewhere. It may be too early to declare the company dead, but it sure appears that the death spiral has begun based off of events over the past few weeks and months.
It is not often that you get two fierce competitors trading at 52-week highs, with one at all-time highs when their principal market is still recovering and the overall economy is still trying to find its footing. Oddly enough that is the situation investors find when looking at the home improvement retailers Home Depot (HD) and Lowe's (LOW). Home Depot has been leading the way higher, and has the better operating results since the business bottomed. Lowe's, on the other hand, was slow to catch up and still trails its competitor by some key metrics, but strangely enough hit a new all-time high yesterday.
In the retail sector these are two of the hottest stocks and it might be fair to say that this is the hottest sector within retail. We like momentum and we like improving businesses and these two offer the best of both worlds. Investors should look at adding these two plays, even to retirement portfolios as they pay decent dividends for retail stocks, as both currently yield 1.80% on a trailing twelve month basis.
Deckers Outdoor (DECK) saw shares rise $4.05 (10.58%) yesterday to close at $42.34/share on volume of 6.5 million shares after the company received an analyst upgrade. The analyst is from Sterne Agee, and they raised their rating to a buy from neutral expecting improvement in the company's business. Many have tried to call the death of the company's popular Uggs brand, but to date no call has been successful as the company continues to breathe fresh life into the product line just as it begins to go stale and their female clientele are very loyal and almost fanatics when it comes to the product. It will be interesting to see how the holiday shopping season plays out for the company as we have noticed many ads this year, with men being the focus.