Markets are higher in spite of the comments from Harry Reid, and as of now markets are up across the board with futures here in the US higher as well. We have a lot of economic data out today but we do not expect today's batch to really impact the market one way or another. It feels like the market is throttling up and wanting to take off, but is being held back by the politicians in Washington. The winning streak we have put together on the Dow in recent sessions is impressive and certainly something to build off of - either into the close this year or the start of next year.
We have economic news due out today, and it is as follows:
MBA Mortgage Index - N/A
Export Prices - ex Ag. - N/A
Import Prices - ex Oil - N/A
Crude Inventories - N/A
FOMC Rate Decision - 0.25% (unchanged)
Treasury Budget - -$113 Billion
Asian markets finished mostly higher today:
All Ordinaries - up 0.23%
Shanghai Composite - up 0.39%
Nikkei 225 - up 0.59%
NZSE 50 - down 0.77%
Seoul Composite - up 0.55%
In Europe markets are mostly higher this morning:
CAC 40 - down 0.12%
DAX - up 0.31%
FTSE 100 - up 0.27%
OSE - up 0.32%
We make a lot of comments on individual stocks as well as many comments on a number of different stocks, and there are times when we are wrong. When that happens we like to come clean and with news out yesterday that Sprint is looking to close a deal for the rest of Clearwire (CLWR) which it does not already own, we are prepared to admit that it appears we were wrong regarding their intentions and who the targets would be. Clearwire shares rose $0.28 (11.67%) to close at $2.68/share on higher than normal volume of 42.1 million shares. This has been a persistent rumor for Clearwire shareholders and with the news leaking yesterday we are curious as to what price a deal gets done at. Remember the shares rallied sharply on the belief that the company would be purchased, so it reasons that the premium at this point would be minimal.
The situation with Apple has to be frustrating for investors who share our view on the shares and the outlook for the company's business and operating results. With the stock seeming to be impacted by things outside of its control, we think that investors would be served well using Cirrus Logic (CRUS) to play knockout earnings from Apple and strong numbers moving forward. It is not a perfectly correlated relationship, however an investment in Cirrus Logic does gain one exposure to Apple sales and success while at the same time keeping one away from the craziness that is the situation currently surrounding Apple and the weakness in its shares. Shares in Cirrus Logic finished at $29.28/share after rising $1.65 (5.97%) yesterday, which is below the $30/share level where we think the shares are a screaming buy.
Much has been made about the dollar stores as a group taking business away from the big box discounters and using those gains to push the needle higher. This growth in the customer base has allowed the industry to add more stores and improve metrics such as same store sales and gross margins over the past couple of year. The stocks have been big gainers and it has been like that across the board. Yesterday however, Dollar General (DG) fell $3.63 (7.79%) to close at $42.94/share with volume of 28.4 million after the company announced that it sees same-store growth slowing and gross margins stuck at current levels. Making matters worse was the fact that a competitor was downgraded on valuation concerns as the analyst and their firm believe that their price had gotten ahead of the expected future growth. If growth has slowed or stalled here and the gross margins have been maximized already then it would seem reasonable to see analysts become less bullish on the outlook here. Something readers should keep an eye on moving forward.
We have been bullish of American International Group (AIG) and written how readers should be bullish of shares and buy on dips, especially when shares are in the low $30s. Our logic was that good news was on the horizon and that it would not be forever that the US government held a large position and could constantly sell shares in secondaries and keep prices low. Well the government stated yesterday that they had priced the last lot of shares they had, were turning a profit on the bailout of AIG of over $22 billion and that the program had been a success in this case. This all caused shares to rise $1.90 (5.70%) to close at $35.26/share and for volume to spike to 253.1 million shares. The exit of the US government as a shareholder removes that overhang of shares to come into the market and the stigma attached to AIG as a bailoutee.
The big mover yesterday was a company named BG Medicine (BGMD) which closed at $3.38 after rising $2.05 (154.14%) on news that the company's CardioSCORE may now be sold commercially since the company obtained the CE Mark. This applies to Europe and other countries where the CE Mark is recognized. The CardioSCORE is a blood test to assess risk for near-term cardiovascular issues which we have read is a test which works better than tests already out there. It will be interesting to see how much of yesterday's gains are kept today as these things usually pull back after huge run-ups like yesterday's.