There will be three Federal Reserve members speaking in San Diego during Friday afternoon and there is always the possibility that something will be said that either itself moves the market or those reading between the lines move the market. After yesterday's sell-off due to the FOMC minutes and it appearing that the Fed seems to be becoming less dovish, a lot of attention will be on members each time they speak. We like to believe that every action has a reaction and likewise every reaction is due to an action, thus the fact that the Federal Reserve believes that they may be able to throttle down on the quantitative easing seems like it could be bullish news for the economy. We say this because it is our opinion that the Fed will not walk away from the job of stimulating the economy before it is able to sustain itself with normal market forces.
We have economic news due out today, and it is as follows (these are the consensus estimates):
Non Farm Payrolls (8:30AM EST): 150k
Non Farm Private Payrolls (8:30AM EST): 145k
Unemployment Rate (8:30AM EST): 7.7%
Hourly Earnings (8:30AM EST): 0.2%
Average Workweek (8:30AM EST): 34.5
Factory Orders (10:00AM EST): 0.5%
ISM Services (10:00AM EST): 53.5
Natural Gas Inventories (10:30AM EST): N/A
Crude Inventories (11:00AM EST): N/A
Asian markets finished mixed today:
All Ordinaries - down 0.38%
Shanghai Composite - up 0.35%
Nikkei 225 - up 2.82%
NZSE 50 - down 0.18%
Seoul Composite - down 0.37%
In Europe markets are lower this morning:
CAC 40 - down 0.43%
DAX - down 0.18%
FTSE 100 - down 0.08%
OSE - down 0.08%
The Federal Communications Commission (FCC) effectively approved Liberty's bid to become the majority owner of Sirius XM (SIRI) yesterday after ruling that Liberty could control Sirius's licenses. In the near future Liberty should be exercising their warrants and moving to increase their equity position above the 50% threshold. Current shareholders, as well as prospective ones, need to keep in mind the fact that a take-out premium no longer exists and only upon a strong market rumor or actual offer (with Liberty's blessing of course) will we see it return. This is not to be misconstrued as us being bearish, simply cautious - especially because John Malone is always five steps ahead of everyone else, no matter how brilliant they are. The stock hit a new 52-week high yesterday and with John Malone now at the helm, we are anxious to see what types of financial maneuvering he does with these assets.
We noticed shares of Vringo (VRNG) on the move yesterday and they closed at $3.50 after rising $0.58 (19.56%) during the session. Volume also spiked to 10.1 million shares after Google settled with the FTC. Investors are betting that Vringo is going to be able to avoid Google's best shot now that they are under the microscope. We have no horses in this race, however we think that it shall be quite interesting to see how this one plays out - especially if an important pillar of Google's business suddenly becomes much less profitable due to licensing fees.
Herbalife (HLF) saw shares rise $4.15 (12.89%) to close at $36.35/share on heavy volume of 20.1 million shares during yesterday's trading session. The spark for the rally was Chapman Capital's Robert Chapman announcing that he made a very large bullish bet on the company after Ackman's bearish announcement and presentation as he viewed it is a bear raid. This caused a short squeeze and has enabled shares to almost accomplish a round trip. There is still a good way to go to get back to even from where Ackman announced his position, but looking at the chart it appears that the shares are now back above the level they traded at right before his in-depth presentation. We still have our doubts about the company and recognize that it is not a popular opinion to have, but the MLMs we think throw up a lot of red flags.
Family Dollar (FDO) saw shares get slammed yesterday as shares fell $8.30 (12.96%) to close at $55.74/share after the company reported lackluster results. Raymond James cut their rating on the stock from an 'Outperform' to a 'Market Perform'. Following the company's report of disappointing sales figures, with the blame being attributed to weak holiday sales, we have to agree. The dollar store segment had previously delivered results investors could count on, but lately it seems that their business is under fire from outside competitors looking to take market share back. With sales figures down and metrics used to measure operating performance deteriorating the outlook simply does not look rosy at this time, especially when some of the world's largest retailers are gunning for you now.
Yesterday saw SunPower (SPWR) rise almost 48% as shares rose $2.94 to close at $9.07/share as investors rushed to buy after Warren Buffet's energy company agreed to purchase two solar plants from the company. Over the past month the shares have now doubled and it seems that investors have now gotten ahead of themselves on this one. The thinking is that Warren Buffett has somehow put his stamp of approval on solar, and that is hardly the case. After all, utilities are required to generate a certain percentage of their generated power via renewable energy sources by certain dates in the future so obviously the company would need to generate wind and/or solar. Based on the economics we are still believers in selling solar issues into strength whenever possible.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.