Following in line with market expectations leading into the new trading week, Monday opened with a bang as a flurry of economic, political and market-related news dominated the headlines all day. As has been expected since the finalization of fiscal cliff talks at the new year, debt ceiling discussions hit full swing this week, as U.S. President Barack Obama fueled the debate with a surprise press conference emphasizing the need to advance towards an agreement with the cooperation of both political parties. Treasury Secretary Timothy Geithner followed up with warnings of his own that the issue cannot wait, and that the U.S. economy cannot be held hostage to another round of bitter negotiations. While the political speak intensified, the markets held relatively flat for the day.
Tuesday will see the release of the first of a few economic data reports for the week, with retail sales numbers and the Empire State manufacturing index expected to hit the wires. These data could set the tone for the day's trading as investors also anticipate a heavy earnings slate for later in the week. The foundation was set on Monday for an exciting week ahead and some high-profile stories are positioning to jump to the forefront of market news. Here are a few to keep an eye on for Tuesday, 15 January, 2013...
Apple Dropping On iPhone Weakness As Research In Motion Jumps
Apple (AAPL) shares dropped below the five hundred dollar mark for a brief period on Monday and will continue to be a hot story to watch for the remainder of the weak. Many who considered the late-2012 drop in AAPL shares as simple consolidation leading into a new trading year may reconsider, as reports have indicated slowing iPhone 5 sales and also hinted at consumer saturation of Apple products that are no longer revolutionizing the industry, but offering only modest upgrades or changes over the previous releases of what many consider the same product.
It has been argued and expected by many, for some time, that Apple could suffer from over-saturation of its products. But in the past the company has always been able to respond with another next-generation blockbuster, and those playing this current AAPL dip will be counting on such a scenario. An Apple iTV has been rumored to be in the works and it would likely only take a few enthusiastic words from the company about a future game-changer to rebound the company shares, but the recent volatility is expected to continue moving forward.
Meanwhile, Research In Motion (RIMM) shares jumped another ten percent on Monday, following a similar spike last Friday and is set to be one of the more anticipated stories for the remainder of the month with the launch of the BlackBerry 10 platform now imminent. RIMM shares are up nearly thirty percent already this year and the BB10 launch couldn't come at a better time for the company, noting the weakness in iPhone sales, as mentioned in the previous paragraph. An exciting launch could push RIMM shares ahead even higher, adding to what has already been a stellar 2013 performance for the stock.
As always, there will be periods of pullbacks and consolidation when individual stocks move so quickly as the day, swing and momentum traders look to bank profits, while those with eyes to the long term consolidate, but RIM could be in the midst of a resurgence.
Apple, on the other hand, could be in a position where it is looked at as a solid rebound play after its dramatic drop over in the last couple of months. The company is still the dominant player in the sector and it's hard to believe that something is not in the works to keep its technology one step ahead of the competition. It's worth keeping an eye on both of these stories, while both may again be 'buy the dips' plays for the long term.
Facebook Event Has Investors Buzzing
Facebook (FB) is slated to hold a "surprise" press event on Tuesday and investors are buzzing as to what could be announced during this date with destiny. The FB rebound has been in full effect, with shares re-gaining the thirty dollar foothold, although a slight pullback on Monday resulted in a drop of over two percent as some investors may be playing the 'sell the news' game, although the 'news' was still a day away.
Rumors have been circulating that the big announcement by Facebook will launch the company more into direct competition with Google (GOOG), either by way of much more robust search engine capabilities or with the introduction of a Facebook smartphone. CEO Mark Zuckerberg has previously denied that the company was planning on jumping into the smartphone market, but some investors have considered that to be business-ploy posturing as it's been no secret that Facebook officials believe the future of its business plan hinges on the mobile market - and you can't get more mobile than having your own mobile platform.
Such speculation makes Tuesday's FB media conference one of the more hyped and anticipated market events of the new year thus far, and the right news could send shares higher towards the IPO price of nearly a year earlier. Beware of any 'sell the news' action, though. Often times investor hype leading into these events can dwindle and lead to a share price decline if the news announced is not in line with expectations. Any hints of that action could lead to a dip below thirty again. Also bear in mind that the company's next quarterly report will likely affect stock movement and investor sentiment moreso than this media event.
Big Banks Trade Flat Ahead Of Earnings, Ironwood Prepares For Linzess
The most significant reports due this week that could affect the overall markets are from the big banks. Wells Fargo and Company (WFC) set the tone last week with an encouraging report, barring the mentions of a decrease is mortgages issued, and other big players such as Bank of America (BAC), Citigroup (C), Goldman Sachs (GS) and JP Morgan (JPM) are slated with reports to follow this week. From this slew of banking reports, investors can gauge trends regarding the health of the U.S. and global economies - whether good or bad - and the markets are likely to trade in-line with the sentiment surrounding these reports, at least temporarily.
Banking shares traded relatively flat on Monday as investors anticipate these earnings reports. Those with an eye towards the long term may view any dips in or around the release of these reports as an ample buying opportunity. GS and JPM are expected to report on Wednesday, while BAC and C are slated for a Thursday release. Look for investors to take and consolidate positions beforehand. Again, for those looking to play in-line with the overall sector rather than play with the individual banks, the Financial Sector SPDR EFT (XLF), or other sector-wide ETFs, may provide a solid option.
Ironwood Pharmaceuticals (IRWD) and Forest Laboratories (FRX) are also going to be hot earnings stories to watch on Tuesday. Ironwood received approval for its GI drug Linzess last year and the company has just undertaken a debt offering that is expected to, in part, cover the product launch. Linzess is entering a billion-dollar market and any positive indications regarding its potential could also reflect on trading of Synergy Pharmaceuticals (SGYP), a company which released positive results earlier this year for a late-stage study for a similar product.
Earnings for Forest Labs, on the other hand, have been noted to have suffered of late with the expiration of some key patents and expectations are already tempered for the quarter. Of note, however, is that the company is also partnered with Ironwood for Linzess and investors will be able to anticipate comments from both company's regarding expectations for the immediate and long term future. Forest will split Linzess profits with Ironwood.
Healthcare, Biotech, Pharmaceutical
Inovio Continues To Rise On Flu Hype
Given the recent hype surrounding the growing flu epidemic that has hit the United States hard this flu season, shares of Inovio Pharmaceuticals (INO) - and those of other companies developing potential vaccines to treat the problem - have been moving higher through the first couple of weeks of 2013. Following another near-seven percent move to the upside on Monday, INO is still looking positioned as a stock to watch moving forward, especially if the search for a universal flu vaccine picks up its pace.
Inovio's pipeline-- including a universal flu vaccine, currently being investigated in clinical trials-- is based on its proprietary SynCon technology. SynCon is a platform from which the company has developed numerous synthetic vaccines intended to treat numerous infectious diseases and cancer types and Inovio has already successfully attracted a few collaborative efforts, as six of the programs in development are funded by third parties, three of which are in the Phase II stages of development.
Numerous news and financial media outlets have picked up their coverage of late of both the subject of the lack of a universal flu vaccine and the companies which could come to the table with a solution. Having already received a fair amount of attention as a result of the subject, Inovio shares are primed to continue attracting new investor interest, which should also draw eyes on a deep SynCon-based pipeline that is soon to transition into the latter stages of development, pending some interim and potentially finalized trial results later this year. Volume has also picked up over the past weeks, which could be indicative of slow accumulation in anticipation of a possible move higher. Organovo Holdings (ONVO) and TrovaGene Inc (TROV), for example, both saw similar price and volume action before their respective breakouts recently.
With flu vaccines starting to steal the spotlight with more ferocity, as evidence by the recent headlines, look for Inovio to jump onto some radar screens.
Dendreon Jumps On Key Indicators
Dendreon (DNDN) shares, after already gaining very significantly on the year, jumped another four percent on Monday and are threatening to move even higher pending further developments and increased media and analyst coverage. After receiving a boost last week from a Bernstein analyst who upgraded the DNDN stock to 'Outperform' while also upping the price target to $10 from $7, Forbes on Monday highlighted some technical analysis that indicates a bullish pattern moving forward.
While the analyst upgrade and positive technical developments are wholly encouraging, Dendreon is still likely to trade in regards to earnings for the time being. A hint at the fourth quarter numbers presented at the JPM Healthcare conference last week indicated a reversal in trend for Provenge sales, based in part on expanded insurance coverage by the likes of Aetna (AET), and investors will look for similar forward-looking statements when the company presents in full for the quarter. Investors will also key in on the benefits received from a slew of cost-cutting measures put into effect over the last year.
Given the noted technical indications and the positive earnings hints provided by the company last week, 2013 is shaping up as a rebound year for Dendreon.
Roundup: International markets traded mixed on Tuesday, following the pattern set by the close of trading on Monday in the United States. U.S. markets are likely to trade in conjunction with any headline-making economic news, as mentioned in the opening of this write-up, as investors gear up for the big earnings announcements of later this week. 2013 has thus far shaped up as a positive one for the markets, and even more so for a few individual stories, and continued enthusiastic predictions regarding economic growth for the year may be enough to stave off any negativity created by the debt ceiling negotiations. It should be a no-brainer to Washington that it's a bad idea for the U.S. to default on its debt, so it should be a given that a deal will be reached. There will be growing political banter, however, over just how much government spending to cut and how many taxes to potentially raise - just the typical stuff we've been hearing for long enough now. Just get it done. For us investors, there's plenty to watch this week.
Disclosure: I am long XLF, INO. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.