Today's Market: News Moving Tech, Manufacturing And Consumer Goods

Includes: BA, HIMX, HLF, TSLA, UTX
by: Matthew Smith

The shutdown and paralysis in Washington continues. The interview President Obama gave yesterday on CNBC after the market closed tells a lot about his view of economics, monetary policy and market psychology. We were a bit shocked at what we perceived to be fear mongering as the president painted a bad picture of what happens to Wall Street if they were not to convince the Republicans to back off of their attack on "Obamacare".

It was not all fear mongering though, because the president also told a pretty funny joke if you can read between the lines. He basically stated that he did not make decisions based on what the stock market did, and it seems obvious that everyone should know this because he uses polling data as his proxies.

All joking aside, we think that the weekend will be a good time for both parties to be able to sit down and possibly hammer something out. Less attention will be on them as most of America watches football on the weekends and the news cycle will be somewhat muted. Markets could see buying heading into the weekend.

Chart of the Day:

The Indian Rupee has continued to hold its ground in recent sessions, but we would like to see it trade higher still before going bullish on India's economy and saying all is clear. They still have some serious internal issues that must be dealt with and until that happens we see serious headwinds for the economy and the currency.

(Click to enlarge)

Source: Yahoo Finance

We have economic news today and it is as follows:

  • Challenger Job Cuts (7:30 a.m. ET): Est: N/A Actual: 19.1%
  • Initial Claims (8:30 a.m. ET): Est: 315k Actual: 308k
  • Continuing Claims (8:30 a.m. ET): Est: 2825k Actual: 2925k
  • ISM Services (10:00 a.m. ET): Est: 57.2
  • Natural Gas Inventories (10:30 a.m. ET): Est: N/A

Asian markets finished mostly higher today:

  • All Ordinaries -- up 0.33%
  • Shanghai Composite -- CLOSED
  • Nikkei 225 -- down 0.09%
  • NZSE 50 -- up 0.03%
  • Seoul Composite -- up 0.03%

In Europe, markets are higher this morning:

  • CAC 40 -- down 0.36%
  • DAX -- up 0.02%
  • FTSE 100 -- up 0.31%
  • OSE -- up 0.36%

Ackman's Short Position Changing

In a letter to investors, Bill Ackman's Pershing Square indicated that they had altered the composition of their short position in Herbalife (NYSE:HLF) to now include options. Roughly 40% of the hedge fund's short has been converted to puts, which means that over the course of this quarter roughly 4% of the company's outstanding shares have been purchased by Pershing Square to cover their position. When one considers the actual float this is actually quite impressive and has been a tailwind for the shares recently. The question is how this will affect the way shares trade, because with a portion of the trade already covered, it means there is less of a trade off of the one big short out there. We are curious as to how this will affect many of the smaller investors who piled on into the shares, that is if they adjust their exposure and risk to the trade at all.

Could we have seen a top for Herbalife now? It might be possible now that the market knows that Ackman has covered nearly half of his short and moved on to puts but one never knows. If this keeps the stock from breaking its old highs on this latest uptrend then one might need to get a little worried in the short-term if they are long.

(Click to enlarge)

Source: Yahoo Finance

A Tesla Care Gives New Meaning To Hot

We recommended readers sell the rest of their Tesla (NASDAQ:TSLA) shares recently in order to lock in the stellar gains that had been attained over the previous few months. We stand by that move, but being the market students that we are we still follow the shares in order to gain market insights and in case a new opportunity were to present itself. Regarding the fire in Seattle that required some work on the local fire department's part, we think that it is being overblown. The shares fell over 6% yesterday on the news, which had video footage that appeared on YouTube and, in our opinion, helped lead to the blowing out of proportion this non-news event. We are not buyers here because of the value proposition now, but for those who like to trade this stock we think a trade might be present here. Combustion engines catch on fire all the time, in fact when we used to have to drive a lot for work we would see at least one vehicle that had caught on fire each week. Yesterday was an overreaction and there is nothing to worry about at this point. Now if this becomes a trend, or there is no cause to be found for why batteries catch fire (as there was for the incident in Seattle) then investors have reason to worry, but not until then.

High-Tech Moving Higher

Himax Technologies (NASDAQ:HIMX) continues its move higher having taken out $11/share yesterday. The launch of Google Glass is going to happen in roughly three months and based on the various accounts we have read, it would seem that this will be a big launch. With the negative reviews beginning to pile up on the Samsung smart watch, we think that consumers may look to other devices when they want to finally buy wearable tech and Google Glass seems to be wear a lot of that spending will go based on what the analysts and others are saying. We have said to be bullish this name since Google invested in their subsidiary recently and even with the nice gains already experienced, we think the stock heads higher still.

Manufacturers Hit, But Still A Buy

The government shutdown is affected the economy in many ways and probably to a greater extent than some of the mindless politicians in Washington understand. Shutting down the bureaucracy sounds great when you hate big government, however the unintended consequence of shutting down corporate partners in the private sector happens too. United Technologies (NYSE:UTX) may have to temporarily lay-off up to 5,000 workers as they shut down various plants across the country due to government inspectors not being on the job. This is the same issue Boeing (NYSE:BA) is facing and we will probably see both of these companies have some revenue and earnings shortfalls in the next few quarters as their production schedules are altered. The longer the shutdown, the more havoc it will create for the companies but we still think that these names are buys.

Boeing has not pulled back nearly as much as United Technologies, but on any further pullbacks we like both names here. One has to be long the manufacturers if you think the economy is going to do well long-term.

(Click to enlarge)

Source: Yahoo Finance

In fact, this might be the pullback many have been looking for in these names and could set us up for another powerful move higher. Again, that is assuming this government shutdown does not last too long and the looming debt ceiling fight does not lead to further gridlock in Washington. Readers might want to watch these names over the next few sessions for buying opportunities because we feel that some nice entry points might be presenting themselves soon.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.