Today's Market: Why Investors Should Stick To These Stocks And ETFs

|
Includes: AAPL, DUK, IWM, SO, T
by: Matthew Smith

Summary

Analyze recent market movements and how investors have reacted.

Revisit our call on Apple and what is currently moving that stock.

Discuss why investors should not be selling high yielding names after one week of good economic news.

If investors have not learned anything over the past year or two, they should have learned that this market's personality has dictated that one should not simply chase the rallies created by economic news but rather patiently wait for pullbacks. Monthly or biweekly buying programs have also worked well for investors, but this thinking that the market will turn on a dime has been costly for those looking to make some quick money via trading.

This is not to say that we are not bullish of growth stocks or those indices which track that segment of the market, because we are bullish of the iShares Russell 2000 (NYSEARCA:IWM). Our point is that one has to be smart when buying, especially with many of the general market indices so close to their record highs. The hardest concept for investors to learn is to remain disciplined at all times and that is really what we are trying to drive home today.

Chart of the Day:

With the volatility we have seen in the market recently as a result of the economic data, it is no surprise that the bond market has been moving as well. Rates once again approached the 2.65% level before retreating and as the three-month chart below shows that is turning out to be a key level.

Click to enlarge

Source: Yahoo Finance

We have economic news today, and it is as follows:

  • JOLTS - Job Openings (10:00 a.m. EST): Est: N/A Act: 4.635 M
  • Consumer Credit (3:00 p.m. EST): Est: $16.3 B

The Asian markets are mixed today:

  • All Ordinaries -- down 0.14%
  • Shanghai Composite -- up 0.20%
  • Nikkei 225 -- down 0.42%
  • NZSE 50 -- down 0.39%
  • Seoul Composite -- up 0.08%

In Europe, the markets are lower this morning:

  • CAC 40 -- down 0.60%
  • DAX -- down 0.61%
  • FTSE 100 -- down 0.73%
  • OSE -- down 0.46%

Gravity Not Affecting This Apple

Our regular readers will remember that we went bullish once again on Apple (NASDAQ:AAPL) shares once we saw signs of life in the tech behemoth. We left money on the table by missing the very beginning of the move, but this was a long-term pick which we were hunting for an attractive entry point for (both in terms of pricing and timing). The thinking was that the company would continue to crank out great products and maintaining market share, while also developing new products which would provide the future growth.

It certainly appears that 2014 is going to be the year which kicks off this new wave of innovation the market has been waiting for, especially after yesterday's announcement that Apple has hired Patrick Pruniaux away from Tag Heuer, adding to their talent pool with marketing experience in the luxury market, especially watches and other wearables. With the excitement from the investment community on Monday and the rumors that the company is going to debut a larger screen, one has to believe that the stock is going to gain momentum from here as expectations build with the approaching launch. We would not be surprised to see the shares use yesterday's fresh 52-week high as a stepping stone to test (and eventually break through) their all-time highs.

Our thinking is that if Apple can break through the $100/share level then $105/share and $110/share should follow. It is a huge company, but investor psychology usually dictates that this takes place.

Click to enlarge

Source: Yahoo Finance

Yield Remains King

The old saying is that 'cash is king' and although that saying held true during the 'Great Recession', the past few years have seen a period where yield is king. The jobs report last week had many investors worried about their portfolios which they had positioned in names such as Southern Company (NYSE:SO), Duke Energy (NYSE:DUK) and even AT&T (NYSE:T). Our initial reaction when we saw the high yielders lower on the jobs news was that it was an overreaction, especially when considering that Southern Company, Duke Energy and AT&T all generally make up the base of investors' portfolios. Big swings generally have a tendency of leveling off and the beginning of the trading week has proven this to be true.

As the market gains steam and shifts to a market where one wants to own growth, names such as Southern, Duke and AT&T will lag the general market but should continue to see buying as more capital enters the market and seeks to allocate among various market sectors. A "correction" will eventually come, be it a move lower or simply underperformance against the market for a period of time, but it will not be a one- or two-day event.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article. All names mentioned in the article have previously been recommended.