The markets had their best day of 2012 yesterday, powered by the release of the bank stress tests. They were released early due to a botched press release, but 15 of the top 19 banks passed. We have a ton of economic news out today including: the MBA Mortgage Index, Current Account Balance, Export and Import Prices, and Crude Inventories. US futures are mixed right now with the Dow up a dozen points, and the Nasdaq and S&P flat to marginally down.
Looking at Asian markets we see that most are up:
- All Ordinaries - down 0.90%
- Shanghai Composite - down 2.63%
- Nikkei 225 - up 1.53%
- NZSE 50 - up 0.81%
- Seoul Composite - up 0.99%
In Europe we see green across the board:
- CAC 40 - up 0.59%
- DAX - up 0.99%
- FTSE 100 - up 0.42%
- OSE - up 0.65%
We were a bit surprised yesterday to see Sirius XM (SIRI) sell off near the end of the day just as the general market was rallying along with financials on the release of the stress test data. We saw risk-on coming back into the market, and strangely enough investors were fleeing. It was not an overall tech trend, as the Nasdaq caught fire late but it may have been a sector trade. We would note that Pandora (P) was down for the day as well and weak the entire day. The two should not trade in tandem, as we have covered in previous articles, but we are a bit disappointed with Sirius's underperformance on such a great day for equities.
Zynga (ZNGA) fell sharply on a Bloomberg report that they will be issuing shares via a secondary. It is being pitched as a way to avoid a fall in share price once the lock-up period ends, but it is really a way for investors to sell their shares. We have seen this before, and it has helped keep shares propped up for a while, but inevitably shares will fall once insiders and large shareholders are allowed to exit their positions.
Starbucks (SBUX) continues to show strength, nearing its 52-week high once again. We like the growth prospects for the company's traditional business as well as the new areas they are entering. The company has its focus back and seems to be firing on all cylinders. A healthy economy will only encourage more consumers to purchase the $5 lattes, much like they did over the past decade. For the short-term we see a $55 price as feasible for the stock, with $60/share possible when exiting 2012, assuming the economic recovery stays in place.
Regions (RF) will be issuing new stock to raise $900 million in order to repay TARP. The company should have no problem doing this, but it will dilute shareholders. Other banks that have done this have performed well, but they were much larger and far healthier. This issue will weigh on the stock, but getting a clean bill of health should give investors confidence moving further and help this become one of the better trading vehicles as the economy improves in the southern U.S.