With the flop of Facebook, it now appears that our belief that there would be a renaissance of sorts for tech stocks, especially internet stocks, which would pull capital out of the commodities space and other recent strong sectors is a bit off base. Sure commodities did correct, but that was more a reaction to the underlying commodity prices which carried the equity prices lower and although techs led the way higher earlier in the year it appears that the risk appetite in this space has been dampened as well. Now investors are forced to focus upon the cold hard facts, and when doing so one comes up with a pretty underwhelming thesis for investing in markets now.
Issues in Europe coupled with issues in China, and keep in mind that they are intertwined, do not bode well for world markets. It will be interesting to see if somehow the miracle that is the U.S. economy can somehow crank up growth -- or the printing presses - to at least help turn the tide for slowing world growth. It cannot be done alone by the U.S. Fed, they will need assistance from other central bankers, but we think there will be a willing coalition for this endeavor.
Regarding economic news in the U.S. today, investors will get to see the latest numbers from the Case-Shiller 20 City Index (Consensus -2.8%) and the Consumer Confidence numbers (Consensus 69.0).
Looking at Asian markets we see markets are higher:
All Ordinaries - up 1.16%
Shanghai Composite - up 1.20%
Nikkei 225 - up 0.74%
NZSE 50 - up 0.46%
Seoul Composite - up 1.41%
In Europe markets are mostly higher:
CAC 40 - up 0.11%
DAX - up 0.36%
FTSE 100 - down 0.06%
OSE - up 0.18%
Facebook (FB) was down $1.12 (3.39%) on Friday to close at $31.91 on volume of 37 million. Volume continues its downtrend, much as we expected it to after the IPO. One would guess that it settles down into the 17-23 million shares a day range before all the other shares are allowed to hit the market. Today it is important for investors to note that options begin trading on the company's shares, so it will be easier for investors to set up net short positions as well as hedge. One would not expect the same fiasco in the options market debut that occurred during the IPO as the banks and exchanges have taken steps to minimize the chance of a situation such as that evolving.
Apple (AAPL) closed down $3.03 to close at $562.29 on extremely low volume which represented just half of the company's three month average. We recognize that it was the Friday before the Memorial Day weekend, but it appears that this affected Apple more so than others we follow. Regarding the company's shares, it is hard to say what is going on here, but we think that whatever move Apple makes next is where the general market goes as well - whether that be up or down.
VeriFone Systems (PAY) had a rough day on Friday as the shares traded down $6.97 (15.49%) to close at $38.03 on volume of 25.8 million. The company's three month average for volume was 2.9 million so this was a very big day for trading in the shares. The company moved lower on what many perceived as disappointing results which only added fuel to the fire in regards to the negative attitudes analysts have had regarding the stock lately. Expect volume to remain above the three month average again today in heavy trading as the computers and day traders move out.
We warned investors to be wary of Rosetta Genomics (ROSG) after the huge run-up and what appeared to be a blow-off last Thursday, and on Friday shares corrected. Investors saw shares fall $3.05 (18.72%) to close at $13.24/share on volume of 4 million. For those still wanting to play this, we probably need to see a rather large retracement before another big movement upwards. Lately the trend has been nowhere but up with this company, but we think it is more probable that trend ends and we see a new trend with shares heading lower before basing out and forming some level of support. We are not 'hating' on this stock as we are sometimes accused of doing, but rather calling them like we see them, and it appears that Rosetta got ahead of itself and now must correct - think of it as a hangover for stocks almost.
Elan (ELN) is another one to watch as its shares rose $1.11 (8.42%) in trading on Friday to close at $14.30/share. Volume was 8.5 million and that was roughly four times its three month average. Investors were bidding shares up due to comments from the Chairman stating that the company could receive a buyout offer pending the results of an experimental Alzheimer's drug being co-developed with two large pharmaceuticals companies. To sum up what was said, the company is not for sale, and the plan is not to sell out but if a suitable offer came around the board would be forced to seriously consider it. To our ears that sure sounds as if the company is fishing for offers to entertain.