Yesterday was an odd day in the market, but the price action did allow investors to see the market's true colors. Europe is beginning to learn what many of us already knew, that no longer can they talk their way out of a financial crisis and the market will no longer allow them to release good news and have it rise accordingly without sufficient details as to how the deal is structured. This was obviously the issue with yesterday, and the more we look at this situation the more it becomes obvious that Eurobonds are needed sooner rather than later. Otherwise this is a house of cards best described as a Ponzi scheme. How ironic, or sad really, is it that Italy will provide roughly 22% for this latest bailout of Spain, only to be next in line to ask for a handout itself. This cannot last, and it is time for the Europeans to circle the wagons and get serious, or have everyone fend for themselves and just end the Euro experiment altogether.
The signs were there yesterday, we just chose to ignore them and go with historical price action and thus looked rather foolish with our calls yesterday. With gold down on that news, alarms should have been sounding because this was the type of news which would get the gold bulls out in force thinking about inflation creeping back into the world economies. This was our mistake, and probably due to our hoping that Europe had finally come around - we are rooting for them, but it is tough to root for those who refuse to do right by themselves.
Today's economic news to look forward to includes Export Prices - Ex Ag, Import Prices - Ex Oil and the Treasury Budget (Consensus -$125 Billion).
Looking at Asian markets we see markets are lower:
All Ordinaries - up 0.17%
Shanghai Composite - down 0.70%
Nikkei 225 - down 1.02%
NZSE 50 - down 0.83%
Seoul Composite - down 0.66%
In Europe markets are higher:
CAC 40 - up 0.31%
DAX - up 0.37%
FTSE 100 - up 0.22%
OSE - up 0.04%
We got news out of Apple (AAPL) yesterday which was a bit of a letdown for the market. Most of what we got was expected with Siri getting updated, the release of a mapping service and a partnership with Facebook (FB). Also announced was a new operating system along with new hardware which focused on the computer segment and not (what seems to be) the mythical AppleTV or iTV or whatever you want to call it. Many analysts and talking heads came out after the announcement to say that it was just so much news that we can expect the TV in the next year. We were expecting something to be said about a new iPhone, but we did not get that either. Shares finished at $571.17/share falling $9.15 (1.58%) after having been up for most of the day. The general market sell-off took hold of Apple shares, and we saw volume tick up to 21.1 million yesterday.
Facebook was having one of its better days trading yesterday until the general market woes got a hold of it as well. Once Apple turned lower, this one followed it lower as well. Shares finished at $27/share down $0.10 (0.35%) on volume of 28.2 million. The expected partnership with Apple which was announced should be good news and make Facebook that much more of an everyday tool for users and working with Apple is much better than working against them - as many have already learned and others appear poised to figure out. This does not solve all of the company's issues, especially since user growth is slowing and now its focus must shift towards monetizing this huge user base.
It seems this morning we have a talent for writing about tech stocks and the degrees which separate them. Apple news impacted Facebook and Facebook's news impacted Zynga (ZNGA) in a negative way. The shares finished down $0.50 (8.26%) to close at $5.55/share on volume of 21.5 million. With Facebook growth down to about 5% YoY, some are getting worried about the company's ability to penetrate the social media gaming market any further. The easy growth is over, and now it is about real growth based on a good business and even better games. Facebook's slowing user growth has been the talk of Wall Street for the past few weeks now, so this news was expected, but obviously the sell-off in the general market and the hard reality settling in on investors that the company now must transform into an earnings machine probably sent the shares down so strongly.
Arena Pharmaceuticals (ARNA) was a good story yesterday. The shares rose $0.455 (6.87%) to close at $7.075/share on volume of 24.9 million. Day traders were obviously involved in this one as the volume surged and after yesterday we are now within shouting distance from the 52-week high of $7.23/share. Big news is due out soon enough, and as we mentioned yesterday there are other ways to play this news if one thinks that shares here are richly priced. One can hedge via shares or options in the two other companies trying to get drugs approved, but obviously it is best to play the actual stock of the company whose future you want to bet on. Investors might very well see another melt-up like we saw last time news was due out.
CONSOL Energy (CNX) was finished the day at $27.27/share down $0.98 (3.47%) on volume of 3.78 million. The stock is nearing its 52-week low of $26.91/share as both natural gas and coal are getting hit in recent trading and weighing upon shares. Shares in coal players were hit especially hard the past two trading sessions as one competitor announced the closing of 4 mines and the curtailment of other production as the economics of the industry change. Things will get worse before they get better, and this will be one of the players left when all is said and done, however waiting to enter into the trade is the wisest route to take, and that has been the case for months now.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.