When we went to sleep last night markets were sharply higher on the news out of Greece. As we woke up this morning we noticed that markets in Europe were still green but we were fading and U.S. futures pointed to a lower open. Europe is letting out a sigh of relief as the Greek results indicate a government will be formed but U.S. futures seem to indicate fear of Spain's issues.
We are probably seeing a situation where the central bankers back off for a bit, but we think that they should do just the opposite. Action is needed, both here in the U.S. and in Europe. It is an election year, but look for the federal reserve to take some sort of action before the election in order to boost the economy.
We have one piece of economic news out today here in the U.S. The NAHB Housing Market Index (Consensus 28) will be released today and the market will get a heavy dose of housing data over the next two days as well.
Looking at Asian markets we see markets are higher:
All Ordinaries - up 1.87%
Shanghai Composite - up 0.40%
Nikkei 225 - up 1.77%
NZSE 50 - up 0.25%
Seoul Composite - down 1.81%
In Europe markets are higher:
CAC 40 - up 0.42%
DAX - up 0.79%
FTSE 100 - up 0.22%
OSE - up 0.13%
Technology
Facebook (FB) had a pretty good day on Friday as the shares closed above the $30/share level. The shares closed at $30.01/share having risen $1.72 (6.09%) on volume of 43.5 million shares. The stock has put together a bit of a winning streak as of late and it now appears that the sell-off in response to the shares being richly priced may have in the short-term pushed them into oversold territory. One thing for investors to keep in mind is that the market capitalization on this one helps it move along with the general market when it rallies - a situation of the dog wagging the tail and not vice-versa.
Apple (AAPL) is one stock which was the tail, and it most certainly wagged the dog when it so chose. On Friday it underperformed the market as it rose $2.60 (0.45%) to close at $574.13/share. Volume was once again weak, as only 11.9 million shares were exchanged. It is our opinion that the company is holding off on the new big products for later in the years to juice the shares going into the end of the year. The situation in Europe is what it is, and China has its own issues, but Apple is its own beast and we would expect them to turn in another good quarter based on results out of China. For those thinking that this is nonsensical, remember that the Chinese economy is switching towards a consumer economy and Apple still has not penetrated the market to the degree of their other geographic areas.
Sirius XM (SIRI) has been in a range, as we have talked about in detail recently. The stock closed at $1.87/share having risen $0.01 (0.81%) on volume of 37.7 million shares. We now think that with the news out of Europe seeming to be bullish, at least for the short-term, that we may see a breakout through the $1.90/share level. Preferably, shares would close above $1.92/share, but that might be asking too much. If Europe remains weak, along with the US futures, then this is probably stuck for a bit more in its latest range.
Biotechnology
Arena Pharmaceuticals (ARNA) had another great day on Friday as shares continued their 'melt-up' on strong volume. Investors saw shares close at $8.40 having risen $0.32/share (3.96%) on volume of 26.3 million shares. We are probably seeing a short squeeze here and one has to question just how large the losses are for those behind those positions. The news is imminent and it seems that market is indicating that it shall be good. We continue to watch this one with interest.
Banking
We recently told readers to sell puts on JP Morgan (JPM) shares as they had been oversold and there was overreaction both in Washington and the stock market regarding the bad bets made. Shares have since rallied a bit and after Friday's move we are inclined to recommend that readers book profits at some point during the day. Friday we saw shares rise $0.38 (1.10%) to close at $35.03/share on volume of 40.9 million shares. We think that there will be a pop in the morning and this is where we would take profits on the trade.
