As we have seen volume fall, so too have the general markets and we see two different opinions forming here. First this could be a bottoming out, should European news consent, or the other option is that we are seeing the summer trading months really sap volume out of the market. We tend to gravitate towards the first idea because more and more trading is done via computer and last we checked the sand in the Hamptons did not serve them well. We are starting to see very good brands on sale in the market and we are thinking we might be forced to deploy some money in retirement accounts into these names in the next few weeks, but much of that will depend on the employment numbers.
US futures are lower today, but we do have some big data points economically speaking. Due up today we have the Initial Claims (Consensus 385k), Continuing Claims (Consensus 3283k), GDP Third Estimate (Consensus 1.9%) and the GDP Deflator - Third Estimate (Consensus 1.7%).
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Looking at Asian markets we see markets are mostly higher:
All Ordinaries - up 0.04%
Shanghai Composite - down 0.95%
Nikkei 225 - up 1.65%
NZSE 50 - up 0.40%
Seoul Composite - up 0.08%
In Europe markets are higher:
CAC 40 - down 1.32%
DAX - down 1.50%
FTSE 100 - down 0.89%
OSE - down 0.23%
Sirius XM (SIRI) surprises us. When it shows weakness it seems it is always able to bounce back into its trading range, and the same can be said for when the stock shows strength and moves above the range and its uncanny ability to fall back down into it. After once again finding its way back into the range in trading on Monday, we saw shares rise $0.03 (1.91%) to close at $1.87/share. That is right in the middle of the range we have discussed in great detail over the past few weeks and this is a good thing for shareholders as the shares have held here rather than behaving like the rest of the market recently. Volume yesterday was 17.3 million shares which remains lower from months past.
We were pleased to see Apple (AAPL) not breach the $570/share level yesterday although volume was only 7.4 million shares and the volatility was lacking. Shares finished at $574.50/share having rose $2.47 (0.43%). The beta on this one is headed lower, and stands at 0.93 currently. It used to be exactly 1.00 for some time and it was quite interesting to watch both Apple and the indexes move in tandem day to day. It is our belief that this one has probably already bottomed out and that with the product announcements we expect in the months ahead that the shares should get a boost and outperform the general market moving forward.
The FDA gave approval for Arena Pharmaceuticals' (ARNA) diet drug Lorcaserin. It was the first diet drug approval in about 13 years and something badly needed by the American public. Arena shares rose $2.54 (28.70%) to close at $11.39/share on volume of 89.7 million shares. Their peers also rose 20% each and the reason this gain was "muted" is due to the large run-up that shares experienced leading up to the news yesterday. Moving forward shareholders could expect further gains if the two most advanced drugs are held up or denied by the FDA. It would seem unlikely they both get denied, but one never knows when dealing with the FDA. The one thing one can bank on is that Arena will be selling a diet drug, and investors are left to speculate on the other names. The question is not whether this diet drug will be a billion dollar drug, but rather how many billions.
O'Reilly Automotive (ORLY) saw shares fall $13.83 (14.34%) yesterday to close at $82.61/share on volume of 12.8 million shares. This was the biggest decline ever for the stock as the company announced that sales growth is slower than expected and investors can now expect the company to hit the lower end of their earnings guidance for the current quarter. The news was bad enough here to drag down its competitors, all of which have great historical track records. One could view this as a good entry point long-term if you believe in the business. If one were to want to move into the competitors, it might behoove you to wait until their earnings and try to buy shares on a dip if they miss or pre-announce.
News broke yesterday that Lincare Holdings (LNCR) has two companies and a private equity investors each potentially putting together bids for the company. The rumor is that Linde AG is close to an offer, but also Air Liquide SA and an unnamed PE firm are not far behind. The Financial Times reported that the bid from Linde is in the neighborhood of $3.4 billion, which even after yesterday's move would allow for heft gains for shareholders. Volume exploded higher on the news with 25.4 million shares traded as shares rose $5.91 (23.40%) to close at $31.17/share. This should be interesting to watch in the next few weeks.