It appears that the EU will make available €30 billion for the Spanish banks by the end of this month. Recapitalizing the banks is a key move as they set the pace for the economy via lending, but the question is whether that amount will cover all of the needs of the Spanish institutions. That is what we are worried about at this time and will be something we watch moving forward.
US futures are up, and European markets now are green as well after opening up down. Earnings season kicked off last night here in the US and it was mixed, which considering all of the talk lately was positive. We think that this earnings season will probably be weaker than expected as companies set the table for the next 3-12 months. Better to under promise and over deliver and this would be a perfect quarter to throw all the bad news out there and use a myriad of reasons to blame poor performance on (from China to Europe, etc.).
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Looking at Asian markets we see markets are mostly lower:
All Ordinaries - down 0.53%
Shanghai Composite - down 0.29%
Nikkei 225 - down 0.44%
NZSE 50 - down 0.44%
Seoul Composite - down 0.36%
In Europe markets are higher:
CAC 40 - up 1.23%
DAX - up 1.23%
FTSE 100 - up 0.73%
OSE - up 1.59%
Technology
We saw strength once again in Apple (AAPL) shares yesterday as shares rose $8.01 (1.32%) to close at $613.89/share on volume of 13.5 million shares. Apple is a blue chip, and it has led technology shares higher when general markets were in murky situations before and that is precisely where we think events are headed. We like the strength we are seeing here as we believe that it is indicating what is to come by the end of the year. Investors need to temper their expectations for this quarter and instead focus on the results going into the end of the year.
Sirius XM (SIRI) had good subscriber numbers yesterday, really good subscriber numbers yesterday to be totally honest. They added over 600,000 new subs and the strength caused the company to revise upwards their guidance for the entire year's subscriber growth. Shares initially moved sharply higher on this news, but fell back early in the morning. Shares finished up $0.03 (1.47%) to close at $2.075/share on volume of 48.9 million shares. We still have earnings at the end of the month, and those numbers will be quite important to shed further light on this deleveraging story.
Facebook (FB) rose $0.44 (1.39%) to close at $32.17/share on volume of 18.1 million shares yesterday. It appears that we are seeing a base and/or trading range develop here for the company's shares and if this is confirmed moving forward it could open up some possibilities for those looking to initiate trading positions here. This will be something we pay attention to in the near-term as this could be a piggyback trade off of Apple's success moving into the end of the year.
Healthcare
It is not often that acquirers' shares close up after announcing that they are purchasing another company. Wellpoint Healthcare's (WLP) deal announced early Monday morning had the market cheering though. They paid a 40%+ premium and their shares rose $2.04 (3.41%) to close at $61.95/share on volume of 9.3 million shares, which we found to be pretty impressive. The deal indicates that Wellpoint is making a move to serve patients qualifying for both Medicaid and Medicare, which are more profitable than those patients qualifying for just one of the two programs. Time will tell how this deal works out, but from initial information it appears that the market really likes it and that it will pay off handsomely for Wellpoint.
Banking
Regions Financial (RF) saw its shares fall $0.05 (0.75%) to close at $6.63/share on volume of 17.8 million shares. We have earnings coming up for the bank at the end of the month and we expect to see further positive results. The company has worked to fix up the balance sheet by raising new capital and selling off non-core assets and now we are seeing the true earnings potential of the bank franchise. With rates as low as they are and the company's dominate market positions we should see a rise in net interest income and increased mortgage activity. Earnings season for the market will probably be a disappointment, however we think that there will be a few bright spots in the financial sector, especially among the regional banks.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
