We should see shares in tech stocks rally after the news from Cisco (CSCO) last night where it supplied a good report and raised the dividend. This should give the dividend-paying tech giants a boost as well as investors look at which ones have the ability to raise their dividends and reward shareholders. There are some good economic indicators out today, with Philadelphia Fed numbers as well as jobs numbers (Jobs Thursday!), so we have plenty of potential kindling for the fire this morning. Looking at markets this morning Asian markets closed mixed and European markets are trading lower. U.S. futures are up, but only marginally so.
We have a ton of economic news out today, and it is as follows (data set - consensus):
- Initial Claims - 368k
- Continuing Claims - 3300k
- Housing Starts - 763k
- Building Permits - 770k
- Philadelphia Fed - -5.0
Looking at Asian markets we see markets are mixed:
- All Ordinaries - up 1.08%
- Shanghai Composite - down 0.32%
- Nikkei 225 - up 1.88%
- NZSE 50 - down 0.41%
- Seoul Composite - up 0.05%
In Europe markets are higher as well:
- CAC 40 - down 0.13%
- DAX - down 0.05%
- FTSE 100 - down 0.08%
- OSE - up 0.29%
JDS Uniphase (JDSU) rose $0.88 (8.24%) to close at $11.56/share on strong volume of 19.4 million shares yesterday after the company announced better-than-expected quarterly results. The stock opened strongly and finished strongly. Part of the reason for the rise in shares was not company specific, but rather industry specific as customers indicated that cap ex cuts would not be as severe as analysts had expected. The overall macro story is not great here, but it is getting better and not worse - which provides the market with some optimism.
Shares in Sprint (S) set another new 52-week high yesterday after the shares popped midday and volume spiked. The shares finished off of the highs, but shares still ended up $0.40 (8.02%) to close at $5.39/share. As we previously mentioned, the volume was about three times the three-month daily average with 138.2 million shares traded. This has become one of the best momentum trades in the market recently, and it is now becoming accepted fact that the company will be the one to roll up all those players left behind by the previous waves of consolidation in the industry. Using shares for these takeovers would enable the company to deleverage the balance sheet and utilize its excess network capacity while cutting expenses. Which brings us to…
MetroPCS Communications (PCS), which saw shares rally $0.61 (6.64%) to close at $9.79% on volume of 7.6 million shares. This is one of the names that repeatedly surfaces when the talk about Sprint consolidating the industry begins to surface. We do not recommend investors invest in a company to play a potential takeover, that is a fool's game and should be left to the traders. It is our opinion that Sprint is the best play in the wireless sector right now, even with the rise in shares as they now have a currency that makes sense to use. Watch this name when, not if, Sprint begins to roll up all these smaller players.
We have been pretty bearish on Abercrombie & Fitch (ANF) over the past few months as it seemed to have priced itself out of the teen market and become something of a joke on various television programs - no longer the cool kid on the block. The company had announced earlier that its results would be poor, but when it released results analysts and investors alike were surprised that the results were not worse. So even though the company reported plunging profits almost on par with some of the plunging necklines of its women's clothing line, the shares still rose due to the already extremely low expectations. Shares rose $2.90 (8.97%) to close at $35.23/share on volume of 11.7 million shares.
Volume spiked to 93.9 million shares for Staples (SPLS) as investors reacted to disappointing results from the company. Shares closed at $11.49/share after falling $1.97 (14.60%) after the 2nd-quarter results. Looking ahead the company expects slow U.S. growth and the current weakness continuing in Europe. Businesses are keeping less inventory and cutting back on office supplies purchases - which gives investors a glimpse into how they are better managing expenses to increase earnings in this environment where revenue is stagnating.