U.S. futures are higher this morning following Europe higher. Asian shares finished the trading session mixed, probably dragged down a bit by some of the earnings releases from U.S. multinationals. As it stands now, even after the Facebook (FB) surprise, technology has been the big disappointment of the earnings season. There is no way around that as they have had numerous misses and guidance going forward which leaves a lot to be desired by investors. We doubt that the worst is behind us and this is probably a kitchen sink type of quarter for not only tech but the market in general. We still think that the fourth quarter will provide a surprise, and with all of this negative guidance we may look back and realize that companies were simply setting the bar low in order to exceed expectations … a page out of Steve Jobs' book.
We have economic news due out today, and it is as follows:
- Initial Claims - 375k
- Continuing Claims - 3237k
- Durable Orders - 8.0%
- Durable Orders - ex auto - 1.0%
- Pending Home Sales - 2.4%
Asian markets finished mixed:
- All Ordinaries - up 0.06%
- Shanghai Composite - down 0.68%
- Nikkei 225 - up 1.13%
- NZSE 50 - down 0.27%
- Seoul Composite - up 0.55%
In Europe markets are trading higher this morning:
- CAC 40 - up 0.71%
- DAX - up 0.61%
- FTSE 100 - up 0.42%
- OSE - up 0.60%
The rumors of Facebook's demise had been greatly exaggerated, and that was proven true during the company's conference call for their latest quarterly earnings. Investors and analysts alike were surprised and it seems that the company may very well have figured out how to monetize mobile. We also heard that the issues plaguing Zynga (ZNGA) are specific to that company only as the rest of their gaming segment continues to grow. Shares in Facebook rose $3.73 (19.13%) for their largest one day gain since going public to close at $23.23/share on huge volume of 228.9 million shares. This is the type of action which was supposed to take place when the company came public, but we say better late than never.
There is nothing to do but look at Monster Worldwide (MWW) and shake your head. Management has had the company for sale for far too long with no takers, which indicates to us that the asset is not that great or the price is too high but we are in the camp which thinks that management is the problem and has destroyed shareholder value. The shares fell further yesterday as Bloomberg reported that another potential bidder announced that they were in fact not interested. The stock closed at $6.52/share after falling $0.72 (9.94%) with volume registering at 5 million shares. We continue to urge readers not to try to play this as a takeover play, it is simply too risky and management has no bargaining power at this time.
From one monster to another, the story was the exact opposite at Monster Beverage (MNST) - at least yesterday. The company's shares rose $6.89 (16.77%) to close at $47.97/share with volume strong again at 12.8 million shares. This was on the heels of the company coming to the defense of their energy drink products and declaring them safe after the recent news that the FDA had received five reports of deaths possibly linked to the company's products. It is going to be a volatile ride here as the story plays out and we have little heart for another roller coaster stock right now so it is our decision to not play this one for a trade on either side. The story will have repercussions for all of the players in the industry however so it will be important for investors with holdings elsewhere in the beverage industry should continue to watch this story closely.
It is hard to say that we are surprised regarding Tempur-Pedic's (TPX) announcement yesterday because in all honesty we have heard nothing but bad news out of the industry recently as competition has heated up and the housing market had slowed. With housing recovering we would assume that the business as a whole should rebound sooner rather than later, but that does not change the reality that the company's investors face. That reality is that their outlook is less than thrilling and shares fell accordingly with the stock closing at $25.66/share after investors trimmed the price by $6.21 (19.49%) in yesterday's session. The merger will help the company, but a turn in the overall sector is what will have the biggest impact and it will need to be worldwide and not just a US story as Europe right now is a big drag for the company.
Corning (GLW) became the latest company to announce cost cuts due to the market conditions in an attempt to maintain profits. Shares fell $1.26 (9.40%) to close at $12.15/share on volume of 45.3 million shares even as the company exceeded Wall Street analysts. It just goes to show how important a company's outlook can be, and the comments from Corning coupled with the comments by other manufacturing companies with significant revenues from overseas really spooked investors. The company will spend around $50 million to cover the costs of the cost cuts and they will probably lay off workers as part of the program.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.