Traders,
What looked to be a rebound ended up being a sell-off into the late session. Is this a support area? Futures are looking a little stronger in the pre-market, there was some covering in the dollar, but the Euro is showing strength again. It would seem that would could continue to see some volatility coming out of Europe as we watch to see if/how/when Greece and other nations are able to over-come their sovereign debt issues. The INDU did break down below the 10,000 level yesterday, but futures are pointing to a visit back to the 10,000 area this morning. Do we get back above it?
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| Coke
is it? |
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Coca-Cola reported profits that met analyst expectations. There was some concern prior to the earnings reports and some analyst began to have doubts about Coke after several other earnings in the sector showed slightly lower growth. However, Coke has been making strong strides into the emerging markets - primarily China and India - where volume sales continue to grow. Sales grew 29% in China and 20% in India - which help boost global volume by 5% - which help off-set continual contraction in the U.S. Total revenue increased 5.4% - I think that sums it up - regardless of what anyone says - China and India continue to be massive consumer markets and will continue to grow. If you think about it - without China and India and if Coke relied on domestic sales - where do you think it would be?
Stock is up in the pre-market and the story will continue to be about companies positioning themselves internationally.
http://www.cnbc.com/id/35300453
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| Pulte Homes
still in the red. |
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Pulte Homes, the largest U.S. homebuilder, reported a net loss for the 4th quarter (which were smaller losses - helped by government tax benefits), but it still missed estimates. The company lost 116 million (or -31 cents a share), that is down from a year earlier - but still about 50% worst than expected. The 800 million income tax benefit related to the extension of the federal law that allows companies to apply losses to prior income - was a huge help.
There is some good news, orders more than doubled to 3,748 over the same period and closings rose 13% to 6,200 homes, but the selling prices continue to drop - this time by 7% to $258,000.
The stock is unchanged.
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| McDonald's
Big Mac Attack! |
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In the time of a recession or lack-luster recovery - the low cost leaders really become the leaders. McDonald's sow key comparison sales rise 2.6% in January - as strong overseas growth off-sets more domestic declines in the U.S. Sales rose overseas by 4.3% and in the U.S. it fell .7%. It seems this story remains the same across the board - emerging markets revenue increase, domestic revenue decreases. Just like the Coca-Cola story.
McDonald's is a recession survivor and in some cases it thrives in a contracting economy as more consumers turn to cheaper meals - people still need to eat. However, domestically there is lots of competition in the "cheap food" arena and as they continue to under-cut each other for foot-traffic the bottom line gets hurt. McDonald's unlike many of its competitors - have made massive in-roads in overseas expansion. They truly are the world's largest fast-food chain and it will be again international sales that will carry them through any domestic rough spots.
Stock is higher in the pre-market
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| Futures Pre-market
Where's the action! |
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The futures are looking strong and the story seems to be international sales - giving confidence.
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| Support / Resistance
Going higher or lower? |
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INDU 10,000 (We broke down through 10,000 yesterday - we seriously need a good close above that to bring back confidence.)
NDX 1750 / 1800 (We saw it break 1750, but the futures are showing some strength this morning that we should open above it.)
SPX 1050 / 1100 (Futures are showing some strength - the question - can we get back above 1100)
RUT 600 (This is the bigger concern - the RUT had held 600 for a while, but recently broke through it - we need to see strength in the broader market.)
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| Conclusion
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There is great news coming out of international sales which looks like the shining light in this gloomy domestic economy. Jobs did show an improvement, but is that a temporary indicator and with more "disgruntled workers" falling off of payrolls (no longer being counted in) - it may give us a false sense of security. The good news behind the jobs number is the continual rise in productivity - at some point it can't go any higher (meaning company employees are burning the candle at both-ends). If consumption does increase we could see some job hiring that will flatten or reduce those productivity numbers.
The question on the equity side - is this a bounce (support) area and if so - how high. Some believe that any bounce off this levels could be the precursor to a further-out steeper decline. However, that may need a catalyst for it to materialized and that would most likely be a shift in monetary policy or further falling out of some sovereign debt. If that is the case the VIX is still under priced, if not it is probably fairly priced. | |
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| Author |
| Michael Williams has 20 years experience as a institututional floor broker and options market maker. He is a partner in both Silexx Financial Systems (a trading software company) and Kinetic Strategic Group (a private investment firm). He co-authored the book "Fundamentals of the Options Market" a McGraw-Hill text and has lectured throughout the country on Options, Risk Management, and Volatility. | |
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