Market Pondering Q2 Earnings and Taper Consequences

George Brooks |

More and more, I see commentary about expectations for the Fed to begin tapering out of QE starting in September. The Federal Open Market Committee (FOMC) meets next Wednesday and I expect we will hear more about taper and assurance that the Fed will not be raising interest rates any time soon. A press Bernanke press conference  is not scheduled, but I expect comments by FOMC members.

   Long-term rates have already risen, and the Fed is seeing demand for two-,five- and seven-year issues weaken due to  taper concerns.

   It is not so much that rates have risen as it is the concern they may rise further.

   It is not so much that the Fed may buy $20 billion fewer bonds starting in September, as the Fed is “changing” its policy after five years.

   So far, the market is taking the prospect of a change in stride.  I think it would be wise to allow for the possibility, the market could decline to level that discounts the uncertainty accompanying  the Fed’s change.

   The Bull market is intact and has yet to enter the more speculative phase en route to a highly speculative phase. In the interim, there will be corrections and consolidations. Odds favor one will develop before fall.

   Q2 earnings are mixed, but were not expected to be a catalyst for higher prices.

   The key here is Q4 and Q1, 2014.  If the Street sees a rebound, the market will take off, probably in September.

Investor’s first read– an edge before the open

DJIA:  15,555.61

S&P 500: 1,690.25

Nasdaq  Comp.: 3,605.18

Russell 2000:  1,034.18

Friday, July 26, 2013         (9:10 a.m.)

   Apple(AAPL: $ 438.50)

While Q2 revenues were flat and earnings down 20%, the latter “beat” the Street’s projections.  iPhone sales were the surprise, up 20% vs. a year ago.

   Analysts will be revisiting estimates and we can expect some changes in ratings.  With a double bottom “in” at $385, AAPL can be expected to attack resistance between $460 and $470, but not in a straight line. Yesterday’s action reflected profit taking and near-term resistance may prevent the stock from crossing $440.75 near-term. Minor support is $436.

FACEBOOK (FB - $ 34.36)

FB shares soared yesterday  as Q2 revenues of $1.81 billion beat Street projections of $1.62 billion big-time. Net income more than doubled in the quarter  to $333 million from $157 million a year ago. Its monthly active users increased 21% over a year ago. Mobile ad sales accounted for 41% of total revenues up from 30% in Q1.

FB was under selling pressure prior to the open today as a result of its downgrade to “hold” from “buy” by Argus.  That, may spark profit-taking after its Thursday surge with a drop to $31 - $32 possible .

I DO NOT OWN, NOR HAVE I EVER OWNED APPLE OR FB.

 

ECONOMY:  Economic reports continue to reflect a slowly improving economy, not anything that would prompt a change in the Fed’s policy of accommodation. Any acceleration in this tempo will raise concern that the Fed will begin to withdraw from its bond buying program.

   While the Fed believes the Street now “get’s it,” that taper is not tightening, investors cannot be convinced of that, clearly not after the plunge in stock and bond markets after Bernanke’s June 19 comments about tapering starting in Q4 and ending in mid-2014.

   For a detailed account of past and current economic reports, including charts go to: mam.econoday.com

FRIDAY:

Consumer Sentiment (9:55)  Proj.: 84.0 July

www.mam.econoday.com.

  George  Brooks

“Investor’s first read – an edge before the open”

sensiblesleuth@gmail.com

……………………………………………..

The writer of  Investor’s first read, George Brooks,  is not registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

More and more, I see commentary about expectations for the Fed to begin tapering out of QE starting in September. The Federal Open Market Committee (FOMC) meets next Wednesday and I expect we will hear more about taper and assurance that the Fed will not be raising interest rates any time soon. A press Bernanke press conference  is not scheduled, but I expect comments by FOMC members.

   Long-term rates have already risen, and the Fed is seeing demand for two-,five- and seven-year issues weaken due to  taper concerns.

   It is not so much that rates have risen as it is the concern they may rise further.

   It is not so much that the Fed may buy $20 billion fewer bonds starting in September, as the Fed is “changing” its policy after five years.

   So far, the market is taking the prospect of a change in stride.  I think it would be wise to allow for the possibility, the market could decline to level that discounts the uncertainty accompanying  the Fed’s change.

   The Bull market is intact and has yet to enter the more speculative phase en route to a highly speculative phase. In the interim, there will be corrections and consolidations. Odds favor one will develop before fall.

   Q2 earnings are mixed, but were not expected to be a catalyst for higher prices.

   The key here is Q4 and Q1, 2014.  If the Street sees a rebound, the market will take off, probably in September.

Investor’s first read– an edge before the open

DJIA:  15,555.61

S&P 500: 1,690.25

Nasdaq  Comp.: 3,605.18

Russell 2000:  1,034.18

Friday, July 26, 2013         (9:10 a.m.)

   Apple(AAPL: $ 438.50)

While Q2 revenues were flat and earnings down 20%, the latter “beat” the Street’s projections.  iPhone sales were the surprise, up 20% vs. a year ago.

   Analysts will be revisiting estimates and we can expect some changes in ratings.  With a double bottom “in” at $385, AAPL can be expected to attack resistance between $460 and $470, but not in a straight line. Yesterday’s action reflected profit taking and near-term resistance may prevent the stock from crossing $440.75 near-term. Minor support is $436.

FACEBOOK (FB - $ 34.36)

FB shares soared yesterday  as Q2 revenues of $1.81 billion beat Street projections of $1.62 billion big-time. Net income more than doubled in the quarter  to $333 million from $157 million a year ago. Its monthly active users increased 21% over a year ago. Mobile ad sales accounted for 41% of total revenues up from 30% in Q1.

FB was under selling pressure prior to the open today as a result of its downgrade to “hold” from “buy” by Argus.  That, may spark profit-taking after its Thursday surge with a drop to $31 - $32 possible .

I DO NOT OWN, NOR HAVE I EVER OWNED APPLE OR FB.

 

ECONOMY:  Economic reports continue to reflect a slowly improving economy, not anything that would prompt a change in the Fed’s policy of accommodation. Any acceleration in this tempo will raise concern that the Fed will begin to withdraw from its bond buying program.

   While the Fed believes the Street now “get’s it,” that taper is not tightening, investors cannot be convinced of that, clearly not after the plunge in stock and bond markets after Bernanke’s June 19 comments about tapering starting in Q4 and ending in mid-2014.

   For a detailed account of past and current economic reports, including charts go to: mam.econoday.com

FRIDAY:

Consumer Sentiment (9:55)  Proj.: 84.0 July

www.mam.econoday.com.

  George  Brooks

“Investor’s first read – an edge before the open”

sensiblesleuth@gmail.com

……………………………………………..

The writer of  Investor’s first read, George Brooks,  is not registered as an investment advisor.  Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk.

 

 

 

 

 

 

 

 

 

 

 

 

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
IGPK Integrated Cannabis Solutions Inc 0.00 0.00 0.00 213,540

Comments

Emerging Growth

Taranis Resources Inc.

Taranis Resources Inc is an exploration stage company. The Company along with its subsidiaries is engaged in the acquisition and exploration of mineral properties. Its projects include Thor Property in…

Private Markets

WayBetter

The spark hit Jamie when he saw co-workers competing to lose weight. Instead of pizzas and subs, they were eating salads and jogging along the river. Some were sneakily leaving…

Cloudera

Cloudera offers enterprises a new data platform built on the Apache Hadoop open-source software package. Hadoop is a data-management platform that can consolidate data in a single repository for comprehensive…