Monday
Feb112008

Sector Dividend Yields and Changes Since the Market Peaked

Below we highlight the current dividend yields of the S&P 500 and its ten sectors.  We also provide each sector's dividend yield as it stood when the market peaked on October 9th.  The S&P 500 as a whole has declined 15.47% since the peak, and its dividend yield has risen from 1.78% to 2.16%.

As shown, Telecom and Financials have seen their yields rise the most since the peak, but they have also experienced the biggest price declines.  The Utilities sector looks pretty good because its yield has risen from 2.87% to 3.15%, while its price has only declined by 6%.  The Materials sector is the only one that has seen its yield decline. 

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Monday
Feb112008

Earnings Season Winners and Losers

Every earnings season, there are always stocks that have huge moves after reporting quarterly results.  Stocks that are big winners typically retain their strong upside momentum, while companies that fall sharply have a tough time regaining their footing.  We track the price reactions of all companies in response to their earnings reports, and below we highlight the companies that have had the biggest 1-day gains and losses on the first trading day following the release of their quarterly numbers this earnings season.

As shown in the first table below, INFN is the stock that has had the biggest upside reaction so far.  In response to its report after the close on 1/31, the company went up 44.13%.  MFLX ranks second behind INFN at 37%, followed by NVEC (35%), LCBM (30%) and STAR (28%). 

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On the downside, so far SIRF has been the biggest loser this earnings season.  After reporting earnings after the close on 2/4, the stock went down 54.76% on the following day.  SIRF is followed by ARAY (-36%), FCFS (-34%), VMW (-33.9%) and MERX (-33.7%). 

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Sunday
Feb102008

The Anatomy of a Slowdown

This article in this week's Economist provides a good geographic summary of the current US slowdown.  We especially like the map included with the article (shown below).

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Friday
Feb082008

Will Microsoft (MSFT) Raise its Offer for Yahoo! (YHOO)?

There has been a lot of speculation over the last few days that Microsoft (MSFT) will raise its hostile takeover offer for Yahoo! (YHOO).  This is illustrated by the fact that YHOO shares traded at a premium to MSFT's offer yesterday.  However, a look at the largest holders of YHOO suggests that if YHOO is going to get a higher bid for the company, they may not want to rely on MSFT.

The table below lists the twenty largest shareholders of YHOO who also hold stakes in MSFT.  As shown, these investors own nearly a third (29%) of YHOO's outstanding shares for a total value of $11.1 bln.  However, at the same time, their holdings in MSFT are over 5 times that at ($57.9 bln).  Given that the size of their holdings in the acquirer far outweigh the size of their holdings in the target, these holders may be on MSFT's side.

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Friday
Feb082008

The Week That Was

Below we provide the titles and thumbnails of the in-depth B.I.G. Tips reports we released this week.  If any spark your interest, they are all available to our Premium subscribers.  These are anticipatory, ahead-of-the-curve research reports that cover markets, economies, stocks, commodities, housing and anything else related to making people money.  And Premium subscribers also receive many more reports as shown on our Products page.

This week's B.I.G. Tips reports: Earnings Triple Plays (stocks that have beaten EPS and revenue estimates and guided higher), It's the Guidance, Stupid (is guidance causing market declines), Top Technicals (some of Bespoke's favorite technical plays), S&P 500 Performance During Recessions (when to expect a bottom), ETF Overbought/Oversold (potential ETF plays), S&P 1500 Dividend Screen (a stock screen based on high yields with expected dividend increases), Are Transports A Leading Indicator? (how the market does when transports outperform), Insider Buying By Sector (where are insiders buying the most), CSCO Earnings (typical price reaction to earnings), At Least There's Tomorrow (market performance following large down days), Housing Futures (what CME's housing futures are predicting for real estate), S&P 500 Decile Performance (what indicators are currently moving stocks), For Comparison's Sake (Nasdaq vs Homebuilders), Is Value a Good Value? (a price to book stock screen).

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Friday
Feb082008

Monthly Bloomberg Survey of Economists

Bloomberg released its monthly survey of 65 economists today, and below we highlight the median estimates for a number of economic indicators.  As most would have predicted, economist projections for the US economy got worse since the January survey.

As shown below, the consensus among economists surveyed is for GDP in Q1 '08 to now grow by just 0.50% -- down from 1.10% last month.  The first quarter is forecast to be the worst, however, with growth slowly increasing through the remainder of the year.  By Q4 '08, GDP is expected to be back at +2.50%.  Unfortunately, CPI estimates were raised and consumer spending estimates were lowered as well.

As far as rates are concerned, economists expect the Fed Funds Rate to eventually drop to 2.50% and stay there for the remainder of the year.  It should be noted that economists didn't predict the most recent rate cuts, however, since just last month they expected the Fed Funds Rate to be no lower than 3.50% by the end of 2008.  The Fed Funds Rate is currently at 3.00%.

While these estimates provide a good gauge of the current sentiment of economists, they don't offer much predictive power.

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Friday
Feb082008

Bespoke on CNBC

Street_signs_4Bespoke's Paul Hickey will appear on CNBC's Street Signs with Erin Burnett today sometime between 2 PM ET and 3 PM ET.

Friday
Feb082008

Two Bearish Covers in a Row

Last week we highlighted Business Week's cover story on the meltdown in housing.  This week's issue follows up with the credit markets.  While the efficacy of the magazine cover indicator as a contrarian signal is up for debate, covers like these (as well as this morning's Wall Street Journal headline) show that no one can accuse the press of being overly bullish on the prospects for the economy.  If things do become as bad as most of the media is predicting, it will be the most widely predicted crash in history.  And remember, these headlines are coming out after many financials and housing stocks have already corrected 50% or more.

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Friday
Feb082008

Are Inflation Concerns Really Weighing on the Fed's Next Move?

This morning's Wall Street Journal had a story with the headline, "Mounting Inflation Concerns Weigh on the Fed's Next Move."  The article questioned how likely future rate cuts are given the mounting concerns among Fed officials that inflation may accelerate in the second half as the economy rebounds.

While we don't doubt that the Fed is closely monitoring inflation levels, we would argue that it has taken a back seat to the current issues in the credit and financial markets.  Since August, the WSJ has run at least eight headlines (red dots below) questioning whether or not the Fed would continue to cut rates because of inflation concerns, and following each one, the Fed has cut rates.

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Friday
Feb082008

Technology P/E Ratio Back to Historical Lows

As shown in the historical chart of the S&P 500 Technology sector, its P/E ratio has now moved back to 15-year lows.  With the sector moving lower in price and earnings continuing to show strength this quarter, Tech's P/E ratio has dropped to 21.63.  The sector's P/E was at these same levels in late 1995 and the middle of 2006. 

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Friday
Feb082008

S&P 500 Advance/Decline Line

Yesterday, we highlighted our trading range charts for the S&P 500 and its ten sectors, noting that prices were still oversold.  However, the breadth of the market has actually remained positive recently.

The 10-day advance/decline line of the S&P 500 is one breadth indicator we use to measure market internals.  It takes the average daily number of advancers minus decliners over the last 10 days.  As shown in the bottom chart below, the S&P 500's 10-day A/D line is just about neutral compared to the trading range chart that shows the index in oversold territory.  Last week, the A/D line moved into overbought territory even though the price of the market was still well below its 50-day moving average.  When breadth gets very overbought, it is a short-term bearish signal.  Longer term, however, it's good to see that internals are not nearly as oversold as the current price is.

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Thursday
Feb072008

Confidence Improving?

While stocks appear poised to test or break below their January lows, various confidence measures of economic and market sentiment have recently shown some slight improvement.  Below we list the current levels of various confidence measures that we track versus their one-year range (circles in chart).  We also list the change in each reading over the last month (line).  Indicators plotted in green indicate improvement over the last month, while red indicates weakness. 

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As shown above, four of the six indicators listed improved over the last month, while only two declined (Investor's Intelligence and ABC News Consumer Confidence).  This contrasts to last month when four of the six indicators were showing declines, with three of them being at 52-week lows.

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Thursday
Feb072008

Back to Oversold Levels; Downtrends Remain

Below we provide our trading range charts for the S&P 500 and its ten sectors.  When the price moves into the green zone, it is one standard deviation below its 50-day moving average.  When it moves below the green zone, it is two standard deviations below its 50-day.  The green zone indicates that the price is oversold versus its historical trading range. 

Last week, most sectors had bounced back from lows reached a couple weeks ago.  This week, however, prices have once again moved to the bottom of the green zone (extreme oversold territory).  Technology, Telecom and Energy are currently the most oversold, while Financials, Industrials and Materials are the least oversold.  Based on these one-year charts, the majority of sectors remain in steep downtrends, and until these downtrends are broken, it's important to take money off the table once prices move to the top of the downward channel.

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Each week, we discuss these sectors and other indicators in detail in our Sector Snapshot only available to Bespoke Premium members.

Thursday
Feb072008

Pending Home Sales Plummet 24.2%

While the homebuilder stocks have recently formed an uptrend on a large pickup in volume, the outlook for the actual real estate market in 2008 has cratered.  The CME has housing futures that track the S&P/Case-Shiller Median Home Price indices.  Over the last 3 months, investors have been sending the November 2008 contracts much lower.  As shown in the charts and tables below, Los Angeles home prices are now expected to decline 16% from 11/07 to 11/08.  The 11/08 contract for Los Angeles has fallen 15% over the last 3 months.  The composite index of all 10 cities is expected to fall 10% from 11/07 to 11/08, down 7% over the last 3 months.  There are a few cities not expected to fall too much though.  Chicago and New York are expected to fall less than 5% by this November, and the New York 11/08 contract is actually up 2.32% over the last 3 months.

Expectations have clearly become very negative for housing this year.  We wonder if 11/08 is the capitulation point?

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Thursday
Feb072008

A Crash or a Fender Bender?

Fastest_15_declines3The declines of the type that the market has seen over the last month have resulted in some commentators bringing the crash adjective off the shelf.  While that may be too severe (at least for what's happening in the equity markets), we would note that the current decline off of the October 2007 highs is the fifth fastest decline of 15% or more from an all-time high in the S&P's history.  Below we highlight each of the five periods as well as how the S&P 500 performed going forward. 

Looking back at the past provides a mixed picture of what to expect over the coming months.  As shown, while the periods covering 1929 and 1987 top the list, when they reached the 15% threshold they were still in free fall and hadn't yet 'crashed'.  In the most recent two periods (1990 and 1998) however, once the 15% threshold was reached, the bulk of the declines were already over.

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