What the Market Wants: Half-full or Half-empty?

Today’s market opened up a tad on positive action from Asian and European markets; however, the pangs of last week’s painful performance took hold and the S&P 500 fell as much as 0.7%.  Earnings and revenues for Caterpillar (CAT) were below estimates causing investors to recall flat to poor results from General Electric (GE), International Business Machines (IBM) and McDonalds (MCD) on Friday.  Then, shortly into today’s session, Existing Home Sales of 4.92M units were reported (within the consensus estimates), but the reading was below last month’s 4.98M units.  That brought back memories of last Monday’s Empire Manufacturing Report which missed estimates and was well below the previous month’s reading. Housing Starts were higher than expected last week, but Housing Permits were below estimates. NVR’s (NVR) earnings release this morning missed revenues and earnings, and that did not help the sagging market. 

But surprise!  Others started finding positives.  Vanguard Founder John Bogle’s ValueAct fund had announced a new $2 billion position in Microsoft (MSFT), driving shares up 4%.  Apple also rose more than 2% on hopes of a good report tomorrow. The rally in tech help the S&P 500 finish up nearly 0.5%.

Bad memories of China’s poor GDP from last Monday, the slump in Gold prices, and the tragedy in Boston will likely weigh on this week’s market. In addition Q1 GDP gets offers a first look on Friday, and with revenues missing estimates in more than 50% of reports so far, it might be prudent to brace for another negative blow.  Last week was one of the worst weeks in 2013 with the S&P 500 falling more than 2% and closing below its 50 day moving average for the first time this year.

Mid-cap Growth had led the cap/styles, off only 2%, while the fragile Small-cap Value dropped more than 3%.  From a sector viewpoint, last week’s investor behavior was purely flight-to-safety: Utilities was the only positive one, and it was closely followed by losing sectors including the stalwart Healthcare and Consumer Non-Cyclicals (Consumer Staples) sectors, which while second and third, generated losses.  A frightening situation, indeed!

Here are the Market Stats.

 The rest of the week will bring announcements from more than 150 S&P 500 companies and literally hundreds of others. So far, earnings have outpaced expectations more than in recent quarters, so maybe we should be looking at the market with “glass is half full” attitude?  After all, there is a lot of money on the sidelines from money market and long term bond evacuations.  The Boston terrorists have been caught.  Asia and Europe were up!

3 Stock Ideas for this Market

This week we did a GARP preset search in MyStockFinder:

Homeowner’s Choice, Inc. (HCI)-Financials

  • Trading for 8.2x current, and 6.8x forward earnings
  • 33% of covering analysts revised EPS estimates up for current quarter
  • Earnings growth projections: 28.4% current quarter, 27% next quarter
  • 3.6% dividend yield

Signet Jewelers Limited (SIG)-Consumer Cyclicals

  • Trading for 15.3x current and 12.3x forward earnings
  • More than 33% of covering analysts have revised EPS up for the current quarter
  • Earnings growth projections: 16.7% current quarter

Abbvie Inc. (ABBV)-Healthcare

  • Trading for 13.2x current earnings and 14.24x forward earnings
  • Strong product pipeline
  • Nearly 50% of covering analysts revised EPS estimates up for current quarter
  • 3.8% dividend yield
  • Up 13% since we first recommended it on February 25th, 2013
What the Market Wants
david / Tag: ABBV, SIG, HCI, MSFT /