Month: April 2012

Markets are secretly wishing for a more dovish Fed

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Regardless of what the Federal Reserve does or does not do Wednesday, financial markets could face some turbulence afterwards.

The Fed`s two-day meeting ends with a statement just before 12:30 pm. ET. The economic and interest rate forecasts of Fed officials are then released at 2 pm, and Fed Chairman Ben Bernanke briefs the media at 2:15 pm.

The Fed is widely expected to take no action, make no moves towards new easing or significantly change its statement. However, it may tweak the language slightly, change its forecast for GDP and employment, and adjust where individual members see interest rates changing.

But there is an undercurrent in the investment community for something more than what the consensus expects, and that`s what analysts say could be a wild card for Wednesday`s markets.

It is also part of the same debate that is playing out with the new volatility in stocks: whether the US economy is just temporarily sputtering or getting ready to slow down.

Bond market traders, for instance, are watching closely to see if the Fed comments on “Operation Twist,” a program expected to end in June.

While most expect no change in “Twist” and a winddown of the program in June, there are some who expect the Fed to actually say it could extend the program. In that program, the Fed purchases longer-dated Treasurys, and sells the same amount of shorter dated securities, in an effort to drive down rates.

“By the way I look at it, the low back end rates are not just because of Europe. There`s some probability being priced in that the market thinks `twist` gets extended. We think they`re going to be disappointed at the April meeting,” said Nomura Americas Treasury strategist George Goncalves, adding it`s more likely the program would be extended at the June meeting.

CRT Capital did a survey of dozens of professionals in the Treasury market last week, and it`s findings also found a split in market thinking.

“Interestingly, the vast majority expected that the Fed would not offer a new round of QE or a materially more dovish statement. In fact, only 3.5% expected the FOMC to be more dovish, and no one expected them to be more hawkish,” said Ian Lyngen, senior CRT strategist.

“On the other hand, 45% said the market was pricing in some additional type of accommodation or more dovish statement, suggesting to us there was a more dovish bias in the market than there actually might be.”

Lyngen said that could create a flurry in markets, therefore, if the Fed does what the consensus believes it will do.

“A largely unchanged statement will be negative to risk assets to the benefit of the Treasury market,” he said.

The markets had been primed earlier in the year to expect a third quantitative easing program, or QE3, should the economy deteriorate, but more positive numbers in recent months and comments by Fed officials have since discouraged that view.

Yet, analysts and traders say there are some investors who are still looking for the Fed to signal it will do more.

QE is a different type of program than “twist.” A third round could involve the purchase of mortgage securities, and unlike “twist” the Fed, in past QE programs, has added the securities to its balance sheet.

“I think the market is positioning for some chaos because I think it`s pretty clear the Fed`s not going to change the key policy variables. They`re not going to change the rate guidance. They`re not going to change the balance sheet guidance. They`ll probably tweak a few things in their description of the economy, maybe on financial stress and inflation,” said Ward McCarthy, chief financial economist at Jefferies. “The more important things will be the changes in the economic forecasts sand the press conference.”

In the stock market, there is also some expectation of a more dovish Fed.

“Either they don`t comment one way or the other which would disappoint, or they say they`re not going to do it (QE), then I the market acts negatively,” said John Canally, economist and investment strategist at LPL Financial. “The market has been a little reactive. They just shoot first and ask questions later.”

“There`s a segment of the market that`s `buy` if there`s QE3, `sell` if no QE3. They`ll be some sell button pushed somewhere if there`s no QE3,” said Canally.

Canally does not expect any more clarity on QE3.

“Bernanke is going to be back and forth. I`m sure a reporter well ask the question: `Will you do QE3?` and he`s not going to say yes or no. He`s going to say `data depending,” said Canally.

Art Cashin, director of NYSE floor operations at UBS, said a lot of the reaction will depend on Bernanke.

“It depends on how effective his performance is. There`s a high risk for them to be disappointing. He`s got to be pretty convincing in that `we think things are moving along somewhat better but we stand ready to move at a moment`s notice,` and maybe even mention QE3,” said Cashin.

Cashin does not expect the Fed to do anything.

“I think he`s going to find a way to hold out a promise – should things deteriorate, we`ll be there for you,” he said.

McCarthy said the individual forecasts of Fed members could be a factor for markets.

They are displayed on a chart, with the timing of the first rate hike from the current zero rate, but the Fed officials are not individually named with their forecasts. In its last forecast, the tendency was for rates to stay low into late 2014.

“You could have a situation where some raise their inflation forecast and some lower it. The mass confusion will come from the scattered diagram of Fed funds forecasts. The core will probably not change,” he said.

But if there are significant moves forward in rate hike forecasts to 2013, or even 2012, that would be market moving.

“On the economic forecast side, they probably will have to lower the unemployment rate,” he said.

The current 8.2% unemployment rate is at the low end of the Fed`s forecast.

“And on the inflation front, I think you could get mixed results there,” he added. “Oil and gas rose, but inflation continued to decelerate.”

McCarthy also noted that the Fed changed the language on the economy to moderate growth from modest growth in its last statement. He does not expect to see that change back to modest even though the economy is showing signs of weakening.

“Maybe they change it to moderate with some qualifier,” he said.

Deutsche Bank chief US economist Joseph LaVorgna said he expects the Fed to raise its GDP number slightly.

“I just think the Fed may sound a little bit more confident in the outlook. I think their numbers will be showing that, and they`re not talking about more QE,” he said. “But I think they`re going to leave the door open to it because that`s how the Fed behaves.”

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Western equities to outperform Asian peers in 2012

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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While developed and emerging market stocks have been locked in a close race so far this year, with the MSCI World Index and MSCI Emerging Markets Index up 8 and 10%, respectively, strategists say Western equity markets are likely to outperform their Asian peers in 2012.

“Earlier this year…there was a short, tactical window where Asia might outperform the developed markets – well they have just barely done that, and now we think that even this tactical window has closed,” Ajay Kapur, Head of Equity Strategy, Asia, at Deutsche Bank said in a report.

Kapur says the large gap between US and Asian “economic surprises”, which made investors more cautious about investing in the US late last year, has converged.

“The economic surprises in the US were at record highs late last year, while those in Asia were exceptionally low. (Now) both regions show economic surprise close to zero,” he said. “So, the advantage that Asian equities enjoyed is gone.”

Major markets in the West including the United States’ S&P 500 and Germany’s DAX have risen 8.7 and 11.4%, respectively since the start of 2012. While within the emerging markets, China’s Shanghai Composite and India’s Sensex have gained 8.6 and 11.2% each, year-to-date.

According to Kapur, positive earnings out of the United States and Europe in the coming months will be a key driver of their outperformance in 2012.

“The earnings (growth) expectations in both the US and Europe are quite low now. For Europe, about 3% and for the US about 6-7%. In Asia, now the expected earnings growth is about 15%, so I think beating the US and European numbers is going to be pretty easy,” he said on CNBC Asia’s “Squawk Box” on Tuesday.

He adds that the free cash flow yield, which measures how much free cash per share a company generates, is higher in the West than in Asia, making the former more attractive.

“The free cash flow yield in Asia is only 2-3%, whereas even Japan is at 4% and the US and Europe are about 7-9%. Whichever way we slice it in terms of valuations for equities, we preferred the developed (countries) to Asia,” Kapur said.

According to Steve Brice, Chief Investment Strategist at Standard Chartered Bank, the “less proactive” monetary policy environment in Asia is likely to constrain the relative performance of the region`s equity markets.

“China naturally plays a key role here and the reluctance to embrace significant broad-based easing has been an impediment (to stock) markets in recent months,” Brice said.

Bullish on US equities

Among the developed countries, analysts back the US markets over their European counterparts. John Woods, Chief Investment Officer at Citi Private Bank is bearish on euro zone equities, but thinks the US markets will likely outperform emerging markets in Asia.

“To the extent Europe is in recession and a large question marks hangs over China, is it any surprise that the US is attracting a safe haven bid at the moment?,” Woods said.

Brice of StanChart says within developed markets, he has a “definite preference” for the US

“The economy looks more resilient than 12 months ago, even if it is likely to disappoint in the near term,” Brice said.

He adds that while Europe is attractive from a valuation perspective, the challenging economic environment may come in the way of broader market gains. “Authorities provide no leadership in managing the austerity versus growth trade-off, focusing almost entirely on the former. Therefore, we remain underweight Europe.”

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Gold upside capped at $1800 despite bullish factors: Charts

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The Dow Index is slipping below 13,000. The US dollar Index is hovering near 80 in a weak symmetrical triangle pattern. The euro/dollar continues in a downtrend with more weakness developing. All these factors should be bullish for gold.

But there are three important resistance features on the weekly Comex gold chart. The first feature is the strong resistance near USD 1,800/oz. The gold price has moved above this level, but this level developed strong resistance in November 2011 and again in February 2012. There is a high probability USD 1,800 will act as a strong resistance again.

This limits the rise in any rally. The second important feature is the long-term uptrend line. This uptrend line started in April 2010. The gold price has tested this trend line as support level in December 2011 and again in April 2012. This trend line is the lower trend line in an up sloping trading channel.

The third important feature is the upper trend line. This is parallel to the lower trend line. The two trend lines create an up sloping trend channel.

The normal behavior for the gold price since May 2010 is to trade within the boundaries of the up sloping trading channel. The breakout above the trading channel in November 2011 and February 2012 is unusual. These breakouts have created a strong resistance level near USD 1,800.

There is a high probability that gold will continue to trade in a rally and retreat pattern of behavior between the trend lines that define the trading channel. This gives short-term rally trading opportunities. The value of the upper trend line in the trading channel is near to USD 1,800.

The interesting feature is that the gold price chart does not appear to react to the changes in the Dow or the changes in the dollar exchange rate. The weakness in the gold price is a contradiction because other factors suggest the gold price should be strong. This contradiction shows traders need to use caution.

The uptrend is strong and stable and the trading activity is not created by fear and worry. The long-term uptrend looks safe but any rallies are limited by the strong resistance features. There is a high probability that the rally will retreat from the upper trend line and the resistance level.

The critical situation for the up trend is when the value of the lower edge of the trading channel trend line moves towards USD 1,800. The price will vibrate between $1,800 and the value of the lower trend line. If the lower trend line fails as support then the long-term uptrend in gold could also end. The first downside support level is near USD 1,500.

Daryl Guppy is a trader and author of Trend Trading, The 36 Strategies of the Chinese for Financial Traders –www.guppytraders.com . He is a regular guest on CNBC`s Asia Squawk Box. He is a speaker at trading conferences in China, Asia, Australia and Europe.

If you would like Daryl to chart a specific stock, commodity or currency, please write to us at ChartingAsia@cnbc.com. We welcome all questions, comments and requests.

CNBC assumes no responsibility for any losses, damages or liability whatsoever suffered or incurred by any person, resulting from or attributable to the use of the information published on this site. User is using this information at his/her sole risk.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Alibaba.com should change model to improve profit: Pro

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Hurt by a shrinking pool of paying members, China’s biggest listed e-commerce company Alibaba.com posted a 25 percent drop in first quarter profit and one analyst tells CNBC the pressure on earnings could stay unless the company changes its business model.

“The membership business in China is just not working out and we think they need to go more for a pay by performance model where people actually pay based on the performance of the platform,” Jin Yoon, Regional Head of Internet Research for Asia ex-Japan at Nomura, told CNBC Asia`s “The Call” on Tuesday.

The pay by performance model takes into account, for example, the number of clicks a product, listed for sale on the website, gets.

Alibaba.com’s paying members in the first quarter fell 1.5 percent from the previous quarter, largely due to an 11.6 percent quarter-on-quarter decline in its premium membership. “Paying customers are actually leaving the website a lot faster than what we expected,” Yoon said.

Alibaba registered a net loss of 11,461 premium or gold members in the first quarter, more than double from the same period a year ago. And Nomura believes this trend will keep Alibaba’s top-line growth under pressure.

But the brokerage thinks the potential privatization of the e-commerce firm could help it implement changes to its business strategy.

While announcing results on Monday, the company also said a document regarding the $2.5 billion offer made by Jack Ma`s Alibaba Group to take Alibaba.com private will be sent to shareholders on Tuesday.

“Without the scrutiny of the public markets, I think the company could easily do a transition to more of a value added service model from the original membership business,” Yoon said.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Will Apple’s earnings worsen the stock sell-off?

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Apple`s recent selloff has some experts recommending investors buy on the dips, but skeptics say the decline-coupled with Tuesday`s earnings report-could be the beginning of a bigger slide for the tech giant.

Apple stock closed slightly lower Monday, following the broader market decline, after see-sawing throughout most of the session. The stock briefly dipped below its 50-day moving average of USD 570 a share earlier in the day.

The stock officially entered correction mode last Friday, tumbling more than 10% from its all-time high of USD 644 a share.

Some analysts called the pullback a “short-term correction,” adding it`s too early for investors to get too bearish on the stock.

“The stock would have to get below a new monthly low [of USD 516 a share] to think we`d really weaken,” said Mark Newton, chief technical analyst at Greywolf Execution Partners on CNBC`s “Squawk on the Street.” “Overall there are still a lot of bullish reasons technically to get involved.”

Investors will be closely watching Apple`s fiscal second-quarter earnings report, due after-the-bell Tuesday. Wall Street analysts expect earnings of USD 10.02 a share on revenue of USD 36.7 billion, according to a consensus estimate from Thomson Reuters.

The company outstripped earnings estimates in the previous quarter, thanks to robust iPhone and iPod sales.

“They`re going to beat, but the question is what the beat is going to look like,” Channing Smith, portfolio manager of Capital Advisors Growth Fund told CNBC`s “Fast Money Halftime Report.” “Over the last week, earnings estimates have risen well over USD 10 and unlike past announcements, we`re seeing a lot of upgrades going into the announcement and that makes us cautious.”

Smith also said he`s worried that the iPad maker will see pricing pressure and an “innovation gap close” in the next few quarters.

“We`ll be looking for the guidance on what the future looks like [for Apple],” said Kenny Polcari, managing director of ICAP Equities. “I`d wait until the stock moves down to the USD 500-level where there`s support to jump back in.”

Apple announced plans back in March to institute a dividend and share buyback program. The firm will pay a quarterly dividend of USD 2.65 per share, starting in its fiscal fourth quarter, which begins July 1.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Political uncertainty in Europe to limit oil’s gains

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Benchmark crude oil prices may rise this week though renewed political uncertainty in the euro zone will limit any upside moves, CNBC`s weekly survey of market sentiment showed.

Less than 50%, or five out of 12 respondents, polled in a weekly CNBC poll of analysts and traders, expect oil prices to rise this week. Four respondents believe prices will fall while three expect levels to be unchanged.

From a technical basis, the charts look constructive for US crude futures this week, noted Sandy Jadeja, Chief Technical Analyst at City Index. That said, prices “must remain above USD 101.80 to remain bullish” otherwise oil may head lower towards USD 98. “Short term continues to see choppy price action.”

That price action may continue to be dictated to by supply-side risks notably from Iran and South Sudan.

Satellite images show a key part of the oil infrastructure in Sudan`s contested Heglig region was destroyed during recent border fighting with South Sudan, a monitoring group said on Sunday. South Sudan seized Heglig, a border region which accounts for about half Sudan`s 115,000 barrel-a-day oil output, on April 10, saying it was acting in self defense after Sudan launched a ground attack from the area, Reuters reported.

“One reason why flat prices may not see more pressure is because nobody would want to get caught in a short position in case political risk gets inflamed or supply shortfalls hit the newswires,” said Johannes Benigni, Managing Director at JBC Energy.

Stresses in the euro zone are likely to take center-stage this week.

Talks over measures to slash the Dutch government’s budget deficit collapsed over the weekend after seven weeks of negotiations, raising questions about the commitment of one of the euro zone`s foremost proponents of fiscal stringency to a German-led austerity agenda, the Wall Street Journal reported.

“The collapse of Dutch budget negotiations not only threatens early elections in the

Netherlands, but also poses a significant threat to effective ratification of the fiscal

compact, a central plank in Angela Merkel`s strategy for addressing the eur ozone crisis,” wrote Alastair Newton, Nomura`s Senior Political Analyst in a report.

Meanwhile, French Socialist Party`s presidential candidate Francois Hollande, who came ahead in the elections` first round on Sunday evening, called for voters of all the left-wing candidates to support him and pledged to lead the European Union towards more growth.

Some investors believe a Hollande victory would partially reverse momentum towards fiscal reforms involving austerity programs and spending cuts.

“I do not think we have seen the worst of the euro zone crisis yet and an increasingly likely Hollande victory in France could complicate already straining coordination between Germany and France,” said Kirk Howell, Chief Operating Officer, of SunGard`s energy and commodities business SunGard Kiodex. “I remain short term bearish as long as we don`t settle above USD 104.90” for US crude futures.

Michael Ivanovitch, President of MSI-Global, however, argues Hollande “will not blow-up” the European agreement. “He just wants more balance between fiscal austerity and growth,” he told CNBC`s `Squawk Box` last Friday.

Whatever direction the political winds blow, the key factor for oil prices and cyclical commodity markets broadly will be the direction of the single currency. The euro retreated from two-week highs against the dollar on Monday, pausing after its best weekly performance since February. The single currency stood at USD 1.3189 in Asia, down from Friday`s peak of USD 1.3225. But this decline came after a near 1% rally last week, its best since late February.

“The canary in the coal mine is EUR/USD and we are keeping an eye on that as a break below USD 1.2970 would be a bullish USD warning, in turn likely triggering a deeper pullback for energy,” said Dhiren Sarin, Chief Technical Strategist Asia-Pac at Barclays Capital.

The release of HSBC`s flash China PMI manufacturing data for April will help inform commodity markets how factory activity is holding up in the world`s second-largest economy.

The data showed factory activity rose to a two-month high in April. HSBC`s Flash PMI rose to 49.1 in April from the final reading of 48.3 in March, confirming expectations that the economy bottomed out in the first quarter, says Nomura economist Zhang Zhiwei.

Investors may cut bullish bets on oil should the Federal Reserve douse expectations of further stimulus at its two-day policy-setting meeting starting this Tuesday. Despite the recent run of mixed US economic data, most economists on balance don`t think the numbers warrant further policy stimulus. In fact, expectations are high that the Fed may raise their growth forecast for the economy.

“Our US economics team expects that the Fed is likely to upgrade economic outlook slightly,” Deutsche bank commodities analysts wrote in a report. “This means that Operation Twist will end as scheduled in June. Chairman Bernanke will hold a press conference following the meeting. It is here that we could learn more about the prospects of further quantitative easing or “twist” type initiatives.”

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

‘China factory data another sign of economy bottoming out’

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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China`s manufacturing activity, while still in contraction, rebounded in April from a four-month low, and one analyst says that`s a further sign that China`s slowing growth has bottomed out.

The HSBC`s Flash Purchasing Manager`s Index (PMI), the earliest indicator of China`s monthly manufacturing activity, ticked higher to 49.1 in April from a final reading of 48.3 in March, after falling for five consecutive months. A number below 50 indicates a contraction, while a figure north of 50 shows expansion.

The change in direction of the PMI is encouraging for the economy, according to Chi Lo, CEO of HFT Investment Management.

“I do expect the HSBC PMI to continue to improve in the coming months and eventually it will climb above the bumper line of 50,” Chi said on CNBC`s Cash Flow. “Give it another one or two months. We`ll see it, we`ll be there.”

Despite the “uncertainty surrounding the external environment,” and the domestic housing market is still in correction phase, Lo believes China`s first quarter growth rate of 8.1% will be the lowest level in the country`s current economic cycle, adding that “momentum” is building in parts of the economy.

“When you look at the infrastructure programs in the economy, they are more than 100,000 projects going on and then there`s this public housing project coming on board, liquidity is being eased, although selectively, it`s going into the economy,” he said.

“So you put all this together, the momentum is gathering and it`s fighting against the moderating mode of the economy.”

Lo anticipates at least one to two more banks` reserve requirement cuts by Chinese authorities in the first half of the year, because he says the current rate of 19% is “too high” for liquidity to make its way through the economic system.

Recovery in Commodity Demand

The pick-up in China`s manufacturing activity is also going to bode well for commodity prices, which have seen volatility on back of concerns over a China slowdown. Lo says the PMI data suggests that China`s commodity inventory correction is “basically over.”

“The drag from inventory correction on the economy on demand is coming to an end and going forward we are going to see demand picked up,” Lo said.

“Inventory rebuilding – that will all help increase the demand for commodities and in general in China.”

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Europe, earnings avalanche to drive market this week

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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A crush of earnings news in the coming week will compete head on with a new vigilance about the health of the US economy and investor concerns about Europe’s sovereigns.

The Federal Reserve also meets this week, and while it is not expected to take action, it will update its economic and interest rate forecasts. Fed Chairman Ben Bernanke also holds his quarterly press briefing.

Wal-mart will be of major interest Monday, as investors react to the shocking weekend report in the New York Times alleging Wal-Mart de Mexico had a widespread practice of bribing officials, as it rushed to build stores and win market share. The story alleges the bribery campaign leads straight to Eduardo Castro-Wright, who was named vice chairman of Wal-Mart in 2008.

The week starts off, however, with a heavy focus on Europe following France’s presidential election Sunday, which resulted in a runoff in May between French President Nicolas Sarkozy and anticipated front runner, socialist candidate Francois Hollande.

There are about 180 S&P 500 companies reporting earnings in the week ahead, but the one that’s got everyone’s eye is Apple. The stock, as of Friday, has corrected 10% in 10 days ahead of its Tuesday earnings report. Apple made a rapid run from USD 400 to USD 600, raising concern that the stock was running too far, too fast, particularly since it has an oversized influence on the overall stock market.

Other earnings will come from major drug companies, like Merck and Bristol-Myers, and big oil, including ExxonMobil and Royal Dutch Shell, as well as industrials, like Boeing and Caterpillar. Consumer names like Amazon and Starbucks also report, as well as dozens of others.

“The earnings will be there, and the Fed, but I think Europe will still be there to drive the bus,” said Art Cashin, director of floor operations at UBS.

PMI manufacturing data from China and the euro zone is expected early Monday morning, and that could also start the week with a focus on the global economy, for better or worse. US data includes new-home sales and home-price data Tuesday, weekly claims Thursday and the first look at first-quarter GDP on Friday.

Euro watch

“I think a stronger showing for Hollande is pretty well priced in. What would be the real surprise would be a stronger showing by Sarkozy which would help the euro,” said David Gilmore of Foreign Exchange Analytics. Hollande favors raising taxes on the rich and does not agree with the fiscal compact agreed by European leaders.

“France is married to Germany and not even a socialist is going to break up that relationship!” said Gilmore.

“I think the focus is really on Spanish bond yields,” Gilmore said. “If they push up high enough, it could get people back in the fetal position and we would see risk sell off – equities weaken and the euro sells off.”

Spanish yields touched 6% Friday, and were trading just under that level at the end of the day. The concern is that Spain cannot grow its way out of its fiscal crisis, and that its banks are not capitalized well enough if the economy deteriorates further.

The euro, however, finished the week with a gain, up about 1.1% against the dollar, at 1.32. It was helped by news that G-20 leaders agreed to inject USD 430 billion into the IMF’s fund. The IMF was holding its spring meeting Friday and over the weekend.

Fed ahead

Some disappointing US economic reports, particularly home sales and jobless claims, helped make for choppy trading in stocks in the past week, and for gains in the Treasury market.

But analysts do not see the economic data as negative enough to force the Fed`s hand on further easing when it meets Tuesday and Wednesday. The Fed has been signaling the market that it has no plans for now for further quantitative easing.

The Fed has also not disclosed what it will do about “operation twist” which is scheduled to end in June. In its “Twist” program, the Fed purchases longer dated Treasurys at the same time it sells shorter-term securities, in an effort to pressure longer term rates.

Fed officials have said they could do a third round of quantitative easing, QE3, by purchasing mortgage securities if the economy deteriorates. However, they have said recently they have no current plans for QE3, and the hawkish members have said they see no need for it.

“The big thing is there’s a lot of talk about will they hint or will they not. I think if they don`t hint at QE3, we’re not going to have the selloff in Treasurys that we had in March, or on the March (Fed meeting) minutes,” said John Briggs, Treasury strategist with RBS. “I think they`ll show a little more concern in the growth paragraph, and not make hints of QE3.”

JPMorgan economist Michael Feroli said, in a note, that he expects Bernanke to be asked about quantitative easing during the briefing. “We expect his answer will be that no tool has been taken off the table, but he will do nothing to convey that QE is an imminent policy easing option at this point,” Feroli wrote.

He expects the Fed’s statement to say the economy is expanding moderately, and it is not likely to change its guidance that interest rates will stay at zero through late 2014. “We don`t think the recent run of data – which has been a little on the soft side – will have much of an impact on their thinking,” he noted. It is also possible the Fed could drop its reference to gasoline prices, given the recent decline in prices.

Whither stocks

The Dow was higher in the past week, rising 1.4% to 13,029. The S&P 500 gained 0.6% to 1378, holding above a key technical level of 1370. But the Nasdaq was 0.4% lower at 3000, dragged down by Apple, for a third week of losses.

The most defensive S&P sectors – utilities and consumer staples – were the week`s best performers, up 2% for their biggest gains since December. The worst sector was technology, down 1.5% for the week, but still up 17% since the start of the year.

Stuart Freeman, chief equity strategist at Wells Fargo Advisors, said Friday that he was raising his year-end target for stocks, upping his S&P forecast to 1400 to 1450, from 1325 to 1375. Freeman’s 2011 forecast was one of the more accurate among strategists last year. He had targeted 1250 to 1300, and the S&P finished the year flat at 1263.

While some traders are comparing the current soft batch of economic reports to last spring, Freeman said he is not that concerned. Unlike last year, he said the fear of a double-dip recession is not there.

“I think we’ll still see some volatility. We’ve still got election noise,” said Freeman. “We’re still going to be hearing about Europe, but we’re feeling a little bit more positive on the economy. For the full year, we’ve increased our GDP number a bit, based on the breadth of information – leading indicators and what we think is going to be continuing slow employment growth but we’re still continuing employment growth domestically.” Freeman said the full-year GDP forecast was raised to 2.5% growth from 2.2%.

“We’re seeing a continuation of spending on autos, and auto sales to us doesn’t look like it’s just replacement. You have consumers who are feeling more confident – enough to step up to the plate and purchase some large-ticket items,” he said.

Freeman said earnings look good so far this quarter, but it’s still too soon to tell. As of Friday, about 80% of the S&P 500 companies reporting beat estimates, which have been being lowered by analysts.

“I do think the Street is in a much better place than it was in a month ago. There were some pretty aggressive expectations out there, despite the fact it looked like [operating] margins hit their peak in the first quarter of last year,” said Freeman.

He said he expects to see six to seven percent earnings growth for the year. Stocks “are sitting here at the same place we were at in early May last year and the earnings are higher than where they were then … and stocks are cheaper,” he said.

Freeman said he is slightly overweight in the industrials and materials sectors, slightly underweight health care and consumer staples. He remains underweight in financials. “We’re underweight tech with the move it’s made and we’re even weight energy, ” he said.

Follow Patti Domm on Twitter: @pattidommQuestions? Comments? Email us at marketinsider@cnbc.com

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Once mighty Apple stock plunges over 10% in 10 days

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Apple stock-which seemed almost invincible a few weeks ago-skidded into correction territory Friday after plunging more than 10% from its all-time high just 10 days ago.

The iPad maker`s shares declined another 2.5% on Friday to finish near USD 573 a share. This is the eighth out of the last nine trading sessions that the stock has traded in negative territory.

Apple`s seen a stellar run this year, surging more than 40% to hit its all-time high of USD 644 on April 10. The firm also became the world`s most valuable company, when its market cap first crossed USD 600 billion.

“[The stock] is way up and people think it has risk,” said Art Cashin, director of floor operations at UBS Financial Services. “The real risk is if people say: `It`s had a great ride, I`m going to take profits.` I think you`re seeing some of that.”

Apple is scheduled to post quarterly earnings next Tuesday, and traders have said some investors are taking profits ahead of the announcement.  

“We`re seeing a pause in the stock,” said Andy Hargreaves, senior research analyst at Pacific Crest Securities. “People have made a lot of money on Apple and with earnings coming up [next Tuesday], they`re worried about cautious guidance in addition to iPhone and iPad demand.”

The stock has also been plagued by more-than-the-usual Apple speculation, including rumors that iPhone sales would be weaker than expected this quarter. There have also been ongoing concerns about iPad and Mac sales.

Adding to woes, Verizon, feeling the pinch of Apple`s pricey iPhone, announced it wants to help rival Microsoft succeed in creating an alternative mobile platform.

Analysts, however, have continued to ramp up their price targets. Canaccord Genuity earlier this week raised its price target on the firm to USD 740 from USD 710 and maintained its “buy” rating, saying it expects strong second-quarter results.

But not all are convinced that the stock is a keeper. Edward Zabitsky, CEO and analyst of ACI Research, has a “sell” rating on the stock with a price target of USD 270, citing competition from the Samsung Galaxy and HTC 1X.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Japan stocks, a hedge against slowing China: Analyst

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

Listen to the Article (6 Minutes)

Japan`s stock market has had a record first quarter with the benchmark Nikkei up 13% year to date, and one analyst expects the bull run to continue as Japanese equities provide a good hedge against a slowing China.

“Over the next two years I see an upside of 50% in the Japanese markets, (compared to) 25% in the US and 15% in Australia,” Brad McFadden, Founder of market analysis and trading forum the Daily Trading Report, told CNBC Asia`s “Cash Flow” on Thursday.

According to McFadden, Japanese equities are being driven by inflation expectations and on hopes that the Bank of Japan will keep the yen down. It is not directly linked to the fortunes of the Chinese economy, he adds, unlike Australia with its huge dependence on Chinese commodity imports.

“There is a very big risk people run now with being overweight Australian equities, and that`s China. Japanese equities get away from that,” McFadden said.

McFadden is not bullish on the prospects of Chinese growth going forward. “For China to continue to grow at the current pace, given the size of the economy now, is almost impossible,” McFadden said.

China`s economy grew by an annual rate of 8.1% in the first three months of 2012, its slowest pace in nearly three years.

Copyright 2011 cnbc.com

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow