Markets Snap Losing Streak; Airlines ‘Take Off’ Again

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving The Markets

Stocks broke their two-day losing streak today as investors became encouraged by better-than-expected earnings reports from Alcoa (AA). All of the major indexes gained. In other earnings news, shares of The Container Store (TCS) dropped 9% after the specialty retailer reported earnings below expectations and said it was experiencing a retail “funk.”

The Fed was back in the headlines today as they announced that they are leaning toward ending the central bank’s monthly bond-buying stimulus in October. Citing an improving labor market and economy, Fed policymakers have tapered their government bond purchases in $10 billion increments at each meeting since December, cutting them to $35 billion a month from $85 billion.

Economists have debated whether the Fed would continue to trim the purchases by $10 billion at the October meeting — leaving it buying $5 billion in bonds until the December meeting — or cut the purchases by $15 billion to zero in October.

You may remember that a couple of days ago I noted that airlines had taken a dive due to decreased international traveler flow to Latin America during the World Cup season. Well, airlines bounced back today. Shares of American Airlines Group Inc. (AAL) and Southwest Airlines Co. (LUV) jumped 4% and nearly 2% respectively on positive forecasts for the second quarter. The companies reported increased demand for air travel in the coming summer months and abated concerns about the health of the sector’s profit margins.

Our 10 ETFs in the Spotlight recovered with one of them again managing to make a new high for the year.

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Investors Remain Bearish Ahead Of Q2 Earnings Season

Ulli Market Commentary Contact

Tue chart

[Chart courtesy of MarketWatch.com]

1. Moving The Markets

It was a good day for German soccer fans, but the same joys were not felt by U.S. investors. Stocks tumbled as the Dow fell nearly 118 points, ending the trading day below the glorious 17,000 mark it surpassed for the first time recently. The S&P 500 and the Nasdaq retreated as well, as the chart above shows.

The buzz on market sentiment today again centered on the upcoming Q2 earnings season. According to Thomson Reuters, the number of companies expecting profit shortfalls outnumbers those predicting upside earnings surprises by a 4 to 1 ratio, which is above the long-term average of 2.6. Thus, investors remain bearish on upcoming earnings announcements.

Weakness in tech shares pressured the Nasdaq today, with Internet names especially hit hard. Netflix Inc (NFLX) fell 3.4% to $445.05 while Facebook Inc (FB) dropped 3.9% to $62.76. Also, TripAdvisor Inc (TRIP) sank 5.5% to $101.45.

Asian stock markets were mostly lower as Japan’s Nikkei 225 index slipped 0.4% and Hong Kong’s Hang Seng index was basically flat.

Our 10 ETFs in the Spotlight slipped a bit but one of them actually managed to eked out a gain on this bearish day.

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Markets Calm After Extended Holiday

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving The Markets

Well, last week ended with a ‘bang’ heading into the 4th of July holiday as the Dow officially passed the 17,000 mark, and the other major indexes both pushed to record highs. The momentum seemed to have fizzled after a long weekend though and the indexes closed Monday lower across the board as the chart above shows.

While there was no one major piece of news that pulled markets lower today, the buzz around the various news studios is that investors secured profits from last week and pulled back a bit today in anticipation of Q2 earnings announcements that will begin funneling in this week. The new earnings season begins Tuesday with results from aluminum producer Alcoa Inc. (AA). We’ll also hear from Wells Fargo & Co. (WFC) on Friday.

Major airlines stocks took a hit today after the TSA announced new security measures that say all electronic devices travelling into the U.S. would need to have power in order to travel, including tablet computers and cell phones, which could impact the number of passengers able to travel. United Continental (UAL) fell 3% to $38.62, Delta (DAL) fell 4.5%, to $36.90 and American Airlines (AAL) fell 4% to $40.10.

Our 10 ETFs in the Spotlight pulled back, and no new highs were made today.

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ETFs/Mutual Funds On The Cutline – Updated Through 07/03/2014

Ulli ETFs on the Cutline Contact

Below are the latest ETF Cutline reports, which show how far above or below their respective long-term trend lines (39 week SMA) my currently tracked ETFs/MFs are positioned.

The first report covers the ETF Master List from Thursday’s StatSheet and includes 398 ETFs, of which currently 392 (last week 394) are hovering in bullish territory.

The second report includes only High Volume ETFs. To clarify, High Volume (HV) ETFs are defined as those with an average daily volume of $10 million or higher.

These ETFs are generated from my selected list of some 97 that I use in my advisor practice. It cuts out the “noise,” which simply means it eliminates those ETFs that I would never buy because of their volume limitations. 91 ETFs (last week 92) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 811 (last week 786) above the line and 39 below it out of the 850 that I follow.

Take a look:

1. ETF Master Cutline Report     

2. ETF High Volume Cutline Report

3. MF Cutline Report

In case you are not familiar with some of the terminology used in the reports, please read the Glossary of Terms.

If you missed the original post about the Cutline approach, you can read it here.

One Man’s Opinion: Certain Sectors In The Economy Are Heating Up While Others Are Falling Behind

Ulli Market Review Contact

92835431The biggest scar from the Great Recession is going to be a smaller labor force and less investment in the US, but it will be an expansion from the previous so-called new normal level, said Alan Krueger, an economics professor at the Princeton University and former Chairman of council of economic advisers.

Asked to comment on Janet Yellen’s speech at an IMF-led gathering on July 2, Alan said Yellen’s speech was substantive and the depth she went into with her speech was impressive. She rightly said macro-prudential relation is the first tool when it comes to fighting bubbles/imbalances in the financial sector. She couldn’t have been clearer on the matter, he noted.

Asked if Yellen believed the Fed can’t fix bubbles, Alan answered in negative because the Fed is a major regulator. Yellen talked about both underwriting and capital standards, where the Fed plays a major role. The Fed can put in speed bumps that the system needs. On monetary policy, she said interest rate hikes were the last resort to prevent bubbles from forming, he argued.

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New ETFs On The Block: JP Morgan Diversified Return Global Equity ETF (JPGE)

Ulli International ETFs Contact

91551549JP Morgan Asset Management, one of the largest issuer of mutual funds in the US, ventured into the fast growing exchange-traded funds space by launching the JP Morgan Diversified Return Global Equity ETF (JPGE) on the NYSE Arca.

The launch of this much-anticipated geographically diversified “smart beta” equity fund is expected to build on JPM’s reputation as an active asset manager and has been designed to make clients feel confident during periods of heightened market volatility.

JPGE follows the FTSE Developed Diversified Factor Index, yet maintains a quasi active tilt to outperform traditional market-cap-weighted index funds. Meant to be a global core equity play for investors, it is based on the premise that market-cap weighted single-factor indexes expose investors to greater risks due to a systemic bias toward overvalued stocks.

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