Equities Snap Two-Day Losing Streak; Bye Bye Nook Biz

Ulli Market Commentary Contact

Wed pic

[Chart courtesy of MarketWatch.com]

1. Moving The Markets

Stocks snapped a two-day losing streak despite the anticipated news that the economy shrank 2.9% in the first quarter. The S&P 500 gained 0.5%, the Dow rose 0.3% and the Nasdaq posted the largest gain of 0.68%.

The general sentiment about the lackluster first quarter mostly relates to the ‘arctic’ winter that blasted the mid and eastern part of the U.S. So, this leaves many optimistic that the economy should keep trucking ahead on an upward climb given the positive economic data on manufacturing, hiring and auto sales for the past two months.

Barnes & Noble (BKS), the struggling bookseller, saw its shares jump up 8% Wednesday after reporting that it will spin off its Nook digital book business. The Nook business will be spun off into a new publicly traded company called Nook Media, is 17% owned by Microsoft (MSFT) and 5% owned by publisher Pearson (PSO).

We also saw shares of CBS (CBS) gain 6.19% today after the Supreme Court ruled that Aereo’s streaming TV service is a violation of Copyright laws. Disney (DIS), Time Warner (TWC), and Comcast (CMCSA) stocks were all up after the ruling came down.

Our 10 ETFs in the Spotlight joined the rebound and gained with only our leading ETF for the year making a new high today…

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Indexes Drop Across The Board; Softer Blow For Nasdaq Due To Vertex Announcement

Ulli Market Commentary Contact

Tue pic

[Chart courtesy of MarketWatch.com]

1. Moving The Markets

U.S. indexes fell across the board on Tuesday (see above chart), largely due to drops in blue-chip stocks such as Exxon Mobil (XOM), Verizon (VZ) and American Express (AMEX), which all fell more than 1% on the day.

One of the biggest market movers today was Vertex Pharmaceuticals (VFTX). The stock gained a massive $26.92 or 40.41% after the company announced that its treatment for cystic fibrosis (a pill called Lumacaftor) met the primary goals of the late-stage trial. Goldman Sachs estimates the drug could tally sales above $5bn a year at its peak. The news lifted the broader sector as well. The Nasdaq Biotech index climbed 1 per cent.

Many investors await an update from the government on the state of the economy coming up tomorrow. Although new home sales last month blew past forecasts to their strongest pace in six years, the prospect that the government may announce that the economy shrank in the first quarter even more than the negative 1% figure given out last month still has many full of anxiety.

Our 10 ETFs in the Spotlight pulled back as well; no new highs were made and 9 of them reside on the plus side YTD.

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A Mundane Monday Kicks Off The Week

Ulli Market Commentary Contact

Mon pic

[Chart courtesy of MarketWatch.com]

1. Moving The Markets

It was too tough for the markets to continue their record breaking trend this Monday, even though we received some positive data that showed an improving housing market. The S&P 500 dropped a tad and the Dow slid slightly. Only the Nasdaq finished the day in positive territory, squeezing out a 0.02% gain.

The main market moving activity today centered on corporate M&A news. The tech lovers out there heard today that Oracle (ORCL), the database and software giant, will buy MICROS Systems (MCRS) for $5.3 billion. We also received word today that GE made notable progress in their $17 bil quest to acquire French infrastructure giant Alstom (ALST).

Perhaps more interesting to those focused on the economy were the existing home sales numbers that came in today. A report was issued this morning that showed existing home sales rose for the second straight month in May. Existing home sales are up 4.9%, which is the best gain since mid-2011. Also, we heard that activity in China’s manufacturing sector in May rose to the highest level since December.

All of these are positive signs that the domestic and global economies are headed in the right direction. But, we all know how investor sentiment can sway from one day to the next regardless of positive economic numbers.

Our 10 ETFs in the Spotlight stayed about even with 1 of them making new highs today; 9 of them are still remaining on the plus side YTD.

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ETFs/Mutual Funds On The Cutline – Updated Through 06/20/2014

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 376) 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. 90 ETFs (last week 86) have managed to remain in bullish territory after the recent market volatility.

The third report covers Mutual Funds on the Cutline. There are currently 788 (last week 749) above the line and 62 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: Will The Federal Reserve Keep Rates Low To Boost Consumption?

Ulli Market Review Contact

92835431Following the Fed’s two-day monetary policy meeting this week, Chairwoman Janet Yellen said the central bank is going to stay accommodative for a long time after it ended its monthly bond-buying program this year, reassuring markets a rate hike is not likely any time soon, said Vincent Reinhart, chief US economist at Morgan Stanley.

Asked if Morgan Stanley agrees with Fed vice-chair Stanley Fischer, New York Fed chief William Dudley etc that the US central bank should push ahead with current policies and not change course, Vince said the Fed is going to keep rates low for a very long time. It’s conventional macro wisdom. There’s still resource slack in the economy; inflation is picking up, but it’s still below the Fed’s target of 2 percent. So, policymakers have still got some room to run, he noted.

Noted economists like Milton Friedman, Ben Bernanke and Richard Timberlake have all said central banks are always behind the curve. Asked if Janet Yellen fell short of expectations this week, Vince said policy rate in every country is asymmetric. It goes up a lot more slowly than it goes down because policy tightening is done in a planned fashion.

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New ETFs On The Block: SPDR Euro STOXX Small Cap ETF (SMEZ)

Ulli Europe, Small Cap ETFs Contact

146026450Europe is expected to witness stronger credit flow in the real economy after the European Central Bank cut its key interest rates this month. Investors are optimistic EU countries will recover from the prolonged recession that started in 2008 and stave off deflation successfully after the ECB’s intervention.

As the business cycle improves, European equities, particularly small cap stocks, are expected to outperform other asset classes since they tend to be highly correlated to local economies.

State Street Global Advisers, the asset management arm behind the SPDR brand of exchange-traded funds, has unveiled a Europe-focused ETF that targets small companies across Europe. The newly launched SPDR Euro STOXX Small Cap ETF (SMEZ) tracks the Euro STOXX Small Index – a gauge consisting of small capitalization companies domiciled in countries within Europe that have adopted the euro as their currency (There are 28 countries in the European Union, but only 18 use the euro).

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