Market Intelligence: Traders See Bumpy Ride Ahead in Stocks
Besides dissapointing earnings from Countrywide and worries about Apple's iPhone sales, traders are watching market volatility, the dollar and bond yields.
"Right now we're seeing a variety of crosscurrent's that we haven't seen in some time," says Andrew Bekoff, chief investment strategist at Printz Capial Management.
"Ten-year Treasurys have rallied, sending yields below 5%, taking some fear out about higher interest rates from the Fed and we've got just a slightly inverted yield curve," Bekoff adds. "But the scenario on Wall Street is event driven, whether its news about earnings, the global economy or subprime."
Bekoff says traders have also been on guard over the recent rebound in the Japanese yen explaining that "the dollar continues its freefall with no one defending it. For several months the Japanese developed a lenient policy with its currency, but now the yen is being allowed to get stronger again. If you look at past spikes in the yen versus the dollar it has resulted in world stock market selloffs. That's a concern."
The Volatility index remains elevated as well. "At the very least," says Bekoff, "the VIX is signalling that market volalitility is going to increase, or at least stay higher."
Eli Lilly posted stronger than expected earnings, and Printz's Bekoff notes that the healthcare stock group was the strongest group--along with telecoms--on Wall Street Monday. On the other hand, he says the financial stock group was the only one that closed in the red Monday, dogged by subprime concerns.
One of the big earnings events of the week comes Wednesday when Apple posts quarterly results. An analyst report released this morning could add to the volatile picture.
CIBC says it has been conducting store checks and believes iPhone demand has declined significantly over the last 10 days. The firm says there is the potential that Apple and partner AT&T will end up spending more to stop recent sales weakness.
Even before Apple posts results, the Ahead of the Tape column of the Wall street Journal takes a look at Amazon.com which will post earnings after the bell today. The column notes that Apple is trading at 121-times last year's earnings and would have to earn $2 a share this year to match the 45-times earnings multiple of high flyers like Google and Apple. Amazon is expected to earn $1.01 a share in earnings this year.
After posting lower than expected revenue, shares are lower, Deutsche Bank reiterated a "buy," saying any pullback should be used to buy shares.
Piper Jaffray has raised its target on GameStop to $48 from $42. It reiterates Outperform saying the company should benefit from strong software sales.
Stifel Nicolaus has lowered Amgen earnings estimates for the 2nd quarter citing expectedweakness in IMS Script data for the quarter. While maintaining a buy Stifel believe Amgen will have to lower its fiscal 2007 guidance.
Thomas Weisel believes shares of Crocs are attractively valued. It reiterates an Overweight rating.