Banks lead this week after underperforming this year. Sector rotation of out defensive plays and into risk-on names is helping.» Read More
Over the weekend, my email was stuffed full of commentary about what would be happening at the Mobile World Congress in Barcelona, which is now underway.
Not surprisingly, Nokia, Sony, Lenovo are all announcing new phones, with Samsung even set to announce a successor to its Galaxy S4, right after announcing new wristwatches. Nokia is even announcing an Android smartphone...wait, isn't Nokia being bought by Microsoft? That's how much the world is changing.
There seems to be one obvious winner already: Qualcomm, who is the leader in chips for the 4G LTE space. They already announced an updated road map for its Snapdragon mobile platform on a chip product that will likely allow it to maintain its leadership in LTE, now one of the global standards for high-speed mobile phone data.
Most of the disappointing macroeconomic data is getting a pass due to weather. Plenty of traders mentioned the the positive data from Markit on flash U.S. manufacturing was the reason the market held up yesterday.
One thing's for sure: much of the market leadership is in speculative technology stocks. I mean Priceline, Google, Linkedin, Netflix, Tesla, Facebook, even Workday is where large amounts of the trading action is.
So far, no one wants to sell on up days, while buying is restricted on down days. We'll see how long that lasts.
After guiding lower at the end of January, Wal-Mart reported earnings of $1.60, roughly in-line with consensus of $1.59. Comparable store sales declined 0.4 percent for the year ending in January, about as expected.
But it was the company's 2015 guidance of $5.10-$5.45, well below consensus of $5.54, that is the major concern. Adding to the grief, the retail giant expects sales to be toward the low end of the 3 to 5 percent guidance they had previously given.
Wal-Mart already guided lower a few weeks ago, so barring a catastrophe, we are unlikely to be greatly surprised. The consensus is for earnings of $1.60, a decline of four percent year-over-year. Same-store sales are also expected to DECLINE by 0.3 percent.
It's a different customer, but Nordstrom is also expected to see a decline of four percent in earnings year-over-year. It didn't guide lower, but you can bet it will probably report that December was in line with expectations, but that January was below expectations.
As for the weather, well, it may have kept some people out of the malls, but it should have helped sales of cold weather items, no?
It's not much better for the rest of the retail space. RetailMetrics estimates that fourth quarter retail earnings (for those reporting January-ending quarters) would see a DECLINE of five percent year-over-year. That would be the worst quarterly report since Q2 2009....nearly five years ago.
By contrast, overall earnings in the S&P 500 are expected to INCREASE 7.8 percent, according to S&P Capital IQ.
This is a reversal of a long-term trend: Retail earnings have outperformed the overall S&P 500 earnings for the last seven quarters.
But isn't this already priced into retail stocks? Many traders are looking to buy retail believing there will be a big weather bounce come March, and the tax refunds kicking in will definitely help.
But be careful: Crummy numbers may already be priced into Wal-Mart, but there could be some nasty surprises elsewhere. For example: I wouldn't be surprised if we saw misses and poor guidance from Ross Stores (ROST) and TJX (TJX)...they are going against tough comps year-over-year...and major gains from aggressive competitors like Macy's (M).
Weather and the economy: The Federal Reserve is as clueless as the rest of us. The first thing I did when the FOMC minutes came out was search for the word "weather." Good luck with that! There are exactly two references. Here they are:
In other words, the Fed isn't worried about the weather ... at least not yet! Adrian Miller at GMP Securities summed it up: "... despite acknowledging weather-related disappointing data of late, the general consensus is 2014 should show growth and labor market improvement."
This meeting was held Jan. 28 and 29, so it was before January economic data was out but well after the lousy December and January weather.
Emerging market problems: Don't blame us. The Fed patted itself on the back over its decision to begin tapering, saying that it "seemed to increase investors' confidence in the economic outlook."
But the Fed implied that emerging markets were responsible for their own problems: "... those effects were reversed late in the period when investors appeared to pull back from riskier assets in reaction to rising concern about developments in some emerging market economies and their possible implications for global economic growth."
The problems in emerging markets are not only not the Fed's fault but not even that serious. "The effects of recent financial market volatility had not been large enough to have a material effect on the overall outlook for those economies and, similarly, that the spillover effects on the United States of developments to date were likely to be modest," the minutes said.
Gee, trying telling that to Turkey. Or Brazil. Or India, which I just returned from, where GDP growth could be as low as 4 percent this year, down from 7 percent a few years ago.
For the past three weeks, Art Cashin has been calling the weather the "get out of jail free" card for the economy. And it happened again this morning. Stocks were little changed on very disappointing January's housing starts—a decline of 16 percent—the biggest drop in three years. Building permits were also fairly ugly.
The bottom line: Wall Street continues to believe that the weather is the primary reason for the slowdown, and this will change soon.
Clearly I've got to leave the country more often.
The market bottomed and began to rally just as I left for India on February 6th. Since then, the S&P 500 has rallied 5.8 percent. The Dow Jones Industrial Average is up more than 800 points. Even emerging market stocks have rallied.
Despite poor economic statistics, most recently January U.S. retail sales on Friday, the rally has been largely off of cyclically oriented names.
S&P futures dropped while Tom Demark, a famous technical analyst, was on our air, saying the next couple days were critical, and that if stocks moved down in the next couple days they would continue to fall no matter what the jobs report said on Friday.
Maybe. It was widely noted Mr. Demark is selling market timing seminars, one of which he is doing today in New York.
Yesterday's volume of nearly 4.2 billion shares was heavy but not as heavy as Monday's selloff; breadth was 3 to 1 advancing to declining stocks, good but not great.
(Read more: Bonds beating stocks in 2014...so far)
In other words, the selloffs are coming on greater breadth and volume than the rallies. We need to see that moderate.
In Japan, the Nikkei rose 1.2 percent, fueled by decent earnings from Toyota and Panasonic.
(Read more: What Wall Street's looking for in Disney earnings)
Another issue impacting the market are perceptions of Fed tapering. Traders will be listening for any comment on whether the taper will continue. Fed hawk Charles Plosser (Philadelphia Fed) and moderate Dennis Lockhart (Atlanta Fed,non-voting member) are speaking today. Yesterday Chicago Fed President Charles Evens said it would take a "high hurdle" for the Fed to move away from tapering, one reason the rally was rather muted.
Steady as she goes is good enough...for the moment. An old trader friend of mine said today was like drawing a pair of twos in a poker game...what do you do when you draw a pair of twos? You don't raise, you don't fold...you wait for another card.
The other card is economic data, particularly the Nonfarm Payroll report on Friday. ISM Services tomorrow is important because the service part of the economy is a little less sensitive to weather. A decent number, particularly the employment component, will be a big help for bulls.
We also get the ADP report tomorrow, which was not a very good predictor of the weak December jobs report.
With that said, all this discussion that the Federal Reserve may stop its taper program is way premature. They would have to be convinced that the U.S. economy is showing undeniable signs of a slowdown in the economy, and you don't get that from two data points.
A lot of people have come on our air saying that if we get another weak jobs report on Friday, on top of the weak December report, that would be sufficient for the Fed to consider stopping the taper program.
I don't buy that. I don't buy it because 1) there is a heavy weather overlay to the report, which clouds the results, and 2) even without weather, the Fed will need more evidence before they decide to halt or reverse the train. They stand to lose a lot of credibility by stopping the train, then realizing two months later that there was only a temporary blip in the data.
And remember, the next Fed meeting is not until March 19th. That means we will get another jobs report--for February--before they have to decide.
An improved February report, even if the January number is disappoint, would change the conversation.
Elsewhere: Pure nat-gas plays soar. With natural gas up over eight percent, passing $5, exploration and production stocks like Pioneer Natural Resources (PXD) are up three to four percent, but a subgroup of players that have heavier exposure to natural gas and very little exposure to oil are especially strong. Companies like Quicksilver Resources (KWK), Ultra Petroleum (UPL), Southwestern Energy (SWN) are up four to seven percent.
For the moment, the markets are a bit calmer. While Asia was weak overnight, emerging market currencies are mostly stronger, European equities are mixed, and U.S. stocks opened in positive territory after a bloody Monday.
Many large European banks are up 1 to 2 percent and the yen—a safe-haven that is a gauge of market fears—is slightly weaker against the dollar. Yet the nervousness remains, since the weak ISM print has many fearful that the nonfarm payroll report on Friday will be weak as well.
The falling out between Bill Gross and his one-time partner Mohamed El-Erian has quickly turned into one of the ugliest bust-ups in recent history.
The founder of a hedge fund with $21 billion under management provided three investing rules and three favorite stocks.
Former executives at Dewey & LeBoeuf were accused of using accounting gimmicks to fool banks and investors.