31 Jul
Daily Market Commentary

Week In Review: Bulls Emerge Victorious in July

Bulls Emerge Victorious in July

July 2015 was a volatile month as investors had to navigate two potential external shocks (Greece and China) and digest the latest round of economic and earnings data. After all was said and done, stocks ended the week and month higher after successfully testing critical support (bottom of the year-long trading range and the 200 DMA line) twice in July. Stepping back, the major indices are still in the middle of their year-long trading range with the Nasdaq leading and the Dow Industrials lagging. By definition, until either support (floor) or resistance (ceiling) is taken out we have to expect this sideways action to continue. For the benchmark S&P 500, support resides near 2039 and resistance near 2134. In the short term, the market is moving sideways while the intermediate and long term trend remains up. We are still in a very strong (but aging) bull market which, by definition, means the path of least resistance remains higher (until any material technical damage emerges). The big take-away from earnings season so far is that investors do not “like” social media stocks ($FB, $TWTR, $LNKD, $YELP) and have an “appetite” for restaurant stocks ($CAKE, $PNRA, $CMG, $BWLD, etc).

Monday-Wednesday’s Action: Bulls Defend 200 DMA

Stocks fell hard on Monday dragged lower by a huge -8.5% decline in China’s Shanghai composite. A lot of technical damage occurred on Monday as the Dow Jones Industrial Average and the small-cap Russell 2000 index both sliced below their July 7, 2015 near term low which bodes poorly for the other averages. The benchmark S&P 500 closed just above its longer term 200 DMA line which is not ideal. The Nasdaq composite sliced below its 50 DMA line. In more M&A news, Teva Pharmaceutical ($TEVA) said it will buy Allergan’s ($AGN) generic pharmaceuticals business for $40.5 billion. Separately, U.S. regulators slapped Fiat Chrysler with a record $105 million for lapses in safety recalls. This came one week after hackers said they can control Chrysler’s Jeep Cherokee. Economic data was light with durable goods rose 3.4%, beating 3.1% estimate. The Dallas Fed Manufacturing survey fell to -4.6%, vs a negative -7.0 in June.
Stocks rallied on Tuesday after the bulls showed up and defended the 200 DMA line in the benchmark S&P 500 index. A slew of earnings and economic data was released. The PMI Services Flash index rose to 55.2, beating estimates for 54.8. The Richmond Fed Manufacturing index came in at 13, beating estimates for 7.5. On the downside: the Case-Shiller index fell -0.2%, missing estimates for +0.3% and consumer confidence slid to 90.9, missing the Street’s estimate for 99.6. That bodes poorly for the economy because nearly 2/3 of the economy is comprised of consumer spending. After Tuesday’s close, $TWTR and $YELP gapped down after reporting their latest quarterly results. Meanwhile, $PNRA and $BWLD both gapped up after releasing their numbers.
Stocks rallied on Wednesday after the Fed concluded its two day meeting and held rates near zero. The Fed did not mention any changes to future rate hikes and remains “data-dependent.” Pending Homes sales fell sharply to -1.8%, missing estimates for a gain of 1%. A slew of earnings were announced and the big take away from earnings season (so far) is that social media stocks are getting sold ($TWTR, $FB, $LNKD, & $YELP) while restaurant stocks are being bought ($PNRA, $CMG, $BWLD, $CAKE, etc).

Thursday-Friday’s Action: Earnings Continue Coming Out In Droves

Stocks were quiet on Thursday as investors digested a slew of earnings and economic data. Before the open, the government said U.S. GDP grew by +2.3% in Q2 2015, missing estimates for +2.6%. This directly contradicts the Fed’s narrative (that the economy will improve in the second half of the year and that will justify a rate hike). The problem the Fed faces is that the economy didn’t improve even with rates at zero! Earnings roulette continued with a handful of stocks gapped up after reporting earnings and a handful gapped down.  Procter & Gamble ($PG), American Express ($AXP), Exxon Mobil Corp ($XOM), United Technologies ($UTX), Caterpillar ($CAT) and IBM ($IBM) were a few Dow stocks that gapped down after reporting earnings. On the upside, The Walt Disney Company, ($DIS), Mastercard ($MA), Nike ($NKE), and Visa ($V) are all up after numbers. Earnings data continued to be mixed. Weekly initial claims rose to +267k, beating estimates for a gain of 272k. Friday was the last trading day of the month and stocks ended up after the bulls defended support (200 DMA line twice in July).  The employment cost index rose +0.2% in the second quarter which missed expectations and was the lowest level in the 33-year history of the report. The reading surprised the Street and basically eliminated the chance for the Fed to raise rates in September. Anything is possible with the Fed but so far, the ‘data” continues to disappoint. The Chicago PMI rose to 54.7, beating estimates for 50. Consumer sentiment softened to 93.1, missing estimates for 94.1.

Market Outlook: The Central Bank Put Is Alive And Well

Remember, in bull markets surprises happen to the upside. This has been our primary thesis since the end of 2012. We would be remiss not to note that this very strong bull market is aging (celebrated its 6th anniversary in March 2015) and the last two major bull markets ended shortly after their 5th anniversary; 1994-2000 & 2002-Oct 2007). To be clear, the central bank put is very strong and until material damage occurs, the stock market deserves the longer-term bullish benefit of the doubt. As always, keep your losses small and never argue with the tape. If you want exact entry and exit points in leading stocks, or access more of Adam’s commentary/thoughts on the market. Consider joining SarhanCapital.com.

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30 Jul
Media Quotes

CNBC Quote: Nasdaq Outperforms Amid Earnings, Data

U.S. stocks closed narrowly mixed on Thursday as investors digested more earnings and second-quarter GDP, a day after the Federal Reserve left interest rates unchanged.
“I think there’s a lot of confusion really. The focus was trying to understand what’s going on with economic growth and the Fed,” said David Kelly, chief global strategist at JPMorgan Funds. “People aren’t quite sure whether the data makes it more likely or less likely that they will tighten.”
After the second-quarter gross domestic product report came in slightly below expectations, traders will watch Friday’s employment cost index for another indicator on the labor market and inflation.
Read MoreThis one word could hold key for Fed’s rate move
“That should shed light on most important data points that the Fed (is watching),” said Quincy Krosby, market strategist at Prudential Financial. “The ECI in this environment is one of the most important pieces. It’s been slow. It’s been grudgingly moving higher.”
The Nasdaq Composite closed a third of a percent higher, with the S&P 500 ending flat.
The Dow Jones industrial average closed about 5 points lower, failing to hold mild gains. The index fell 100 points in the open as Proctor & Gamble shares declined after reported earnings that beat expectations on revenue that missed slightly. The company said organic sales in the current fiscal year will be down slightly to up single digits.
Western Digital jumped nearly 10 percent as one of the greatest advancers in the Nasdaq. The firm reported adjusted quarterly profit that topped estimates but the hard drive maker’s revenue was below forecasts.
On the other hand, Facebook fell about 2 percent to weigh on the Nasdaq as investors were disappointed by an 82 percent surge in expenses. The social media giant did report earnings after the close Wednesday that beat on both the top and bottom line.
“Overall I think the Facebook numbers reflect tremendous strength in their business,” said Steve Weinstein, senior research analyst at ITG Investment Research. “I don’t see anything in their numbers that will change the trajectory of their business. I think the selloff today is not material.”
Other firms reporting earnings before the bell were Cigna and AB InBev. Companies posting results after the close includeAmgen,LinkedIn and Expedia.
“I think earnings have been very enlightening this quarter, and the market is starting to get the message that things aren’t as good as previously thought,” said Maris Ogg, president at Tower Bridge Advisors.
Insurance company Cigna posted mixed quarterly results. Brewer AB InBev missed on both the top and bottom line due to poor weather and weak economic conditions.
“I think what’s driving markets here is earnings and we’ve been up two days in a row,” said Art Hogan, chief market strategist at Wunderlich Securities.
“The Fed has come and gone in the July time frame such that consensus hasn’t moved an inch. Everybody’s trying to come up with a reason why the Fed shouldn’t raise rates,” he said. “Pick your poison but the Fed really is trying desperately for one if not two rate hikes.”
In economic news, U.S. gross domestic product came in at 2.3 percent, slightly below economists’ estimates. The department revised its first-quarter GDP reading to a 0.6 percent increase from a 0.2 percent contraction.
“I was mostly surprised by the first quarter revision in GDP,” said Randy Frederick, managing director of trading and derivatives at Charles Schwab.
“This means there are no negative quarters, and that’s good,” he said.
Read MoreUS government revises earlier GDPs to fix anomalies
“I think this means (policymakers) have room to hold off on an interest rate hike,” said Tara Sinclair, chief economist at Indeed.
Sinclair remains optimistic on the economy despite the miss on the second-quarter growth figure. “My own reading of the data is there’s still room to grow,” she said.
U.S. weekly jobless claims increased by 12,000 week-over-week, but came in below expectations at 267,000, the Labor Department said.
“The thing with GDP is that it’s old news. We’re already well into the third quarter and this is a far back looking number,” said Peter Boockvar, chief market analyst at The Lindsey Group. He added that Wall Street was “more focused on digesting what the Fed said yesterday.”
On Wednesday, the central bank kept rates unchanged and gave no hint of liftoff coming in the next meeting. The decision on the rates was unanimous. Policymakers said the economy is expanding moderately and made no mention of recent volatility around Greece or China.
“While the official estimates say December is now more likely (for a rate hike), I believe most investors think September is the more likely bet,” Frederick said.
In fact, Mark Luschini, chief investment strategist at Janney Montgomery Scott, noted that the one of the Fed’s favorite indicators on inflation, the core personal consumption expenditures price index, rose 1.8 percent.
Read MoreUS GDP a dud but gives Fed inflation glimmer it needs
Not all analysts were convinced the economic data supports a rate hike in September.
“I think the underlying takeaway today is the Fed is facing a real problem,” said Adam Sarhan, CEO of Sarhan Capital. “How can the Fed justify their word if economic growth is coming in lower than expected, with rates at zero?”

The Dow Jones industrial average closed down 5.41 points, or 0.03 percent, at 17,745.98, with Procter & Gamble leading decliners andMicrosoft the greatest advancer.
The S&P 500 closed up 0.06 points, or 0.00 percent, at 2,108.63, with energy leading four sectors lower and utilities the greatest advancer.
The Nasdaq closed up 17.05 points, or 0.33 percent, at 5,128.78.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 12.
Advancers were a touch ahead of decliners on the New York Stock Exchange, with an exchange volume of 789 million and a composite volume of 3.5 billion in the close.
The U.S. dollar traded about half a percent higher against major world currencies, with the euro at $1.09.
The 10-year Treasury yield fell to 2.26 percent, while the 2-year note yield trimmed gains to hold near 0.73 percent.
Treasury Department auctioned $29 billion of 7-year notes at a high yield of 2.021 percent.
Crude oil futures for September delivery settled down 27 cents at $48.52 a barrel on the New York Mercantile Exchange. Gold futures settled down $4.60 at $1,088.70 an ounce.
—CNBC’s Peter Schacknow contributed to this report.
On tap this week:
Thursday
Earnings: Amgen, Broadcom, Digital Realty Trust, Electronic Arts, Expedia, LinkedIn, United Health Services, Western Union, FireEye, Tempur Sealy
Friday
Earnings: Exxon Mobil, Chevron, Honda Motors, Seagate Technology, TransCanada, Newell Rubbermaid, Weyerhaeuser, Phillip 66, CBOE Holdings, Legg Mason, ArcelorMittal
8:30 am: Employment cost index
9:45 am: PMI
10:00 am: Consumer sentiment
30 Jul
Media Quotes

Reuters Quote: US #STOCKS – #WallStreet lower at the open after GDP data

* Second-qtr GDP rises at 2.3 pct vs 2.6 pct est
* Weekly jobless numbers rise
* Facebook, P&G fall after results
* Skechers jumps as results beat expectations
* Indexes down: Dow 0.45 pct, S&P 0.48 pct, Nasdaq 0.47 pct (Updates to open)
By Tanya Agrawal
July 30 (Reuters) – U.S. stocks opened lower on Thursday after data showed that the U.S.economy grew at a slower-than-expected pace in the second quarter even as the Federal Reserve left doors open for a possible rate hike in September.
Gross domestic product expanded at a 2.3 percent annual rate, the Commerce Department said, but economists had expected a 2.6 percent rise.
The numbers come a day after the Fed said the U.S. economy and job market continue to strengthen.
The Fed has maintained near-zero interest rates for nearly a decade, saying it will raise rates only when it sees a sustained recovery in the economy.
“There is a disconnect between what the Main Street is seeing and what the Fed is telling us,” said Adam Sarhan, chief executive of Sarhan Capital.
“If the economy isn’t meeting expectations at near zero percent interest rates, then how is it going to grow when the Fed does raise rates? The numbers are a direct contradiction to what the Fed is telling us.”
Adding to the pressure, the number of Americans filing new applications for unemployment benefits increased last week but remained near cycle lows.
U.S. stocks closed stronger on Wednesday after the Fed statement. The S&P 500 has bounced about 2 percent higher in the past two days following a near-3 percent drop over the preceding week that had been caused in part by a rout in China’s stock markets.
At 9:45 a.m. ET (1345 GMT), the Dow Jones industrial average was down 79.2 points, or 0.45 percent, at 17,672.19, the S&P 500 was down 10.21 points, or 0.48 percent, at 2,098.36 and the Nasdaq Composite was down 24.15 points, or 0.47 percent, at 5,087.58.
Nine of the 10 major S&P sectors were lower with the consumer staples index’s 0.61 percent fall leading the decliners.
Procter & Gamble’s 3.2 percent fall dragged down the Dow, after the company reported its sixth straight fall in quarterly sales.
Facebook shares fell 2.5 percent to $94.50 after the social media company’s quarterly profit fell due to higher costs and weighed heavily on the tech-heavy Nasdaq.
More than halfway through the second-quarter earnings season, analysts expect overall earnings of S&P 500 companies to edge up 0.8 percent and revenue to decline 3.9 percent, according to Thomson Reuters data.
While earnings are expected to increase this quarter, valuations remain a concern. TheS&P 500 is trading near 16.9 times forward 12-month earnings, above the 10-year median of 14.7 times, according to StarMine data.
Companies scheduled to report during the day include Expedia, LinkedIn and Western Union after the close.
Whole Foods Market slumped 10.8 percent to $36.41 after same-store sales growth cooled.
Skechers USA jumped 11.2 percent to $142.54 as the sports shoe maker and retailer reported a better-than-expected rise in quarterly revenue.
Declining issues outnumbered advancers on the NYSE by 1,755 to 887. On the Nasdaq, 1,450 issues fell and 741 advanced.
The S&P 500 index showed 12 new 52-week highs and four new lows, while the Nasdaqrecorded 19 new highs and 28 new lows. (Editing by Don Sebastian)
http://www.reuters.com/article/2015/07/30/markets-stocks-usa-idUSL3N10A5HU20150730

30 Jul
Blog

A Closer Look At 5 Airline Stocks

By, Adam Sarhan SarhanCapital.com
The Airline Industry Has Evolved:
The airline industry has consolidated significantly over the past decade. In addition to the massive and much needed consolidation, airlines have cut costs, become leaner, and created a new set of fees that generate billions of dollars per year in new revenue (bag fees, change ticket fees, misc fees, charging for food, etc, etc) in the past.
Lower Fuel Prices Help Earnings:
Oil prices plunged -54% from June 2014 high to today. Unless the airline is hedging, airline companies benefit when oil prices decline because lower fuel prices bode well for margins. While other airline stocks are acting poorly, here are a few that are acting well:
A Closer Look At 5 Airline Stocks
Alaska Air Group, Inc. is a holding company and has two principal subsidiaries: Alaska Airlines, Inc. and Horizon Air Industries, Inc. Both subsidiaries operate as airlines. However, each subsidiary’s business plan, competition and economic risks differ substantially. Alaska is a major airline, operates an all jet fleet, and its average passenger trip length is 833 miles. Horizon is a regional airline, operates jet and turboprop aircraft, and its average passenger trip is 231 miles. The stock is a leader in the group and is currently forming a bullish three weeks tight base on base pattern.  ALK just broke out above a $70.96 buy point. As long as this level holds, the stock is in good shape.
1111alk
JetBlue Airways Corporation, a passenger carrier company, provides air transportation services. As of December 31, 2014, the company operated a fleet of 13 Airbus A321 aircrafts, 130 Airbus A320 aircrafts, and 60 EMBRAER 190 aircrafts. It also served 87 destinations in 27 states in the United States (the U.S.), the District of Columbia, the Commonwealth of Puerto Rico, the U.S. Virgin Islands, and 17 countries in the Caribbean and Latin America. JetBlue Airways Corporation was founded in 1998 and is based in Long Island City, New York. The stock continues acting well as it sits just above its 50 DMA line.
111JBLU
Virgin America Inc. is a premium airline providing scheduled air travel services in the continental United States and Mexico. The Company offers a wide range of services such as transporting passengers between cities in the United States, providing in-flight food, beverages, and entertainment, and assisting customers with scheduling flights. The Company’s services feature mood-lit cabins with fleetwide WiFi, custom-designed leather seats, power outlets, and a video touch-screen at every seatback offering guests on-demand menus and countless entertainment options. Virgin America Inc. is headquartered in Burlingame, California. The stock gapped up today after reporting their latest quarterly result indicating strong institutional buying.
 111VA
Ryanair Holdings plc, together with its subsidiaries, provides scheduled-passenger airline services in Ireland, the United Kingdom, continental Europe, and Morocco. It also offers various ancillary services, such as non-flight scheduled services and Internet-related services; and markets accommodation services and travel insurance through its Website, as well as is engaged in the in-flight sale of beverages, food, and merchandise. In addition, the company sells bus and rail tickets onboard its aircraft and through its Website; and markets car parking, attractions, and activities, as well as gift vouchers through its Website. As of June 30, 2014, it had a fleet of 297 Boeing 737-800 aircraft and 5 leased aircraft; and offered approximately 1,600 scheduled short-haul flights per day serving approximately 186 airports primarily in Europe. The company was founded in 1985 and is headquartered in Swords, Ireland. Ryanair is the Jetblue of Europe and is forming a bullish 4-week handle as it pulls into its 50 DMA line.
 
111Ryaay
Allegiant Travel Company, a leisure travel company, focuses on the provision of travel services and products to residents of under-served cities in the United States. The company offers scheduled air transportation on limited frequency nonstop flights between under-served cities and leisure destinations. As of February 2, 2015, it operated a fleet of 53 MD-80 aircraft, 4 Airbus A319 aircraft, 9 Airbus 320 aircraft and 6 Boeing 757-200 aircraft provided services on 229 routes to 94 cities. The company also provides air-related services and products in conjunction with air transportation, including use of its call center for purchases, baggage fees, advance seat assignments, travel protection products, change fees, priority boarding, food and beverage purchases on board, and other air-related services. In addition, it offers third party travel products, such as hotel rooms, ground transportation, and attractions; and air transportation services through fixed fee agreements and charter service on a seasonal and ad-hoc basis. The company was founded in 1997 and is headquartered in Las Vegas, Nevada. In the short term the stock is clearly extended but continues to be a leader in this space.
Positions None

29 Jul
Media Quotes

Int'l Business Times: Earnings Buzz: Twitter Inc (TWTR), Facebook Inc (FB), LinkedIn Corp (LNKD)

By @JessicaMenton on July 28 2015 3:55 PM EDT
Earnings season continues in full force this week as nearly one-third of the Standard & Poor’s 500, or about 160 companies, are due to report results, including social media giants Facebook Inc., Twitter Inc. and LinkedIn Corp. Analysts now expect overall earnings from S&P 500 companies to dip 0.3 percent, compared with the 3 percent decline expected at the start of July, according to Thomson Reuters data.
About 200 companies in the S&P 500 have reported earnings so far, and roughly 72 percent of them have beat Wall Street estimates, according to S&P Capital IQ.
Following the closing bell Tuesday, Twitter is scheduled to post results for the April-June quarter after CEO Dick Costolo stepped down on July 1. The former chief executive faced tough shareholder questions about slowing user growth.
Twitter reported 302 million active monthly users for the first quarter of 2015, up 18 percent from 255 million a year earlier. But the gains pale in comparison to Facebook, which has more active monthly users than Twitter and LinkedIn combined. Facebook announced in April that it officially has more monthly active users (1.44 billion) than China has people (1.4 billion).
Twitter needs to demonstrate it can grow users and monetize them in a positive fashion compared to their competitors, says James Gellert, chairman and chief executive officer at Rapid Ratings International Inc. “Whether they like it or not, Facebook is the competitor people look at for social media and advertising, and Facebook is doing a really great job,” Gellert said. 
Adam Sarhan, founder and chief executive officer of Sarhan Capital agrees, saying Facebook’s stock is well positioned to continue its upward trajectory. “Facebook is firing on multiple cylinders,” said Adam Sarhan, founder and CEO of Sarhan Capital. “There’s huge growth potential for the company, and that’s why investors are paying up.”
Here’s a deeper look at the social media companies reporting this week.
Tuesday
Although Twitter Inc.’s (NYSE:TWTR) quarterly profit beat estimates in the first quarter of 2015, revenue and mobile monthly active users both missed forecasts. The company also cut its earnings outlook for 2015.
In parallel, Twitter has made an aggressive bet on video through applications like Vine and the recently acquired Periscope, which allows users to stream live videos from their mobile phones. Other acquisitions during the second quarter include TenXer, a collaboration platform; TellApart, an advertising-sales solution; and Whetlab, a machine learning startup.
Wall Street projects Twitter is to report a fiscal second-quarter loss of $177.3 million, or earnings per share of 27 cents, on revenue of $481.3 million, according to analysts polled by Thomson Reuters. That compares with a loss of $144.6 million, or earnings per share of 24 cents, on revenue of $312.2 million a year ago.
Shares of the company have lost nearly 17 percent of their value since Twitter’s initial public offering on Nov. 7, 2013.
Wednesday
Shares of Facebook Inc. (NASDAQ:FB) hit another an all-time high last week after the company leapfrogged over U.S. multinational conglomerate General Electric to make it the eighth most valuable company in the Standard & Poor’s 500 index. The Menlo Park, California, company is currently valued at around $267 billion, above General Electric Company ($261 billion) and JPMorgan Chase & Co. ($251 billion).
Facebook joined Apple Inc., Microsoft Corporation and Google Inc. on the list of most-valued companies, after knocking Wal-Mart Stores Inc. out of the top 10 highest-valued companies in the S&P 500 in June.
The company is forecast to report fiscal second-quarter net income of $666.3 million, or earnings per share of 24 cents, on revenue of $3.9 billion, compared with a profit of $791 million, or earnings per share of 30 cents, on revenue of $2.9 billion a year ago.
Shares of Facebook have gained approximately 25 percent in the last 12 months.
Thursday
Professional networking company LinkedIn Corp. (NYSE:LNKD) slashed its full-year forecast, citing lower demand for advertising. The company said spending on display ads fell 10 percent in the first three months of the year.
The company’s hiring subsidiary Talent Solutions, which accounts for 62 percent of LinkedIn’s total revenue, saw its revenue rise 36 percent in the quarter ended March 31. The Mountain View, California, company cut its full-year outlook, forecasting a profit of $1.90 per share, excluding items, on revenue of about $2.90 billion, down from a previous forecast for earnings of $2.95 per share on revenue of $2.93 billion to $2.95 billion.
LinkedIn is forecast to report a fiscal second-quarter loss of $133.02 million, or earnings per share of $1.23, on revenue of $679.96 million, compared with a loss of $1.03 million, or earnings per share of 1 cent, on revenue of $533.88 million a year ago.
Shares of LinkedIn have rallied 24 percent during the last 12 months.
http://www.ibtimes.com/earnings-buzz-twitter-inc-twtr-facebook-inc-fb-linkedin-corp-lnkd-2028461

29 Jul
Media Quotes

Reuters Quote: Facebook's ascent has investors betting on more gains

Technology | Tue Jul 28, 2015 2:19pm EDT
 BY SAQIB IQBAL AHMED
Investors in social media shares have zeroed-in on Facebook Inc (FB.O), piling into stock options to add bullish bets on the company in the days ahead of its Wednesday earnings.
Facebook escaped a rout in social media stocks after last quarter’s results and its shares are up about 20 percent this year. The stock and a handful of other winners account for the bulk of the S&P 500’s .SPX gains this year.
The ascent has made Facebook one of the ten largest S&P companies in terms of market capitalization, with the stock now worth more than $260 billion – surpassing decades-old companies like Wal-Mart Stores (WMT.N) and Procter & Gamble (PG.N).
Traders in the options market are betting on more gains for the stock after it reports results Wednesday.
“Facebook is definitely the standout leader in the group,” said Adam Sarhan, chief executive of Sarhan Capital.
“The stock’s recent performance, combined with the company’s leading position, explains the bullishness of the options activity,” he said.
Earnings seasons are typically choppy for stocks and even more so for social media companies, due to their high valuations and ongoing concern, in some cases, about their business models.
Last quarter, investors spooked by disappointing results sent shares of Twitter (TWTR.N), LinkedIn (LNKD.N) and Yelp (YELP.N) down by more than 20 percent the week they reported results.
“These stocks are some of the most expensive stocks in the market,” said Stephen Massocca, managing director with Wedbush Equity Management in San Francisco.
“If numbers are disappointing and either growth or profitability looks out of reach, it’s very easy to see why investors would get out in a hurry,” he said.
The bullishness in Facebook’s recent options trading makes it unique in the sector. The number of open contracts in Facebook’s options has jumped 25 percent since the start of July, and is the highest since mid-January.
Analysts expect robust mobile pricing and strength in video ads to help the company post strong results when it reports after the close of trading on Wednesday. Strong YouTube viewership helped drive Google Inc’s (GOOGL.O) second-quarter results, boding well for video on Facebook’s own platform.
In July, open interest in Facebook’s call options, usually used for bets the stock will rise, increased by 24 percent, twice as much as the increase in puts, which are usually bets on a decline. For every put option, there are now nearly two calls open, the lowest this ratio has been in favor of puts, according to options analytics firm Trade Alert.
“The recent decline in Facebook’s put/call open interest ratio to an all-time low implies long positioning ahead of earnings,” said Jim Strugger, a derivatives strategist at MKM Partners.
In contrast, trading in the options of Twitter, LinkedIn and Yelp suggest high risk of volatile moves in the shares but give little clue to their direction.
Twitter and Yelp are expected to report results on Tuesday afternoon, and LinkedIn’s results are scheduled for Thursday.
So far, there is little to suggest traders are preparing for the kind of selloff that social media shares experienced last quarter, said Anshul Agarwal, equity derivative strategist at Bay Crest Partners in New York.
“For LinkedIn, Yelp, and Twitter, we haven’t witnessed particularly bearish options flow,” he said.
Source: http://www.reuters.com/article/2015/07/28/us-usa-options-socialmedia-idUSKCN0Q21SV20150728

25 Jul
Blog

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24 Jul
Blog

Good & Bad For The Week

Good:

  1. Initial jobless claims plunged to 255k, easily beating estimates for 279k and hit the lowest level in decades
  2. Leading Indicators rose by +0.6% in June, beating estimates for +0.2% gain
  3. The Manufacturing PMI Flash index rose to 53.8, beating estimates for 53.7
  4. The Chicago Fed National Activity Index rose to 0.08, beating estimates for -0.05
  5. The FHFA house price index rose +0.4%, matching estimates
  6. Existing homes sales rose 3.2% to 5.49M, beating estimates for 5.4M

 

Bad:

  1. The major indices fell last week as earnings fail to impress investors (so far)
  2. The Transports and a slew of Commodities fell hard and that bodes poorly for the broader economy
  3. New home sales plunged -6.8% to 482k, missing estimates for 550k and erased the past two months of gains
  4. Kansas City Fed Manufacturing Index remains in negative territory and contracted to -7
24 Jul
Media Quotes

IBTimes Quote: Stocks Drop Amid Mixed Earnings, US Markets Headed To Weekly Loss As Commodity Prices Plummet

By @angeloyoung on July 24 2015 12:02 PM EDT
U.S. stocks headed toward a weekly loss Friday as they followed world markets into the red. Meanwhile, global commodity prices continued their downward spiral. With no clear trend emerging from U.S. corporate earnings results and disappointing U.S. home sales data released Friday, all three U.S. markets were down in midday trading.
“What we’re seeing right now in this earnings season is a mixed bag,” said Adam Sarhan, CEO of Sarhan Capital, an investment and advisory firm. “Companies are beating estimates but those estimates have been ratcheted down for several months.”
Energy and basic material stocks were leading the sell-offs Friday, while tech and telecom shares were showing gains by midday. Amazon.com Inc. (Nasdaq:AMZN) shares continued their rally after the online seller and cloud-storage services provider reported a surprise quarterly profit. The company’s stock gained more than 15 percent to $556.45 by midday.
The Dow Jones Industrial Average (INDEXDJX:.DJI) dropped 71.82 points, or 0.41 percent, to 17,660.10. The Standard & Poor’s 500 index (INDEXSP:.INX) dipped 7.40 points, or 0.35 percent, to 2,094.84. And the Nasdaq composite (INDEXNASDAQ:.IXIC) lost 2.98 points, or 0.06 percent, to 5,142.93.
European and Asian stocks closed in the red Friday after a sell-off in global commodities that could indicate a major global slowdown is underway. Copper prices fell to their lowest level since 2009 and mining stocks retreated after Anglo American plc (LON:AAL), a leading mining company, reported a 36 percent drop in earnings and said it was slashing 6,000 jobs. Anglo American CEO Mark Cutifani said volatility and global economic uncertainly would continue to impact global mining, a signal of an economic slowdown in construction and other key industrial activities.
“Except for cocoa and cattle, all commodity prices are down. Demand remains very weak and that doesn’t bode well for the global economy,” said Sarhan. “We have lackluster growth across the global economy with central banks either printing money or offering easy money.”
The U.S. Commerce Department said Friday that new home sales dropped to their lowest level in seven months while May sales were revised lower, indicating a setback in housing market recovery. New home sales dropped 6.8 percent to a seasonally adjusted annualized rate of 482,000. May sales were revised from 546,000 to 517,000.
On the upside, preliminary monthly data from Markit Economics about business purchases ticked up to 53.8 in July, from a 20-month-low in June of 53.6. Readings above 50 indicate growth. A strong dollar was putting pressure on U.S. exports, according to the respondents to the monthly survey.
The U.S. dollar strengthened against key Asian-Pacific currencies hit by the commodities row and China’s announcement on Friday it would allow the yuan to fluctuate more freely in an effort to weaken it to boost exports. A weaker yuan would gut exports from other Asian emerging markets. Australia’s dollar is being hit by weak demand for its core mining exports.
Since Thursday, four major U.S. air carriers have reported lower than expected revenue for their second quarters. Airline stocks dipped, as American Airlines Group Inc (Nasdaq:AAL) shares fell 2.06 percent to $41.76 while Spirit Airlines Incorporated (Nasdaq:SAVE) stock dropped 1.89 percent to $60.21 following the carriers release of their quarterly earnings statements before markets opened on Friday.
United Continental Holdings Inc (NYSE:UAL) stock was recovering from Thursday’s sell-off after the airline reported a miss on revenue in its second quarter. United’s stock recovered from Thursday’s decline, gaining 2.15 percent to $57.89 on Friday morning.
Southwest Airlines Co. (NYSE:LUV) shares were down 1.04 percent to $36.11 after shedding nearly 3 percent on Thursday. Southwest’s price was still above its Wednesday close as investors saw only a slight revenue miss and viewed the airline’s plans to expand to 50 international destinations as good news for the budget carrier.
http://www.ibtimes.com/dow-jones-industrial-average-drops-amid-mixed-earnings-us-markets-headed-weekly-loss-2023701

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