Home' Trinidad and Tobago Guardian : April 20th 2014 Contents APRIL 20 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
STOCKS | SBG 11
LONDON---World stocks were subdued Thursday
ahead of a long weekend for many markets and after
mixed earnings reports in the US.
Though General Electric was upbeat and Goldman
Sachs and Morgan Stanley beat expectations, sentiment
was still dented by weak reports from Google and
Supportive comments from Federal Reserve Chair
Janet Yellen, who said the day before that the central
bank would continue to provide stimulus for the job
market, failed to boost markets much.
On Wall Street, the Dow lost 0.1 per cent to
16,402.24 and the broader S&P 500 was flat at
European markets fared better, with Britain s FTSE
100 closing 0.6 per cent higher at 6,625.25. Germany s
DAX advanced 1 per cent to 9,409.71, and France s
CAC 40 edged up 0.6 per cent to 4,431.81.
Earlier, Asian stocks ended the day mixed. Japan s
Nikkei 225 index recouped earlier losses to close
unchanged at 14,362.94 after rising 3 per cent on
Bank of Japan governor Haruhiko Kuroda said in
a speech that the bank would make adjustments as
needed to its ultra-loose monetary policy, and he reit-
erated his confidence that the policy is having the
desired effect of stimulating the economy, according
to Kyodo news agency.
South Korea s Kospi also ended little changed at
1,992.05. Hong Kong s Hang Seng climbed 0.3 per
cent to 22,760.24 and Australia s S&P/ASX 200 rose
0.6 per cent to 5,454.20. In mainland China, the
Shanghai Composite Index shed 0.3 percent to
In energy trading, benchmark crude oil for May
delivery was up 92 cents to US$104.68.
In currencies, the dollar was steady around 102.20
yen while the euro rose 0.1 per cent to US$1.3833.
NEW YORK---Earnings season shifts into
high gear this week, and with nearly one-third
of S&P 500 names set to post results, investors
hope the news provides a catalyst to buy stocks
and leave the market s recent weakness in the
Several behemoths, including Apple, the
largest US company by market value, as well
as Microsoft, McDonald s and AT&T, are due
to report earnings.
Also reporting arehighfliers like Netflix and
Facebook, giving the first real cross-section
of the state of corporate America as temper-
atures rise across the country and investors
hope to put the cold weather behind them.
Strategists will also be looking for clues on
how badly China s slowdown hits US corporate
The first batch of earnings came out as
equities were working their way through a
selloff led by trading-crowd favorites like
Netflix and the biotech stocks. With the late-
week recovery, the hope is that the recent
volatility has ebbed. If poor results dominate
next week s action, that could reignite the
"We are still off our highs, but we still remain
in an uptrend so it would not surprise me to
see sideways action," said Andre Bakhos, man-
aging director at Janlyn Capital LLC in
Bernardsville, New Jersey.
"If we were to have a set of earnings releases
that were well off expectations to the downside,
that could create hesitation in the market."
A few themes will dominate in the coming
week: The outlook for China, the rotation to
slower-growing stocks, and results from high-
flying trading favorites.
S&P 500 companies first-quarter earnings
are projected to have increased 1.7 per cent
from a year ago, Thomson Reuters data
showed. The forecast is down sharply from
the start of the year, when profit growth was
estimated at 6.5 per cent, but has climbed
from a low of 0.6 per cent reached on Wednes-
That jump occurred despite notable disap-
pointments from IBM Corp and Google Inc.
Even with those two lackluster reports, equities
still mostly rallied on Thursday.
The benchmark S&P index rose 2.7 per cent
for the holiday-shortened week, helping the
index recapture nearly all of the declines suf-
fered in the previous week. The US stock mar-
ket will be closed for Good Friday.
The China challenge
Investors eyeing the impact of China s trou-
bles on corporate America s bottom line will
have a few spots to pick from, including Apple,
Qualcomm and Yum Brands
There have been warning signs, with IBM
saying this week that its disappointing quarterly
revenue was due to worsening sales in the
world s second-largest economy and other
emerging markets. Earlier in the week, China
reported growth came in at its slowest pace
in 18 months.
Qualcomm s financials for its fiscal year
ended September 29, 2013, showed China
accounted for nearly half of the company s
revenue. Options activity in Qualcomm has
been defensive in nature, with investors paying
more money to hedge against a fall than a rise
in the stock s price.
But strategists at Goldman Sachs see this
as a buying opportunity, believing the options
data shows investors are overly concerned
about the quarter.
Apple Inc also derives 13 per cent of its sales
from China, according to Thomson Reuters
data. The company was once a favorite among
momentum investors looking to capitalize on
swift price gains, but the stock dropped sharply
from all-time highs reached in late 2012. It
has been mostly stuck in a range for the last
StarMine expects Apple to exceed earnings
estimates by 1 percent. Notably, Apple has not
benefited from a rotation into older tech stocks
like Microsoft has. Its shares are down 6.1
percent on the year.
Along with Facebook Inc and Netflix Inc,
momentum names such as Gilead Sciences
Inc, Biogen Idec Inc and Illumina Inc are set
to post results.
Investors are gearing up for wild swings
in those names next week. Trading in Face-
book options expiring next Friday suggest
investors expect about a 12 per cent move
in the stock s price by the end of next week.
Weekly options are often used in advance of
a major event like earnings. Similarly, Netflix
options also suggest a 12 per cent move.
After a spectacular performance in 2013,
the selloff in many of these stocks over the
past few weeks has contributed to the mar-
ket s volatility. Whether they affect the broad-
er market may determine how well stocks
trade next week.
The Nasdaq biotech index is down nearly
19 per cent from its closing high on February
25 while the Global X Social Media Index
ETF is down 18 per cent from its March 6
high. However, both have bounced off drops
of more than 20 percent that had sent each
into bear market territory.
With the nervousness created by the
declines in the momentum names, investors
have rotated into more defensive names.
"What happens at some point is (momen-
tum names) become disassociated from the
market at large. People see this happening,
they become scared, and they start selling
other companies as well," said Stephen Mas-
socca, managing director at Wedbush Equity
Management LLC in San Francisco.
"It gets to a point where that stops hap-
pening and the rest of the market---outside
of these crazy names---is not that overval-
Some of those names, including Dow com-
ponents Microsoft, DuPont and Travelers,
are among those identified by Credit Suisse
quantitative analysts as potential "contrarian"
picks as they re among the least loved by
Wall Street analysts.
All three are also considered undervalued
by StarMine s measure of intrinsic value that
looks at the long-term growth expectations
for these names. Microsoft, for example, is
the third-best performer in the Dow this
year, having gained 7.0 per cent for the year.
World stocks subdued
amid mixed US earnings
Spring fever brings hope for US earnings
Weibo Corporation Chairman Charles Chao, centre, is joined by company CFO Herman Yu, left, and Xiaoyin Zhang, of Goldman Sachs, as
the Weibo's IPO begins trading, at the Nasdaq MarketSite, in New York on Thursday, April 17. Weibo provides a Twitter-like service that
allows users to post up to 140 Chinese characters to share with others. Weibo has 61.4 million average daily active users, according to its
filing with the US Securities and Exchange Commission. AP
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