Monday, August 27, 2012

Monday Morning Musings

The markets are roughly flat this morning despite some declines in Asia overnight.  The Jackson Hole summit is coming up later this week, and investors are still hopeful that Bernanke will talk about some additional easing.

There was also quite a bit of M&A news coming out of the weekend.  Hudson City Bancorp (HCBK) will be acquired by M&T (MTB) for a 12% premium.  Kenexa (KNXA) will be bought by IBM for a whopping 42% premium.  And Dollar Thrifty (DTG) is being bought by Hertz (HTZ) for an 8% premium to Friday's close. 

The other big news was from the courts late Friday when Apple (AAPL) won a big patent victory over Samsung.  The stock has boosted AAPL to new highs, while hurting those stocks that will have to either redesign their products or even pull some from shelves pending resolution.  AAPL was also awarded $1.05 billion in damages. 

Separately, the energy sector is on alert as Tropical Storm Issac enters the Gulf of Mexico and could disrupt oil production in the region.

Asian markets were lower overnight after China got hit by 1.7% following the release of disappointing industrial profit growth (5.4% in July).  The Shanghai composite continues to hit levels not seen since March 2009. 

Europe is roughly flat this morning despite comments from Germany over the weekend again speaking against the ECB plans to buy government debt.  The President of the Bundesbank repeated that such actions could be illegal and could produce intended consequences.

The dollar is flattish today, as are most commodities.  Oil prices are slightly lower to $95, while gold prices are flat near $1672.

The 10-year yield is lower to 1.65%.  And the VIX is 5% higher today almost back to the 16.0 level following last week's options expiration.

Trading comment: We finally did get a down week in the market last week, but it wasn't by all that much, and volume was relatively light.  The SPX got down to its 20-day average on Friday, where buyers stepped in and the market rallied.  This morning the market is trying to add a little bit to those gains.  I still expect more consolidation overall this week, but any news out of Jackson Hole could cause some fireworks.  I continue to watch for stocks breaking to new highs, and the group that seems to have a lot of names is the biotech group. 

KAM Advisors has long positions in AAPL


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