Thursday, February 14, 2013

Buffett Goes After A Biggie

The market is slightly lower in early trading, but not nearly enough to call it a selloff.  Most of the indexes are merely down fractionally while the small and mid-cap indexes are bucking the weakness.

There has been some notable M&A action this morning.  Warren Buffett is making a big acquisition by acquiring Heinz (HNZ) for $28 billion and a 20% premium to yesterday's close.  Also, Constellation Brands (STZ) is spiking 35% after a revised agreement to divest the US Groupo Modelo business.

Weekly jobless claims came in better than expected, but there hasn't been much other market moving economic data.

Overnight Asian markets were mostly higher.  China remained closed for the holiday, but Hong Kong reopened with a 0.9% gain.  Japan's Economic Minister said the economy remains weak now but will gradually recover with help of Bank of Japan.

Europe's markets are down across the board after a string of weak GDP readings.  Germany's Q4 GDP came in at -0.6%, France was -0.3%, Italy contracted -0.9%, and Greece dropped -6.0%.  In all, Eurozone GDP for Q4 contracted -0.6%, more than expected.

The dollar index is rallying but commodities are mixed.  Oil prices are firm around $97.45 while gold prices are bit weak down to $1640.

The 10-year yield is higher to 2.03%, right at its January highs.  The volatility index is flat again just below the 13.0 level.

Trading comment: The dip buying mentality persists.  The S&P 500 dipped this morning near the open, down near the 1515 level but quickly found its footing and began to recoup its early losses.  Energy stocks are higher today while tech remains weak again.  The Nasdaq still trails the recent gains in the S&P 500, so after some further consolidation we could see it play catch-up to the other indexes.  If AAPL were to embark on a new uptrend that would really help the Nasdaq overall.

KAM Advisors has long positions in AAPL, STZ


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