Monday, April 08, 2013

Monday Morning Musings

The markets are lower in early trading following Friday's bounce from the lows.  There isn't too much in the way of market moving news this morning.  The big M&A news is GE buying Lufkin Industries (LUFK) for $88.50 a share, which is a 38% premium to Friday's close.

This week also kicks off earnings season.  Alcoa is set to report earnings after the close today, but the 2 biggies investors are waiting for are on Friday when JPMorgan and Wells Fargo report.

Asian markets were mixed overnight.  Japan continues to rally as export stocks climb and the yen weakens in response to the BoJ QE initiative.  Trading in Japanese govt bonds had to be halted for the 2nd consecutive session after volatility tripped the circuit breakers.  China closed at its lowest level of the year after concerns over a new bird flu are spreading.  So far it has been reported that 21 people have contracted the bird flu in recent weeks.  Restaurants with chicken exposure could see weak sales in the near-term.

European indexes are mostly higher. German industrial production rose 0.5%.  But the Eurozone Sentix investor confidence index fell to -17.3 from -10.6 last month.  Lastly, Portugal's constitutional court ruled some of the EU-imposed austerity measures are unconstitutional.

So far defensive consumer staples stocks are bucking the weakness while healthcare stocks are lagging.

The dollar is up a bit today, and commodities are mixed.  Precious metals prices are lower with gold down slightly near $1572.  But oil prices are higher ($93.20) as are ag prices and copper.

The 10-year yield is bouncing just a little bit after Friday's extreme weakness to the 1.71% level.

And the volatility index is still trading below the 15 level currently up 3.3% to 14.38.

Trading comment: The S&P 500 looked like it was headed for a test of its 50-day moving average on Friday before dip buyers stepped in and the index rallied late in the day.  But the Nasdaq index and the Mid-cap index are both right at their 50-day support, while the Russell 2000 small-cap index has broken below its 50-day.  In addition, many leading stocks have either started to break down or remain sufficiently extended that they need to further consolidate recent gains.  As a result I expect the market to continue to be choppy in the near-term without much of an edge going to the bulls or the bears.

KAM Advisors has long positions in JPM and WFC


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