STTG Market Recap Jan 30, 2015 – Stock Trading To Go
It remains a time for caution. After a brief flurry of optimism this Monday the rest of the week went quite badly. Friday the indexes opened mixed, sold off until mid day, tried to rally til mid afternoon, and then a flurry of selling into the close. Not great. The S&P 500 fell 1.30% and the NASDAQ 1.03%. A lower than expected fourth quarter gross domestic product hurt the market. Now we have to see if this is a hiccup or the beginning of a new trend. The number especially stunk considering the tailwind lower energy prices gave the consumer.
U.S. economic growth slowed sharply in the fourth quarter as weak business spending and a wider trade deficit offset the fastest pace of consumer spending since 2006. Gross domestic product expanded at a 2.6% annual pace after the third quarter’s 5% rate, the Commerce Department said in its first GDP snapshot on Friday. Economists had expected the economy to expand at a 3% rate in the fourth quarter. For all of 2014, the economy grew 2.4% compared to 2.2% in 2013.
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, advanced at a 4.3% pace in the fourth quarter—the fastest since the first quarter of 2006. According to government data, gasoline prices have plunged 43% since June, leaving Americans with more money for discretionary spending. Business spending on equipment fell at a 1.9% rate. It was the largest contraction since the second quarter of 2009.
Indexes remain in a shaky state. The S&P 500 is now testing the lower trend line in dotted blue which connects recent lows; in fact that is exactly where we saw it skid to.
The NYSE McClellan Oscillator is now back firmly in the red; another reason for caution.
Ten year Treasury yields continue to plummet – we now are in the 1.6%s. When demand for Treasuries goes up, yields go down – and usually yields sinking like this means bad things for the future economy.
Oil finally put in a POTENTIAL reversal day. West crude has not been over its 20 day moving average since last September. That’s amazing. Today it broke over. Now we need to see some confirmation next week and if it happens we might have put in a bottom today. If we just see oil reverse down then it’s just a false alarm.
Oil prices rocketed higher Friday in their biggest one-day gain in two and a half years, after data showed U.S. drillers were slamming the brakes on the shale drilling boom. Brent crude shot up to more than $53 per barrel, its highest in more than three weeks, after Baker Hughes data showed the number of rigs drilling for oil in the United States fell by 94 – or 7 percent – this week. The rig count drop was the most since 1987.
It was a great day for biotech giant Biogen (BIIB) after an earnings beat.
Biogen said that earnings minus one-time items rose 74% to $4.09 a share, the third straight quarter of accelerating year-over-year growth. It beat the analyst consensus by 31 cents, according to Thomson Reuters. Sales rose 34% to $2.64 billion, in line with estimates.Full-year sales rose 40% to $9.7 billion, with profit up 54% to $3.3 billion. The biotech guided 2015 EPS at $16.60 to $17.00, ahead of the Street’s estimate of $16.37. It projected 14% to 16% sales growth. The analyst average is 15.6%.
An IPO to keep an eye on is casual burger joint Shake Shack (SHAK) which opened today and gained a mere 118%. The valuation seems a bit absurd. Obviously no chart here but we’ll see if investors continue to bid it up.
At the close of trading, Shake Shack’s $1.6 billion market cap gave it a price to sales ratio of roughly 15, based on annualizing its $83.8 million in revenue for the first nine months of 2014. Chipotle, by comparison, goes for less than 6 times sales, while The Habit Restaurants, a chain that had its own successful IPO in November, fetches about 5 times sales.
Have a good weekend and we’ll see you next week to kick off February.
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STTG Market Recap Jan 30, 2015 – Stock Trading To Go
