David's Feed
Apr 28, 2014
via Counterparties

MORNING BID – Bonds in the Post-Renaissance

Consensus could not have been more wrong when it came to the bond market in 2014. With nearly four months gone, the iShares 20-year+ Treasuries ETF has been kicking everyone’s butt, with its year-to-date return up at 10 percent and the stock market remains pretty much flat so far on the year. While it’s natural that the stock market is taking a breather after the 2013 rally, the bond market’s move in the long end has been surprising to many, but there’s some decent evidence suggesting that it’s not going to end, not yet, anyway. The 30-year note fell to a yield of 3.42 percent on Friday, lowest in 11 months, surprising at a time when the expectation is for higher rates.

Long-dated bonds have been a favored asset throughout the year for a number of reasons, be they macro, market related or pension-liability related (more on that later). Overall expectations for higher rates haven’t been entirely incorrect – the short-dated part of the curve and the “belly” (five and seven year maturities) are certainly selling off on the year, as the Federal Reserve winds down its monthly bond-buying stimulus and edges ever closer to the time when it will begin to raise interest rates. That’s produced a bit of a weird dynamic here; instead of seeing an additional steepening in the curve as rates rise across the board, the longer-dated rates have been held down by less-than-stellar outlooks on economic data, liability-driven pension buys, and the concern that inflation just isn’t going to make quite the comeback that anyone, including the Fed, is hoping for (and yes, the Fed wants more inflation, and hasn’t been able to get it).

Apr 25, 2014
via Counterparties

MORNING BID – Stability, earnings, and Russia

The S&P 500 heads into the last session of the week less than 1 percent from an all-time closing high, corporate credit spreads have generally continued to shrink or at least stay stable, and overall investors remain enamored of riskier assets even though the momentum crowd has had its head handed to it for the better part of two months now.

Volatility is low overall, and while earnings estimates are coming down for the second quarter, they’re doing so at a pretty slow pace – with the second quarter expected to come in at 8.1 percent from 8.4 percent estimated on April 1. That’s pretty tolerable, though of course we’ve still got more than half of the earnings season left to get through.

Apr 25, 2014
via Counterparties

MORNING BID – Stability, earnings, and Russia

The S&P 500 heads into the last session of the week less than 1 percent from an all-time closing high, corporate credit spreads have generally continued to shrink or at least stay stable, and overall investors remain enamored of riskier assets even though the momentum crowd has had its head handed to it for the better part of two months now.

Volatility is low overall, and while earnings estimates are coming down for the second quarter, they’re doing so at a pretty slow pace – with the second quarter expected to come in at 8.1 percent from 8.4 percent estimated on April 1. That’s pretty tolerable, though of course we’ve still got more than half of the earnings season left to get through.

Apr 24, 2014
via Counterparties

MORNING BID – Microsoft, up from the ashes

Microsoft heads into tonight’s earnings report coming in on a high, having recently breached the $40 threshold for the first time in forever (it’s all Frozen references this week, folks). The company pushed past $40 a share in early April for the first time in nearly 14 years, and spent most of that time ensconced in a tight range between about $22 and $35 a share, depending on what the overall market was doing. It tanked in 2008 with everything else, and then spent the 2010-2012 period putting together a cumulative 13 percent price loss in the midst of a raging bull market, if evidence of its sad-sack status couldn’t be more apparent.

This year, though, the company’s been the beneficiary (along with the other “horsemen,” Cisco, Intel and Oracle) of a shift away from overvalued momentum-driven stocks towards cyclical technology stories. These are the types of companies that produce steady revenues even if they’re not doing anything but collecting on consistent upgrades of stuff that everybody needs and doesn’t really like. And really, the company had a stranglehold over PC operating systems that it defended aggressively, let’s not kid ourselves.

Apr 24, 2014
via Counterparties

MORNING BID – Microsoft, up from the ashes

Microsoft heads into tonight’s earnings report coming in on a high, having recently breached the $40 threshold for the first time in forever (it’s all Frozen references this week, folks). The company pushed past $40 a share in early April for the first time in nearly 14 years, and spent most of that time ensconced in a tight range between about $22 and $35 a share, depending on what the overall market was doing. It tanked in 2008 with everything else, and then spent the 2010-2012 period putting together a cumulative 13 percent price loss in the midst of a raging bull market, if evidence of its sad-sack status couldn’t be more apparent.

This year, though, the company’s been the beneficiary (along with the other “horsemen,” Cisco, Intel and Oracle) of a shift away from overvalued momentum-driven stocks towards cyclical technology stories. These are the types of companies that produce steady revenues even if they’re not doing anything but collecting on consistent upgrades of stuff that everybody needs and doesn’t really like. And really, the company had a stranglehold over PC operating systems that it defended aggressively, let’s not kid ourselves.

Apr 23, 2014

Apple slice: Share split makes joining the Dow more likely

By David Gaffen

(Reuters) – Who says Apple does not want to be in the Dow Jones industrial average?

The iPhone maker’s market value has stood high above most U.S. corporations’ for a few years, yet Apple still isn’t a component of that blue-chip stock benchmark. That is because the Dow weighs its 30 components by price, so a $500 stock would overwhelm the index.

Apr 23, 2014
via Counterparties

MORNING BID – Volatility, or lack thereof

It was another disappointing night for those looking for heavy volatility out of those reporting earnings – the trio of biotech stocks many were looking at, Gilead, Illumina and Amgen, had varying results, but they didn’t show the kind of bounce that some people were expecting.

In after-hours action Illumina was moving around 7 percent, short of the 11 to 12 percent move the options market was looking for, and Gilead was up around 3 to 4 percent, less than the six percent gain that the options market had factored in. Following the disappointment among those betting on volatility post Netflix-earnings — and the stock still moved a lot, just nowhere near as much as expected — it raises questions about whether some investors might start to temper expectations when it comes to overall volatility, because putting down money on a big swing has been a bit of a loser so far.

Apr 23, 2014
via Counterparties

MORNING BID – Volatility, or lack thereof

It was another disappointing night for those looking for heavy volatility out of those reporting earnings – the trio of biotech stocks many were looking at, Gilead, Illumina and Amgen, had varying results, but they didn’t show the kind of bounce that some people were expecting.

In after-hours action Illumina was moving around 7 percent, short of the 11 to 12 percent move the options market was looking for, and Gilead was up around 3 to 4 percent, less than the six percent gain that the options market had factored in. Following the disappointment among those betting on volatility post Netflix-earnings — and the stock still moved a lot, just nowhere near as much as expected — it raises questions about whether some investors might start to temper expectations when it comes to overall volatility, because putting down money on a big swing has been a bit of a loser so far.

Apr 23, 2014
via Counterparties

MORNING BID – Volatility, or lack thereof

It was another disappointing night for those looking for heavy volatility out of those reporting earnings – the trio of biotech stocks many were looking at, Gilead, Illumina and Amgen, had varying results, but they didn’t show the kind of bounce that some people were expecting.

In after-hours action Illumina was moving around 7 percent, short of the 11 to 12 percent move the options market was looking for, and Gilead was up around 3 to 4 percent, less than the six percent gain that the options market had factored in. Following the disappointment among those betting on volatility post Netflix-earnings — and the stock still moved a lot, just nowhere near as much as expected — it raises questions about whether some investors might start to temper expectations when it comes to overall volatility, because putting down money on a big swing has been a bit of a loser so far.

Apr 23, 2014
via Counterparties

MORNING BID – Volatility, or lack thereof

It was another disappointing night for those looking for heavy volatility out of those reporting earnings – the trio of biotech stocks many were looking at, Gilead, Illumina and Amgen, had varying results, but they didn’t show the kind of bounce that some people were expecting.

In after-hours action Illumina was moving around 7 percent, short of the 11 to 12 percent move the options market was looking for, and Gilead was up around 3 to 4 percent, less than the six percent gain that the options market had factored in. Following the disappointment among those betting on volatility post Netflix-earnings — and the stock still moved a lot, just nowhere near as much as expected — it raises questions about whether some investors might start to temper expectations when it comes to overall volatility, because putting down money on a big swing has been a bit of a loser so far.

    • About David

      "David Gaffen oversees the stocks team, having joined Reuters in May 2009. He spent four years at the Wall Street Journal, where he was the original writer of the web site's MarketBeat blog. He has appeared on Fox Business, CNN International, NPR, and assorted other media and is the author of the forthcoming book "Never Buy Another Stock Again.""
    • Follow David