September has a reputation as being a tough month for stocks. Since 1929, it has yielded an average loss of 1.4% for the Dow Jones Industrial Average and 1.3% for the S&P500. It is also the only month of the year that has been down more than 50% of the time. But this time around, not only are stocks battling history, they are also dealing with a fresh round of weakness in the Euro zone.
That’s what drove Friday’s big sell off, with rumors of a pending Greek default circulating across the Street. The Euro zone story has been quiet lately, but with another chapter unfolding, investors chose to take a conservative approach, selling stocks and rotating into more conservative assets and segments of the market.
It also looks like we saw a bit of “buy the rumor, sell the news,” on Friday, with the market seeming a little less than impressed with President Obama’s jobs plan announcement from Thursday night.
There is still a lot of uncertainty surrounding the initiative, particularly related to its probability of passing Congress and then its actual ability to stimulate jobs and economic growth. And with Euro zone and Greek default story stealing the headlines on Friday, it simply wasn’t enough to rally the market and support stocks.
Moving forward it looks like the market will have it work cut out for it. The Euro zone story remains a huge drag and the addition of exactly 0 jobs in August continues to weigh on confidence. So now it all comes down to the Fed, scheduled for an extended 2-day meeting on September 20 and 21. The most powerful central bank in the world will need to step up big time to provide more support for a market that is desperately searching for good news.
Updates:
But in spite of the red week, there were still plenty of good stocks that finished in the green.
EZCorp (EZPW) was a top performer, bucking the trend and gaining 2% on the week. Not only is this company seeing huge sales and earnings growth in the weak economy, it also remains a favorite name for investors looking to rotate into more defensive segments of the market. That two-tiered dynamic has helped buoy EZPW is a very choppy market for the last few months.
With trading volumes spiking on the recent wave of volatility in global markets, the exchanges were on the upswing. That lifted Intercontinental Exchange (ICE), a leading derivatives exchange, to a 2% gain as well. That has shares trading within 15% of the 52-week high, outperforming the averages in spite of its status as a high-quality growth stock.
McDonald’s Corp (MCD) has been an awesome stock this year, posting solid gains when the market has been strong and staying very defensive when the market has been weak. That has shares trading with a solid 11% gain on the year, easily outperforming the market. But MCD was a bit weak on Friday after the company announced monthly sales results in key international markets that fell short of analust expectations, pushing shares down 4%. Although that’s a pretty big move for this stock, the longer-term trend is still strong so let’s look for that to support shares moving forward.
And finally, we have Verifone Systems, Inc. (PAY), leading the pack with a 2.4% gain after reporting strong Q2 results that came in ahead of expectations. The company noted that it is seeing strong demand from international market and also announced it had completed its acquisition of industry competitor Hypercom, Inc.
Analyst are projecting that should add $350 million in sales in 2012 and 20-25 cents in earnings. It also helps the company expand its international reach, providing exposure to untapped international markets in Eastern Europe. So even though PAY has been a bit weak in the bumpy market, it is a leading name in a high-growth industry that is looking undervalued at these levels.
With the market looking weak, dividend stocks continue to gain favor with investors. So if you are interested in getting a little more defensive, here is a good article discussing how dividend stocks tend to outperform in a weak market and a list of 10 good dividend stocks. Until next time, enjoy and have a great week.
10 Hot Dividend Stocks for a Cold Market
Your Investment Partner,
Mike
