Volatility remained in play this week, as stocks swung in a wide range on somewhat mixed results on the earnings front. For the week, the Dow Jones added 1.4%, the S&P gained .7% and the NASDAQ trailed with .24% decline.
The big story this week was earnings. And so far, the results are looking a bit mixed. Bell weathers Microsoft Corp (MSFT) and General Electric (GE) both chimed in with winning quarters that came in ahead of expectations, giving the Dow its outsized gain. McDonald’s (MCD) was also there with a good quarter of its own, giving shares a nice boost into the end of the week.
But we also saw some weakness, particularly out of financials, with both Bank of America (BAC) and JP Morgan (JPM) closing in the red on the week.
Guidance has been looking pretty solid too, with no companies really ringing the alarm bells that they see demand falling off a cliff.
Looking forward, it’s still early in the season, so we have plenty of earnings reports to look forward to. Results will be important, but the Street will be watching guidance even closer, turning to the biggest companies in the world for an indication of the strength of the global economy.
Bigger picture, the averages are still trading mostly range bound near the recent high. There have been a few head fakes higher and lower, but it looks like the market is still very much figuring out what to do. There are a lot of warnings signals out there, like Europe, China and gas prices but the market cares more about the Fed than anything else. SO just like we’ve seen all year, look for the market to be taking its biggest cues from Helicopter Ben and his dollar bandits.
Updates:
With earnings heating up, we heard from some of our favorite companies.
Like McDonald’s Corp (MCD), meeting expectations with income that was up 5% last year. The company continues to see a nice mix of domestic and international results, with its longer-term expansion plans in China on track. Its value items and dollar menu also continue to be popular as consumers look to cut daily expenses. Bigger picture MCD has been trading between $95 and $100 for the last three months. This was the top Dow stock of 2011, so shares are probably taking a little breather. But longer term, with a strong global business and solid dividend McDonalds is one of my favorite stocks.
But it wasn’t all peaches and cream. Mirroring the market, we also saw some weakness, with EZcorp, Inc. (EZPW) missing expectations and guiding soft, sending shares into a tail spin and 14% loss on Friday. Although that’s a fairly rough move, this looks more like expectations getting too high than a terrible quarter. Because sales were up 20% from last year and income increased 17%, both solid. So for the time being, EZPW took a bit of a beating, but the valuation looks great down here so we’ll see if that gets peoples attention as a chance to buy.
Other than that, we saw some more volatility from Apple, Inc. (AAPL) pulling back from $620 and closing the week at $575. We talked about Apple a little bit last week and how lots of “hot money” has flowed into this stock over the last few months. So some profit taking is still in order. But bigger picture I don’t think I need to talk about how Apple pretty much dominates everything it gets into. The company is set to report its Q1 results this week, so that will give us a nice update on business.
That’s it for this week, but until next time, here is some insight into Apple’s Q1 results set for Tuesday morning. The company’s strong Q4 results had a lot to do with the recent run in shares, so we’ll be looking for a repeat performance.
Apple To See Another Big iPad and iPod Quarter
You Investment Partner,
Mike
