Stocks have rallied 177%, and while calling a top is the easiest thing to do, it might not be the most accurate, Cramer says.
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Pushed toward riskier plays by the Fed's money-printing binge, investors have been overlooking these options.
June is here, and with it will come a number of things that should make just about everyone happy: warmer weather, the end of school, and the official start of summer, to name just a few.
For investors, however, June brings with it a giant question mark: the end of the liquidity jolt known as QE2, the Federal Reserve's second round of quantitative easing. One of the results -- or, some folks might say, intentions -- of this huge stimulative policy was a surge in equities. And the biggest beneficiaries appear to have been smaller, speculative stocks. It seems, not surprisingly, that by deluging financial markets with cash, the Fed has encouraged risk-taking in equity markets.
An interesting byproduct of that is that the current bull run has yet to switch gears. In the typical bull, MarketWatch's Mark Hulbert recently noted, lower-quality junk-type stocks lead the market initially but then give way to higher-quality stocks by the time the bull is a year old, if not earlier. We're now more than two years into this bull market, and large, high-quality stocks remain quite cheap compared with smaller, lower-quality plays.
Investors are worried. The economy is slowing. The Fed's $600 billion bond-buying initiative is set to end. But beneath the surface, a groundswell of new support builds.
Rising inflationary pressures and Japanese supply chain woes (which I wrote about back in March) have pulled down factory activity and consumer confidence. Housing is on the slide again. On Friday, we learned that this "soft patch" of growth has hit where it hurts most, in the job market.
The May payroll report was disappointing. Payrolls increased by 54,000, a sharp decline from April's 232,000 gain and well short of the consensus estimate of 170,000. What's worse, Wall Street analysts had just furiously marked down their forecasts. Deutsche Bank cut from 300,000 last week to 225,000 on Tuesday to 160,000 on Wednesday. The unemployment rate jumped to 9.1%, up from 8.8% in March.
Investors are once again clamoring for more policy stimulus from the Federal Reserve. But because of bubbling inflationary pressures and the damage it's causing via higher energy and import prices, another big round of long-term asset purchases is unlikely. With the $600 billion QE2 initiative started last November coming to its end, a QE3 appears to be off the table.
Yet the Federal Reserve still has a few cards to play. In fact, a "stealth stimulus" is already under way.
The charts of 3 funds in particular look the strongest, and bullish signs from another potential standout sector are emerging.
By Tom Aspray, MoneyShow.com
The second quarter has been a tough one for the major averages, and the first day of trading in June has many people concerned about how the quarter will end. There have been only a few bright spots among the major market sectors, as four of the nine are currently underperforming the S&P 500.
On April 15, I analyzed the major sectors and used relative performance, or RS analysis, to identify Two New Market-Leading Sectors. Those were health care, as represented by the Select Sector SPDR - Health Care (XLV), and consumer staples, as tracked by the Select Sector SPDR - Consumer Staples (XLP).
Real-estate securities yield as much as 19% at a time when equities are about to lose some of the Fed's support.
By Jake Lynch, TheStreet
Federal Reserve Chairman Ben Bernanke has indicated that the hurdle for QE3 is very high. Other Fed governors have echoed this sentiment and, given the QE2-backlash from politicians and the recent ramp in commodity prices, the Fed wouldn't consider more easing unless deflation emerged and a double-dip recession loomed.
As QE2 ends, there are other significant headwinds facing the economy. In the past two weeks, every single economic report has missed its consensus projection. Consumer confidence posted a disconcerting drop and the S&P Case-Shiller Home Price Index fell to an all-time low.
In many ways, the issues that caused the Great Recession are still prevalent and dogging growth. In this environment, with the government tackling budget cuts and employment stagnating, the Fed funds rate is likely to remain at zero, longer than previously expected.
Users of the deal-a-day site stand to save even more money on heavier discounts. Includes video.
By Miriam Marcus Reimer, TheStreet
Groupon is looking to raise $750 million through its impending IPO, giving the company capital to continue to build its business and providing a windfall for its owners.
Nokia makes an 'Elop flop.' Zuckerberg starts killing his own meat. The safety of mobile phones remains in question after major WHO announcement. Goldman Sachs' Libya dealings come to light.
Here is this week's roundup of the dumbest actions on Wall Street.
5. Nokia takes the Elop flop
Nokia's rough road to recovery got even rockier Tuesday as the phone giant cut its second-quarter sales forecast due to weak demand.
Stocks have been trading in lockstep with the dollar-euro relationship, but this market needs good news out of Europe, not more bad news from the US.
The CurrencyShares Euro Trust (FXE) has been a terrific barometer of the action for several months now. On Thursday it was a good one that just turned bad.
When the dollar plunged on the Moody's warning, of course sending the FXE higher, the Dow shot up to even instantly. There are clearly buy programs that kick in automatically. Did anyone think that, by now, in a world dominated by high-frequency trading, there would be anything different?
But then the market came right back down, a recognition, perhaps, that we don't want the dollar to weaken on a default basis, and that anything short of a real debt deal and a real cut in the budget will actually send rates higher and derail what, until recently, had been considered an anemic recovery to begin with.
The mining equipment maker impresses in its second quarter, and investors push up shares more than 5%.
Revenue climbed 19% from the second quarter of fiscal 2010 to $1.06 billion. That was slightly above the consensus forecast of $1.03 billion.
Another increase in guidance for the full 2011 fiscal year: For fiscal 2011, the company now sees earnings of $5.30-$5.60 a share (former guidance was $5.10-$5.40). Wall Street analysts had been projecting earnings per share of $5.41.
Revenue, the company now projects, will total $4.1 billion-$4.3 billion. That's above former guidance of $4 billion-$4.2 billion. (The Wall Street consensus was $4.17 billion.)
The daily deals site wants to raise $750 million in an IPO, trading under the symbol 'GRPN.'
The site, which offers daily discounts at local shops and restaurants, filed plans today to raise $750 million in an initial public offering, creating a new wave of anticipation among investors who want to cash in on social media.
Groupon had been on this path ever since it rejected a $6 billion offer from Google (GOOG) last December. The company pioneered the daily-deals business, and was rewarded by seeing a rash of competitors and clones. Google, Facebook, LivingSocial and Amazon (AMZN) have all jumped into the pool, offering customers discounts at hair salons, photography studios, restaurants and other stores.
Post continues after this video about Groupon's IPO filing:
At least one major cable company said that the focus should be more on Internet than anything else.
But times have changed. As the economy turned sour, people were open to ditching the digital phone. And some have cut the cable cord, too, relying on Hulu and Netflix (NFLX) instead.
But the one part of that triple play that people absolutely can't live without is their Internet connection. And that's causing cable companies to shift their focus from triple play to selling the single play of broadband Internet.
One investor says the pieces are in place for the market to go sky high.
One reason Altucher is bullish is because the Federal Reserve's second round of quantitative easing hasn't really started yet. Last November, the Fed said it would buy $600 billion in long-term Treasury bonds, hoping to juice the economy by unleashing new money.
Federal stimulus takes six to 18 months before one dollar of it means something to the economy, Altucher writes. He expects that $600 billion to make an impact toward the end of this year.
Altucher's also optimistic because President Barack Obama extended the tax cuts he inherited from his predecessor. Altucher even calls Obama's presidency the "third administration" of George W. Bush.
As the weather warmed up in May, same-store sales cooled off. Here's a look at retailers showing some cracks.
By Jeanine Poggi, TheStreet
As the weather heated up in May, retail same-store sales cooled off.
Of the 23 retailers tracked by TheStreet, 12 missed Wall Street's estimates, with even some of the top-notch performers disappointing.
"Unlike the April same-store sales report, May's batch of numbers contained a singular message," Wall Street Strategies analyst Brian Sozzi wrote in a note. "That message, echoing the commentary on first-quarter earnings conference calls, is one of reality coming home to roost."
Before simply giving in to the widespread selling and panic that has swept the markets this week, take a look at the current technical picture for help in making more calm, well-educated decisions.
By Tom Aspray, MoneyShow.com
After weathering a torrent of worrisome economic and financial news over the past few weeks, stocks hit the tipping point on Wednesday, as the selling was heavy for most of the day.
Today’s Wall Street Journal headline announced “Economic Outlook Darkens.” The combination of a weaker-than-expected ADP employment report, a sharp decline in manufacturing output, and a late-day downgrade of Greece’s debt combined to keep the selling pressure heavy.
One measure of how negative the action was is that only ten S&P 500 stocks were higher on the day. As I have been noting for the past week or so, the sentiment measures for the stock market are more consistent with a market bottom, not a top.
This week’s sentiment reading from the American Association of Individual Investors (AAII) is likely to show a further decline in bullishness, as it will approach last summer’s lows of 20.7% bulls. Newsletter writers, while bullish overall, still have a high percentage who are looking for a correction.
Wednesday’s stock market decline clearly reversed the positives from Tuesday’s strong gains, but is it really the start of a more significant market correction?
I think it is impossible to gauge the true state of the economy or the direction of stock prices from monthly economic numbers that are always subject to revision. Therefore, the most objective approach is to look at the technical outlook to determine the market’s direction.
The overseas markets are sharply lower in early trading on Thursday, as those markets are now reacting to the US market troubles, but is a waterfall decline likely? Take a look at the technical evidence first; then decide.
Patience? Ding. Checklist? Ding. TV news? Bzzzt.
Reuters blogger Felix Salmon posted a video last week arguing against attending meetings like the Ira Sohn conference in New York, an annual gathering in which some of the world's richest hedge fund managers talk about themselves and share an investing idea or two.
These people are just talking up their books, Salmon says. Sales pitches. Infomercials. As he puts it: "If you want to go there and spend your money and eat, like, rubber chicken and rub shoulders with plutocrats, then all power to you. But don't pretend that you're doing this for your investment portfolio."
Joe Weisenthal of Business Insider came back with a thoughtful rebuttal. Chasing stock tips might be futile, he said, but "It's not often that you get to hear the thought process and reasoning employed by these financial professionals."
As the retail giant holds its annual meeting, investors wonder: When will US sales recover?
By Jeanine Poggi, TheStreet
Everyone from Miley Cyrus to "American Idol" Season 9 winner Lee DeWyze has performed at the Bud Walton Arena in Arkansas, the state where Wal-Mart is based. Actor, comedian and singer Jamie Foxx hosted last year's spectacle, which also featured double-dutch jumping unicyclists and belly dancers.
But it will take more than pop icons to overshadow the biggest question concerning Wall Street: When will Wal-Mart's domestic sales recover?
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The US isn't strong enough not to care about them now. But one day it will be.
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[BRIEFING.COM] Recent action saw the S&P 500 (-0.3%) regain about eight points from its session low thanks, in part, to the relative strength of the three top weighted sectors. Financials (-0.2%), health care (+0.1%), and technology (-0.1%) trade ahead of the broader market and their relative strength is noteworthy considering the trio accounts for more than 46.0% of the entire market.
Meanwhile, consumer discretionary (-0.5%), industrials (-0.7%), and materials (-0.6%) continue ... More
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