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Information provided by Theflyonthewall.com

Friday's noteworthy upgrades include:

• Pandora (P) upgraded to Outperform from Sector Perform at RBC Capital
• Procter & Gamble (PG) upgraded to Buy from Neutral at UBS
• Sherwin-Williams (SHW) upgraded to Outperform from Neutral at RW Baird
• Wendy's (WEN) upgraded to Buy from Neutral at Janney Capital
• Alliance Data (ADS) upgraded to Outperform from Market Perform at William Blair

 

By Richard Suttmeier

 

Sequestration spending cuts were expected to adversely effect the performances of companies that provide products and services to the U.S. military. As we prepare to honor those who served our country on Memorial Day, I profile nine stocks that have performed extremely well so far this year. I can only assume that the risk of defense spending cuts has been priced into these aerospace sector stocks.

 

The stock market continues to trade under a ValuEngine Valuation Warning, with 72.7% of all stocks overvalued. My sector focus today is aerospace, which is 17.6% overvalued. With 35.4% of all stocks in this sector rated "sell" or "strong sell," I give the sector an underweight rating. View the setting of new multiyear highs this week as an opportunity to book profits. 

 

The reality distortion field that had been bolstering global markets has been shattered violently over the past 36 hours, starting with heavy volatility and steep losses in Thursday's Japanese trading session that continued into Friday. The NYSE Composite is moving below its 20-day moving average for the first time since early April as cyclical, economically sensitive stocks pull back.

 

The Dow Jones Industrial Average ($INDU) has had a particularly wild ride, dropping more than 300 points from its intraday high on Wednesday.

 

The question is: Should investors buy on this dip ahead of continued gains or take it as a sign to get out of stocks?

 

To answer that question, one must ask another: Can the status quo continue?

 

By Keith Fitz-Gerald, Money Morning

With Apple (AAPL) off nearly 50% from its $705.07 a share high set last September, many investors want to know if it's a buy.

Not in my book. Here's why:

1. The company has held on to its premium pricing strategy for too long. Going out on price as it has recently with iPhones, for example, is the death knell of competitive differentiation. Businesses that engage in price wars have a very difficult time climbing back up the proverbial ladder.

2. The present management team is having trouble fulfilling the late Steve Jobs' vision, and execution appears to be stumbling.

 

By The ETF Professor

Following Thursday's savage plunge that saw Japanese stocks notch their worst one-day performance in more than two years, it is no surprise that ETFs focused on the world's third-largest economy are tumbling today.

That group includes the WisdomTree Japan Hedged Equity Fund (DXJ), an ETF that has gained rock star status in 2013 as the yen has plunged, boosting Japanese stocks in the process (see Benzinga).

DXJ was down about 4.3% Thursday, but that was an improvement from its worst levels of the day of more than an 8% plunge. Before Thursday, DXJ was up a jaw-dropping 28.4% in the past three months. Now home to almost $10.8 billion in assets under management, DXJ has been the top asset-gathering ETF in the world this year.

 

ChannelAdvisor (ECOM) and Hewlett-Packard (HPQ), the two standout names today, represent polar opposites, and yet both were up big Thursday, a phenomenon that explains a lot of this market's innate strength.

Most market participants thought that Hewlett-Packard would be a disaster, given the rapid secular decline of the personal computer and the hideous results of competitor Dell (DELL). Instead, we got the opposite, a totally solid positive-cash-flow quarter that showed a dramatic improvement in the balance sheet and a nice bump in the dividend.

None of this was expected. Consequently, Hewlett has rallied significantly, something that makes a ton of sense, because the issue of the company's viability, which was in question not that long ago, has been taken off the table entirely. CEO Meg Whitman has reined in expenses, improved supply-chain management and billing and is doing much more with far less.

 

By George Anders

Hewlett-Packard (HPQ) did something that practically defies the laws of physics: It reported a 10% revenue decline for its fiscal second quarter ended April 30, along with correspondingly soft earnings -- yet saw its stock rocket ahead 17%, to $24.86. The quick explanation was that relieved investors had braced for even worse results. But there's more to the story.

The biggest driver of HP's stock price lately has been -- and will continue to be -- investors' gut sense of whether the giant tech company can steer its way toward a successful turnaround or not. If everyone agrees that HP is on the mend, the company's quarter by quarter results this year aren't nearly as important as investors' growing confidence that the computing and printing company will be doing much better in 2016 and beyond. But if there's any chance that HP's troubles might be unfixable, then everything that investors need to know is summed up in one word: "sell."

 

By Tim Parker

On Thursday the Dow Jones Industrial Average ($INDU) erased a loss of more than 120 points to end close to flat on the day, suggesting a buy on the dip mentality. Let's not forget that this is a market that found a way to attract buyers on a day the Nikkei was down more than 7% and most global markets sold off as well.

This morning, g around the world were steady with most major averages near the flatline.

Morning news

• S&P 500 futures are down nearly 3 points to 1647.25
• The EUR/USD was up at 0.38% to 1.2984
• German 10-year government bond yields are unchanged at 1.466%.

 

by Jim Probasco

Demand for cars and trucks is up. U.S. automakers have noticed and are responding. Bloomberg noted Wednesday that number two U.S. automaker Ford Motor Co. (F), will add the capacity to build 200,000 more vehicles a year in North America. All this based on increased demand for Ford’s F-Series pickups and Fusion sedans.

In addition, most Ford North American assembly plants will be idle for one week this summer instead of two. That, alone, will increase production by about 40,000 cars and trucks.

Ford Motor Co.'s F-Series pickups are no stranger to strong sales, having led sales of U.S. full-size trucks the past 36 years. F-Series trucks, in fact, have been the country’s best-selling vehicle of any type for more than 30 years according to Bloomberg.

 

By Jennifer Booton

 

Rue21 (RUE) inked a deal on Thursday, to be acquired by private-equity firm Apax Partners for $1.1 billion in cash -- a move it says will deliver "substantial and certain value" as it looks to grow its store base and build out its e-commerce platform.

 

At $42 a share, the transaction represents a 23% premium to the Warrendale, Pa.-based teen-apparel retailer's closing price on Wednesday. The deal will return Rue21 to private management.

 

Apax has long held a stake in Rue21. The firm's chief executive, John Megrue, said he's worked closely with Rue21's Bob Fisch to support the company's growth -- from less than 100 stores at the time of the initial investment in 1998 to more than 900 today.

 

Global meltdown?

I saw headlines Thursday morning saying just that. But to me this looks like profit-taking on a huge run up in global markets so far, no more and no less -- even in Japan.

Here’s the background: At its high Wednesday, the Standard & Poor’s 500 was up 10% from its low on April 18; the Nikkei 225 was up 21% from its April 18 low; the NASDAQ Composite was up 12% from its April 18 low.  The phrase, “too far, too fast” comes to mind.

 

 

For a stock market that was supposed to be collapsing, the U.S. market held  its own on Thursday. The market had opened sharply lower, with the Dow Jones industrials ($INDU) off as many as 127 points, in large part because of a shockingly big sell-off in Japan.

But stocks rebounded off those lows because reports on the U.S. economy -- jobless claims and new-home sales -- were better than expected.

Plus, Federal Reserve officials were running around -- trying to assure investors around the world that they weren't about to pare back or stop their big bond-buying program any time soon. Fed Chairman Ben Bernanke had made the point repeatedly in Congressional testimony, but minutes from the Fed's April meeting suggested a change might come starting in June.  

 

By Tom Pizzuti and Kurt Hulse

A wide set of markets currently seem to be at a cusp, and the direction they go from here might require investors to take a radically different approach to protecting their wealth.