Why stocks are in for a rough ride this week
Stocks in for a rough ride this week

Longtime market bull Jeremy Siegel says investors could realize the market is behind the curve on interest rates.


Fed keeps important 'considerable time' language in reference to short-term interest rates, but dissents and dots leave doubts.

By InvestorPlace 35 minutes ago

By Anthony Mirhaydari

It was another seemingly make-or-break Federal Reserve day, with all eyes on the September policy meeting statement hints as to what's next for interest rates. Heading in, speculation was high that the Federal Reserve would drop its "considerable time" phrase in reference to when short-term interest rates might start rising.

That would be sometimes after the Fed's QE3 bond buying program ends, likely in October. A language change would have been seen as moving up the timing of this rate hike from around September 2015 to June 2015, or maybe even sooner.

The good news is that the Fed kept the language in. And initially, stocks reacted by rallying hard, pushing the S&P 500 to new record highs. But then, into the closing bell, stocks wilted as investors realized there was some bad news, too.

It's notable that despite the push to new highs for large-cap stocks, the small caps in the Russell 2000 continued the sideways crawl they've been doing all year. In fact, the index is headed towards a "death cross" as its 50-day moving average threatens to move below its 200-day -- something that hasn't happened in a big way since 2011. You can see this in the chart above as the red and blue lines prepare to intersect.

But back to the Fed.

The policy statement itself, while increasing in word count to a record high as Fed policymakers are forced to add more and more verbiage to explain an increasingly contorted policy stance, was largely unchanged. Its noted recent improvements to the labor market, but highlighted ongoing underutilization of resources (i.e. slack in the job market).


Again, the big takeaway was the inclusion of the "considerable time" language.

Now, the bad news.

There were two dissents against the statement from the more hawkish members of the Fed committee. These members believed the statement language on holding rates lower for a considerable time was too lax given signs of excessive confidence in the financial markets, stable inflation, a tightening job market and stable economic growth. That's a sign that there is growing dissent within the Fed about holding rates lower for longer -- a division that will grow as long as the economic data remains strong.

Also, the summary of economic projections (known as the "dot plot") showed that the median estimate of where the Fed's policy interest rate will be at the end of 2015 increased from 1.125% in June to 1.375% in September. At the same time, the Fed committee collectively lowered its economic growth forecast.

And finally, the Fed issued a separate statement on its exit strategy as it prepares to end its most accommodative monetary policy stance in history -- outlining how it plans on forcing up the cost of money at a time when the monetary base has grown to more than $4 trillion from $800 billion before the recession.

So, what's the takeaway?

Stocks -- or at least the large caps in the Dow Jones Industrial Average and S&P 500 -- are operating in their own bubble universe at the moment.

But other asset classes continue to prepare for rate hikes from the Fed despite the inclusion of the considerable time language. Fed chairwoman Janet Yellen, in her press conference, said this phrase isn't indicative of a period of time (earlier this year, she said it represented something like six months) but is a statement that's dependent on the flow of economic data. As long as the data remains strong, especially anything related to jobs, then the rate hike timing will continue to narrow around the middle of 2015.

The U.S. dollar surged strongly on the day, adding to a run higher that started in July. Long-term interest rates moved higher once again as Treasury bonds weakened. And commodity prices slid lower on the day, with the PowerShares DB Commodity Index Tracking Fund (DBC) losing another 0.4%.

For now, I continue to recommend investors raise some cash while the more aggressive look for ways to profit from the market's rate hike preparations. That includes positions like the Direxion 20+ Year Treasury Bear 3X Shares (TMV), which is up 6.1% for Edge subscribers over the past week.

More from InvestorPlace

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters, as well as Mirhaydari Capital Management, a registered investment advisory firm.

Tags: DBC

It's time for a reality check in advance of the Chinese e-commerce giant's much anticipated initial public offering.

By MSN Money Partner 5 hours ago

An employee is seen behind a glass wall with the logo of Alibaba at the company's headquarters on the outskirts of Hangzhou, Zhejiang province, April 23, 2014. © CHANCE CHAN/Newscom/ReutersBy Paul J. Lim, Money

Everything about Alibaba, the Chinese e-commerce giant, seems larger than life.

Its initial public offering, slated for Sept. 19, is expected to be the biggest IPO in U.S. history, raising possibly $25 billion.

Money on MSN MoneyThe company is also China's largest retailer, not to mention the biggest e-commerce player in the world, dwarfing U.S. companies like eBay (EBAY) and Amazon.com (AMZN). Indeed, in the media, Alibaba has been described as Chain's eBay, Amazon and Google (GOOG) all rolled into one. Wow.

Of course, whenever there's a convergence of three of the market's favorite topics -- tech investing, Chinese stocks and IPOs -- hyperbole has a way of creeping in. So here's a realistic look at the biggest myths about Alibaba that will help you put the stock in perspective.


Investors should note whether this phrase gets dropped from the Federal Reserve's policy statement after its September meeting.

By MSN Money Partner 6 hours ago

In this July 16, 2014, photo, Federal Reserve Chair Janet Yellen removes her glasses as she testifies on Capitol Hill in Washington. © AP Photo/Pablo Martinez MonsivaisBy Greg Robb, MarketWatch

When the Federal Reserve concludes a two-day meeting, traders will focus on two words in its policy statement.

MarketWatch on MSN MoneySince March, the Fed has promised that it intends to hold rates steady for a "considerable time" after it stops buying bonds, now on track to end in October.

Specifically, the Fed said: "The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored."

Fed watchers think it is a close call on whether this language gets dropped from the policy statement.


An interest rate tease in The Wall Street Journal sends the market into an optimistic tizzy -- but one that doesn't end quite at the top.

By InvestorPlace 24 hours ago

Traders work on the floor of the New York Stock Exchange. © Spencer Platt/Getty ImagesBy Anthony Mirhaydari

Markets had been drifting lower over the last few days in anticipation of a more hawkish outcome from the Federal Reserve's latest two-day policy meeting, due to wrap up on Wednesday.

Given the robust performance of the economy over the summer, investors are preparing for the Fed to confirm this by ending the QE3 bond-buying program in October and moving forward the timing of its first short-term interest rates hike since 2006 into the middle of 2015.

This was a change from the September 2015 timing that Wall Street analysts had penciled in.

So the dialogue was all about the end of the steady flow of cheap-money stimulus.

That changed on Tuesday, sending the Dow Jones Industrial Average ($INDU) to record intraday highs -- although the Standard & Poor's 500 Index ($INX) couldn't close above the 2,000 level once again.


Longtime market bull Jeremy Siegel says investors could realize the market is behind the curve on interest rates.

By MSN Money Partner Tue 3:23 PM
Credit: © Matt Stroshane/Bloomberg via Getty Images
Caption: Jeremy Siegel, the Russell E. Palmer Professor of Finance at the Wharton SchoolBy Matthew J. Belvedere, CNBC

Stocks could be in for a rough ride in the next week or so as investors come to realize that the market is a "little behind the curve" on interest rates, longtime stock market bull Jeremy Siegel (pictured) said Tuesday as the Federal Reserve began its two-day policy meeting.

But in the long-run, stocks should continue their march higher, the Wharton School professor added in an interview on CNBC's "Squawk Box."

"If you look at the Fed Funds futures market, they are below the rates the FOMC [Federal Open Market Committee] members believe are going to prevail at the end of the 2015 and 2016," Siegel said. "We usually think the Fed is behind the curve."

He's among the market watchers who believe the Fed will drop the phrase "considerable time" in its policy statement Wednesday when referring to how long the central bank will keep interest rates low.


The feature comes after iTunes users complained about being forced to download and keep the free songs.

By InvestorPlace Tue 3:12 PM

The Edge, Bono, Larry Mullen, Jr. and Adam Clayton of 'U2' arrive at the 86th Annual Academy Awards, Los Angeles
© Dan MacMedan/WireImage/Getty ImagesBy William White

Apple (AAPL) has released a new tool that will delete U2's newest album, "Songs of Innocence," from iTunes.

Apple's tool has users visiting this site. The webpage has a button labeled "Remove Album" and clicking it will delete the U2 album from users' iTunes accounts after they've logged in.

The tool's release comes after several iTunes users complained about being forced to download and keep the free album. These users had the ability to delete the music from their devices, but it would always remain in their libraries on iCloud.

U2 anticipated that not everyone would enjoy having their new album and addressed this in a blog post.

Tags: AAPL

A group of investors snapped up preferred shares in the Chinese e-commerce company through a little-noticed private offering in 2012.

By MSN Money Partner Tue 2:56 PM
Credit: © Carlos Barria/Newscom/Reuters
Caption: An employee walks past a logo of Alibaba at its headquarters in ChinaBy Jenny Strasburg, Mia Lamar and Telis Demos, The Wall Street Journal

The initial public offering of Alibaba Group Holding Ltd. this week will be a bonanza for a group of previously undisclosed investors who snapped up preferred shares in the Chinese e-commerce company that were sold in the run-up to its public debut.

Roughly two dozen investors bought convertible preferred shares in Alibaba through a little-noticed $1.7 billion private offering in 2012, including sovereign-wealth funds, Asian hedge funds, one of the banks that managed the deal and other big asset managers, people familiar with the matter said.

They stand to profit handsomely from the investment -- and their potential payday got a little bigger Monday, when bankers pitching the shares to investors moved their price even higher.

Tags: YHOO

The chain is expanding a build-your-own-burger test in California. It could be viewed as market research for the next hit combo.

By MSN Money Partner Tue 2:34 PM
Credit: © Gene J. Puskar/AP

Caption: A McDonald's Big Mac sandwichBy Venessa Wong, Businessweek

McDonald's (MCD) recently expanded its build-your-own burger test

Now, in four Southern California stores, customers will be encouraged to assemble any combination of the following:

Beef patty: One or two

Bun: Buttered toasted bakery-style bun, buttered toasted artisan roll

Cheese: American, sharp white cheddar, pepper jack

Tags: MCD

The stock is expensive and the guidance is weak -- not an appetizing combination.

By TheStreet.com Staff Tue 1:39 PM

Credit: © Andrew Harrer/Bloomberg via Getty Images
Caption: Cans of Campbell Soup brand productsBy Richard Saintvilus, TheStreet

With shares down more than 6 percent over the past two months, investors are hungry for any news that will heat up Campbell Soup (CPB) stock.

TheStreet.com logo

They didn't get it last week and probably won't for some time.

There are better -- and cheaper -- food-related companies worth your investment, starting with General Mills (GIS).

Campbell's, known for its cans of soups, Pepperidge Farm snacks, V8 products and Spaghettios, missed revenue estimates, which sent the shares lower by another 2.5 percent the day after the earnings report.


The precious metal has suffered as the dollar climbs, geopolitical risks abate and demand from key consumers slows.

By MSN Money Partner Tue 1:35 PM
Gold Bars © Stockbyte/SuperStockBy Sri Jegarajah, CNBC

Gold may drop to $1,200 an ounce, possibly breaching the key support level, thanks to a resurgent U.S. dollar and higher Treasury yields on expectations that the U.S. Federal Reserve could signal tighter policy this week, CNBC's latest survey of strategists, analysts and traders shows.

"In the shorter term I believe gold tests $1,200, trades as low as $1,190 or so, after which the bargain-hunters will come in and move the price back to the $1,240 to $1,250 level," said Anthony Grisanti, President of GRZ Energy, in a Sept. 15 commentary. 

"Geopolitical has been quiet and all major economies are easing one way or another. And that makes the Greenback the strongest buck on the block. My bias for gold is lower."


An announcement about the closely watched competition is expected as early as Tuesday.

By MSN Money Partner Tue 12:40 PM
Credit: © Boeing/AP Photo
Caption: In this artist illustration shows an artist concept of Boeing’s Crew Space Transportation (CST)-100 spacecraft approaching the International Space Station.By Andy Pasztor, The Wall Street Journal

Boeing (BA) appears positioned to beat out two smaller rivals for the bulk of a multibillion-dollar NASA contract to ferry astronauts to and from orbit, according to government and aerospace-industry officials.

An award to Boeing would represent a victory over the newer Space Exploration Technologies Corp., or SpaceX, which had been considered a favorite in many quarters because of its lower costs and nimbler approach. 

The decision on the development of space taxis will be a milestone for commercial space endeavors, locking in unparalleled authority for contractors to develop and operate vehicles with limited federal oversight. An announcement is expected as early as Tuesday.

Tags: BA

The loan is a sweet deal for Eddie Lampert. The company needs the money to get through the holidays.

By MSN Money Partner Tue 12:16 PM
Credit: Gregory Bull/AP

Caption: Eddie Lampert, CEO of Sears

By Nathan Vardi, Forbes

Billionaire Eddie Lampert (pictured), who made his fortune running his ESL Investments hedge fund and is now CEO of Sears (SHLD), is lending the company he runs $400 million to help it get through the key Christmas shopping season.

Shares of Sears fell by more than 6 percent in Tuesday trading to $31.21 after the loan was disclosed. 

The loan is a safe bet for Lampert. Affiliates of Lampert's ESL Investments are making the loan, which is short-term in nature and will be secured by 25 of Sears' properties. The loan carries an interest rate of 5 percent and an upfront fee of about $7 million.

Tags: SHLD

Nearly half of fund managers polled believe the Fed will soon introduce what would be its first rate tightening in 9 years.

By MSN Money Partner Tue 12:05 PM
Credit: © Jin Lee/Bloomberg via Getty Images
Caption: Traders work on the floor of the New York Stock Exchange in New YorkBy Sara Sjolin, MarketWatch

Investors are increasingly expecting the Federal Reserve to raise interest rates in the spring of 2015, with the dollar forecast to rise as a result, according to the Bank of America Merrill Lynch Fund Manager Survey for September.

Nearly half of the fund managers polled, 48 percent, believe the U.S. central bank will introduce what would be its first rate tightening in nine years in the second quarter of next year. That's up from 38 percent last month. Against that backdrop, a net 86 percent of the respondents see the dollar strengthening further against the euro and yen.

"As the first Fed rate hike since 2006 draws closer, we'll see a new U.S. dollar bull market and movement out of bonds," said Michael Hartnett, chief investment strategist at B. of A. Merrill Lynch Global Research, in the release.


Hedge funds' capital raising is causing all kinds of cascading destruction in the go-go names.

By Jim Cramer Tue 10:52 AM

A general view of the Alibaba Group headquarters in Hangzhou, China © Hong Wu/Getty ImagesAlibaba is causing a kind of cascade. But believe me, if funds are going to get all the Alibaba they need on the sheets, they are going to need every penny being sold now.

You layer right on top of that the hedge funds that know how the game is played, and you see the kind of destruction that is being wrought to all of the go-go names.

Remember, you cannot justify owning almost any of these names versus Alibaba. The Chinese Internet company has more earnings power, greater growth and a bigger moat than anything out there until it gets to roughly $100 a share.

TheStreet.com logoGiven that they are talking about $70, which probably means $75, and given how hot the deal is and, therefore, how small the allocation is -- well, you can see for yourself, these names still have to be sold, and sold hard.


Customers say the Internet service provider has threatened to cancel service, but the company says it has no problem with the browser.

By MSN Money Partner Tue 10:26 AM
File photo of the Comcast logo on a television screen (© Elise Amendola/AP Photo)By James Cook, Business Insider

Some users of the anonymous Web browser Tor have reported that Comcast (CMCSA) has threatened to cut off their Internet service unless they stop using the legal software.

Comcast completely denies their claims. In a blog post, the company said, "We have no policy against Tor, or any other browser or software. Customers are free to use their Xfinity Internet service to visit any website, use any app, and so forth."

According to a report on Deepdotweb, Comcast customer representatives have branded Tor "illegal" and told customers that using it is against the company's policies.

Tor is a type of Web browser that, in theory, makes all your Internet activity private. The software routes traffic through a series of other connected Internet users, making it difficult for governments and private companies to monitor your Internet usage. 



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[BRIEFING.COM] The major averages ended the midweek session with slim gains after showing some intraday volatility in reaction to the release of the latest policy directive from the Federal Open Market Committee. The S&P 500 added 0.1%, while the relative strength among small caps sent the Russell 2000 higher by 0.3%.

Equities spent the first half of the session near their flat lines as participants stuck to the sidelines ahead of the FOMC statement, which conveyed no changes to the ... More


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