5 reasons the market is seeing red
5 reasons the market is seeing red

Geopolitical crises are taking a toll on stocks as we head into the seasonally weak month of August.

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The opening of Texas locations and a Dallas distribution center could mean moves as far north as Iowa and as far east as Florida.

By InvestorPlace May 13, 2011 9:57AM

Southern California's In-N-Out Burger has officially opened in Texas. And if opening day of the Frisco location is any indication, Ronald McDonald should be shaking in his big red shoes. 


Despite gas prices averaging more than $4 a gallon, folks waited as long as three hours in the In-N-Out drive-thru to get a taste of its burgers. Some even ran out of gas and had to have some delivered.


It's all part of what some folks think is a big expansion plan that could bring the burger joint with a cult following to the entire Southern U.S.

 

Solid earnings from Macy's and Kohl's tell us consumers are thriving. Bet on more of the same from Home Depot, Target and Lowe's next week.

By Jim Cramer May 13, 2011 8:54AM

jim cramerthe streetThroughout this period of retail reporting, I have not heard a single word from the negativists about how these numbers could be so bountiful.

 

We have weak housing, we have so-so employment, we have stretched balance sheets, and we have higher gasoline prices. Yet the numbers so far, from Kohl's (KSS) and from Macy's (M) -- two you would think would be hit the hardest, because you can easily trade down to dollar stores or Target (TGT) or, yes, Wal-Mart (WMT) -- were superb. There were no holes in them.

 

Macy's, in particular, was astonishing. You had this incredible nirvana of data: fantastic sales of the higher-end products, truly terrific across-the-board selling of almost all goods except women's apparel (which was just OK) and an amazing reduction of credit balances and bad debts on the credit card side.

 

Kohl's, similarly, just shot the lights out when it came to profitability. Solid, good numbers. Not the kind that you can put up when things are not so hot.

 

A change in bank policy sparks new worries about how China views its own economy.

By Jim J. Jubak May 12, 2011 5:06PM
Jim Jubak
Another month, another increase in the reserve requirement for China’s banks.

Today, May 12, the People’s Bank raised the reserve requirement by another 0.5 percentage points, to a record 21%.

This is the fifth time this year, and the eighth time since October, that China’s central bank has raised the percentage of assets its banks need to keep on hand. (Money held in reserves is money that can’t be lent out. In theory, raising the reserve requirement should slow the economy and help control inflation.)

Unless my math is off, that’s one increase a month since October 2010.

You might think the move would be old hat by now, but it’s not. In fact, today’s move has raised new worries in China’s financial markets.
 

Facebook hires a public-relations firm to wage a stealth campaign against Google's social-networking efforts.

By Kim Peterson May 12, 2011 4:56PM
Facebook is a bit embarrassed today after being uncovered as the culprit involved in a smear campaign against rival Google (GOOG).

The issue came to light after Facebook hired a well-respected public-relations firm, Burson-Marsteller, to suggest some ugly things about Google to reporters. Burson assigned two of its highest-profile employees to the job: former CNBC reporter Jim Goldman and former political reporter John Mercurio.

Two of them got to work, alerting reporters to Google's "sweeping violations of user privacy." The culprit? Google Social Circle, which builds a network of Gmail users' friends and contacts -- and their friends and contacts. Google culls public sites like Twitter and, yes, Facebook, for the information. You can read more about it here

This cash cow remains the market leader in routers, switches and other advanced technologies. It also has an amazing balance sheet.

By MSNMoney partner May 12, 2011 2:45PM

By Adam Stockmeister, Seeking Alpha


The last of the stocks in my portfolio is the once-mighty Cisco (CSCO). It was the highest-priced company in the world at one point, with a market cap of a staggering $500 billion.


Today it sits at a lowly $96.5 billion valuation and is valued as if it were 2009 all over again. Expected margins for 2Q are 61% and FY of 62%. These are much lower than most expected, and the stock price has been unfairly punished. The products that Cisco sells have not changed, and they are going to be around for a long time, with demand staying flat or increasing in the future. I don't generally like a dividend, but I like the $0.24 dividend (paid quarterly) for about a 1.4% yield.


I believe Cisco's future is only looking up from here. Future dilution will likely stop (unless the share price increases 30%) since the average exercising price of the 732 million pending option shares for employees is $21.39, with nearly half of those options exercisable at prices 15% higher than current prices. This is good for outstanding share count as Cisco has approved up to $10B for buybacks on the current program. The company has bought back over $62B in shares in the company's history.

 

The food giant says it was able to cover a jump in costs for fuel and raw ingredients. With video.

By Kim Peterson May 12, 2011 12:32PM
The price for raw ingredients is killing some food companies. While costs are going up, in this economy any sort of price increase will irritate consumers.

But Kraft Foods (KFT) has managed to navigate those rough waters pretty well. Analysts say it could be the only food company so far this year to successfully raise prices enough to cover costs without sacrificing demand. Kraft's largest brands include Nabisco, Maxwell House and Oscar Mayer.

Kraft "may take the prize as the only (food) company to have offset inflation via pricing" in the first quarter, a Barclays Capital analyst told Dow Jones. "To the extent that pricing can continue to run in line (or slightly ahead) of commodity costs, Kraft should have all the more flexibility to continue to reinvest against its brands and support volume growth." 

Wednesday's circus in the oil market will probably lead to further declines in both crude oil and stocks.

By MoneyShow.com May 12, 2011 12:26PM
By Tom Aspray, MoneyShow.com

Crude oil’s failure to rally through first resistance, and the ensuing sharp downside reversal, has seriously weakened the outlook for the energy sector.

The Energy Select Spyder (XLE) was clearly the star performer in the first quarter of 2011, but failed to make new highs with many of the market averages in early May.

In last night’s report, Fasten Your Seatbelts, I noted that the major stock-market averages were very near critical short-term support and that they were moving in lock-step with crude oil. Later, I examined several major oil companies, all among the largest components of XLE, and they also appear to be completing significant top formations.

The completion of these tops in the energy sector will impact the S&P 500 and Dow much more than the energy-light Nasdaq-100. If we get a drop in the major averages to more important support, it will be important for another sector to step in and take over leadership. It could be the tech sector.
 
Tags: oil

Though first-quarter earnings have been solid, there are new concerns that the momentum won't continue.

By Anthony Mirhaydari May 12, 2011 12:11PM

While job growth, housing and wages have all lagged during the economic recovery to date, corporate earnings have been the bright spot as executives leverage a vast pool of cheap labor, rising global demand and a focus on cost cutting to expand margins and deliver impressive profitability growth despite modest revenue growth.  
 
As a result, corporate profits have pushed to record highs, lighting a fire under the stock market. We've seen this reflected in first-quarter earnings. Of the 443 S&P 500 companies that reported though the week of May 6, 267 beat analyst earnings estimates, 299 beat on sales and 198 beat on both.

 

That's all well and good. But there is increasing evidence that the profit tailwind is set to subside. And with stock market valuations looking stretched and the economic outlook darkening, this is likely to put added pressure on equities in the months to come. Here's why.

 

National Presto provides some risk, as well as a tasty hidden payout.

By Motley Fool Pick of the Day May 12, 2011 11:41AM

By Anand Chokkavelu, CFA

 

Last week, I laid out the investment case for one massive hidden dividend. The company I was referring to was National Presto (NPK).

 

Now I'm putting my money where my mouth is, buying shares for my real-money Rising Star portfolio.

 

Why I'm buying
Long story short, National Presto pays out a small, regular dividend each year, equating to a 0.9% dividend yield at today's prices. But counting its special dividend (which increased slightly from the year before), that yield jumps to 7.4%.

 

The company has a lot of moving parts, and there are definitely risks (which I'll detail below) that could keep it from prolonging its dividend magic, but I like the stock at today's prices -- and I like it even more if the stock falls further.

 

Some of the biggest names in consumer sales are forgoing traditional e-commerce to push sales directly via their Facebook accounts.

By InvestorPlace May 12, 2011 11:40AM
Every day, millions of people catch up with buddies on Facebook, play games or just share something that's on their minds with the world. So why wouldn't users just do a little shopping while updating their status?

That's the mind-set of some of the biggest names in retail, anyway, as more and more merchants move away from traditional e-commerce websites and integrate sales directly into their Facebook accounts.

Is this just a craze, or could social media wind up killing traditional online retail sites as we know them? 

A unique 'rental' plan providing Chrome computers to students could help fend off the iPad craze.

By InvestorPlace May 12, 2011 11:10AM

investorplaceThere's no doubt Apple (AAPL) and its runaway success with the iPad are taking a bite out of the laptop market. But for some folks, the flash of a tablet isn't worth the expense, and the comfortable old click of a keyboard is just plain faster for writing longer documents.

That's why Apple's Silicon Valley competitor Google (GOOG) is pushing forward with an ambitious plan to offer ultra-cheap laptops using its Chrome operating system. The gadgets go on sale for as little as $349.

But the real sales potential, according to a rumor first reported by Forbes, is that the Chrome laptop -- complete with Internet access can -- be "rented" for just $20 a month.

 

The People's Bank may raise interest rates at least twice more this year.

By Jim J. Jubak May 12, 2011 11:03AM
Jim JubakChina's annual inflation rate dropped to 5.3% in April, from March’s 5.4%. That 5.3% rate was above the 5.2% consensus projection by economists, as surveyed by Bloomberg. And it was still way above the government’s 4% inflation target.

In Shanghai, stocks fell a modest 0.25% for the day. The futures market priced non-deliverable yuan forwards to indicate a 2.4% appreciation in the yuan against the US dollar, from the current rate of 6.4926 yuan.

I think both the stock and currency markets may be a bit too optimistic.

The inflation data -- and continued heavy bank lending in the month (banks made 740 billion yuan ($114 billion) in new loans) -- say to me that the People’s Bank of China will raise interest rates at least two more times in 2011.
 

While the world's largest companies can seem boring, they are historically cheap and may catch up to their small- and mid-cap counterparts in the months ahead.

By TheStreet Staff May 12, 2011 10:22AM

By Don Dion, TheStreet

 

A combination of factors is helping to boost the popularity of large, industry behemoths like General Electric (GE), Exxon Mobil (XOM)IBM (IBM), and Procter & Gamble (PG).

 

Although mega caps such as these are often viewed as boring, this slice of the marketplace could prove attractive in the months ahead.

 

For one, companies in this mega-cap segment appear noticeably cheap. This week, both the Economist and Barron's cited an analyst report from Morgan Stanley that noted that, relative to the broader market, mega-cap companies are currently at their cheapest levels in a quarter century.

 

The sell-offs in silver, oil and stocks are necessary for markets to go higher on the basis of reality.

By Jim Cramer May 12, 2011 9:08AM

jim cramerthe streetLooks like total end-of-the-world alert time. Let's spin it: Commodities prices are collapsing because there is a sudden cessation in demand, brought about by skyrocketing commodities prices. Because gasoline (which is going down now) had gone up so much, the consumer doesn't have enough left to spend. And because food prices (which are going to plummet) went up so much, households don't have enough left from their paychecks to buy anything.

 

When we see the prices of the big metals come down, something that the Chinese government has been waiting for so it can stop tightening its economy, then we have to sell stocks, because the Chinese government is tightening.

 

Housing prices, which are being kept down by aggressive selling of foreclosed homes, as the most recent existing-home sales numbers tell you, will keep going down because the foreclosed homes are weighing on pricing. Of course, the fact that even with all of the foreclosed homes being sold pricing is only off about 5% doesn't matter. Housing is crashing!

 

Got that?

 

This week's corrections have turned the outlook for the markets almost upside down, at least in the short term. A big rally will be needed soon to get the uptrend back on track.

By MoneyShow.com May 11, 2011 6:49PM
By Tom Aspray, MoneyShow.com

The sharp reversal in the crude oil and stock market has weakened the short-term outlook for both markets.

Though the stock market in particular has done everything to surprise us on the upside, I am seeing similar short-term chart formations in both commodities and stocks that suggest the current decline will continue.

The key support levels to watch are the lows we made last week. If we can hold these levels tomorrow, we can keep the short-term uptrend intact. If not, than we are likely to see a drop back to—and possibly below—the April lows.

The good news is that the S&P A/D line did make new highs this week, so after a correction the stock markets’ overall uptrend should resume. On the other hand, the failure of the Russell 2000 A/D line to move above the early April highs favors further weakness. 

Let’s look at the charts.
 

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[BRIEFING.COM] The stock market finished a down week on a cautious note with small caps leading the retreat. The Russell 2000 lost 0.5%, widening its weekly decline to 2.6%, while the S&P 500 shed 0.3%. The benchmark index ended the week lower by 2.7%.

This morning, the market was provided a basis to rebound with the July employment report, which was just right for the policy doves (209K versus Briefing.com consensus 220K). It showed payroll growth that was weaker than expected, ... More


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