You can still find small-cap superstars
Small-cap superstars still abound

There are some picks in this sector that have excellent valuations and strong earnings growth.


Italy is the world's third-biggest debtor after the US and Japan. That fact, along with the country's deficit, makes many bondholders nervous.

By Jim J. Jubak Jul 11, 2011 5:29PM
Jim Jubak"If I fall, then Italy falls. If Italy falls, then so falls the euro. It is a chain," Italian finance minister Giulio Tremonti said over the weekend.

The grandiosity of Tremonti’s rhetoric aside, global financial markets bought into his logic Monday. The French CAC stock index closed down 2.7%, the German DAX index was down 2.33%, and the euro was down 1.74%, to $1.4016.

Yields on Italy's 10-year bonds were at 5.68%, a nine-year high. That puts Italy perilously close to the 7% threshold that triggered bailout rescue requests from Greece, Ireland and Portugal.

Why is Italy in crisis  now? And why is what happens with Italy so important to the euro?

Italy makes so many bondholders nervous because it is the world's third-biggest debtor after the U.S. and Japan, with $2.6 trillion in government bonds outstanding. The country will run a budget deficit again this year that will push debt to 120% of GDP.

The upscale grocer appeals to niche consumers who are well on their way to economic revival. Goldman Sachs has added the stock to its list of picks.

By Kim Peterson Jul 11, 2011 2:50PM

Image: Groceries (© Tetra Images/Corbis)As the recession lingers, a grocer nicknamed "Whole Paycheck" shouldn't be doing well. But Whole Foods Market (WFMI) is on fire, with shares up an astonishing 70% in the past year.

And now Goldman Sachs (GS) has added the stock to its Conviction List. Analyst Stephen Grambling thinks sales and profits will come in better than management has forecast for 2011.

Those beats will come in as the chain expands, Grambling says. He set a $76 target on the stock, which is about 18% higher than Monday's price.

So why is Whole Foods doing so well in this time of high unemployment and economic turmoil? The grocer is capitalizing on a growing divide in this country between the well-to-do and the middle- to low-income households. Wal-Mart (WMT) shoppers are still living paycheck to paycheck, struggling to make ends meet and shopping at dollar stores when they can.


Even dollar-store customers are staying away from unnecessary items, and the slowdown in showing in company earnings.

By Kim Peterson Jul 11, 2011 1:58PM
Image: Cash register (© Hill Street Studios/Blend Images/Getty Images)A significant shift is taking place with American shoppers: The urge to splurge is ending.

This became evident at Target (TGT) and Wal-Mart (WMT) in the recession as those stores saw customers pass up furniture and sporting goods in favor of basic must-haves like toilet paper and cereal.

Now even dollar stores are seeing the end of the splurge. Sales and profits aren't growing as fast anymore, The Wall Street Journal reports. Shoppers are no longer buying even the cheap toys and home decorative items.

With high gas prices and high unemployment on their minds, shoppers are sticking to food, cleaning supplies and other necessities. Those products have lower margins, and as a result, investors are seeing missed quarterly earnings from Dollar General (DG), Family Dollar Stores (FDO) and Dollar Tree (DLTR).  

The search giant's answer to Facebook is gaining users quickly.

By TheStreet Staff Jul 11, 2011 1:47PM

By Scott Moritz, TheStreet


Google's (GOOG) social-networking site Google+ is possibly the best office-time distraction since, well, Facebook.


Ripples of invites launched during the Google+ field trials have built rapidly expanding waves of sign-ups across the broader online population. In other words, everybody's doing it -- or will be soon.


Blogger Paul Allen estimates the number Google+ users, as of Sunday, has nearly tripled to 4.7 million from 1.7 at the beginning of last week. Allen expects to update his estimate Monday.


But so what? Google has a product that could be as big as Gmail. Does that mean success on any level other than popularity in the blogosphere?


The company is said to be looking for another manufacturer to help build its next tablet.

By TheStreet Staff Jul 11, 2011 1:24PM

By James Rogers, TheStreet


Faced with massive demand for its next-generation iPad, Apple (APPL) is looking for an additional contract manufacturer to help build the device, according to the DigiTimes Web site. Taiwan companies Quanta Computer and Pegatron Technology are in the frame, it said.


Citing industry sources in Taiwan, DigiTimes reports that Pegatron stands a better chance of winning the potentially lucrative iPad orders. Previously, Apple used just one manufacturer, Foxconn, to build its iconic tablet, but a recent explosion at the company's plant in Chengdu, China, has sent the gadget maker looking for an additional contractor.


Rumors have also been swirling for some time that Apple is tightening its relationship with Pegatron. Earlier this month, DigiTimes said Apple had ordered Pegatron to begin production of 15 million new iPhones for a September sales launch.


Despite low valuations, Bank of America, Citigroup and JPMorgan are sucker's bets.

By Jul 11, 2011 12:38PM
By Tom Aspray,

The dramatic stock market rally over the past few weeks has caused some analysts and advisers to recommend some of the beaten-down big banks because their valuations are supposedly attractive.

There is always the temptation to step in and buy the bargains once a well-known company declines sharply. These choices are often made on the basis of projected earnings, book value or some other fundamental justification.

One of the more painful lessons all investors learn is that a 20%-40% loser in your portfolio can offset the nice gains from the other holdings. Of course, this is why risk management is so important.

If you can avoid taking a big hit in one stock or one trade, your portfolio has a much better chance of showing positive performance. The big banks have been on my stinker list for most of the year. In February, my technical appraisal of both Bank of America (BAC) and Citigroup (C) was negative, and I advised having stops in place to avoid having big losers in your portfolio.

Two technical tools that I find most important for gauging a stock’s potential are the on-balance volume (OBV) and relative performance, or RS analysis. Stocks that have positive volume patterns and are acting better than a market average like the S&P 500 are the best stocks to consider buying.

So using volume and RS analysis, do the Select Spyder SPDR - Financial (XLF), Bank of America, Citigroup and/or JPMorgan Chase (JPM) deserve consideration for your portfolio?

Strong quarterly results from JPMorgan and Citigroup could help the SPDR KBW Banks ETF. For Google exposure, consider First Trust Dow Jones Internet Fund.

By TheStreet Staff Jul 11, 2011 10:56AM

Image: Stock investor (© Tom Grill/Corbis)By Don Dion, TheStreet


Here are five exchange-traded funds to watch this week.


1.    SPDR KBW Banks ETF (KBE)


Earnings season kicks off this week with aluminum giant Alcoa (AA) scheduled to announce its quarterly performance and outlook after the bell. A number of companies will follow suit, providing investors with insight into the state of the U.S. and global economic recoveries.


Financials will be of particular interest among earnings watchers during the latter half of the week when JPMorgan (JPM) and Citigroup (C) step up to the plate. These two rank as the first- and second-largest KBE components and together account for 15% of its index.


It's hard to pull the trigger on what appears to be a crowded trade, but these energy stocks are poised for ongoing earnings growth and greater gains.

By TheStreet Staff Jul 11, 2011 10:49AM

Image: Oil drums (© Kevin Phillips/Digital Vision/age fotostock)By Jake Lynch, TheStreet


Bullish commodities analysts see oil hitting $150 by next spring. Such a spike, while a detriment to economic growth, would bring outsized gains to energy stocks.


Chevron (CVX) and larger rival Exxon Mobil (XOM) delivered record profits in 2008, following crude's meteoric rise to $147 a barrel. We may be in the midst of another energy bull market as oil has retained a foothold above $90 and is enjoying support amid improving global demand fundamentals.


Chevron is scheduled to report second-quarter results Tuesday. The company's stock has advanced 15% in 2011 and 50% in the past 12 months as the commodities boom widened the company's profit margins, bolstering net income. Chevron's first-quarter pre-tax margin, at nearly 20%, ranked in the 73rd industry percentile. Return on equity, the critical measure of profitability for stockholders, was outstanding, at 20%.


Earnings will need to impress investors to keep stocks moving higher.

By Jamie Dlugosch Jul 11, 2011 10:06AM

A weaker-than-expected jobs report Friday took some of the steam out of the pre-earnings rally, but the market rebounded at the close, limiting the damage. The market finished the week with a small gain.


Earlier in the weak, economic data supported bigger gains as the market waited for corporate profits to roll in. Investors won't have to wait much longer, as earnings season begins in earnest this week with a report from Alcoa (AA) after the close of trading Monday.


After Alcoa (AA), a whole host of companies are set to report results. The big-name report this week comes from Google (GOOG). The technology bellwether will give us a read on the overall health of the economy.


I expect a strong report. ETF buyers should keep the pedal to the metal this week with the iShares S&P North America Technology and Multimedia Fund (IGN).

Tags: etf

Italy is the latest dire debt story being used to stir up fear amid what should be a decent earnings season.

By Jim Cramer Jul 11, 2011 9:14AM

jim cramerthe streetSubstitute Italy for Greece and replay the whole thing? Is that the plan for folks who need the market lower?


Start pumping up the credit default swaps like last time? And the time before? And the time before that? Get everyone frightened, including the ratings agencies? Make sure everyone knows that Italian bonds are really so overvalued that they have to be restructured and you simply can't own them?


Why not? If it worked before, why not again? You can do this for every country on earth save maybe Germany and France, and definitely not China. It's too lucrative not to do.


Of course, it helps that the current backdrop of stalled employment growth and politicians struggling over debt ceilings allows the negativity to come center stage. A deal to take over Arch Chemicals (ARJ), the only good news here today, certainly can't counteract the gloom. Not to mention China's inflation figures, which are particularly egregious, just when they are supposed to be peaking.


If inflation hits, companies with economic moats should be prepared.

By John Reese Jul 8, 2011 7:01PM

The Federal Reserve's second -- and perhaps final -- round of quantitative easing has ended, and some Congressional leaders continue to talk tough on deficit reduction. But make no mistake: The U.S. is still far from a state of conservative fiscal and monetary policy. Interest rates remain near zero, and, for all of the deficit-reduction talk, many of the cuts being proposed by various politicians only scratch the surface of our $1.4 trillion annual shortfall.

That climate and other factors have many top strategists saying that significant inflation will finally hit the U.S. economy in a big way sometime soon. Just in the past couple of weeks, hedge fund titan Carl Icahn, top-performing mutual fund manager Chuck Akre and insightful strategist Rob Arnott all said they see inflation on the horizon. Icahn says it will come as Asia's growing middle class creates competition -- and rising prices -- for commodities and finished products from that part of the world. Arnott, meanwhile, says that the U.S. will likely try to get out of its debt hole by printing more money, which will lead to an inflation spike.


Friday’s downturn should continue into next week, but technically this should be just a correction that will set up a buying opportunity.

By Jul 8, 2011 6:24PM
By Tom Aspray,

It turned out to be another rollercoaster ride in the financial markets, as stocks powered higher leading into the monthly jobs report. In fact, the new bullish sentiment was a bit overwhelming.

Even though the ADP employment numbers on Thursday were much stronger than expected, Friday's jobs numbers were ugly.

Even though the major averages opened sharply lower, they did close well above the day’s lows. On days like Friday, you sometimes see a second wave of selling late in the day—which we did not get.

The other economic news was mixed, as while the ISM Non-Manufacturing Index was weaker than expected, the same-store sales data gave retail stocks a big boost on Thursday.

The key question now is whether we will see a brief pullback in the stock market, or whether a more prolonged correction is likely. In either case, as I discuss in more detail below, the new highs in the A/D line still paint a positive picture for stocks once the correction runs its course.
Tags: goldoil

The video service's future lies abroad.

By Motley Fool Pick of the Day Jul 8, 2011 3:04PM

By Anders Bylund


Shares of Netflix (NFLX) skyrocketed this week when the video maven announced an ambitious international expansion plan. By the end of 2011, Netflix plans to sell digital streaming plans in 43 new nations across the Americas and the Caribbean.


The expansion itself surprised no one, but the grand scale of the rollout -- or, perhaps, its pace -- did raise some eyebrows.


The fast and the furious
Netflix had already signaled plans to go nearly worldwide with its digital services. Recent job postings looking for customer support personnel fluent in Brazilian Portuguese and Latin American Spanish tipped off the pan-American move, but also gave us clues to Netflix's next phase.


The head of Berkshire Hathaway says he has a great plan: Tie lawmakers' political futures to the deficit.

By Kim Peterson Jul 8, 2011 2:34PM
Warren Buffett, in a recent interview with CNBC, offers one of the best quotes I've heard in all this drama about the debt ceiling:

"I could end the deficit in 5 minutes," he told Becky Quick. "You just pass a law that says that anytime there is a deficit of more than 3% of GDP, all sitting members of Congress are ineligible for re-election."

They don't call him the Oracle for nothin'. Warren also had some rather harsh words for Republicans digging in their heels on the debt issue. We raised the debt ceiling seven times during the administration of President George W. Bush, Buffett said. But now it's become a hostage. You can hear more from Buffett in the following video interview.

Post continues below: 

David Einhorn's Greenlight Capital hedge fund has sold its position in the Internet giant at a loss.

By TheStreet Staff Jul 8, 2011 2:11PM

By Robert Holmes, TheStreet


David Einhorn's hedge fund Greenlight Capital has sold out of its position in Yahoo (YHOO) at a loss following the Internet search giant's dispute over the ownership transfer of Alibaba's online-payments business Alipay.


In a letter to shareholders Friday, Einhorn said his initial purchase of Yahoo was "based on a sum of the parts analysis," which included putting substantial value on the company's Chinese assets. Following the dispute over Alibaba, Einhorn says the hedge fund "exited with a modest loss," saying that the finger pointing by involved parties "wasn't what we signed up for."


Greenlight's sale of Yahoo comes only two months after the hedge fund took a stake in the Internet search company. Shares are down nearly 15% since setting a 52-week high of $18.84 on May 6 after Einhorn disclosed his position. In Friday's letter, Einhorn acknowledges that Greenlight Capital's fund is down 5% this year, underperforming the market.



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[BRIEFING.COM] The major indices have reclaimed a portion of their losses, but the S&P 500 remains lower by 0.2% with eight sectors showing losses.

Cyclical sectors displayed broad weakness at the start, but a couple growth-sensitive groups have overtaken the S&P 500 since then. Consumer discretionary (-0.3%), financials (-0.5%), industrials (-0.3%), and technology (-0.3%) continue trailing the broader market, while energy (+0.1%) and materials (-0.2%) trade in-line or ahead of ... More


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