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.

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They don't have the best track record, and critics wonder whether they are too influential.

By Kim Peterson Jul 27, 2011 2:57PM
Credit-rating agencies are about as popular as used Kleenexes this week. Critics from all sides are claiming the agencies are unnecessary -- and may even be responsible for the current debt-limit deadlock.

Let's start with Holman Jenkins at The Wall Street Journal, who says the ratings agencies, especially Standard & Poor's, helped turn an artificial crisis into a real one. Standard & Poor's is signaling plans for a U.S. debt downgrade unless the government figures out how to cut deficits by $4 trillion over the next decade.

But the U.S. is not in danger of default, Jenkins writes. It still has enough cash to avoid a partial government shutdown until at least mid-August. America's IOUs are still completely acceptable to the markets. 

Precious metals are under pressure as the US dollar surges.

By Anthony Mirhaydari Jul 27, 2011 2:51PM

Stocks moved lower Wednesday as the debt ceiling stalemate in Congress continued. Adding to the pressure have been renewed eurozone worries, with Greece and Cyprus both suffering downgrades, as well as a weak durable-goods report here at home.

 

The big winner in all this has been the U.S. dollar, which is sort of ironic. Despite all its faults and political brinkmanship, the United States is still seen as the haven of choice when things are looking dicey, as they are now.

 

As a result, the big losers are dollar-sensitive precious metals, which got a boost on U.S. default fears. I think these guys are prime short candidates now, since they are in trouble either way: If the U.S. defaults, haven flows are likely to boost the dollar and hurt precious metals. If a default is avoided, the "fear trade" will come out of precious metals and they'll fall. I wondered in my last blog post whether gold and silver were vulnerable to a pullback. Wednesday, we got the answer.

 

Here's how to take advantage.

 

Sharp declines in a pair of big steel stocks caught many investors by surprise, but analysis could have revealed weakness in advance.

By MoneyShow.com Jul 27, 2011 2:06PM
By Tom Aspray, MoneyShow.com

Every day, it is often helpful to analyze the stocks that are the biggest gainers, and those that are the biggest losers. From Tuesday’s trading, the 17.46% drop in AKS Steel Holding Corp. (AKS) stood out, and a bit further down the loser list was US Steel Corp. (X), which lost more than 8%.

When two stocks in the same industry group get hit that hard, I want to find out whether it is the start of a more serious decline. I also want to find out how the industry group looks from a technical standpoint.

In the majority of cases, when you see such a sharp drop, I have found that the relative performance, or RS analysis, for the stocks is already negative and has been warning of the weakness in advance.

Earlier in the year, the RS analysis on some of the big financial companies, as well as the Select Sector SPDR Financial (XLF) indicated that the financials were a sector to avoid.

Hopefully a closer examination of Tuesday’s big winners and losers will show the importance of avoiding stocks with weak relative performance, or RS analysis.
 

Even state governments are preparing in response to the budget drama.

By Kim Peterson Jul 27, 2011 1:59PM
The possibility of a debt-limit disaster is finally settling in, and state governments and big corporations are getting ready.

For many of them, this means hoarding cash or getting hold of as much cash as possible -- just when we were finally starting to see companies loosening up with cash in the form of higher dividends or share buybacks.

Now companies are not only holding on to cash, but they're delaying hiring and investments, The Wall Street Journal reports. They're also laying off employees.

General Electric
(GE), for example, ended the second quarter with $91 billion in the bank. "Our main protection against something like that not going well, or having a rocky outcome, is to have a lot of liquidity," the company's chief financial officer told the newspaper. 

The latter plans to compete with Big Oil for a place in your fuel tank.

By Motley Fool Pick of the Day Jul 27, 2011 12:06PM

Image: Natural gas plant (© Kevin Burke/Corbis)By Adam J. Crawford

 

Americans might be addicted to oil, but the world's largest integrated oil company is addicted to natural gas. ExxonMobil (XOM) has gone on a natural-gas shopping spree, with no end in sight -- and Chesapeake Energy (CHK) should top its list. 

 

NGLs
Exxon execs recently revealed the company is looking for some "liquid plays." Chesapeake would be a good place to start that search.   

 

Chesapeake is heavily committed to the natural-gas liquids market. The company plans to allocate 75% of its 2012 capital expenditures to NGLs, up from 30% in 2010. The extreme shift to natural gas liquids could seriously boost revenue, considering that NGLs historically follow the price of crude.

 

Among this week's crowded field of stock market debuts, the premium tea retailer ranks as a favorite because of its growth story.

By TheStreet Staff Jul 27, 2011 11:27AM

By Debra Borchardt, TheStreet

 

Teavana Holdings (TEA) is the top pick from among this week's crowded slate of IPOs, according to Francis Gaskins, the president of IPO Desktop.

 

Teavana is a specialty retailer that sells loose-leaf tea and tea-making accessories. Predominantly located in malls, the retailer is known for courting shoppers to try the tea, which is premium priced.

 

The Atlanta company is looking to raise roughly $100 million through the sale of 7.1 million shares at $13-$15 per share. It plans to use the proceeds to redeem preferred stock and pay off its debt. The company's shares will trade on the New York Stock Exchange under the symbol TEA.

 

The corporate parent of the coffee and breakfast giant goes public at a steep premium, fueled by aggressive growth plans. The stock jumps more than 40%.

By InvestorPlace Jul 27, 2011 10:54AM

Updated: 4:37 p.m. ET

 

By Jeff Reeves, Editor, InvestorPlace.com


According to the slogan, America already "runs on Dunkin'." But after a nearly $424 million IPO Wednesday morning and aggressive expansion plans to satisfy shareholder appetite, Dunkin' Brands Group (DNKN) hopes the world will run on its doughnuts and coffee soon.


Dunkin' plans on doubling its U.S. store count and making an ambitious move into emerging markets -- adding 500 stores a year.


On its first day of trading Wednesday, the stock was up 46.6%, closing at $27.85 from an opening price of $19.

 

Consumer spending has been noticeably strong despite the impasse on Capitol Hill.

By TheStreet Staff Jul 27, 2011 10:45AM

By Don Dion, TheStreet

 

The gloomy debt situations facing the United States and the EU have led many people to question the strength, stability and longevity of the global economic recovery. While the current economic climate is certainly challenging, there are still a number of places investors can turn to in order to find stability and strength.

 

Earlier this week, I highlighted gold miners as a pocket of strength, given the market's uncertainty and the continued appeal of gold. Funds like the Market Vectors Gold Miners ETF (GDX) have managed to power higher, outpacing not only the broader markets but also physically backed gold offerings like iShares Gold Trust (IAU).

 

While gold and gold miners have surged and will continue to stay in favor as investors second-guess the strength of the market's recovery, other corners have become attractive because of their surprising resilience in the face of market turmoil.

 

Consumers, for instance, have held strong throughout this bout of market rockiness. As Washington, D.C., lawmakers have continued to butt heads over a debt ceiling agreement and EU leaders struggle to sort out their own debt crisis, domestic consumers have remained willing to open their wallets and spend.

 

Pfizer, Johnson & Johnson, Bristol-Myers, Elan and other companies are following a strategy that suffered a big blow recently.

By InvestorPlace Jul 27, 2011 10:00AM

By Barry Cohen, Health Care Writer


It's true that a rising tide can lift all boats.


At the same time, a sinking ship can suck the innocent down in its vortex. That's exactly what might happen to a number of pharmaceutical companies that had high hopes for their Alzheimer's treatments.


Pfizer (PFE), Johnson & Johnson (JNJ), Bristol-Myers Squibb (BMY), Elan (ELN) and a host of other companies are following a strategy that suffered a big blow recently. The death knell for drugs based upon the assumption that the buildup of amyloid in the brain causes Alzheimer's might have been sounded when Eli Lilly (LLY) released results of a follow-up study at the recent Alzheimer’s Association International Conference in Paris.

 

Before you bet against it, consider the impeccable track record of CEO Reed Hastings.

By Jim Cramer Jul 27, 2011 8:28AM

jim cramerthe streetTo sell or not to sell Netflix (NFLX)?

 

You know what? In a curious twist on Shakespeare, that is not the question.

 

To me, the question is: Do you take advantage of the decline in Netflix and have faith that management did the right thing in raising subscription rates?

 

It's very rare that there is such a hot-button battleground stock like Netflix. The world seems to be divided between people who think Netflix is always one quarter away from being revealed as a colossal joke and those who believe Netflix is going to take over the world.

 

To me it is not that simple. To hold on to Netflix or even to buy it, you have to take a leap of faith about management, about CEO Reed Hastings and about his ability to navigate the waters of price increases and payments to creators of entertainment. You have to believe that he has loyal customers in America and that he will have loyal customers in the future, particularly overseas, where the company has just started to expand.

 

The oil-services company is now able to raise prices across product groups and regions.

By Jim J. Jubak Jul 26, 2011 6:01PM
Jim JubakYes, Schlumberger (SLB) beat on earnings (87 cents, instead of the 85 cents Wall Street expected) and on revenue ($9.62 billion, instead of the estimated $9.3 billion), but the real news in the oil-services giant’s quarterly earnings announcement was a return of pricing power.

Schlumberger reported seeing the ability to successfully raise prices across all its product groups and all its geographies. Pricing improvement started near the end of the second quarter in its international product lines, and in liquids-rich drilling in North American shale formations.

To Schlumberger, this doesn’t look like a short-term trend. The company says that it sees an oil- and gas-industry-wide shortage developing for oilfield services.
 
Tags: oil

Sometimes a stock has everything you want but is not a bargain

By Jim Van Meerten Jul 26, 2011 5:52PM
Right now my Wall Street Survivor portfolio is full but each week I still look to see what I'd buy if I had some cash.  I'd advice you not to take others' buy/sell recommendations unless you've studied how that person invests and your investment philosophy meshes with theirs.

I'm 64 years old and have already accumulated a large portfolio.  I want to keep what I've got but still need growth to beat future taxes, inflation and whatever other uncertainties that may be thrown up for me to cope with by either the economy or politicians.

Some of my readers have complained  that my articles are "cookie cutter" but I take that as a complement because I want all my stock to have he same attributes.  I want to know the same information about any potential investment and pass on any that don't meet all my criteria.  They are: 

Don't let the sparkle throw you off your game.

By Motley Fool Pick of the Day Jul 26, 2011 2:23PM

By Alex Pape

 

Gold is a hot topic among investors these days. Some are arguing that the gold run is just getting started. Others argue that we are in a gold bubble that is poised to pop. Still others maintain that gold is a store of value -- a way to protect their wealth. I don't agree with any of these arguments, but I will put forth one of my own: Having a strong conviction about future gold prices is arrogant.

 

What exactly are you analyzing?
However dazzling, gold comes up short when it comes to:

  1. Cash flow analysis (no cash flows).
  2. Any kind of practical fundamental analysis (there are no bottom-up fundamentals).
  3. Any realistic absolute valuation technique.

What we do have is economic data about gold.

 

The fast-food giant slims down the fries and promises to add a fruit or vegetable to all Happy Meals by April.

By Kim Peterson Jul 26, 2011 2:22PM
Will carrots and raisins help McDonald's (MCD) sell more Happy Meals?

The fast-food chain gave in to pressure from advocacy groups Tuesday, promising to add a fruit or vegetable to Happy Meals nationwide by April. The chain also said it will downsize the fries included in the meals.

McDonald's was even willing to go as far as removing fries altogether from Happy Meals, but customers didn't like that option, The Los Angeles Times reports. So the company is slimming down its fry holders to contain just 1.1 ounces of potatoes (down from 2.4 ounces).

McDonald's currently offers Happy Meal customers the option of fries or apple slices (though only 11% of customers choose apples). The new Happy Meals, which start rolling out in September, will automatically include both apples and the smaller pack of fries. 

Republicans and Democrats unveil strikingly similar proposals. The difference is in the timing.

By Kim Peterson Jul 26, 2011 1:00PM
The debt limit conflict in Washington, D.C., is heading into its final days, ugly as ever. We're now at the point where Democrats and Republicans have dueling news conferences and competing proposals -- and no one wants to give in.

But in reality, the two sides aren't that far apart. Just take a look at the two proposals, which have more in common than you'd think. 

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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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