Investors know what's working and what's not. Jim Cramer says these stocks could power higher through the end of the year.
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The correction is not yet complete, but some favorable buying opportunities may pop up soon in this high-risk, high-reward sector.
- Related reading: Gain an Edge with Volatility Analysis
These stocks are cheaper than ever. Here are some compelling reasons to buy.
By Sean Williams
It's not really a surprise that small-cap and mid-cap companies have generally outperformed large caps over the past decade, but that outperformance is rapidly increasing.
Over the past five years, the SPDR S&P 500 Trust, an ETF that tracks perhaps the broadest measure of large-cap performance, rose a mere 12%, while ETFs tracking the S&P Mid Cap 400 and Russell 2000 returned 31% and 18%, respectively. More interestingly, this divergence didn't become readily apparent until after the stock market lows of March 2009. Following one of the largest lessons of our time on regulating risk after the near-collapse of the U.S. banking system, are we to believe that investors once again have an insatiable appetite for risk? I'm not inclined to believe so and feel that we could be on the verge of a major shift away from small and mid caps and back toward large-cap outperformance.
Funds tracking the Internet, dividend payers and solar energy are worth a look in rough market conditions.
By Don Dion, TheStreet
Here are five ETFs to watch this week.
More social-media companies are preparing to follow in the footsteps of LinkedIn (LNKD) and go public. Late last week the chatter centered on Groupon and Pandora after the two announced their IPO valuations.
Facebook and Zynga were also in the news last week after reports that Will Danoff, the manager of the Fidelity Contrafund (FCNTX), had acquired a stake in the two companies.
As I've explained in the past, it's best to be on the sidelines with respect to these social-media companies. FDN, however, provides investors with exposure to well-established online entities and will likely benefit from the added attention these upstart companies have generated.
Staying cautious can keep you one step ahead of the market
Poor economic news, including a weak jobs report, pushed stocks over the brink last week. About the only silver lining for investors was low volume, at least at the start of the holiday-shortened weak.
Imagine where we might go with a full lineup of traders ready to pounce on the slightest bad news. Sentiment has clearly shifted to the negative. Not even strong corporate earnings have helped.
The focus is on the future, and the market does not like what it sees. What the market needs now is a dose of good news. The most likely timing of that news is when second-quarter earnings are released, but that does not happen until July.
Keep your powder dry until then. On the long side the ETF to buy this week is the dividend play PowerShares Dividend Achievers (PFM)
The company will likely provide details about its MacBook Air and iCloud service. Look for an appearance from CEO Steve Jobs, too.
By Scott Moritz, TheStreet
It's the first WWDC in four years that doesn't focus on the iPhone, which is likely to be upgraded this fall. Instead, Apple is expected to show off a few gems like new versions of its Mac OS and iPhone iOS 5 software, a possible update to its MacBook Air, an inspiring performance from co-founder Steve Jobs, and the long-awaited unveiling of iCloud, a service that could help transform Apple.
The keynote to these annual developer events is usually a consumer-focused showcase for Apple's latest innovations. It's the annual big show of the cards by the company that has far and away the hottest hand at the tech table.
Here's what's on tap:
It feels like we're waiting for something good to happen with this market -- but do we even know what's good and what isn't?
Fair characterization? I think so. It is almost as if we are sitting here waiting for stocks to go down every day until something good happens, but it seems nobody knows what's good and what isn't.
For example, do we want oil prices to go down? I would say yes, absolutely. But I think these days if oil goes down, that will send rates lower, which will then confirm the worst of the slowdown fears.
We certainly wanted the dollar to go lower for the longest time, and we were happy when it was going lower, because Europe got its act together. But then Europe's act fell apart, and then we fell apart, and now we don't even know if the CurrencyShares Euro Trust (FXE) -- the best measure of the tension -- goes higher when it was really all we needed to know not that long ago.
Take the federal purse and divide by 10 million, and you get a picture of an affluent household earning $200,000 each year -- and spending more than $300,000.
By Jeff Reeves, Editor of InvestorPlace.com
The United States budget is broken beyond fixing. We could cut out all the pork, slash entitlements by 30% and still not have enough money to pay the bills.
Here are the cold numbers: This year we will spend about $3.5 trillion while taking in less than $2.2 trillion. Consider that those expenses would buy a brand-new Chevy Volt for one out of every four Americans. Or consider that the deficit alone is only slightly larger than the total GDP of Spain.
These numbers show how truly ugly things are, but they're too big for most folks to make sense of. That's why I decided to do some arithmetic and scale down the bloated federal budget to that of a household that brings in $200,000 a year. Here's what Uncle Sam's "family budget" would look like on this real-world scale:
Bank of Nova Scotia, Canada's third-largest bank, sees profit climb 41% to a record high in its second quarter.
Shares of Bank of Nova Scotia (BNS), Canada's third-largest bank, have modestly lagged the Canadian banking sector in 2011. I think that's about to change. (I think these shares are a good switch if you're holding shares of big U.S. banks, too.)
On May 31, the bank, which does business as Scotiabank, announced that net income for its second quarter (the three months ended on April 30) climbed 41% from the second quarter of 2010 to a record C$1.54 billion ($1.58 billion.)
The surge had two sources.
First, like its peers, Toronto-Dominion (TD) and Bank of Montreal (BMO), Bank of Nova Scotia reduced the amount that it set aside for loan losses in the quarter. Additions to reserves in the quarter fell to C$262 million from C$338 million in the same quarter of 2010. The bank is nearing the inflection point where it stops adding to reserves and instead starts to reduce them and add the cash back to its bottom line.
The retailer announces a huge stock buyback at its annual meeting, and says it will reverse negative sales growth in the US.
The company is trying to cheer up investors, and today announced it will buy back $15 billion in shares. Under a similar plan announced last year, Wal-Mart spent $12.9 billion to buy back 244 million shares.
Executives tried to reassure shareholders at the company's annual meeting at the University of Arkansas, telling them the company is on track to improve U.S. sales, which have slid for two years. "You better get ready, because we're coming," said Bill Simon, who is in charge of Wal-Mart's U.S. business.
Check out this video report from today's shareholder meeting. Post continues after video:
The industry continues to grow despite rising oil prices.
By Sean Williams
Despite popular belief, oil prices, which have been hovering around $100 per barrel for the better part of three months now, have not completely sucked the life force out of the freight sector.
On the contrary, numbers out of UTi Worldwide (UTIW) yesterday suggest that freight companies are becoming more efficient and have been able to successfully pass along higher fuel costs to customers. It's time we stopped being frightened by freight and instead look at the growth story right under our nose.
As mentioned above, UTi Worldwide reported an in-line, one-time costs excluded, EPS figure of $0.13, but the real story was that the company was able to pass along rising fuel costs to its customers, which helped it surpass revenue expectations.
The airline, once the flat-out leader in discount fares, has raised ticket prices 7 times since December.
Southwest used to be the go-to airline for the best fares. With smart fuel hedging and ultra-efficient fleet management, Southwest created savings and passed them on to customers through deep discounts.
But that seems to be changing. Southwest isn't that cheap anymore. Its average ticket price has increased 39% in the past five years, The Wall Street Journal reports. The industrywide fare increase during the same period averaged only 10%.
Now some of its last-minute tickets can top $1,000. And Southwest doesn't always have the lowest prices anymore. I recently booked a trip to Las Vegas on Southwest, only to find later that U.S. Airways (LCC) was a much better deal.
Pushed toward riskier plays by the Fed's money-printing binge, investors have been overlooking these options.
June is here, and with it will come a number of things that should make just about everyone happy: warmer weather, the end of school, and the official start of summer, to name just a few.
For investors, however, June brings with it a giant question mark: the end of the liquidity jolt known as QE2, the Federal Reserve's second round of quantitative easing. One of the results -- or, some folks might say, intentions -- of this huge stimulative policy was a surge in equities. And the biggest beneficiaries appear to have been smaller, speculative stocks. It seems, not surprisingly, that by deluging financial markets with cash, the Fed has encouraged risk-taking in equity markets.
An interesting byproduct of that is that the current bull run has yet to switch gears. In the typical bull, MarketWatch's Mark Hulbert recently noted, lower-quality junk-type stocks lead the market initially but then give way to higher-quality stocks by the time the bull is a year old, if not earlier. We're now more than two years into this bull market, and large, high-quality stocks remain quite cheap compared with smaller, lower-quality plays.
Investors are worried. The economy is slowing. The Fed's $600 billion bond-buying initiative is set to end. But beneath the surface, a groundswell of new support builds.
Rising inflationary pressures and Japanese supply chain woes (which I wrote about back in March) have pulled down factory activity and consumer confidence. Housing is on the slide again. On Friday, we learned that this "soft patch" of growth has hit where it hurts most, in the job market.
The May payroll report was disappointing. Payrolls increased by 54,000, a sharp decline from April's 232,000 gain and well short of the consensus estimate of 170,000. What's worse, Wall Street analysts had just furiously marked down their forecasts. Deutsche Bank cut from 300,000 last week to 225,000 on Tuesday to 160,000 on Wednesday. The unemployment rate jumped to 9.1%, up from 8.8% in March.
Investors are once again clamoring for more policy stimulus from the Federal Reserve. But because of bubbling inflationary pressures and the damage it's causing via higher energy and import prices, another big round of long-term asset purchases is unlikely. With the $600 billion QE2 initiative started last November coming to its end, a QE3 appears to be off the table.
Yet the Federal Reserve still has a few cards to play. In fact, a "stealth stimulus" is already under way.
The charts of 3 funds in particular look the strongest, and bullish signs from another potential standout sector are emerging.
By Tom Aspray, MoneyShow.com
The second quarter has been a tough one for the major averages, and the first day of trading in June has many people concerned about how the quarter will end. There have been only a few bright spots among the major market sectors, as four of the nine are currently underperforming the S&P 500.
On April 15, I analyzed the major sectors and used relative performance, or RS analysis, to identify Two New Market-Leading Sectors. Those were health care, as represented by the Select Sector SPDR - Health Care (XLV), and consumer staples, as tracked by the Select Sector SPDR - Consumer Staples (XLP).
Real-estate securities yield as much as 19% at a time when equities are about to lose some of the Fed's support.
By Jake Lynch, TheStreet
Federal Reserve Chairman Ben Bernanke has indicated that the hurdle for QE3 is very high. Other Fed governors have echoed this sentiment and, given the QE2-backlash from politicians and the recent ramp in commodity prices, the Fed wouldn't consider more easing unless deflation emerged and a double-dip recession loomed.
As QE2 ends, there are other significant headwinds facing the economy. In the past two weeks, every single economic report has missed its consensus projection. Consumer confidence posted a disconcerting drop and the S&P Case-Shiller Home Price Index fell to an all-time low.
In many ways, the issues that caused the Great Recession are still prevalent and dogging growth. In this environment, with the government tackling budget cuts and employment stagnating, the Fed funds rate is likely to remain at zero, longer than previously expected.
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The S&P 500 manages to keep a deathgrip on 2,000, but key areas of the market are already buckling under pressure.
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For the most part, the stock market was a sideshow. The main trading events were seen in the commodity and Treasury markets, both of which saw some decent-sized losses within their respective complex.
Dollar strength was at the heart of the weakness in ... More
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