Morning Call: Wednesday, April 29, 2009
Good morning. Again the market outperformed. Swine flu in 60 countries and the word "Pandemic" is being used. The impact on the global economy would be devastating, as it would be on the still fragile markets. Global TV interviewed Dr. Don Low head of communicable disease agency in Ontario and he characterized this as a normal flu outbreak. Hundreds of thousands (maybe millions) infected and 150 have died. Unfortunately more will die but it’s too early for the "P" word.
Given the media driven concern, the markets once again put on a heck of a performance. We should have been down a lot.. The WSJ reports that BAC will need lots more money from the Fed and they're in better shape than Citi. However there are analysts who differ from that conclusion. We will see on Monday. What if 17 of the 19 have passed the stress test?
Consumer confidence rose to 39.2 and while not a stellar number, we have to start somewhere. This coupled with the general response to individual company earnings reports suggest that fundamentals are starting to have an impact on markets again. But the Jury is out. Bears point to the major market Indices where not one is through its 200 day moving average. So there's no evidence that this isn't a bear market rally. But lots of stocks are above their 200 day MA and the 50 day for the Indices are encouraging. So if you think the bottom is in, there's nothing in the charts to contradict that either. Nor is there anything to contradict the bear case. The market action says higher for now. So while this strongly suggests selling your gold shares we can't imagine a portfolio without some gold in it.
About Stocks
Cramer talked up the railroads and mentioned CNR.
IBM bumped their dividend from 50 to 55 cents. They doubled the buyback and the business keeps chugging along. We think many of the large cap Tech will follow suit. Oracle paid a 5 cent dividend. Are you kidding?
There's scuttlebutt out of London that Apple has a new iPhone that's a "media pad" and that it will blow the competition away. Think RIM. What to do? The charts don't tell you, nor does our momentum work. Book profits, maybe? With the volatility where it is, some are selling covered calls to capture income.
That both Fortunoff and Filene's Basement are bankrupt is very telling. The consumer pulled back from the high end jeweler all the way down to basically a dollar junk store.
But for now the performance is persistently strong. The GDP was down 6.1% vs. expectations of -4.8% and the market turned up on the miss. First time since 1975 that we've had 3 straight quarters that were down.
Follow the trend which is your friend (until its not) and ….………… invest the money.
XLF US (Bloomberg): Financial Select Sector SPDR Fund is an exchange-traded fund incorporated in the USA. The Fund’s objective is to provide investment results that, before expenses, correspond to the performance of the Financial Select Sector. The Index includes financial services firms whose business’ range from investment management to commercial and business banking.
Quote of the Day:
“If you don't drive your business, you will be driven out of business.”
-B. C. Forbes
Ed Pennock, CFA, Managing Director
416-369-6921, epennock@dominick.ca
Kris Fisher, Institutional Equity Trading
416-369-6924, kfisher@dominick.ca
416-369-6921, epennock@dominick.ca
Kris Fisher, Institutional Equity Trading
416-369-6924, kfisher@dominick.ca
The above note is prepared by an Institutional Salesperson based on morning meeting comments and general Institutional desk discussion and should not be construed as a research report or a solicitation. For information purposes only. D&D Securities, its clients, and principals may have positions in these securities.
