Stocks Slide With Portugal Bonds as Treasuries, Gold Gain

European stocks fell and Portuguese bonds dropped as concern deepened over missed debt payments by a company linked to the nation’s second-largest bank. Standard & Poor’s 500 Index futures signaled a selloff earlier this week will resume, while the yen, Treasuries and gold gained.

The Stoxx Europe 600 Index lost 1.3 percent at 8:35 a.m. in New York, led by a gauge of banks dropping to this year’s low. Financial bond risk increased in Europe for a fifth day. Standard & Poor’s 500 Index futures fell 0.9 percent. Portugal’s 10-year bond yield rose 11 basis points to 3.88 percent while Treasuries gained and the yen advanced against all but one of its 16 major peers. Indonesian stocks climbed to a one-year high as polls showed Jakarta’s Governor Joko Widodo won the presidency. West Texas Intermediate oil slid 0.3 percent to $101.62 a barrel while gold climbed 1.1 percent.

Bonds of Europe’s most-indebted nations declined as speculation resurfaced that the euro region remains vulnerable to shocks as it emerges from the sovereign debt crisis. The sell-off comes after minutes of the Federal Reserve latest meeting showed yesterday some policy makers were concerned investors may be growing too complacent. The value of global equities climbed to a record $66 trillion last week, data compiled by Bloomberg show.

Photographer: Dimas Ardian/Bloomberg
One-month rupiah forwards added 0.2 percent as unofficial counts showed Jakarta… Read More
“The concern of an event like this is always determining whether it’s occurring in isolation or whether it’s the first domino,” said Lawrence Creatura, a fund manager at Federated investors Inc. in Rochester, New York. His firm manages about $363.8 billion. “People will shoot first and ask questions later when news like this hits. It’s a classic flight to safety across the equity, commodities and bond markets. Portugal has been perceived as a weaker link so it’s not a particular surprise they’re encountering this kind of trouble now.”

Fewer Americans than forecast filed applications for unemployment benefits last week, a sign the labor market is strengthening, a government report showed today.

Peripheral Bonds

Portuguese bonds fell for a fourth day. The yield on 10-year Italian notes rose six basis points to 2.94 percent and Spain’s rate jumped six basis points to 2.82 percent. The Markit iTraxx Europe Senior Financial Index of credit-default swaps on 25 European banks and insurers rose two basis points to 71 basis points, the highest since June 4.

While Portugal’s central bank said Banco Espirito Santo SA, the nation’s second-largest lender, is protected after its parent missed debt payments, Moody’s Investors Service downgraded a company in the group citing a lack of transparency and links to other companies.

Banco Espirito Santo tumbled 17 percent before the Portuguese securities regulator said it stopped trading in the shares pending an announcement. Espirito Santo Financial Group SA, which owns 25 percent of the lender, fell 8.9 percent before the company suspended trading earlier in stocks and bonds, saying it’s “currently assessing the financial impact of its exposure” to Espirito Santo International, which has missed payments on short-term paper.

Fugro Tumbles

More than nine shares declined for every one that advanced in the Stoxx 600, with trading volumes 72 percent higher than the 30-day average, according to data compiled by Bloomberg. The gauge of banks tumbled 2.7 percent to the lowest since Dec. 18.

Banco Popular Espanol SA (POP) dropped 4.8 percent. The Spanish lender said it postponed a planned issue of the riskiest bank debt because of “heightened volatility” in credit markets.

Fugro NV (FUR) sank 20 percent, the most since November 2012, after the Dutch deepwater-oilfield surveyor forecast a drop in profit margin and writing off of as much as 350 million euros ($477 million). Skanska AB lost 2.5 percent after the Nordic region’s biggest construction company by global revenue said it will scale down operations in Latin America after booking 500 million kronor ($73.7 million) in project writedowns and restructuring costs.

Jobless Claims

The S&P 500 index (SPX) rebounded 0.5 percent yesterday following two days of losses.

Jobless claims declined by 11,000 to 304,000 in the week ended July 5, the fewest in more than a month, a Labor Department report showed today in Washington. The median forecast of 45 economists surveyed by Bloomberg called for 315,000.

Federal Reserve Bank of St. Louis President James Bullard said yesterday that a surprisingly fast decline in unemployment will fuel inflation and back the case for higher interest rates.

The Jakarta Composite Index added 1.4 percent to 5,095.20, heading for its highest close since May 2013. The rupiah gained 0.7 percent to 11,555 per dollar, according to prices from local banks, after touching the strongest level since May 22.

Both Widodo, known as Jokowi, and his opponent Prabowo Subianto claimed victory in yesterday’s presidential vote. Jokowi had about a five percentage point lead in the poll, according to unofficial counts from two survey companies that declared him the winner. Official results aren’t due for about two weeks. Bank Indonesia will probably hold its reference rate at 7.5 percent today, according to the median of 21 estimates from economists surveyed by Bloomberg.

The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong advanced 0.3 percent, after losing 1.6 percent yesterday, its biggest decline in two weeks. The Shanghai Composite Index slipped less than 0.1 percent, extending yesterday’s 1.2 percent retreat.

China Exports

China’s overseas shipments fell short of the 10.4 percent expansion that was the median of 47 economists’ estimates compiled by Bloomberg. Imports grew by 5.5 percent in June, less than the 6 percent increase projected. The trade surplus fell to $31.6 billion for June, from $35.92 in May. Data yesterday showed producer prices fell last month at the slowest pace in more than two years.

“Extreme cautiousness towards China’s economy has receded overall, with the government showing signs it will step in to support growth when needed,” said Mari Oshidari, a Hong Kong-based strategist at Okasan Securities Group Inc.

West Texas Intermediate oil dropped to $102.01 a barrel. Gasoline inventories increased by 579,000 barrels last week as a measure of consumption slid, the Energy Information Administration said yesterday. Brent declined 0.2 percent to $108.10 a barrel, the ninth consecutive decline in the longest streak since May 2010. The crude closed at a two-month low yesterday amid signs that Libya, the holder of Africa’s largest crude reserves, will boost exports, while Iraqi production remains unaffected by an insurgency.

Treasury Sale

Gold for immediate delivery jumped to $1,342.23 an ounce, the highest since March 19. Palladium rose 0.3 percent to $876.25 an ounce, the 14th consecutive advance and the longest streak since June 2000. Cotton fell 0.4 percent to the lowest price since July 2012 on ample supplies.

The yield on 10-year Treasuries dropped five basis points to 2.50 percent. The rate on 30-year notes declined five basis points to 3.33 percent as the U.S. prepares to sell $13 billion of the debt.

Greece’s five-year note yield increased 11 basis points 4.33 percent. The government sold 1.5 billion euros of three-year notes via banks, priced to yield 3.5 percent. That’s higher than forecasts earlier this week for a rate of about 3 percent from HSBC Holdings Plc and Royal Bank of Scotland Group Plc.

The yen strengthened 0.3 percent to 101.36 per dollar and gained 0.3 percent to 138.31 per euro.

Australia’s dollar retreated from the highest in a week, falling against all of its 16 major counterparts after the nation’s jobless rate climbed. The Aussie weakened 0.4 percent at 93.74 U.S. cents.

DRYSHIPS Analysts Update

Re: Jack A. Bass Managed Accounts

1 % set up fees

20 % annual performance fee

Shares of DryShips (NASDAQ:DRYS) was the target of some unusual options trading activity on Friday. Stock investors acquired 21,588 call options on the stock, reports. This is an increase of approximately 179% compared to the average volume of 7,726 call options.

DRYS has been the subject of a number of recent research reports. Analysts at Zacks reiterated a “neutral” rating on shares of DryShips (NASDAQ:DRYS) in a research note to investors on Friday. They now have a $3.00 price target on the stock. Separately, analysts at UBS AG initiated coverage on shares of DryShips (NASDAQ:DRYS) in a research note to investors on Thursday, August 22nd. They set an “outperform” rating on the stock. They noted that the move was a valuation call. Finally, analysts at Imperial Capital initiated coverage on shares of DryShips (NASDAQ:DRYS) in a research note to investors on Thursday, August 22nd. They set an “outperform” rating and a $2.75 price target on the stock.

Five equities research analysts have rated the stock with a hold rating and three have assigned a buy rating to the stock. The stock presently has a consensus rating of “Hold” and a consensus target price of $2.40.

DryShips (NASDAQ:DRYS) traded up 4.16% on Friday, hitting $2.88. 23,919,192 shares of the company’s stock traded hands. DryShips has a 1-year low of $1.46 and a 1-year high of $2.78. The stock’s 50-day moving average is $2.12 and its 200-day moving average is $1.95. The company’s market cap is $1.163 billion.

DryShips (NASDAQ:DRYS) last posted its quarterly earnings results on Wednesday, August 7th. The company reported ($0.05) EPS for the quarter, beating the Thomson Reuters consensus estimate of ($0.07) by $0.02. The company had revenue of $336.10 million for the quarter, compared to the consensus estimate of $329.57 million. During the same quarter in the prior year, the company posted ($0.05) earnings per share. The company’s quarterly revenue was up .0% on a year-over-year basis. On average, analysts predict that DryShips will post $-0.25 earnings per share for the current fiscal year.


Avago Technologies Limited

AVGO : NASDAQ : US$36.56
Target: US$45.00

Avago Technologies Limited is a designer, developer and global supplier of analog semiconductor devices. Avago offers products in three primary target markets: wireless communications, wired infrastructure, and industrial and automotive electronics. Applications for Avago products include smartphones, connected tablets, consumer appliances, data networking and telecom equipment, and enterprise storage and servers.

Technology — Communications Technology — Semiconductors
Investment recommendation:

Avago reported strong Q3/F13 results above our estimates with strong Wired and Industrial division sales offsetting weaker-than-expected Wireless demand. Further, Avago guided to strong sequential sales growth in Q4/F13 driven by strong
trends in the company’s Wireless and Wired divisions. We believe Avago’s proprietary technologies, strong IP portfolio, and diverse customer base in several growth markets position the company for strong long-term growth trends with industry-leading margins.

We reiterate our BUY rating and increase our price target to $45.
Investment highlights
 Q3/F13 sales of $644M and pro forma EPS of $0.74 were above our $623M/$0.68 estimates driven by 18% Q/Q sales growth in the higher-margin Industrial and Wired Infrastructure (excluding CyOptic sales) divisions versus our mid-single digit growth estimates for each division. CyOptics contributed $21M in sales during the quarter and should contribute $55M in Q4.
 Wireless sales increased only 3% sequentially or below management’s high-single digit sequential growth guidance, but
this is consistent with our analyses indicating softer high-tier smartphone sales trends during Q3/F13.
 Avago management guided to a 12-15% Q/Q sales increase for Q4/F13 driven by solid Q/Q growth in the Wireless and Wired Infrastructure divisions. Management anticipates mid-teens percent Q/Q growth in the Wireless division due to sales ramping into new smartphone programs at both Apple and Samsung, as Avago is benefitting from increased content share in high-end LTE smartphones.
 Given the strong results and our expectations for sustained growth trends, we have increased our F2013 pro forma EPS from $2.76 to $2.82 and F2014 from $3.29 to $3.30.
Valuation: Our $45 price target is based on shares trading at roughly 13x – 14x our F2014 pro forma EPS estimate.

Skyworks Solutions

The old Skyworks Logo
The old Skyworks Logo (Photo credit: Wikipedia)

SWKS : NASDAQ : US$23.64
Target: US$30.00

Skyworks is a leading supplier of power amplifiers, front end modules and other RF components for mobile devices (handsets, smartphones, and tablets) and communications infrastructure.

Investment recommendation:

While investors remain concerned regarding potentially slower high-end smartphone market growth in mature markets, we believe Skyworks growing content share and growing sales initiatives in new markets should result in 12-15% annual sales growth with expanding margins over the next couple years. Given Skyworks’ broad RFIC portfolio and customer base, we believe Skyworks growing portfolio of RF and analog solutions positions Skyworks to grow content share within its handset customer base and expand Skyworks’ content share in other markets such as wireless infrastructure, 802.11ac WiFi, and the M2M market. We reiterate our BUY rating and increase our price target $30.
Investment highlights
 We believe Skyworks is well positioned to hold strong dollar content share with leading LTE smartphone platforms and gain incremental share with its SkyOne integrated front-end solution in smartphones during F2014. Further, we believe new smartphone socket wins including power management ICs and WiFi PAs, recovered sales in wireless infrastructure, and strong growth from a diverse set of increasingly connected consumer and M2M market verticals should drive higher-margin HPA sales growth.
 In fact, we anticipate an increased mix of higher margin new products within both the Handset and HPA businesses over the next several quarters. Therefore, we are modeling steady gross margin improvement from 43.4% in F2013 to 44.5% in F2014. Our F2014 pro forma EPS estimates of $2.65 remains above consensus estimate of $2.55.

Our $30 price target is based on shares trading at roughly 11x-12x our F2014 pro forma EPS estimate.

Contrarian Alert: Is It Time To Buy Cliffs Natural Resources (CLF)?

POSTED ON MAY 22, 2013 BY   Commodity HQ

The party continues on Wall Street; investors remain bullish on stocks judging by the sheer price action as both the S&P 500 and Dow Jones Industrial Average managed to close out last week well above their all-time highs. The economic data front is sending hints of a potential downturn as manufacturing indicators remain weak; nonetheless, this has failed to put a noticeable dent in the bulls’ armor of confidence as markets shrugged off last week’s worse-than-expected industrial production data [for more market news and analysis subscribe to our free newsletter].

Not every stock is surging to record highs; in fact, one particular large-cap miner offers a risky, but compelling, opportunity for investors still looking to get a piece of the action on Wall Street. Contrarian investors should add Cliffs Natural Resources (CLF) to their watchlist because this former S&P 500 sweetheart is resting on major historical support, thereby offering a great entry point for those with a bullish outlook for the steel industry and the global economic recovery as a whole.

Chart Analysis

Consider CLF’s 10-year weekly performance chart . This stock has endured a downtrend since peaking in mid-2011 and it has failed to take part in the 2013 bull run seen across Wall Street. What’s noteworthy is the fact that CLF is trading and holding right at a major support level (red line) which it previously rebounded off in mid-2009; after this, it posted a monstrous gain when it surged to over $100 a share in just two years. CLF has also seen above-average buying volumes swoop in at these low levels over the past few weeks, perhaps suggesting that institutional buyers are loading up on this bargain miner.

Consider CLF’s year-to-date daily performance chart . Notice the big volumes on 3/27/2013; what’s even more encouraging is that CLF has manage to hold above $18 a share while slowly climbing higher along a rising support level (blue line). Another encouraging sign is the above-average buying volumes see on 4/25, which further adds weight to the bullish argument at hand.

nvestors looking to jump in long should be mindful of the overarching risks plaguing this stock; fundamentally, iron ore mining has seen very sluggish growth due to the stagnant global recovery, while technically, CLF is still stuck in a long-term downtrend.


Hints of global growth should drive this stock higher as increased steel production requires iron ore, which is CLF’s staple. In terms of upside, the next resistance level for this stock comes in at around $25 a share. On the other hand, a broad-market correction can easily sink it back below $20 a share, while a break below $17 a share will likely welcome serious selling pressures. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit-taking techniques.

NIKE How Five Hundred Bucks and a Handshake Created a Colossal Stock Market Winner

Footballshoes of the mark Nike.
Footballshoes of the mark Nike. (Photo credit: Wikipedia)

By Mitchell Clark, B.Comm. for Profit Confidential

One company that always reports early is NIKE, Inc. (NYSE/NKE).

The company has doubled on the stock market since 2010, and it has more than tripled since 2006.

This kind of stock market performance really is amazing. In just three years, a $12.5-billion company has become a $25.0-billion company.From Oregon, Bill Bowerman and Phil Night created Blue Ribbon Sports with $500.00 each and a handshake. In January of 1964, Bowerman and Night ordered 300 pairs of Tiger brand shoes from Onitsuka Inc. of Kobe, Japan for distribution in the U.S. market. Night began selling the shoes out of his Plymouth “Reliant,” and Bowerman began tearing them apart.

Bowerman took an idea from his wife’s waffle iron and created a new running shoe.

Jeff Johnson (a friend and the company’s first employee) came up with the NIKE name in 1971. Shoes were successfully tested and Carolyn Davidson, a graphic design student at PortlandStateUniversity, created the “swoosh” logo. The company’s first shoes were sold at the U.S. Track & Field Trials held in Eugene, Oregon. The rest, as they say, is history.

As a stock market investment, NIKE has mostly been excellent. The position was flat between 1997 and 2004. The company signed Eldrick “Tiger” Woods in 1996. In its latest quarter (ended February 28), the company’s comparable sales grew nine percent to $6.2 billion, up solidly from $5.7 billion. Comparable earnings grew from $560 million to $866 million, for a gain of 55%, while earnings from continuing operations were $662 million, up 16% from $569 million.

Sales growth was strongest in North America (18%), followed by Central and Eastern Europe (16%), then Western Europe (8%). Western Europe’s growth is uncharacteristic compared to other earnings reports from many global brands. On February 1, 2013, NIKE sold its Cole Haan brand to Apax Partners for $570 million. The deal resulted in a gain on sale of $231 million. But on November 30, 2012, NIKE sold Umbro to Iconix Brand Group for $225 million. This resulted in a loss of $107 million, net of tax.

I consider NIKE to be fully valued on the stock market currently. With a price-to-earnings ratio of approximately 25, the company’s earnings growth combined with its dividend suggests it’s a little pricey.

NIKE is a shining example of how a business can still be very successful during tough times. Arguably, the position held up extremely well on the stock market through the financial crisis and the recession.

Wall Street estimates for the company have been going up for the next quarter, all of 2013, and all of 2014.

Realistically, I wouldn’t say the stock is a buy right now, simply because the stock market is at an all-time record high. It’s very difficult to consider new positions with the stock market sitting so high. I would say, however, that this company would be worthy of consideration for long-term investors if the stock were to experience a meaningful retrenchment. While a track record of success certainly cannot predict the future, NIKE’s demonstrated record of innovation and wealth creation still makes it a winner.


John Bogle, MacBeth and the Market

Welcome to the Stock Market Casino

“Tranquil,” BloombergBlack’s Adam Freedman called U.S. stocks last week. Instead of the topsy-turvy markets of recent years, investors are seeing prices gently rise, often for days at a stretch. A measure of such volatility, the Chicago Board Options Exchange Volatility Index, last month hit its lowest level in six years.
Though traders who thrive on volatility may complain, many other investors are quite happy. The S&P 500 gained 10 percent in the first quarter, while the value of global stocks rose $2.6 trillion.
Adding to the upbeat mood is greater enthusiasm for initial public offerings, or IPOs, which raised almost $20 billion worldwide in the last three months. “IPOs are inherently risky,” says Scott Sweet, co-founder of research firm IPO Boutique. Investors are more likely to take a chance when “literally day after day we’re setting new records.” 

Case in point: Pinnacle Foods rose 21 percent in the week since its IPO. Housing contractor Taylor Morrison is the “hottest deal coming out right now,” Sweet says. Also expected are IPOs from the world’s largest satellite-services company, Intelsat, and from SeaWorld.

What the market’s mellow mood hasn’t done is soothe nervous investors, who fear this is the calm before another storm. This is the “most hated rally in Wall Street history,” says FusionIQ’sBarry Ritholtz, a phrase he first used in Oct. 2009 before U.S. stocks rallied a further 50 percent. “People not only fought it the whole way up, they continue to fight it,” he told BloombergTV on April 2.

So, many investors are seeking protection against an expected spike in volatility. Their armor comes from so-called “minimum volatility equity funds” — a relatively untested batch of funds designed to limit exposure to big market swings. According to BlackRock, that category of exchange-traded fundsattracted $4.1 billion last quarter, a 76 percent increase in assets.

People like Vanguard founder John Bogle have no patience for such worries. When it comes to the market’s daily ups and down, he told me: “Ignore it.” Anyone who owns stocks should be investing for the long run, in which case day-to-day, or even year-to-year, fluctuations don’t matter. When it comes to volatility, Bogle quotes William Shakespeare’s “MacBeth”: “It is a tale told by an idiot, full of sound and fury, signifying nothing.”

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