The Dow Jones Industrial Average closed up 32 points yesterday at 16,583, up 0.4% on the week, beating the previous all time high of 16,581 set on April 30. The Nasdaq Composite finished the week at 4,072, a drop of 1.3% for the week and the S&P 500 finished at 1,878, marginally down 0.1% for the week. The FTSE 100 finished down 0.1% for the week at 6,815. With the Dow at an all time, where next I ask myself?
Dow Jones Industrials 2013-2014
Catalysts for the upside seem somewhat limited right now, though the ebb and flow of Mergers & Acquisitions activity has kept investors guessing. With Publicis and Omnicom calling off their $35 billion merger as a result of a class of cultures between the French and US management and the Pfizer takeover of Astra Zeneca seemingly running into political obstacles the mega deals are not always that straightforward to finalise. AstraZeneca’s shares finished at £46, a declines of 4.3% on the week as UK politicians started talking about legally binding guarantees of British jobs and US lawmakers said that they would be looking to close the tax loophole which is at the heart of the Pfizer plan to make the UK its official tax domicile. The surprise was that Apple announced a $3.2 billion purchase of Dr. Dre’s Beats Electronics yesterday for a staggering $3.2 billion to shore up its presence in digital music and portable head wear. Tim Cook really is ploughing a different furrow to Steve Jobs with Beats apparently being worth over three times what it was a year ago. But I guess with $160 billion of cash burning a hole in Cook’s pocket he felt it was time to spend some of it on something other than dividends and buy backs.
The US earnings season for quarter one 2014 is near to its end. As of May 8th, 446 S&P 500 members that combined account for 92.2% of the index’s total market capitalisation had earnings up +1.6% from the same period last year on +0.6% revenues, with 68.8% beating EPS estimates and 49.7% coming out with positive revenue surprises. The Finance sector has dragged down the aggregate growth with Bank of America’s earnings particularly weak in the first quarter.
Looking forward the US Federal Reserve is never far from my thoughts. With the Fed likely to continue its tapering of its gigantic asset purchase programme at the next Federal Open Market Committee meeting on June 17th the summer period is sure going to be interesting for stocks.
There is much talk of a correction with the markets looking far from cheap especially in tech and biotech market valuations are also being challenged as the Nasdaq is trading at roughly 35 times reported earnings while Biotechnology is at 40 times reported earnings. If a correction does take place in the coming weeks it seems unlikely to be of a huge magnitude but certainly I don’t see many reasons to commit lots of cash into the market particularly to small caps or tech right now. However, continued M&A deals may well add a bit of spice to things though with companies seemingly more prepared to spend cash on their balance sheets than in 2013. Careful stock picking seems to be key right now and the days where you could buy into a tracker and makes lots of cash without a thought seem to be behind us as it was in 2009-2013. Lets see how the guru fund managers get on in this more difficult market!
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.
by contrarianuk
With Dow Jones Industrials at record high where next?
May 10, 2014 at 7:30 am in Market Commentary by contrarianuk
The Dow Jones Industrial Average closed up 32 points yesterday at 16,583, up 0.4% on the week, beating the previous all time high of 16,581 set on April 30. The Nasdaq Composite finished the week at 4,072, a drop of 1.3% for the week and the S&P 500 finished at 1,878, marginally down 0.1% for the week. The FTSE 100 finished down 0.1% for the week at 6,815. With the Dow at an all time, where next I ask myself?
Dow Jones Industrials 2013-2014
Catalysts for the upside seem somewhat limited right now, though the ebb and flow of Mergers & Acquisitions activity has kept investors guessing. With Publicis and Omnicom calling off their $35 billion merger as a result of a class of cultures between the French and US management and the Pfizer takeover of Astra Zeneca seemingly running into political obstacles the mega deals are not always that straightforward to finalise. AstraZeneca’s shares finished at £46, a declines of 4.3% on the week as UK politicians started talking about legally binding guarantees of British jobs and US lawmakers said that they would be looking to close the tax loophole which is at the heart of the Pfizer plan to make the UK its official tax domicile. The surprise was that Apple announced a $3.2 billion purchase of Dr. Dre’s Beats Electronics yesterday for a staggering $3.2 billion to shore up its presence in digital music and portable head wear. Tim Cook really is ploughing a different furrow to Steve Jobs with Beats apparently being worth over three times what it was a year ago. But I guess with $160 billion of cash burning a hole in Cook’s pocket he felt it was time to spend some of it on something other than dividends and buy backs.
The US earnings season for quarter one 2014 is near to its end. As of May 8th, 446 S&P 500 members that combined account for 92.2% of the index’s total market capitalisation had earnings up +1.6% from the same period last year on +0.6% revenues, with 68.8% beating EPS estimates and 49.7% coming out with positive revenue surprises. The Finance sector has dragged down the aggregate growth with Bank of America’s earnings particularly weak in the first quarter.
Looking forward the US Federal Reserve is never far from my thoughts. With the Fed likely to continue its tapering of its gigantic asset purchase programme at the next Federal Open Market Committee meeting on June 17th the summer period is sure going to be interesting for stocks.
There is much talk of a correction with the markets looking far from cheap especially in tech and biotech market valuations are also being challenged as the Nasdaq is trading at roughly 35 times reported earnings while Biotechnology is at 40 times reported earnings. If a correction does take place in the coming weeks it seems unlikely to be of a huge magnitude but certainly I don’t see many reasons to commit lots of cash into the market particularly to small caps or tech right now. However, continued M&A deals may well add a bit of spice to things though with companies seemingly more prepared to spend cash on their balance sheets than in 2013. Careful stock picking seems to be key right now and the days where you could buy into a tracker and makes lots of cash without a thought seem to be behind us as it was in 2009-2013. Lets see how the guru fund managers get on in this more difficult market!
Contrarian Investor UK
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.