This past week may have been a bit more volatile than the past, but we still managed an uptick on the Dow Industrials by 1% and half as much on the S&P 500; but the NASDAQ retreated by 0.1%. While much attention was focused on Twitter’s IPO, there was some more significant news: Namely a surprise 0.25% cut in interest rates by the European Central Bank on Thursday, and U.S. job growth was stronger than expected in October, but the unemployment rate ticked up to 7.3%. GDP growth in the third quarter moved up to an annual pace of 2.8%, but much had to do with inventory vs. real productive growth. And so it goes: Whenever there is favorable economic news the market reacts negatively looking for a faster tapering of stimulus by the Federal Reserve. Such an eventual move will push up interest rates and bond prices will decline, along with high paying dividend stocks that act as a proxy to, and compete to some extent with, the bond market.
There were nice upward earnings surprises by Con Edison and CVS Caremark this past week. DIRECTV profits grew nicely in the third quarter, but Latin American growth was a little on the short side. With the market always priced for the best, Qualcomm disappointed analysts with earnings per share up “only” 26% on strong revenue growth. The company’s guidance for the first quarter of fiscal 2014 displeased traders, but the long-term trend for QCOM is still favorable, in my opinion. This week there will be a slew of retail earnings’ announcements with implications for all-important Christmas season shopping along with them. Also, there will be chatter from some of the regional Federal Reserve presidents that will spin the market, so the week could again be volatile with major indices at all-time highs. Keep the faith.
“Wall Street is the only place that people ride to in a Rolls Royce to get advice from those who take the subway.” Warren Buffett