Thanks to Friday’s set-back, the market moved mostly sideways on the week. Russia’s stock market and currency tumbled Thursday as investors and traders worry about an intensifying standoff in eastern Ukraine. The crisis then spilled over to the U.S. and other markets, where we saw a nearly 1% decline in the major averages on Friday. The conditions helped gold a bit and futures closed above $1,300. For the week, the Dow was off a mere 0.3% and the S&P less than 0.1%, but the NASDAQ fell nearly 20 points or 0.5%. The Russell 2000 and the S&P Small Cap Indexes were off 1.3% and 1.2%, respectively, signaling a move to more conservative plays; a theme we have seen for a while now. Indeed the utilities soared 1.8% and healthcare 1.1%, but virtually all other sectors hit a wall. The telecommunications group was down a hefty 3.6%. Wireless competition is heating up and Verizon Communications (NYSE: VZ – $45.94) and AT&T reported less than stellar results with weaker than expected outlooks, and the two rivals fell $1.66 and $1.58 a piece. The iShares Global Telecom ETF (NYSE: IXP – $66.38) tumbled $.94 or 1.4% on the week and is 2.8% below where the shares started at the beginning of the year. The FCC and the courts are looking into a number of pricing rules for broadband providers, so there will be ongoing turmoil for now along with the inherent stock price volatility. Longer-term, however, I believe the sector will regain its footing as the major players extend their offerings beyond smartphones into autos, home security and automation and distribution of entertainment content. Verizon is consistently profitable and is committed to returning cash to shareholders and despite a highly competitive environment, I believe income-oriented investors would do well with a few select players such as Verizon and a basket of global telecoms provided in the iShares exchange traded fund.
There was some good news for Harris Corp. (NYSE: HRS – $71.62) this week. The U.S. Navy awarded the company an eight-year contract valued at up to $133 million to provide shipboard terminals that give crews access to high-bandwidth voice and data communications. Looking ahead, Harris will report third quarter results on Tuesday, with per share estimates of $1.19 vs. $1.12 a year ago. Other earnings news will come from Hess Corp. on Wednesday ($1.02 vs. $1.95) and on Friday CVS Caremark is expected to post profits of $1.05 per share for the first quarter vs. $0.83 last year. On Wednesday, the FMOC will make its policy announcement and the market will be paying attention to any changes to forward guidance. And finally, McDonald’s Corp. (NYSE: MCD – $100.73) unveiled a new Ronald McDonald – take a look.