Even with sure things, there’s no sure thing. Consider the fate of the new Hunger Games movie, Mockingjay — Part 1, the first part of the two part conclusion to the entire saga. BoxOfficeMojo had estimated that the film could take in $148 million over the weekend, but that was before we knew that the film pulled in just $17 million on Thursday night despite opening at 8pm. That caused the folks at BoxOfficeMojo to write that “Mockingjay absolutely should have earned more than this,” and all but writing off its chances for a $150 million weekend. Could mixed review be to blame? Grantland’s Wesley Morris, for one, praises Mockingjay for making you “feel as if something's at stake in this world,” even if he resents how it ends (you’ll have to see the film to find out), while Chris Vognar of the Dallas News writes that once “you accept that the splitting of Mockingjay is a business decision, not a dramatic imperative, Part 1 comes off as a curiously satisfying nonaction movie.” One that might still end up a disappointment.
Associated Press Remember that when watching the stock market continue its rally almost unabated. The S&P 500 gained 1.2% to 2,063.50 this week, a new record high, while the Dow Jones Industrial Average rose 1% to 17,810.06, also a record. The Nasdaq Composite advanced 0.5% to 4,712.97, its highest close since March 2000 and the small-company Russell 2000 ticked up 0.1% to 1,172.42.
Even more amazingly, every downdraft in the market was met with a response that pushed the S&P 500 back near positive territory, something that happened on Monday, Wednesday and Thursday. It got to the point that by Thursday morning, Rhino Trading’s Michael Block looked at the futures–they were down–and predicted they’d by up by 10:06 a.m. He was right. And on Friday it was off to the races after China cut interest rates and the ECB’s Mario Draghi sounded readier than ever to start buying government bonds.
At these moments, it’s tempting to get complacent–something Schwab’s Liz Ann Sonders and team warn again:
Being a bull seems pretty easy with regard to US stocks. The near-correction of mid-October is a distant memory, new records for major indexes are being set on a regular basis, November and December traditionally have been quite positive for the stock market, and the third year of presidential terms is historically the best.
We, too, believe the longer-term trend is higher, but risks exist and more bouts of weakness and volatility like in October are possible. One near-term concern—sentiment, which tends to be a contrary indicator, is elevated, with the Ned Davis Research Crowd Sentiment Poll in extremely optimistic territory. Using sentiment as a timing tool isn't a great idea, especially with regard to the optimistic side, but it does suggest the market may be more vulnerable to negative catalysts. Additionally, foreign growth remains a concern, although exports make up only 13% of US gross domestic product (GDP), potentially limiting the impact on the United States of modest weakness overseas.
Deutsche Bank’s David Bianco and team see weakness overseas posing challenges for S&P 500 earnings:
Given the challenges in many world regions, we think any acceleration in global growth will be muted despite US acceleration. We think a stronger US economy, stronger US consumer and dollar purchasing power provides significant help abroad. But if changes in oil prices are thought of as income transfers in a zero-sum sense globally, then real income is unchanged globally and lower oil prices will likely reduce capex incentives in many regions. We are convinced that weak oil prices will weigh on S&P 500 capex growth and curb overall US capex acceleration in 2015. Soft commodity complex capex and US exports will be a big challenge to Industrial Capital Goods companies in 2015.
Citigroup’s Tobias Levkovich isn’t so sure:
The Energy sector's effect on either market trend or earnings is not as significant as many might perceive. While many investors have been raising the issue of the plunge in oil prices and its potential influence on earnings, capital spending, employment trends, equity markets and consumer activity, reviewing the data suggests that it is not the end all. Indeed, there are offsetting factors like consumer-related business versus energy profits not to mention valuation…
Top 5 Computer Hardware Stocks To Own Right Now
Energy accounts for less than 12% of S&P 500 earnings and the sector comprise roughly 8.5% of the broad market capitalization. The energy segment contributed less than 15% of overall market profits for the most part going back more than 20 years and is below 12% currently. In contrast, the sector topped out at more than 25% during the misguided "peak oil" perspective of 2008/09. Notably, it often rises during recessions as a proportion of aggregate earnings since more cyclical domestic businesses suffer and the drivers for incremental hydrocarbon demand have moved offshore.
Let the games begin.
No comments:
Post a Comment