Article sponsored by the Dr. Stoxx Options Letter
It's a busy week for the U.S. Markets as traders and investors digest last week's European developments and this week's economic reports from the home front. Here is a list of what market mavens are paying attention to:
1. Shares of Apple, Inc., (AAPL) closed at an alltime record high yesterday of $133, pushing its market cap up to $775 billion, after the company announced plans to invest $2 billion in two green-energy powered data centers in Europe. Goldman Sachs upped its share price forecast from $130 to $145, saying there is more room to the upside than previously thought given recent data points coming from the company.
2. Greece submitted a 6-page document on Monday containing a list of promised austerity measures aimed at winning the debt-burdened nation another 4 months of bailout from Brussels. The list includes the promise not to roll back any ongoing or completed privatizations, compromises on major issues such as labor reforms and social spending, and a delay in the planned hike of its minimum wage.
3. All eyes will be on Fed Chair Janet Yellen as she testifies before Congress on Tuesday at 10am, ET. There is uncertainty over whether she will affirm the dovishly toned minutes from the Fed's last meeting, or open a window on June as the most likely time for a first rate hike. Last month's surprising spike in the non-farms payroll numbers, a new data point the FOMC did not have before them at their last meeting, may play a role in what is said. "Given the growing evidence that the backdrop can more than withstand what will amount to a modest increase in the policy rate, we find it hard to imagine Yellen will promote the 'lower for longer' mantra that was espoused in the minutes," RBCM chief U.S. economist, Tom Porcelli, said. "Economic fundamentals quite clearly show we no longer need emergency levels of accommodation."
4. This time things may be different for the Nasdaq as it inches back up to the 5000 level, an achievement not seen since the dot.com bubble peaked nearly 15 years ago. For one thing, the tech-heavy index is not quite so tech-heavy today. Healthcare stocks now show a stronger presence. In addition, the index is not as bloated as it used to be with outrageous P/E ratios and start-ups without a sales record. The cyclically adjusted P/E ratio (or CAPE) for the Nasdaq today is set at 27.8 vs. 43.8 back in 2000, and the price-to-sales ratio has dropped from 2.1 to 1.8.
5. The price of crude continues to give back the gains it won three weeks ago as calls from key players point to lower prices ahead. On Monday there was some chatter about a possible reconvene by OPEC to discuss the crisis, but that was quickly downplayed as wishful thinking from Nigeria's oil minister, who also acts as President of OPEC. But the fact remains that production cuts remains in the hands of the Saudis, and they have consistently said that such cuts will not happen in the foreseeable future. U.S. drilling rigs continue to come offline and are now down 37% over the past 5 months, yet production numbers remain strong because only unproductive rigs are being shuttered.
6. We are in the tail end of earnings season, but a number of key companies have yet to report. Those reporting this week include: Berkshire Hathaway, Comcast, Home Depot, BHP Billiton, Lowes, Hewlitt-Packard, and Target.
7. The week is backloaded with important, tape-influencing economic reads including the following: today look for Consumer Confidence numbers (out just as Yellen begins her testimony); tomorrow we'll see New Home Sales. On Thursday we get the Initial Jobless Claims numbers, the Consumer Price Index, and the Durable Goods orders; and to cap the week we'll get a revised reading of the GDP (second estimate), along with the Purchasing Managers Index.
There you have it. Trade well, and be blessed, Tom Carr