The daily dynamics of the stock market is not something that long term investors should focus on. But if you are a short term trader, this is what you live on. Whether you want to get a sense of the market for the long term or you are looking for short term trading opportunities, here are some of the things happening today that you might be interested in.
The Dow Jones Industrial Average was up .69% today to close at 13,090.72. The S&P 500 index was up 1.36% to close at 1390.69. The NASDAQ was up 2.3% to close at 3,029.63 on Apple’s stellar earnings announcement.
Federal Reserve Teasing the Markets
The market wants to see another round of QE. Although all of the experts say that printing money is not good for the long term, the reality is that the vast majority of players in the market is looking for short term gains.
And I’m not just talking about day traders. Even “respectable” money managers that work for pensions and mutual funds also want to see a spike in the stock market. That is because this is where their livelihood comes from.
Also, the long term ramifications of quantitative easing are hard to measure. It’s also difficult to translate into real terms. There is more incentive to see a short term rally in the stock market than long term inflation or other consequences.
The Fed has shown that they are more than willing to do QE. That means there is really an artificial price floor in the stock market. They won’t let it go down to a certain level before they intervene. Some call this a safety net. Others call it a moral hazard.
The Fed is also improving their long term outlook. It was reported today that they are looking to raise interest rates in 2014. That means they see positive signs in the employment picture as well as the overall economy. That’s a good sign.
Apple Earnings Beat Estimates and Drives up the NASDAQ
Apple blew out their earnings estimates today. Of course, this caused a rally in their stock price. It was even more pronounced because there were rumors that Apple might be struggling with sales. Well, they proved that rumor wrong to their great benefit today.
Since they are the largest stock by market cap, they also served to drive up the NASDAQ today. Apple has become a kind of bellwether stock for this exchange.
There are growing pressures for Apple to increase dividends. That is still up in the air.
The long term question is whether Apple can continue their rise? The elephant in the room is, can Apple continue this rise without Steve Jobs? Everyone knows that Jobs probably laid out a 2-3 year road map for the company before he departed. But a lot can happen in those 2-3 years. If the competition, which is getting quite fierce, catches up, will Apple rise to the challenge? A lot of things have to continue to go well for them to sustain their current market value.
Wal-Mart Bribery Scandal
Wal-Mart is reeling from its bribery scandal in Mexico. This company with a reputation for the highest of high ethical standards has come under fire. It started with a New York Times story over the weekend. The big news is that not only does it implicate senior executives in the Mexican subsidiary; it also implicated top managers at the main headquarters. Read more about the Wal-Mart bribery scandal.
Wal-Mart stock has dropped 8 percent from Friday’s close. That is a significant drop for something that has nothing to do with earnings or actual numbers. My guess is that it will continue to decline as there are new developments regarding this scandal.
Facebook IPO Chatter
There is still continued chatter around the Facebook IPO. It will be one of the hottest, if not the hottest, initial public offering in history. Their valuation fluctuates between $100 and $150 billion. There is still analysis going on regarding their recent purchase of Instagram for $1 billion to beef up their mobile platform. Now there is chatter about them making a smartphone in partnership with HTC. Quite honestly, this could be one of the hottest stocks to buy this generation, or it could be the biggest flop in this generation. We shall see.
Housing Market is Still Plaguing the Economic Recovery
It was a housing bust that caused the financial crisis and the ensuring economic recession. This sector will need to recover in order for us to get back on our feet. It doesn’t seem like it will happen any time soon. Housing prices according to the Case-Schiller index is still quite bad. It looks like housing prices are actually dropping.
There is still a huge backlog of foreclosed properties that were held up from coming to market because of the robo-signing scandal. Those houses should be trickled into the market in the next year, which will further impede a recovery.
US Economic Recovery
The US recovery is continuing to be positive, albeit slow. We all expected it to be slow. So as long as the trend is up, we should be in good shape even if it’s not super fast.