Monday’s green shoots sprouted a little more on Tuesday. There was more breadth to the advance and I would note that the market held its positive tone after an early morning attempt to fade the market was repelled. The best news of the day was that tech and NASDAQ stocks outperformed other sectors and the relentless buying of safety value stocks seems to be abating. Today’s opening is indicated higher with techs and NASDAQ set to take a leadership role.
An Economic Expansion is on the Horizon
After the market closed yesterday, Alcoa (AA) unofficially began earnings season. The earnings season kicks off in earnest when the money center banks commence reporting on Friday. Not only did Alcoa report better than expected results, for seemingly the first time since my Bar Mitzvah, but the stock advanced after-hours and appears to be holding that bid in today pre-market. The important take away from Alcoa’s earnings report is that the company indicated that slack in the aluminum market has dissipated. This indicates that the automotive, aerospace and construction industries are all driving material demand. Hence, one can conclude, that there is an economic expansion on the horizon. I would not be a buyer of Alcoa off of this news but would focus more on the industrial companies who will benefit from end user demand.
Zoe’s Kitchen IPO Set to Be Priced
Following up last week’s successful initial public offering from GrubHub (GRUB) comes Zoe’s Kitchen (ZOES) IPO which is supposed to price its shares after the market closes today. I read through the company’s S-1 filing with the SEC ( that is the kind of boring yet important stuff that investment advisors do ). The company’s financial results have been drained by debt service that the company incurred to expand its operations. The proceeds of the IPO will wipe out that debt, help the company to expand further across the country and improve its financial results and condition. I would be a buyer of ZOES at a reasonable price. The stock is expected to be priced at $13 – $15.
So for today, let’s take what the market gives us. A solid follow through to yesterday’s session is what we need to firmly establish that the equity markets are on the mend from the recent spate of flu that it endured.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long GRUB — although positions can change at any time.
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