It was a weird day in the markets yesterday. The market opened lower as it appeared that shorts were trying to front run Janet Yellen’s testimony. Once her testimony began, the markets caught a bid, which clearly fouled up their strategy. As the day wore on, another round of selling took place. Then in the late afternoon buyers stepped up, as I expected they would, and drove the markets higher.
The Love Affair With Utilities Continues
However, once the dust settled, tech stocks took it on the chin again, albeit closing well of their lows. Furthermore, the love affair with Utilities continues. The Philly Utility Index (UTY) surged 1.60% and is up just over 13% this year, without dividends. This is where momentum is piling into as it extricates it capital out of tech. The only difference is that tech has growth in its future while utilities don’t. I own both for different strategies. However, one has to wonder why Pepco Holdings (POM) is selling above its takeover price of $27.25. Utilities as flavor of the month will end but growth in technology is still quite alive. The former is a slow and steady strategy while the latter has a more volatile long term growth profile.
The hubbub yesterday was all about Alibaba. We are going to hear about this company and its IPO, ad nauseum, for the next few months. I remain on record as saying that in the long run this company could be the world leader in global market capitalization. Unfortunately, the news of Alibaba’s IPO dragged down Yahoo (YHOO) stock.
Today Apple (AAPL) went ex-dividend for $3.29 per share. That is cash in the bank, at least on May 15 when the payments are received. The stock price will be adjusted lower by the amount of the dividend on today’s market open.
Direct TV is in Talks to Sell to AT&T
In the economic world, the ECB will be announcing its rate decision and US weekly unemployment claims will be released. AT&T (T) is rumored to be in talks to purchase Direct TV (DTV). CBS (CBS) and Priceline (PCLN) will report results today. Early morning futures indicate an uncertain direction for the market open. We could be in for another teeter totter session. The hatred of technology may spill over into today’s session but the growth to value trade is starting to get long in the tooth.
Finally, the NFL draft is today. I predict that Texas A&M’s Johnny “Football” Manziel (no relation to Broadway star Idina Manzel) will be selected by the Cleveland Browns without help from Kevin Costner. The Giants need help on their offensive line. Disney’s (DIS) ESPN and the NFL Network will be winners with draft coverage. I will be in the road tomorrow and will return with more of My Gut Feeling on Monday.
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Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long AAPL, DIS, YHOO, POM & PCLN — although positions can change at any time.
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