The equity markets opened higher and for the most part did not get faded at all. This is contrary to what we expect to occur on a Monday. Mr. Market likes to keep you on your toes and will do its best to befuddle you, which is exactly what occurred on Monday. As any statistician would note, one data point is not indicative of a whole series, so if we repeat today’s opening 99 more times, it would likely result in what we have come to expect – a strong Monday opening gets faded.
Is the Utility Boom Stock Over?
With all those statistics aside, the continued easing in oil prices and Citicorp (C) earnings results, energy and financial shares led the market higher. Utilities were the only S&P sector to decline and did so by 1.2%. Whether we are seeing the end of the demand for dividend stocks or it was just profit taking, I cannot say just yet. It is worth noting that the Philadelphia Utility Index (UTY) peaked at 563.62 on June 30 and closed at 538.68 yesterday, a decline of 4.42% which has also taken the index below its 50-day moving average. However, if market participants decide to exit the utility sector, it is certain to benefit technology, growth and small cap stocks. Let’s get ready to act if that indeed comes true.
Yahoo Also At Critical Juncture
Earnings kicks into high gear today, as I outlined in yesterday’s My Gut Feeling. My greatest interest is in the earnings report from Yahoo (YHOO). With the Alibaba IPO just less than four weeks away, we will get a glimpse into how the Chinese internet giant performed in the second quarter. We are about flat on our Yahoo position, which was initiated with Alibaba in mind. Should Marissa Meyer fail to deliver a respectable quarter or the stock falls, it is likely that I will jettison the Yahoo positions and just wait to buy Alibaba after its IPO.
With earnings on the docket and the July labor report in the books, economic data will likely take a back seat to earnings reports. Today’s retail sales might impact retail stocks but we have come to expect the worst for that sector, such that even a bad report could be viewed as good news for retailers. I have a shopping list of retail stocks that I want to purchase later in the quarter or when I see a sustainable turnaround in the sector.
So, as you can see, I have several conditional opportunities on the horizon. That is all the more reason to raise cash and keep that capital idle for deployment at the right time.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long YHOO — although positions can change at any time.
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