Monthly Archives: February 2016

Samsung wins appeal dispute with Apple

A U.S. appeals court just overturned a $120 million verdict against Samsung,  in its patent feud with Apple.

The court said Samsung  did not infringe Apple‘s “quick links” patent, and that two other patents covering the iPhone’s slide-to-unlock and auto-correct features were not valid. The court also said Apple was liable for infringing one of Samsung‘s patents.

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Stocks Slightly Higher After Data

U.S. stocks traded mostly higher Friday, on pace to end the week with solid gains, as oil prices rose amid some data reports.

Personal income in January rose 0.5 percent, while personal spending rose 0.5 percent. The core PCE, which excludes food and energy, rose 0.3 percent.

The core PCE price index, the Fed’s preferred inflation measure, increased 1.7 percent in the 12 months through January, the largest rise since July 2014, after rising 1.5 percent in December.

Stocks pared gains following the report and the Dow Jones industrial average briefly fell into negative territory. Oil also came off session highs.

As of this morning, the major U.S. averages were on pace to end the week with gains of more than 2 percent.

The S&P 500 closed above the key 1,950 resistance level Thursday as stocks rallied into the close. Both the S&P 500 and Dow Jones industrial average were within 10 percent of their 52-week intraday highs, out of correction territory.

Coming Up:

G-20 meets in Shanghai
10 a.m. Consumer sentiment, personal income, consumer spending
Earnings: J.C. Penney, Foot Locker, Sotheby’s, Sempra Energy, AmericanTower, Centerpoint, Liberty Media, Telefonica, Rowan Cos

Saturday:
Earnings: Berkshire Hathaway

Indexes Struggle For Gains, Oil Lower

THURSDAY – U.S. stocks traded in a range Thursday, after a better-than-expected durable goods report, as oil held mostly lower.

The Nasdaq composite gave up opening gains as declines in Apple and other major tech stocks weighed.

The S&P 500 struggled to hold initial gains as energy weighed on the index, while telecommunications and utilities led advancers.

WTI traded more than 1 percent lower near $31.70 a barrel in morning trade ET.

Coming Up This Week:

Thursday

Earnings: AB InBev, Bayer, Apache, Best Buy, Campbell Soup, Domino’s Pizza, Kohl’s, Chico’s FAS, Sears Holdings, SeaWorld, Baidu, Autodesk, Gap, Intuit, Kraft Heinz, Herbalife, Live Nation Ent., Noodles & Co., Weight Watchers
10:30 a.m.: Natural gas inventories
11 a.m.: Kansas City Fed Manufacturing Index
12 p.m. San Francisco Fed President John Williams
1 p.m. $28 billion seven-year notes
G-20 finance ministers meet in Shanghai

Friday

G-20 meets in Shanghai
Earnings: J.C. Penney, Foot Locker, Sotheby’s, Sempra Energy, AmericanTower, Centerpoint, Liberty Media, Telefonica, Rowan Cos
8:30 a.m. Real GDP Q4 (second reading); international trade
8:30 a.m.: Personal income, consumer spending
10 a.m. Consumer sentiment

Dow Out Of Correction Territory

U.S. stocks traded more than 1 percent higher Monday, trying to build on their best weekly gain of 2016, as oil prices climbed.

The Dow Jones industrial average added 200 points in morning trade to come within 10 percent of its 52-week intraday high, out of correction territory on an intraday basis. Goldman Sachs and UnitedHealth contributed the most to gains.

The S&P 500 also traded within 10 percent of its 52-week intraday high, or out of correction, with materials, energy and financials leading gains.

The Nasdaq composite rose more than 1 percent, helped by gains in Amazon, Microsoft and Facebook. Apple traded more than half a percent higher.

WTI futures for March delivery, which expire after the settle Monday, gained more than 6 percent in morning trade after the International Energy Agency said in its medium-term outlook Monday that U.S. shale oil production was expected to fall by 600,000 barrels per day (bpd) this year and another 200,000 bpd in 2017.

The forecast added to last week’s drop in U.S. oil rig count to their lowest level since December 2009, according to Reuters.

Stock Market: The Week Ahead

With next week’s calendar full of economic data releases and speeches by economic policymakers, investors have been poised to watch the Federal Reserve for clues about the U.S. central bank’s next move, but an unexpectedly hot reading on inflation on Friday will further sharpen that focus.

After coming into 2016 with an expectation of three or four interest rate hikes through the year, market participants recently were viewing the Fed as likely raising interest rates once, if at all, in light of weak inflation and global volatility.

But Friday’s data showed the core consumer price index (CPI), a measure of underlying U.S. inflation, rose in January by the most in nearly 4-1/2 years to a 2.2 percent annualized rate. It drew particular attention as the number was above the Fed’s 2.0 percent target, though it is not the central bank’s benchmark inflation measure.

The uptick in price pressures has already shifted the market’s expectations on the Fed’s next move.

The dollar rose alongside Treasury yields shortly after the data, as markets saw the higher inflation as nudging the Fed toward tightening policy. The euro hit its lowest since Feb. 3.

Equity markets have also closely followed expectations on Fed policy. Lower rates tend to support stocks in general, with high-paying dividend names like utilities gaining investors’ favor. In an environment of rising rates, banks tend to take the lead.

The expectation of higher interest rates has been cited as one of the reasons for stocks having fallen as much as 11 percent this year. The S&P 500 .SPX is down 6 percent so far in 2016, and on track for its third positive week of the year.

The inflation numbers add to recent economic data, including a stronger job market and consumer spending, that will force the Fed to seriously reconsider more rate hikes, said Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis.

The Most Shorted NYSE Stocks

Chesapeake Energy Corp. (NYSE: CHK) saw its short interest drop less than 3% to around 224.80 million shares by the end of January. That was the third consecutive period of decline, and it was 34.4% of the company’s float. The days to cover remained about eight as the daily average volume pulled back.

The short interest in Freeport-McMoRan Inc. (NYSE: FCX) surged another 25% between the most recent settlement dates to more than 222.71 million shares. That followed a 15% gain in the previous period, and it was 19.6% of the miner’s float. It would take about three days to cover all short positions, as the average daily volume rose to a 52-week high.

Sprint Corp.’s (NYSE: S) short interest declined about 5% in the final weeks of the month, ending five consecutive periods with an expanding number of shares short. The most recent reading of around 212.78 million was 34.2% of the float. The days to cover dropped from more than 13 to about six as the daily average volume increased.

The number of Vale S.A. (NYSE: VALE) shares short dropped by some 19.66 million in the two weeks to almost 198.12 million. At the most recent average daily volume, it would take about seven days to cover all short positions, down from nine mid-month.

Petróleo Brasileiro S.A. (NYSE: PBR), better known as Petrobras, saw the number of its shares short shrink by 2.7% in the two weeks to almost 191.18 million. That was still the second highest level of short interest in the past year. The days to cover fell to about six as the average daily volume increased again.

A nearly 14% rise brought Alcoa Inc.’s (NYSE: AA) number of shares short to more than 187.78 million at the end of the two-week period. That was the fifth straight period of rising short interest, up to some 14.7% of Alcoa’s total float. The days to cover increased from three to about five.

Stock Futures Higher After Janet Yellen Remarks

U.S. stock index futures pointed to a sharply higher open on Wednesday after a very volatile week so far, as investors digested the written testimony from Federal Reserve Chair Janet Yellen.

In her prepared remarks, Yellen said that, if the economy were to disappoint, a lower path of Fed funds rates would be appropriate. She also said that near-term inflation remains low due to falling energy prices, but that the FOMC expects inflation to reach 2 percent in the medium term.

Dow futures held about 110 points higher after the testimony’s release, after briefly gaining 150 points. Yellen is scheduled to testify in front of Congress Wednesday and Thursday.

Coming Up This Week:

Wednesday
MBA Mortgage Applications
EIA Petroleum Status Report

Thursday
Jobless Claims
Bloomberg Consumer Comfort Index
Janet Yellen Speaks

Friday
Retail Sales
Consumer Sentiment
Baker-Hughes Rig Count

Are Small Caps Less Risky Than You Think?

Here’s a thing I like about small companies. In many cases, the people who run them aren’t just executives — they’re proprietors who took massive risks to build what exists today and who run themselves ragged to make sure that what does exist will be even better in the future. While I’ve met hundreds of extremely competent, dedicated executives over the years, there’s just something different about the person who scratch-built a company. To him or her, there is no such thing as a better employment offer around the bend. There’s no such thing as down time, or weekends, or even hobbies. This company is it. There’s no pushing ideas through some big committee. That person is the committee.

Maybe those kinds of companies sound a little risky to you. After all, doesn’t classic finance hold that, all else being equal, the smaller a company is, the riskier it is? Well, yes, on a company-by-company basis, those with smaller market capitalizations are riskier in terms of volatility and potential for total loss.

I believe, all else being equal, that this is insane in the aggregate. There is no reason that a portfolio of well-researched, quality small-cap companies should be riskier than one consisting of large-cap companies.

Oil Drops, Stock Recover From Session Lows

U.S. equities traded in a wide range on Tuesday as U.S. oil prices seesawed and investors looked ahead to Fed Chair Janet Yellen’s testimony.

The small-cap/penny stock Russell 2000 index was lower by 1% midday.

WTI futures slipped 4.8 percent, or $1.45, to trade at $28.44 a barrel in choppy trading. Earlier, the International Energy Agency said that demand for oil will “ease back considerably” in 2016.

The S&P 500 dropped nearly 1 percent at the open, led lower by energy, before briefly turning positive.

The Nasdaq composite seesawed, opening down more than 1 percent, before reversing losses and gaining about 1 percent. The index sat lower in midday trading.