Blog Posts by Jennifer Carinci

Expectations are running high ahead of Wal-Mart's (WMT) second-quarter earnings results due out before the bell on Thursday. In addition to analysts boosting earnings estimates, our nation's largest retailer has recently seen a rush of positive news turn its way. Last month, shortly after the big box king marked its 50^th anniversary, the stock climbed to a record closing high of $74.80 on July 27th; surpassing levels not seen since late 1999.

Analysts expect earnings of $1.17 a share compared to $1.09 a share during the same quarter last year. Revenues are estimated to be a whopping $115.56 billion, up from $109.37 billion a year ago.

"Expectations are very high. Will they beat earnings? Yes. Will they raise full-year guidance? Yes, but I think that's priced in right now," says Brian Sozzi, chief equities analyst at NBG Productions. "This has been the ultimate fiscal cliff stock play."

Widely seen as an economic barometer, Wal-Mart's price action could be signaling further growth deterioration ahead.

"The stock price is telling you the second half of the year, the consumer is going to trade down; middle income consumers going to Walmart, low-end consumers are going to buy more private label products, and drive tighter margins," he predicts.

Money chases performance. Or at least, that's how it used to be on Wall Street. ETF pro Nick Colas, the chief market strategist at ConvergEx Group, recently crunched some numbers on ETF performance versus fund flows, and the results are truly surprising.

Colas uses data compiled from Exchange Traded Funds and Exchange Traded Products — ETFs and ETPs — that have three-year track records. Why three years? That's how long it takes, according to his research, to prove your staying power and gain the attention of the "serious money." Basically, after a decent three-year track record, you've earned street cred.

According to ETF database www.xtf.com, 778 of the 1,486 U.S.-listed ETFs & ETPs have existing for over three years. The median three-year return is 35.6%. Of course, there's a wide discrepancy between the top and bottom performers, but the money flows in and out couldn't be more counterintuitive.

"I fully expected that the old adage on Wall Street that money will chase performance to be in place here, and it was just the opposite," says Colas. "The names that did the best didn't have very much in terms of new flows, the names that did the worst had tremendously strong flows."

The S&P 500 crossed a key psychological level this morning, breaking above 1,400 for the first time since May. Volume and sentiment remain low, but investors are rotating back into risky assets. We've seen this shift over and over this year, which is why investors should remain level-headed and not take on the all or nothing, risk-on versus risk-off trade.

"We continue to maintain a strategy of a balance between your defensive steady eddies, like a Johnson & Johnson (JNJ) and then your more offensive, cyclical-type companies, whether it's a Dupont (DD) or Eaton (ETN), a company that has more exposure to the economy," says Hank Smith, chief investment officer at Haverford. "But we don't think you can ignore the defensive companies, and J&J is truly a poster child."

While defensive in nature, J&J has been hit with some negative headlines this year. The most recent was yesterday's announcement that it dropped further research on a highly anticipated Alzheimer's drug; a joint effort with Pfizer (PFE). And the company's McNeil unit, a major part of J&J's consumer division responsible for producing brands such as Tylenol, Motrin, and Splenda, has struggled with various recalls over the last several years.

Nonetheless, Smith is optimistic that the recall problems are behind them and continues to focus on the J&J's "modest valuation" and attractive 3.5% dividend yield.

"If it's a risk-on market and J&J does not participate, you're getting paid to wait, and that's a very important attribute," he states.

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The FOMC is back in session today, assessing the economy and the need for more stimulus. The meeting ends with an official statement updating the world on the Fed's outlook and any changes to monetary policy at 2:15pm/est on Wednesday. Last week the Wall Street Journal's Jon Hilsenrath reported that a fresh round of easing in some form could be announced tomorrow or during the September meeting as the Fed grows more concerned about the weak recovery. The Hilsenrath leak fueled a 4% rally over three trading sessions.

Exuberance ahead of the Fed is nothing new. Earlier this month, the Federal Reserve Bank of New York released a new study finding that anticipation alone leading up to Fed policy statements has dramatically boosted the broader market. Here's the gist:

"We show that since 1994, more than 80 percent of the equity premium on U.S. stocks has been earned over the twenty-four hours preceding scheduled Federal Open Market Committee (FOMC) announcements (which occur only eight times a year)—a phenomenon we call the pre-FOMC announcement "drift."' -David Lucca, Emanuel Moench July 11, 2012

This pre-FOMC drift has pumped the S&P 500 more than 50% higher than it would be without the gains made in the 24-hour period before Fed statements.

"There is an element of truth to this study, that the Fed has been generally a boost to the stock market, especially over the last few years," says Jim Bianco, president of Bianco Research in the attached video. But this Fed-watcher says the impact is weakening and investors shouldn't be so quick to jump when the Fed seems poised to shift its policy.

"Europe is burning," stated Treasury Secretary Timothy Geithner earlier today with CNBC's Larry Kudlow at the CNBC/Institutional Investor "Delivering Alpha" conference in a steamy New York City.

While the Treasury Secretary isn't expected to stay on board for a second Obama presidency if he's re-elected, Geithner stayed on message with the Administration's economic plan — boost growth by raising taxes on the wealthy in order to pay for government spending programs. He pressed the point, which hits at the heart of the only debate that seems to matter in American politics today. Republicans fiercely oppose any tax hikes during a time of weak economic growth; a subject Geithner did not shy away from, and the subject of conversation in Breakout's attached video clip.

Geithner highlights three reasons the economy is "definitely slower" than we'd all like it to be.

"It's slower mostly because of the trauma from Europe, the after effects of the rise in oil prices earlier this year, and

It's rough out there! While the latest U.S. recession —also referred to as The Great Recession—spanned from December 2007 to June 2009, many Americans are still feeling the pain from the worst economic downturn since the Great Depression. A recent study from Yale University shows the recession hit even harder in particular areas of the country, and the Federal Reserve released staggering numbers showing the wealth of the average family plunged 40% from 2007 to 2010.

Although the U.S. economy is recovering it has been a slow, cumbersome rebound, and particularly unnerving for Americans nearing retirement. Recently-named AARP financial ambassador Jean Chatzky has six smart money moves to make in this scary economy.

1. Draw a Road Map

Chatzky's first recommendation is to make a plan. Set your money goals and aspirations by asking yourself the following questions:

Where [financially] are you right now?

Where do you want to go?

How much money do you need to save regularly to get there?

"You can't be too aggressive in the amount you think you're going to earn on your money these days because it causes us to under save, which is a chronic problem in America," she warns. "So be conservative and save enough."

2. Refinance!

Interest rates are at historic lows and the Federal Reserve intends to keep it this way through at least 2014. You need to take advantage of the low rate environment, even if you're not a homeowner.

"You've got to expand beyond the mortgage," says Chatzky. "Car loans, student loans, credit cards, whatever is in your portfolio of debt, refinancing it to a lower rate is just money in your pocket."

Jim Paulsen, chief investment strategist at Wells Capital Management, is sticking by his year-end target of 1,500 on the S&P 500. He's zeroing in on four main catalysts that could spark a rally in the second-half of the year.

First up is Europe. Yes, Europe. Despite the market selling off on the latest round of concerns that nothing will emerge from another European Summit at the end of this week, Paulsen says we've seen this before and it's simply not the crisis it was once considered. He calls it more of a "chronic problem" that will be with us for the next decade, rather than a full-blown imminent threat.

"We've seen how this works out, the Euro fears flare, the market sells off, then they calm down and we go on to new highs," he says. "So rather than Europe fears flaring as a sell signal, I think what it has represented for the last two years is a good buying opportunity."

Second, Paulsen is as bullish on the U.S. economy as it gets these days. In his view, investors are too focused on China and Europe, and overlooking underlying strengths domestically. While overseas economies matter, he believes this year's U.S. growth data has been overstated, understated, and is now balancing out at about 2.5%. Paulsen ticks off several economic stimulants that could push growth as high as 3%, including historically low mortgage rates, the weak dollar, falling gas prices, and low inflation.

Further, according to his research, those that ignored the Euro crisis since January 2010 and held long positions in the broader market have seen an annualized return north of 10%.

While the Spanish bank bailout is making headlines today, and Moody's (MCO) is readying its latest round of bank downgrades, one money manager is keeping his focus here on the U.S. banks that his firm owns and the potential opportunity to add more exposure soon.

"They're extraordinarily cheap on today's earnings, and let alone what normalized earnings might be two or three years from now. They're ridiculously cheap," says Hank Smith, chief investment officer at Haverford Trust. "Also they're a play on an economy that is expanding, and we don't see a recession going forward."

Smith's general strategy right now is to trim exposure to take some gains when the financials rise, and buy shares on the cheap when they fall. But he still hasn't added to his JP Morgan (JPM) holdings.

"We still think it's [JP Morgan] the highest quality bank in the world despite their trading gaffe. We also own Wells Fargo (WFC), which is another one of the very high quality banks that has held up a little better than JP Morgan here."