Posts by Lawrence Lewitinn

  • Traders get bullish on Apple earnings

    Lawrence Lewitinn at Talking Numbers 2 hrs ago

    This is the week Apple investors have been waiting for.

    The tech giant is set to report its most-recent quarter’s earnings on Tuesday. And with the iPhone now grabbing more market share in China, Japan and South Korea, shareholders are hoping Apple surprises Wall Street. According to FactSet, the consensus is for earnings of $2.59 per share on $67.3 billion in revenues.

    But according to some traders, there’s really only one thing that matters: iPhone 6 sales.

    “The Apple iPhone 6 and 6 Plus, of course, are the key drivers for top line growth over the next 18 months,” said Chad Morganlander, portfolio manager at Washington Crossing Advisors. “We would be buyers here.” His firm’s parent company, Stifel Nicolaus, has a $130 price target on the stock. Monday morning, it was trading at $117.

    Still, despite the bullishness, Morganlander believes investors should be prudent when buying Apple. 

    “Even though we are giving a bullish call here, we want investors to be able to be somewhat more pragmatic about their allocation over the course of the next 36 months,” he said. “We just want people to weigh Apple in their portfolio where it’s a 5 percent weighting not a 50 percent weighting.”

  • Is the dollar a ticking time bomb?

    Lawrence Lewitinn at Talking Numbers 2 days ago

    The dollar rally is continuing.

    The U.S. dollar index, a basket of currencies versus the greenback, hit an eight-year high after the European Central Bank announced its monetary stimulus plan. With more euros floating around, each one is anticipated to be worth less compared to the dollar.

    But with nearly half of all revenues for companies in the S&P 500 coming from overseas, some worry that a strong dollar may be a ticking time bomb for stocks in the U.S.

    However, some traders say a dollar rally is a positive signal for shares.

    “The dollar will continue to strengthen so investors want to be overweight U.S. equities,” said Chad Morganlander, portfolio manager at Washington Crossing Advisors. While he expects the greenback to be a slight drag on the revenue growth in 2015, Morganlander believes topline growth will nonetheless be around 2.7 percent while he forecasts earnings growth in a range between 4 and 5 percent.

    “Dollar strength bodes well for the overall U.S. stock market,” he said. “We are anticipating 5 to 6 percent total returns for the S&P 500.”

    “The rising dollar won’t kill this rally,” Morganlander added.

  • Why rates could stay ridiculously low for a long time

    Lawrence Lewitinn at Talking Numbers 3 days ago

    Europe has joined the bond-buying frenzy.

    Ripping a page from the U.S. Federal Reserve’s playbook, the European Central Bank announced plans to buy 60 billion euros ($70 billion) worth of bonds every month from March until September to stimulate the stagnant euro zone economy. The move is intended to boost Europe’s economy by keeping rates low, but the program comes with an added benefit: lower rates here at home.

    “In theory, it should move investors over to European bonds and away from U.S. bonds, therefore pushing prices down and raising rates,” said Erin Gibbs, equity chief investment officer at S&P Capital IQ Global Capital Markets. But according to Gibbs, falling rates in Europe are acting as an anchor for rates in the United States and as a result, borrowing costs here could soon get a lot cheaper.

     “Whether we see those assets as a whole being enough and being relatively attractive to U.S. Treasurys is really a big question that is still out there,” said Gibbs, who is responsible for more than $15 billion in assets under advisory.

    For Gibbs, Europe’s economic uncertainty will keep investors from selling U.S. bonds in order to join the ECB’s bond buying.

  • These two beaten sectors are poised for a bounce

    Lawrence Lewitinn at Talking Numbers 3 days ago

    The start of 2015 hasn’t been great for stocks, but it’s been a real stinker for two sectors in particular. But some traders are betting on a rebound for the financial and energy sectors.

    Since the start of 2015, the ETF tracking the financial sector (trading under the ticker symbol XLF) is down nearly 4 percent. Not far behind is the energy sector ETF (trading under the ticker symbol XLE), which is down 3 percent, despite a strong recent rally.

    Financial Sector ETF (XLF) Top 5 Holdings

    Company

    Weight

    YTD return

    Berkshire Hathaway (Class B)

    9.3%

    -0.9%

    Wells Fargo

    8.5%

    -3.1%

    JPMorgan Chase

    7.2%

    -9.0%

    Citigroup

    5.0%

    -9.3%

    American Express

    2.7%

    -8.6%

     

    Energy Sector ETF (XLE) Top 5 Holdings

    Company

    Weight

    YTD return

    Exxon Mobil

    17.0%

    -0.6%

    Chevron

    13.5%

    -3.8%

    Schlumberger

    7.2%

    -4.4%

    Kinder Morgan

    4.6%

    -0.9%

    EOG Resources

    3.9%

    -2.2%

    The poor performance from both sectors is not a coincidence. Many investors have sold financial stocks for fear that the crash oil prices could soon become a credit issue that could weigh on bank balance sheets. That fear has not materialized, and  some traders sense opportunity in both sectors.

  • Why investors need to ignore volatility and buy: Pros

    Lawrence Lewitinn at Talking Numbers 4 days ago

     

    Buying stocks these days is a lot like buying a beautiful used car: The market may seem good, but a look under the hood could show things aren’t as they appear.

    Even though the S&P 500 is up 10 percent over the last 12 months and just 3 percent off its record highs, most stocks in the market are struggling. According to data compiled by Bespoke Investment Group, the average stock in the broader S&P 1500 index—which includes small- and mid-cap stocks—is down nearly 16 percent from 52-week highs. And the average stock in some sectors, particularly energy and materials, is doing a whole lot worse.

    That could explain why stocks have been so volatile this year. The S&P 500 has had four 1 percent moves year to date, twice as many as it did for this time in 2014.

    “When you look at it the sectors that have held up the best are really kind of your classic defensive, low-volatility areas: staples, health care and utilities, which have been the best-performers year to date,” said Andrew Burkly, head of institutional portfolio strategy at Oppenheimer & Co.

  • This chart spells serious trouble for gold

    Lawrence Lewitinn at Talking Numbers 4 days ago

    Gold is shining brightly again.

    The yellow metal is trading near $1,300 an ounce and is at five-month highs. Year-to-date, gold is up 9 percent.

    In recent days, traders have been flocking to bullion after Switzerland removed the franc from its peg to the euro. That caused a surge in the franc, which is traditionally seen as a proxy for gold.

    What’s more, in just a few hours, the European Central Bank is expected to announce its quantitative easing program which may yet weaken the euro against other currencies, including gold.

    But while the metal may yet rally some more because of central bank moves, not everyone is optimistic about gold’s long-term prospects.

    “Central bank actions are causing a lot of volatility in the currency market, and gold is performing its traditional safe haven asset right now,” said Andrew Burkly, head of institutional portfolio strategy at Oppenheimer & Co. “But longer term, the only reason you really want to own gold is as an inflation hedge. And just about anywhere you look, inflation pressures are on the decline. There is really no sign of inflationary pressures out there. I think there are a lot of better opportunities [elsewhere].”

  • The unthinkable is about to happen in the currency markets

    Lawrence Lewitinn at Talking Numbers 5 days ago

    Currency trading is all about small numbers. But now a  large number is at the top of every trader's screens: 1.

    That’s because with euro is now at trading at 11-year lows versus the U.S. dollar, and the European Central Bank to announce its own version of quantitative easing, many traders expect the euro to soon have the same value as a dollar, or as they call it in the currency pits, parity.

    Should a euro QE happen, it won’t come as a surprise to most people. For some time now, the markets have been anticipating the ECB to add euros to stimulate the euro zone economy. In the last six months, the euro has devalued by 14 percent and is now trading at around $1.15. That's below the $1.17 it debuted at in 1999.

    ECB President Mario Draghi is expected to announce a QE measure this coming Thursday. The size of the stimulus will dictate where the euro will head next, according to one macroeconomics expert.

    “The larger the program that is announced, the more the euro will sink,” said Gina Sanchez, founder of Chantico Global.

    Sanchez says that parity can nonetheless happen, and she said that may not be a bad thing.

  • Why it could get worse for banks

    Lawrence Lewitinn at Talking Numbers 5 days ago

    The big banks are feeling big pain.

    Financials are the worst-performing sector in the S&P 500 in 2015, having fallen nearly 5 percent thus far. Names Citigroup, Morgan Stanley and Goldman Sachs are all down by double-digit percentage points since the year started as they underwhelm Wall Street with their latest earnings reports.

    The ETF tracking the sector as a whole (trading under the ticker symbol XLF) is down 5 percent year to date, and one trader says it’s only going to get worse.

    “There’s more pain to come,” said Gina Sanchez, founder of Chantico Global. “I’m not constructive on this sector. The banks still have more headwinds to deal with.”

    Sanchez, a CNBC contributor, sees three big factors hurting the sector in the coming months: oil, dividends and seasonality.

    “Any banks lending to the oil sector have to be bracing for losses,” she said. “Even if you’re not lending to the oil sector, there is still going to be some ripple effects to that. So that’s a big negative.”

    And while investors would traditionally look forward to dividend growth in bank stocks, that may not be the case this time around.

  • Quick gains in Google?

    Lawrence Lewitinn at Talking Numbers 9 days ago

    Once the darling of traders, Google is now being scorned.

    Google’s Class A shares are off by 12 percent in the last 12 months while the Nasdaq Composite index is up 10 percent as investors have begun worrying about the search giant’s growth prospects and the company’s penchant to spend on far-out projects like self-driving cars.

    Despite the dip, some traders are still staying away.

    “Earnings revisions have been generally declining for nine consecutive months at this point, and we see that continuing into 2015,” Andrew Burkly, head of institutional portfolio strategy at Oppenheimer & Co. His company has a “perform” rating on Google and makes a market on the stock.  “We think margins will continue to be under pressure.”

    Investments in projects with relatively low margins, increased regulatory issues, and the now-volatile foreign exchange markets may also hit Google’s earnings, B urkly said. “The fundamentals just don’t look like they are ready to accelerate here,” Burkly added.

    Now the Google shares are trading below $510, the technicals are also negative, according to the chart work of Steven Pytlar, chief equity strategist at Prime Executions.

  • Here is a 30-year chart of why rates are headed lower

    Lawrence Lewitinn at Talking Numbers 10 days ago

    Rates on the 10-year continue to defy logic.

    On Thursday, yields on the U.S. 10-year bond dropped below 1.8 percent to their lowest levels since May 2013.

    The global situation is what is keeping rates down, according to Kevin Caron, portfolio manager at Washington Crossing Advisors.

    “If you look at around the world, there’s just not a lot of yield there,” he said. “If you look at growth for the global economy, it has been decelerating. That’s not suggestive of higher interest rates. And if you look at inflation, remember you’ve also had a very big drop in oil prices. Inflation expectations are falling. So neither real growth nor inflation really speaks towards higher yields so I’m really not surprised to see we are with these relatively low yields.”

    However, Caron expects that to change. “I don’t expect to see a recession involved this year,” he said. “Ultimately, I would expect to see the bond yields start to get a floor here. And as growth continues and eventually inflation starts to pick up a little bit, I would expect those yields to move higher.”

    But according to one renowned technician, we haven’t seen the floor in rates just yet.