Posts by Michael Santoli
Michael Santoli at Yahoo Finance 4 hrs ago
We can discuss Greece, China, moving averages and crowded trades without end. And we will.
But over any significant span of time, the stock market is driven by corporate profits and what investors are willing to pay for them.
Using this undeniable two-factor principle, it makes almost perfect sense for the market to be trading exactly where it is.
Near the end of July 2014 – nearly 15 months ago – the collective forecast for the next 12 months’ S&P 500 (^GSPC) companies’ per-share earnings was $127.71. Right now, the 12-month forward forecast is at $127.62, within a whisper of where it was a year-and-a-quarter ago.
And the S&P 500 itself was at 1987 late July of last year, or 15.6-times forward earnings. Today, the index is at 1995 as of last night’s close, 15.6-times expected earnings.
Of course, between then and now, the index traded down 8% by last October and then rallied 17% from there into the May high, before the latest deep pullback and partial recovery of the past couple of months.
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Michael Santoli at Yahoo Finance 21 hrs ago
Synonymous with indulgent treats in America, the Hershey Co. (HSY) is now exporting its resources and expertise to help deliver basic nutrition in Africa.
The chocolate maker has had a program in West Africa called Nourishing Minds, which works with local peanut growers to make a protein snack for schoolchildren. This month, the company announced it was joining a broader effort led by General Mills Co. (GIS), Partners in Food Solutions, to help further develop the food infrastructure in Africa.
Hershey CEO J.P. Bilbrey says these initiatives fit with his company’s long tradition of helping the underprivileged.
“Our company has really been about social impact, actually from the very beginning,” he tells us in the attached video interview from the Concordia Summit in New York. Company founder Milton Hershey founded a school for orphans, which continues to operate in Hershey, Pa. The trust he created to support the school remains the largest shareholder of Hershey.
Michael Santoli at Yahoo Finance 2 days ago
Has the volatility storm tracked out to sea like Hurricane Joaquin - giving us a scare, prompting frantic precautionary actions and inflicting isolated damage, but ultimately sparing us real pain?
That’s what the typical Wall Street weather buff is asking today. After a five-day winning streak, stocks have put some distance between the S&P 500 and its August low, while finally lowering the pitch of investor fear, if not dispelling confusion.
A bit of noise is being made now about the fact that the CBOE S&P 500 Volatility Index (^VIX), which tracks demand for protective index options, has receded below the 20 mark for the first time in more than five weeks.
While no magic threshold, many traders use 20 as the frontier between a hazardous, agitated market and a more orderly one. Certainly, the VIX chart now shows a steep spike that certainly resembles many passing market storms of years past, though it’s always tricky to sound a confident “all clear.”
Michael Santoli at Yahoo Finance 3 days ago
Since its founding nearly 120 years ago, General Electric Co. (GE) has presented itself as the essential growth company, whose main product was “progress” as it brings “good things to life.”
Now elephant-hunting activist investor Nelson Peltz is suggesting, gently but firmly, that GE come to terms with its maturity and behave a bit more like an entrenched cash cow.
This was not Peltz’s explicit message in spending $2.5 billion for about a 1% stake in GE in what might be called a “friendly activist” approach. In a “white paper” laying out recommendations for the company and detailing its investment thesis, Peltz’s Trian Fund Management calls GE a “defensive growth” company. Trian also classifies the company's long-term organic growth prospects in its industrial and healthcare franchises as “strong.”
In many respects, such a reassessment by Immelt would merely be an acknowledgement of the way Wall Street has already defined GE in the last decade or so.
Michael Santoli at Yahoo Finance 6 days ago
This is not the interest-rate scare we were promised.
Most market players for most of the year have been looking toward the approach of the first Federal Reserve rate boost since 2006.
Some felt it would signal the momentous end of an easy-money era, for good or ill. Plenty of Wall Street handicappers have insisted it would be no big deal, but most figured it would at least stir the markets’ anxieties as it arrived.
Instead, we’re witnessing two quite different rate scares: Another alarming, and mostly unexpected, drop in Treasury rates, and a grinding rise in yields on high-risk corporate bonds.
The 10-year Treasury yield (^TNX) has slid to just above 2% from 2.3% the day before the Fed elected to keep rates near zero three weeks ago.
But it’s undeniable that this compression of rates has come amid yet another global economic soft patch that has not fully spared the U.S.
If the GDPNow model is close to correct, it would be the weakest third quarter and the first to fall short of at least 2% growth since 2011.
Michael Santoli at Yahoo Finance 7 days ago
The path to happiness begins with low expectations. Cynical, maybe, but true often enough when it comes to life and markets.
The sudden break in the stock market last month and the anxious aftermath have certainly dimmed the public’s expectations for their investments nicely, focusing attention on the risks.
Many of those risks are always there, of course, but only when stocks fall apart to they get their due. What is commonly euphemized as “uncertainty” on Wall Street is the inherent ambiguity of the world, which is ever present but only gets widely noticed in a tougher tape.
Expectations for stocks over the next six months have dropped along with the indexes. The fresh weekly survey by the American Association of Individual Investors showed those expecting lower prices jumped 11.2 percentage points to 39.9%, while those anticipating gains fell to 28.1%.
This is close to a multi-year high in bearishness, though 40% were bearish on July 30 right before the market tanked, so this is far from a reliable contrarian indicator on its own.
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Michael Santoli at Yahoo Finance 8 days ago
The shelling of the market by cornered, forced sellers has quieted for the moment. But is it a lasting truce, or are they simply re-loading?
Yesterday in some respects was a missed opportunity for a nice “turnaround Tuesday” bounce in stocks. The S&P 500 (^GSCP) had a nasty Monday and was again looking stretched to the downside, with bleak investor attitudes and Carl Icahn’s doomsday market call serving as what could’ve been an ideal ironic Buy signal.
Yet the early rally mostly fizzled, credit markets stayed squishy, bank stocks kept bleeding and biotechs stayed under pressure.
Still, the relative calm yesterday and the return of several key market gauges to the low of Aug. 24 is prompting debate over whether this might have been a proper, low-drama “retest” of these earlier market depths. Today’s decent early bounce in indexes will intensify this argument.
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Michael Santoli at Yahoo Finance 10 days ago
If the Dow is poised to recover, aren’t the obliterated emerging-market stocks a Buy?
Anyone who thinks the tech sector has been punished enough should be tempted to buy South Korean stocksas much as the Nasdaq, right?
And if you think the flight from risk since late summer has just about run its course, wouldn’t the junk bond index at a 7.7% yield offer more comfort than the S&P 500, which still isn’t exactly cheap?
If you answered “No” to these questions – perhaps because those more exotic sectors look to be in scary liquidation mode – then you have a sense of the bind the U.S. stock market is in.
Unceasing pressure is being applied across so many global markets that the headline asset class captured by the Dow and S&P has been unable to find its footing.
It’s not just about relative value, with other stuff getting cheaper and leaving big American equities in a less flattering light.
Michael Santoli at Yahoo Finance 10 days ago
Oil prices can’t stay in their recent depressed trading range indefinitely, without idling enormous amounts of industry production and spurring widespread failures of exploration companies.
As ever, the solution for low oil prices will be low oil prices, plus time. Supply will come down to lift prices...eventually. Yet for the next year or so, crude will have a hard time recovering much ground as price-insensitive suppliers keep pumping.
That’s the view of Paul Sankey, energy analyst at New York brokerage firm Wolfe Research.
“We think ... $40 to $60 [per barrel] is unsustainable long term,” he says in the attached video interview. “Companies are not making any money, not covering capital expenditures with cash flow.”
Just recently, the weekly U.S. crude inventory report showed a drop in stored oil even as refinery usage declined a bit as they entered a seasonal slowdown. This could qualify as “the first really decent fundamental data we’ve had in probably a year,” Sankey says, though this is hardly a decisive dent in the oversupply situation.
But how long is the long term?
Michael Santoli at Yahoo Finance 12 days ago
The banking crisis struck in 2008, but the number of bank branches in the U.S. kept climbing for another couple of years, as lenders big and small were hooked on a storefront approach to attracting deposits and writing mortgages.
But since then, branch closures have picked up, and the trend looks sure to continue, as ecommerce encroaches on banks just as it has on other retailers.
“It’s almost surprising in many ways that we continued to grow the number of branches until 2010 in this country, given what’s going on with technology,” Keefe Bruyette & Woods research director Frank Cannon says in the attached video. “Because today, with smartphones, just how much do people need to go into branches?”
Among the largest dozen banks, 10 of them have shrunk their branch networks in the past two years, closing more than 1,000 locations on a net basis. This represents about a 4% decline in branches for this group of 10.
Along with post-crisis rules requiring more capital held at banks, years of low interest rates have pressured bank profit margins and prompted constant cost-trimming by the largest players.