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Is this the 'stock picker's market' you've been asking for?

Michael Santoli
Michael Santoli

You wanted a “stock picker’s market.” Maybe you were even among those predicting at the start of the year that we’d finally get a “stock picker’s market.” Well, we’ve got one. And now all anyone can talk about is how frustrating it is to watch the indexes stuck in a range.

A stock picker’s market isn’t one where investors can somehow make easy money focusing on individual company performance. It doesn’t mean that fund managers can readily beat the benchmark indexes. It’s simply a market where a greater number of individual stocks and sectors go their own way, rather than track the broad market.

And so coming into the week we saw retail stocks (XRT) up almost 10% for the year and transportation names (^DJT) down about as much. The bond market has been strong but stocks like utilities that typically track bonds have been losers.

The subtle interplay of expectations and fine print inside corporate reports seem to dictate market reaction. Boeing (BA) beats forecasts nicely, but the stock backs off. McDonald’s (MCD) has another lousy quarter, but hopes for a turnaround pulled the stock up 3%.

Expect plenty more of this shadow dancing around company results today, the busiest day of the quarter for profit reports. Facebook Inc. (FB) shares were indicated a bit lower early after showing powerful growth but also a spending binge that will test Wall Street’s appetite for huge companies that invest heavily toward the next big things. Isn’t that what growth investors say they want in this age of corporate risk aversion and stock-buyback dependence?

On the whole, companies are beating severely reduced earnings forecasts while falling short on revenue growth and blaming the strong dollar with predictable frequency.

All this push-pull is what has kept the marquee indexes trapped in the tedious sideways slog that we’ve all been forced to focus on. We begin the day again near the upper end of that range, near 2100 on the S&P 500 (^GSPC).

Traders have been rewarded for selling or stepping aside at this level quite often in the past couple of months. Including Wednesday, the S&P 500 has crossed the 2100 level on 18 separate days since Feb. 17 – that’s about 40% of all trading days.

Something will jar this market out of that pattern - but who knows what or when? The index has held firm to its longer-term uptrend as have a majority of stocks underneath the surface. By some lights, this stall pattern has been a good thing, as it’s prevented the market from stretching too far ahead of those corporate fundamentals that everyone claims are what truly matters for investors.

One non-fundamental thing that has begun to matter for the Street is some regulatory action steering the fates of big companies.

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The reports this morning that federal regulators are taking a close ad critical look at the long-planned merger of Comcast Corp. (CMCSA) and Time Warner Cable Inc. (TWC) is going to set the merger-arbitrage community further on edge.

Aside from those traders, though, it’s hard to see how the fate of the deal will matter too much to customers or the broader economy. These cable companies will do OK, but will simply have to contend with subscriber declines and more over-the-top video competition on their own rather than together.

Customers will still hate them, yet the alternative video offerings will still struggle to deliver anything like the breadth of entertainment for the buck that the cable bundlers do.

Media players, content producers and distributors both, will continue to search for ways to rearrange themselves to preserve their franchises and participate in the new Internet-everywhere, on-demand world we’ve got now. Thwarting the Comcast-Time Warner deal will simply usher in a new slate of media merger gambits.

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