The news out of China over the weekend explained exactly why they did the bold move last week with their rates. Bank profits will be squeezed by that movement, but it should be good for the overall economy and growth, and after that economic data it is safe to say that the country really needs it. Without the Spanish Bailout we wonder just how bad trading would have been today, but good news providing further hope will move the market higher than any bad news these days and that is the reality. We think we will see a broad based rally, with financials leading the way, today but it will be interesting to see just how interested investors will be in adding risk.
The futures in the US are up on this news, and quite strongly. This will be the news that markets have to trade on today as today is a day off for US economic news. Tomorrow will have news for investors to digest, but today's focus shall be on the Spanish Bailout and that is it.
Looking at Asian markets we see markets are higher:
All Ordinaries - CLOSED
Shanghai Composite - up 1.07%
Nikkei 225 - up 1.96%
NZSE 50 - up 0.14%
Seoul Composite - up 1.71%
In Europe markets are higher:
CAC 40 - up 1.85%
DAX - up 2.00%
FTSE 100 - up 1.18%
OSE - up 1.43%
Technology
We have a bit of leadership out of Apple (AAPL) on Friday as shares rose $8.60 (1.50%) to close at $580.32. Volume was once again weak with 12.4 million shares being traded which is well off of its three month average. The company should have news out this week, and maybe the news will once again stir up activity in the company's shares. We think that this is a high probability and also a real possibility is that we get a new product from Apple, or a new generation of current products. We see either moving shares higher, possibly testing the $600/share level.
We highlighted Sprint (S) on Friday discussing its long-term prospects with Apple releasing a new phone and their network with the unlimited data plans. The stock had a great day rising $0.24 (8.76%) to close at $2.98/share. Volume was 84 million shares, about 50% above the three month average. Friday's chart looks pretty good, as it rises from the bottom left to the upper right. What is more is that the shares closed just pennies off of the highs and did not sell off as we have noticed in many big risers lately.
Biotechnology
Arena Pharmaceuticals (ARNA) had a decent day on Friday rising $0.20 (3.12%) to close at $6.62/share. Volume was 10.4 million as the countdown until we know if their drug will be approved or not. We have been looking at this for some time and if Arena is a bit pricey at these levels for anyone, they might do better looking elsewhere in the industry to trade on the FDA announcement. This whole group will move on news, so there are many trades which can be set up prior to the announcement in order for one to profit in the coming weeks.
Banking
JP Morgan (JPM) rose $0.87 (2.65%) to close at $33.68/share on volume of 34 million in trading on Friday. Our call to sell puts last week is looking good, and after the European/Spanish news we should see the share price move smartly higher. This extra cushion will be extremely nice to have moving forward, especially as we learn more about the bad trade's losses. We think that if the market can turn around, so too can the losses the company realized there and we could see a recovery in the company's share. The company's CEO will be on Capitol Hill on Wednesday, and that could put pressure on the shares. This is but another reason why we would like to see this cushion get bigger as there is no telling how battered the shares will be once the politicians are allowed to pretend they are outraged and experts on the situation.
Regions Financial (RF) closed Friday at $6.15/share after having risen $0.06 (0.99%) on volume of 22.3 million shares. The company should see a nice pop based on the banking news from Europe, even though it has no exposure to the situation, as we look for financials to rally on this news. This could be a turning point, for the stock and the industry, but it is hard to imagine that the Europeans will understand the necessity to continue working together until the market makes them come back to the table once the next situation arises. We think that Regions could rise to the $6.50/share level on this news over the next few days.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
By Mathew Smith
Source: seekingalpha.com
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