Tag - Ands

It was a bad day for stocks. The Dow Industrials was down 185 points or 1.9%. The S&P 500 lost 22 points, the Nasdaq lost 40 points and the Russell 2000 dropped 15 points or 2.65%. On a percentage basis, the Russell was the biggest loser, which is to be expected. Small cap stocks outperform on both the up and the downside.

Retractable Tech (AMEX:RVP) was the top small cap gainer today, jumping 103%. This move came on no news that I could find, but somebody knows something – volume was huge. 

Mining and oil company U.S. Energy Corp (Nasdaq:USEG) came in second with a more reasonable 22% move. Rounding out the top 5 were Anadys Pharmaceutical (Nasdaq:ANDS) up 19% Digital Angel (Nasdaq:DIGA) up 17%, and Alpha Pro Tech (AMEX:APT) up 13%.

Not a good day for some small cap biotech stocks. Acadia Pharmaceutical (Nasdq:ACAD) was the top loser with a gut-wrenching 65% decline. Builders FirstSource (Nasdaq:BLDR) also made the list with a 35% drop. Other notable losers include, Catalyst Pharmaceutical Partners (Nasdaq:CPRX) down 21%, Gander Mountain (Nasdaq:GMTN) down 18%, and AIG (NYSE:AIG), yes THAT AIG, down 18%.

*****Yesterday's headlines made it sound like the sky was falling after China's Shanghai Index sold off 6.7%. There's no doubt, bulls are a bit nervous and bears are getting a bit bolder. That's to be expected after a six month rally that's been remarkable in that there have been no corrections.

That's also why it's imperative to keep a cool head these days: there's a big difference between what the financial media is saying and what investors are doing.

If you didn't read the news yesterday and simply watched the S&P 500, you'd wonder what the excitement was all about. The S&P dropped right out of the gate, but quickly recovered and finished the day with a -0.8% loss.

Even Chinese stocks listed on U.S. exchanges made a nice recovery from the early weakness.

*****The reason U.S. stocks are shrugging off seemingly bad news is pretty simple. The government has guaranteed much of the risk for the financial markets. That's lead to a recovery for the U.S. economy. And it's widely expected that the U.S. economy is putting up decent growth numbers in the third quarter, which is now two-thirds over.

Oil's action yesterday is also telling. Yes, oil was down. It traded below $70 a barrel yesterday. But it's hard to call that bearish. After all, oil just hit a new high at $75 a few days ago. A little consolidation, or profit-taking is in order.

Frankly, the relatively small correction for oil prices seems bullish when you consider how important the China growth story is for oil prices. That could change, of course. But right now, there's' no reason to panic that the rally is over and the bear market is coming back.

*****The main concern for the bulls right now should be third quarter earnings. In my opinion, the low rate of revenue growth for corporations is the biggest threat to the Cash for Clunker Stock Rally.

According to Goldman Sachs, 46% of companies soundly beat earnings expectations in the second quarter. But only 23% did so with a healthy boost to revenues.

For the most part, earnings growth was a result of cost-cutting. And without a rise in revenues, there's no way for earnings to keep growing. Retail stocks will show this most clearly, as they are most dependent on consumer spending.

*****Before I finish for the day, I want to discuss Chinese stocks a little more. Yesterday, I mentioned that economist Andy Xie is calling the Shanghai Composite a bubble. And that may be.

But ever time I review the Chinese stocks that are in the SmallCapInvestor PRO (and believe me, I review them frequently), I'm encouraged by the low valuation and attractive growth prospects.

The highest forward P/E among them is 14.5. And the PEG ratios average around .5.

Now, it could be that aggressive lending in China is pumping revenues artificially, and that's showing up in P/E and PEG ratios. But SmallCapInvestor PRO Chinese stocks are well diversified between energy, biotech, commodity and technology. I'm not convinced that all of these stocks are being lifted by the same loose lending practices.

*****Also, I'm releasing a new micro-cap report to SmallCapInvestor PRO readers today. This report features my "best bet" micro-cap stocks to post triple-digit returns. If you'd like to get that report, or find out about the Chinese stocks we're holding, click here.  
 
Until tomorrow,

Ian Wyatt
Editor
Small Cap Investor daily

P.S. My book The Small-Cap Investor: Secrets to Winning Big with Small-Cap Stocks is coming out on September 14 - visit www.smallcapbook.com to learn more. You can also follow me on http://twitter.com/ianwyatt 

Ian Wyatt is the Chief Investment Strategist of SmallCapInvestor.com and author of The Small-Cap Investor: Secrets to Winning Big with Small-Cap Stocks. You can learn more about his book and receive small-cap stock picks at www.smallcapbook.com.

Stocks continued Thursday's rally as investors reacted to news about the second quarter GDP number with the Nasdaq the exception.

The Dow closed up 16.93 to finish the week at 9,171.39; the Nasdaq finished down at 1,978.50, losing 5.80 points after showing gains for most of the day; and the S&P 500 close up 0.72 points to finish at 987.47.

Stocks in the Russell 2000 closed down 0.09 points to end at 557.71. 
 

Leading small-cap gainers include VirnetX Holding (AMEX:VHC) up 112%; Anadys Pharmaceuticals (Nasdaq:ANDS) up 44%; Inovio Biomedical (AMEX:INO) up 38%; and Integra Bank (Nasdaq:IBNK) up 34%.

Small-cap decliners were lead by notebook computer parts maker Synaptics (Nasdaq:SYNA) down 33% on news that the firm had disclosed fiscal 2010 growth will be slower than expected. Analysts immediately downgraded the stock driving prices down immediately at the open.

Other small-cap decliners include iStar Financial (NYSE:SFI) down 19%; Ariad Pharmaceuticals (Nasdaq:ARIA) down 18%; and YRC Worldwide (Nasdaq:YRCW) down 17%.

*****Today was the big one. Say what you want about yesterday's rally, the reaction to this morning's 2Q GDP number should be expected to influence trading going forward.  

Now, I'm going to let TradeMaster Jason Cimpl's morning commentary to his traders provide the in-depth analysis to the GDP number:  

Second quarter annualized rate GDP was reported at -1.0%, compared to the consensus of -1.5%.  

First quarter GDP was revised lower to a 6.4% decline from the previous reading of a decline of 5.5%. Personal consumption fell 1.2% (the consensus had been 0.5%). 
This market might be crazy enough to ignore the downward revision from the previous quarter, but how can they possibly brush off that personal consumption reading? 
Personal consumption is the largest portion of GDP. This number should have investors concerned. 

Volume numbers today will be a big tell if the street really likes the GDP figures. At the end of the day, GDP is a lagging indicator, so don't expect that today is the game changer. 

Thanks, Jason. 

He's got his Friday video online where he'll do a quick recap of the market for the week and more importantly, provide guidance on market direction and action for the coming week. Click here to watch Jason's video analysis.

*****Deutsche Bank (NYSE:DB) CEO Josef Ackerman says "The crisis is not over." He told Bloomberg that "[b]ad loans are the next wave. Banks that have fared relatively well so far will also be affected by this." 

As evidence, problem loans at Deutsche Bank rose 44% on the last quarter. Deutsche Banks has raised its loss reserves to $1.4 billion and also reduced its balance sheet and risk-taking.  

*****I continue to view oil as a critical leading indicator for global economic recovery. So long as oil prices remain strong, investors are clearly ignoring current demand statistics and focusing instead on future demand and slack production growth.  
For instance, Europe's third largest oil company, Total SA (NYSE:TOT) reported that production fell 7.3% in its 2nd quarter. That puts Total's production back to year 2000 levels.  

The reason is obvious: demand is down, and Total, like most oil companies, is cutting back on investment in new production because prices are down.  

Despite a slight rise in production, Chevron (NYSE:CVX) reported a 51% drop in revenues. It would seem likely that the revenue shortfall will affect Chevron's investments in new production, too.

The big question, though, is if investors will shift their focus to current demand numbers. At some point, declining profitability and continuing economic weakness should bring oil prices down.

*****It's pretty clear now that trends like weak GDP, weak demand for oil, rising unemployment we've seen emerging from the financial crisis and recovery will be with us for a long time.

Clearly, these conditions will have a profound effect on your investments in the months and years ahead.

And because many of these conditions are a direct result of government bailouts, I'm calling the condition Managed America.

We're hosting a video conference to look forward to investing strategies for the remainder of 2009 and beyond, and to explore my concept of Managed America and how you can still make profitable investments. The U.S. economy has changed and investors need to understand the changes in order to make the best investments.

The Managed America video conference will air on August 10, 2009 at 6:00 P.M. You can register for this important event when you click HERE.

Best Regards,

Ian Wyatt
Editor
Daily Profit

Small caps took a breather after financial stocks pulled back today following a rally last week.

At closing, the Russell 2000 (NYSE:IWM) was down 1.93%, while the Dow was down 1.82% and the S&P 500 fell 2.15%.

Concerns about more shares issued to the market by three banks that passed the government’s “stress tests” weighed on financial stocks today. Tech saw a rise today, though, after large-cap benchmark Microsoft Corp. divulged plans to raise money through a debt offering for the first time, and Dish Network posted better-than-expected quarterly profits.

Although today was a “down” day, there were still small caps that made solid gains. Communications services provider D&E Communications (Nasdaq:DECC) climbed a healthy 52% today after news broke that the small cap would be acquired by Windstream for $330 million. Anadys Pharmaceuticals (Nasdaq:ANDS) was also up 33% today after an analyst upgrade, while The South Financial Group (Nasdaq:TSFG) gained 32% following its operating results release late last week.

*****The “Stress Test rally” didn’t last long. Bank stocks had a good day Friday. In fact, they had a good week. Bank of America (NYSE:BAC), for instance, went from $8.70 to $14.17, a +62.8% gain. With that type of one-week gain, it’s not too surprising that banks backed off today as investors look to take profits.

There’s no doubt that the major indices are extended. Some kind of pullback is on order. But Jason Cimpl, technical analyst at TradeMaster, is in “buy the dips” mode.

Even though prices might be extended, we are still looking at an economy and a stock market that is in recovery. And that means current levels, like 8,400 on the Dow or 1,700 on the Nasdaq, have room for upside.

I’ll keep you posted on what Jason’s looking at and where he thinks . . .