Tag - Mvl

Stocks are selling off around the world. And China is in the lead. The Shanghai Composite is down 23% since August 4. Former Morgan Stanley Asia economist Andy Xie says Chinese stocks have been in bubble mode and there are more declines to come.  

The main issue for China is the same as it is here in the U.S.: prices are getting ahead of fundamentals. At least, that's the fear. It's funny, though, that nobody looks at AIG's moonshot and concludes the U.S. stock market is a bubble.  

I sure hope this isn't the end of the rally, because I'm really growing fond of my new term, the Cash for Clunker Stock rally.  

*****In his morning missive to his TradeMaster Daily Stock Alerts readers, Jason Cimpl offered the following advice: "Pay close attention to any weakness in our early warning sign groups such as small caps, technology, oil and bonds, as ways to gauge a top in the US indices."

For clarification, if the Cash for Clunker Stock rally is over, we will see bonds rally as investors move into safe-haven investments. So far today at least bonds are down right along with stocks. And since U.S. stocks are down only slightly, I think it would be prudent to consider the current action profit-taking for now.  

******We should probably add shipping stocks to Jason's list of stocks to watch. The Baltic Dry Index, a leading indicator that measures shipping rates, is down 28% this month.  

Shipping rates are down mainly because China is buying less iron-ore. And new ships being delivered is expanding supply and helping drive prices lower.  

The Baltic Dry Index was absolutely decimated at the outset of the global recession. SmallCapInvestor PRO readers made 65% on shipping stock Genco (NYSE:GNK) as shipping rates recovered. We took profits on July 22, as the Baltic Dry Index was showing signs that it would roll over. 

If shipping rates fall another 50%, as some are expecting, it will mean two things. One, the bloom will be off the global economic recovery and the Cash for Clunker Stock rally will have ended. And two, it will be time to buy shipping stocks again. 

*****Before we get too bearish, though, please note that two M&A deals were announced today. Disney (NYSE:DIS) is buying Marvel (NYSE:MVL) for $4 billion and oil services company Baker Hughes (NYSE:BHI) is buying BJ Services (NYSE:BJS) for $5.5 billion.  

Mergers and acquisitions are generally considered bullish because they indicate that the acquiring company feels prices are attractive and there is growth ahead.  

That's especially significant in the case of Baker Hughes. There's not an analyst out there who hasn't been saying that oil prices have risen too high in the current environment of growing supply and falling demand.  

Oil is an important indicator of investor expectations for the economy. And now, it seems, even the "insiders" are getting more bullish on oil prices.  

Oil is trading below $71 today. That's a far cry from the $50-$60 range that some say is fair value. And a move to these levels is looking less and less likely. 

Best regards,

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.

Small-cap stocks are expected to open moderately higher Tuesday, lifted by a dip in crude oil prices overnight, and by ideas that Monday’s declines were overdone. The Russell 2000 (NYSE:IWM) was up 0.3% in after-hours trading, which would translate to a cash opening near 743.25.

Gains should be curbed by losses in overseas stock markets, and by lingering concerns about financial shares following renewed credit crunch issues Monday and talk of large players raising capital again this morning.

Global equity markets were lower overnight, catching up with the big decline in U.S. prices on Monday. Japan was off 1.6%, Hong Kong down 1.8%, Singapore lost 1%, South Korea shed 1.5%, Taiwan lost 1.6%, Australia was down 1.5% and Bombay was off 0.6%. European shares also were slightly lower ahead of the U.S. opening, but got a mild boost from an upward revision in first-quarter GDP.

The market now awaits comments from Federal Reserve Chairman Ben Bernanke. He is slated to talk about the economy and field audience questions as he gives a speech via satellite to the Central Bankers’ Panel at an IMF conference in Barcelona. Bernanke is expected to deliver the speech around 9:00 a.m. ET.

Following the Bernanke speech, the market also faces factory orders data at 10:00 a.m. ET, and vehicle sales numbers throughout the day. General Motors Corp. (NYSE:GM) announced plans to close four truck plants and shift production away . . .

Small-cap stocks started out the week in the red, but the early dip in equities did not live up to the selling interest suggested by overnight trends and a surprisingly stout ISM Non-Manufacturing Survey sparked a bout of buying that lifted stocks back toward steady levels. At 10:01 a.m. ET, the Russell 2000 (NYSE:IWM) was down 1.05, or 0.1%, at 724.69.

The ISM Non-Manufacturing Survey came out at 52%, which was well above the median forecast of 49.5%, and the highest point since December. The reading also snapped three consecutive months of contractions, which is a plus for the economic outlook.

The market had a bit of the merger blues this morning after weekend news that Microsoft (Nasdaq:MSFT) pulled out of negotiations for a takeover bid of internet services company Yahoo! Inc. (Nasdaq:YHOO). Yahoo shares took it in the chin on the news, sinking 18% in early trading Monday. The deal was reportedly close to fruition and the failure to close might take some excitement out of the M&A picture — at least in the short run. That said, wireless phone company Sprint (NYSE:S) was up 7% on news that the firm could be a takeover target.

Marvel Entertainment Inc. (NYSE:MVL) shot up nearly 8% this morning . . .